UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 AQUA CLARA BOTTLING AND DISTRIBUTION, INC. FLORIDA EIN 84-1352529 1315 Cleveland Street Clearwater, Florida 33755-5102 (727) 446-2999 www.aquaclara.com Indicate by check mark whether the Registrant (1) has filed all report required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 stock as of the latest practicable date. As of June 30, 2001, the registrant had 79,588,943 shares of common stock outstanding at no par value. Part I Financial Information Aqua Clara Bottling & Distribution, Inc. And Subsidiary Consolidated Balance Sheet (unaudited) June 30, 2001 ------------- ASSETS Current assets: Cash and cash equivalents $ 6,249 Accounts receivable less allowance for doubtful accounts 189,388 Inventories 75,846 Prepaid expenses and other current assets 770,788 ------------- Total current assets 1,042,271 Property, plant and equipment net of accumulated depreciation 1,735,649 Other assets 5,598 ------------- Total assets $ 2,783,518 ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 275,077 Accrued expenses 193,356 Current portion of long term debt 192,220 Due to related party 311,795 Current obligation under capital lease 5,589 Due to stockholders 378,331 ------------- Total current liabilities 1,356,368 Obligation under capital lease less current portion 6,836 ------------- Total long term liabilities 6,836 ------------- Total liabilities 1,363,204 ------------- SHAREHOLDERS' EQUITY Preferred stock, no par value, 5,000,000 shares authorized, 100 shares issued and outstanding 74,602 Common stock, no par value, 1,000,000,000 shares authorized; 79,588,943 shares issued and outstanding 10,178,856 Additional paid in capital 2,960,942 Common stock subscription receivable (20,000) Accumulated deficit (11,774,086) ------------- Total stockholders' equity 1,420,314 ------------- Total liabilities and stockholders' equity $ 2,783,518 ============= See Notes to Financial Statements. 2 Financial Information Aqua Clara Bottling & Distribution, Inc. And Subsidiary Consolidated Statements of Operations (unaudited) Three Months Ended June 30, 2001 July 1, 2000 ------------- ------------ Sales 235,955 89,976 Cost of sales 190,521 61,414 ------------- ------------ Gross profit 45,434 28,562 Selling, general and administrative expenses 185,092 350,099 Stock options forfeited 0 (410,020) ------------- ------------ Operating profit/(loss) (139,658) 88,483 Other (loss)/(expenses) Interest expense (2,536) (7,931) ------------- ------------ Net (loss)/income (142,194) 80,552 Dividends on preferred stock 0 29,196 Net income/(loss) applicable to common stock (142,194) 51,356 ========== ========== Basic income/(loss) per share (0.00190) 0.00085 ========== ========== Weighted average common shares outstanding 74,994,728 60,685,328 ========== ========== See Notes to Financial Statements. 3 Part I Financial Information Aqua Clara Bottling & Distribution, Inc. And Subsidiary Consolidated Statements of Cash Flows (unaudited) For the three months For the three months ended ended June 30, 2001 July 1, 2000 -------------------- -------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net (loss)/income (142,194) 80,552 Adjustments to reconcile net (loss)/income to net cash provided by (used in) operating activities: Depreciation 28,727 28,342 Issuance of stock for services and fees 14,458 140,322 Stock options forfeited 0 (396,760) Increase/(decrease) in cash caused by changes in: Accounts receivable (153,459) (12,091) Inventories 46,076 9,408 Prepaid expenses 11,421 116,769 Accounts payable 109,154 35,248 Accrued expenses 3,686 (182,668) Other liabilities 121,815 8,372 ----------- ------------ Net cash provided by/(used in) operating activities 39,684 (172,506) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of equipment (36,975) (2,247) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt 0 214,785 Payments on long-term debt (3,134) (45,104) ----------- ------------ Net cash provided by/(used in) financing activities (3,134) 169,681 Net decrease in cash and cash equivalents (425) (5,072) Cash and cash equivalents at beginning of period 6,674 20,980 ----------- ------------ Cash and cash equivalents at end of period $ 6,249 $ 15,908 =========== ============ See Notes to Financial Statements. 4 Aqua Clara Bottling & Distribution, Inc. And Subsidiary Notes To The Unaudited Consolidated Financial Statements Interim Consolidated Financial Statements - ----------------------------------------- The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-QSB. Accordingly, certain principles for complete financial statement are not applied within these statements. They have been prepared on a consistent basis including normal recurring adjustments and should be read in conjunction with the consolidated financial statements and related notes contained in the Annual Report for the fiscal year ended March 31, 2001. Significant Accounting Policies - ------------------------------- The consolidated financial statements include the accounts of Aqua Clara Bottling & Distribution, Inc. and its wholly owned subsidiary, Pocotopaug Investments, Inc. All significant intercompany accounts and transactions have been eliminated. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. Cash equivalents consist of all highly liquid debt instruments purchased with an original maturity of three months or less. Inventories are stated at the lower of cost (first-in, first-out) or market. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the consolidated financial statements carrying amounts of existing assets and liabilities and their respective income tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that included the enactment date. The Company charges to retained earnings and credits its additional paid-in capital for the amortization of the intrinsic value of the conversion feature of its preferred stock in accordance with the statements issued by the Securities and Exchange Commission. Shares of common stock issued for other than cash have been assigned amounts equivalent to the estimated fair value of the service received until the time the Company's stock began trading. At that time, the Company valued the transactions based on quoted prices. The Company records shares as outstanding at the time the Company becomes contractually obligated to issue shares. Property, plant, and equipment are recorded at cost. Depreciation is calculated by the straight-line methods over the estimated useful lives of the assets. Property under capital leases is amortized over the shorter of the lease terms or the estimated economic life of the property. Fair value estimates discussed in these notes are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain financial instruments on the balance sheet approximate their fair values. These financial instruments include cash, investment securities, accounts payable, and 5 accrued expenses. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature or they are receivable or payable on demand. The fair value of the Company's long-term debt is estimated based upon the quoted market prices for the same or similar issues or the current rates offered to the Company for debt of the same remaining maturities. Basic loss per share is based on the weighted average number of common shares outstanding during each period. The Company implemented SFAS No. 128 "Earnings Per Share" during the year ended April 4, 1998. On August 31, 1999 the Company entered into employment agreements with Emanuel Mersis and John Plunkett to serve as the Company's Chief Executive Officer and Chief Operating Officer, respectively. Under the provisions of these agreements, both Mr. Mersis and Mr. Plunkett received stock options in addition to salary. The options vested at a rate of 20% per year over a five year term starting on the execution date of the agreement. The number of shares available would have incremented based upon targeted ownership percentages in relation to the number of the Company's outstanding shares - Mersis agreement targeted a 22.4% ownership and Plunkett a 7.6% ownership. Additionally, the Company would have been liable to compensate the company officer for any tax liability resulting from the exercise of any options. An accrual for this provision was not included in the accompanying financial statements. Mr. Mersis forfeited his options at his resignation. In January, 2001, Mr. Plunkett's options were adjusted to a fixed 6,000,000 shares, vesting at the rate of 2,000,000 shares per year. The Company's responsibility for tax liability was removed from the options. Mr Cifers was granted the same option agreement. Inventories consist of the following at June 30, 2001: Raw materials $ 10,403 Work in progress 182 Finished goods 65,261 ----------- $ 75,846 =========== Property, plant, and equipment consist of the following at June 30, 2001: Land $ 90,000 Building 926,520 Machinery and equipment 1,034,012 Vehicles 22,392 ------------- Total 2,072,924 Less accumulated depreciation (337,275) ------------- $ 1,735,649 ============= The Company has reviewed its long-lived assets for impairment and has determined that no adjustments to the carrying value of long-lived assets is required. 6 Due to stockholders consists of notes payable due upon demand. Interest on these notes accrues at rates between 5% to 8%. Long-term debt at June 30, 2001 consists of: Note payable: Secured 8% Series B Convertible Debenture was raised in June 1999. The note will be converted into common stock. Series B Convertible Debentures $ 50,000 Note payable: interest at 10%, secured by building 137,365 Installment note payable; interest at 10.5%; payments $461 per month including interest; collateralized by a vehicle 4,855 ----------- Long-term debt $ 192,220 Less current installments 192,220 ----------- Long-term debt, less current installments $ 0 =========== The following is a schedule by year of the principal payments required on long-term debt: 2002 $ 192,220 ------------- $ 192,220 At June 30, 2001, the Company is obligated under a long-term capital lease for equipment. The following is a schedule by year of future minimum lease payments under these capital leases. 2002 $ 5,623 2003 6,791 2004 2,352 ----------- Total lease payments $ 14,766 Less amount representing interest (6.5% - 8%) 2,341 ----------- Present value of lease payments 12,425 Less current obligation 5,589 ----------- Long-term capital lease obligation $ 6,836 At June 30, 2001, the Company has no vehicles or equipment under operating leases. No provision for income taxes is recorded due to the amount of tax losses incurred since inception. The Company had unused net operating loss carryforwards to carry forward against future years' taxable income of approximately $5,836,000, which will begin to expire in years after 2011. Temporary differences giving rise to the deferred tax assets consist primarily of the deferral and amortization of start-up costs for tax reporting purposes. Management has established a valuation allowance equal to the amount of the deferred tax assets due to the uncertainty of the Company's realization of this benefit. The components of deferred tax assets consist of the following at March 31, 2001: Deferred tax assets: Net operating loss carryforwards 2,196,000 Other 267,000 ----------- 7 Gross deferred tax assets 2,463,000 Valuation allowance 2,463,000 ----------- Total deferred tax assets $ - Since inception, substantial changes of ownership of the Company have occurred. Under federal tax law, these changes in ownership of the Company will significantly restrict future utilization of the net operating loss carryforwards. Other than the net operating losses, which have been limited because of the change in ownership as described above, any other net operating losses will expire if not utilized within beginning in years after 2011. Commitments and Contingencies A former officer of the Company filed suit against the Company for approximately $80,000 of accrued wages and loans that took the form of a mortgage on the property. This claim also seeks 1,350,000 shares of the Company's common stock. The Company has accrued $80,000, relating to the accrued wages and loans, in the accompanying financial statements. However, the Company asserts that all or a majority of the number of common shares due is a frivolous claim and has not included any amount related to these shares in the accompanying financial statements. 8 Aqua Clara Bottling & Distribution, Inc. And Subsidiary Part II Management's Discussion and Analysis Of Financial Condition and Results of Operations RESULTS OF OPERATIONS The Company's sales commenced in April 1997, with the introduction of its 5-gallon bottled water service. In the year ended April 4, 1998, the Company had $135,710 in sales from this business. Revenues were comprised of cooler rentals and water sales, which terminated in March, 1998. With the proceeds from its offering of Series A Preferred Stock, the Company entered the PET bottled water market. The sales for the fiscal quarter ended July 1, 2000 were $89,976. Sales for the quarter ended June 30, 2001, were $235,955. This significant increase over the same quarter last year and over the previous quarter was due to sale of excess inventory during and initial sales under the SerVen Rich contract this quarter. The gross profit for the quarterly period ended June 30, 2001 was $45,434 with general and administrative, and selling expenses period totaling $185,092. The gross profit was lower than normal for the level of sales due to additional write-downs taken on excess inventory. That inventory was sold at significant discount this quarter. The Company intends to increase spending over the next six months in advertising, marketing and distribution, which amounts are expected to be expended prior to the receipt of significant revenues. There can be no assurance as to when, if ever, the Company will realize significant operating revenues or attain profitability. LIQUIDITY AND CAPITAL RESOURCES While the Company has identified a source for restructuring the existing demand debt, there are no plans or arrangements in place with respect to additional capital sources at this time. Nor does the Company have any significant lines of credit available to it at this time. There are no assurances that additional capital will be available to the Company when or if required. Although the Company expects to experience losses in the 2nd quarter of fiscal year 2002, management believes that the losses will continue to decrease and a break-even point could be reached in the near term. Inflation has not had a significant impact on the Company's results of operations. BUSINESS AND PLAN OF OPERATION GENERAL Prior information pertaining to Aqua Clara Bottling & Distribution, Inc. can be found in the Annual Report for the fiscal year ended March 31, 2001. During the year ended April 4, 1998, the Company began its five-gallon water business. In February, 1998, the Company sold this portion of the business. The assets disposed of consist of certain receivables, a vehicle, and various equipment used in the Company's bottled water business. The total sales price was approximately $352,394, which included the assumption of installment notes payable of approximately $149,782 by the acquiring company. During the year ending April 3, 1999, the Company began producing 20- oz. bottles of oxygenated water packaged in a PET container. The Company's oxygen enriched water contains approximately 32 parts per 9 million of oxygen. Normal tap water contains approximately 3 parts per million of dissolved oxygen. As such, the company's oxygen enriched bottled water contains approximately 800% more oxygen. INDUSTRY OVERVIEW Oxygen is currently in the public view as an additive to a range of consumer products. There are currently oxygen bars in Toronto, New York City and the Los Angeles area. Oxygen in beverages has received recent widespread media coverage through television, radio and print media. PRODUCTS Oxygen Enriched Bottled Water. The Company's primary focus will be the production/distribution of oxygen enriched bottled water in small package, PET, containers ranging in size from .5 liter to 1.5 liters. The points of purchase will include super markets, convenience stores, mass merchants, health food stores, spas and hotel resorts. The Company's oxygen enriched bottled water is made by combining super purified water and oxygen. Through water purification processing the source water will be reduced to 1-2 parts per million of total dissolved solids and then oxygen is introduced through a unique, proprietary process. As a point of reference, the Food and Drug Administration's (FDA) definition of distilled water is 5 parts per million or less of total dissolved solids. As such, the base water is of distilled quality, although the distillation process is not used. The Company's market research, undertaken by a non-affiliated research firm, has indicated that no specific medical claims have to be made to consumers with regard to its product. According to this market research the public will readily accept the necessity and benefits of both highly purified water and oxygen. Oxygen is literally the breath of life; oxygen is a natural energizer and body purifier. Oxygen is odorless and tasteless, as well as non-carbonated. As such, the Company's water tastes like a fine premium bottled water - light and crisp. Oxygen does not produce the unhealthy "jolt" associated with caffeine products. Rather, it is believed to create a feeling of physical well being and mental clarity. There is one significant competitor, Beverage Systems, Int'l., producing oxygen enriched bottled water. The Company also knows of eight other entities that are attempting to produce and distribute oxygen enriched bottled water. None of the well-established traditional bottled water producers has an oxygen enriched bottled water product. There can be no assurance that the Company's products will achieve consumer acceptance. Consumer preferences are inherently subjective and subject to change. Initially, the Company will not carbonate or flavor its water. After the successful introduction of the Company's oxygen enriched bottled water product, the introduction of a new product with natural flavoring or carbonation will be considered. Likewise, the Company will consider the infusion of beneficial herbs. The Company will also consider the production of super oxygen enriched sports drinks, providing even higher levels of oxygen, to be marketed at a higher price. The Company utilizes a distinctive bottle and label for its water products. In conjunction with its contract with SerVen Rich, the Company expects to add additional beverage and non-beverage products to its business base. Some or all of these additional products will be produced by other packagers under contract. STRATEGY The Company's objective is to build product markets in Florida, concentrating on the Tampa area, and then expand nationally. Aspects of the Company's strategy include the following. The Company intends to enter into additional distribution agreements with 2-5 non-affiliated partners. The Company intends to use these distributors, as well as its own production/distribution facility, as operational models. The Company then intends to expand into multiple markets. 10 The Company's oxygen enriched small package bottled water product will primarily be sold through retail outlets, including convenience stores, gas station markets, grocery stores, health food stores, and health spas. However, secondary distribution will be effected through vending and private labeling. Although the Company will distribute its own product in certain areas, primarily the Company will sell to qualified third party distributors. These third party distributors will have the right to distribute to retail outlets in defined geographic areas. A large number of potential distributors have contacted the Company regarding potential distribution of its oxygen enriched bottled water. In addition to several small and regional distributors, the Company has entered into an arrangement with SerVen Rich, Inc., for sales and distribution of its products throughout the United States, and overseas. PRODUCTION The Company currently operates out of a facility with approximately 14,000 sq. ft. under roof with an exposed four-bay loading dock sitting on 2.1 acres in Clearwater, Florida. Approximately 2,400 sq. ft. is utilized for office facilities, with the balance predominantly used for bottling and warehouse operations. Upon delivery to the Company's facilities, the source water is passed through a number of filtration, ion exchange, and reverse osmosis processes by which it is reduced to a very pure 3 - 5 parts per million of dissolved solids. Water is oxygenated using the purest oxygen commercially available in a proprietary process. The water is then treated with ultraviolet light, which effectively kills bacteria and other micro-organisms before delivery to the bottling area where the various products are filled and capped. The filling room is supplied with pressurized air from high-capacity, high-efficiency particulate filters, resulting in a clean filling and capping environment. The manufacturing process is designed to be highly automated. Bottles are mechanically de-palletized, cleaned, filled and capped. The filled bottles are automatically coded, labeled, tamper-banded (if applicable), and packed in cases. After palletizing and stretch- wrapping, the product is either loaded directly onto a truck for immediate shipment or is stored in the warehouse facility for future shipment. The Company maintains exacting internal quality control standards. Each shift's production is tested in Company laboratory facilities according to FDA and IBWA standards, and random samples are submitted regularly to an independent laboratory for confirmation testing WATER SOURCES Under FDA guidelines, bottled water must contain fewer than 500 parts per million (ppm) of total dissolved solids. Varying amounts and types of dissolved solids provide different tastes to water. The Company uses FDA and International Bottled Water Association approved water sources. COMPETITION The bottled water industry is highly competitive. According to "Beverage Marketing", there are approximately 350 bottled water filling locations in the United States with sales increasingly concentrated among the larger firms. Nearly all of the Company's competitors are more experienced, have greater financial and management resources and have more established proprietary trademarks and distribution networks than the Company. On a national basis, the Company competes with bottled water companies such as The Perrier Group of America, Inc. (which includes Arrowhead Mountain Spring Water, Poland Spring, Ozarka Spring Water, Zephyrhills Natural Spring Water, Deer Park, Great Bear and Ice Mountain) and Great Brands of Europe (which includes Evian Natural Spring Water and Dannon Natural Spring Water). The Company also competes with numerous regional bottled water companies located in the United States and Canada. Aqua 11 Clara has chosen to compete by focusing on a higher quality oxygen enriched purified drinking water, innovative packaging and customer service. SEASONALITY The market for bottled water is seasonal, with approximately 70% of sales taking place in the seven months of April through October. As a result of seasonality, the Company's staffing and working capital requirements will vary during the year. TRADEMARKS The Company has registrations in the U.S. Patent and Trademark Office for the trademarks that it uses, including Aqua Clara. The Company believes that its common law and registered trademarks have significant value and goodwill and that some of these trademarks are instrumental in its ability to create demand for and market its products. There can be no assurance that the Company's common law or registered trademarks do not or will not violate the proprietary rights of others, that they would be upheld if challenged or that the Company would, in such an event, not be prevented from using the trademarks, any of which could have an adverse effect on the Company. REGULATION The Company's operations are subject to numerous federal, state and local laws and regulations relating to its bottling operations, including the identity, quality, packaging and labeling of its bottled water. The Company's bottled water must satisfy FDA standards, which may be periodically revised, for chemical and biological purity. The Company's bottling operations must meet FDA "good manufacturing practices" and the labels affixed to the Company's products are subject to FDA restrictions on health and nutritional claims. In addition, bottled water must originate from an "approved source" in accordance with federal and state standards. State health and environmental agencies, such as the Florida Department of Agriculture and Consumer Services also regulate water quality and the manufacturing practices of producers. The Company's products satisfy all federal and state requirements and the Company is proceeding with applications to obtain distribution permits in all 50 states. These laws and regulations are subject to change, however, and there can be no assurance that additional or more stringent requirements will not be imposed on the Company's operations in the future. Although the Company believes that its water supply, products and bottling facilities are and will be in substantial compliance with all applicable governmental regulations, failure to comply with such laws and regulations could have a material adverse effect on the Company. 12 Aqua Clara Bottling & Distribution, Inc. And Subsidiary Part II Other Information Item 1 Legal Proceedings LEGAL PROCEEDINGS The Company is not a party to any material legal proceedings except as set forth below. Civil Litigation in the Circuit Court of the Sixth Judicial Circuit in and for Pinellas County - Rand L. Gray and Kathleen Gray v. Aqua Clara Bottling & Distribution, Inc. et al., Pinellas County, Case No. 00- 2122-C1-021. This case arises out of an alleged breach of an employment contract. An Amended Complaint was filed by the Plaintiffs on June 26, 2000. The Amended Complaint alleges 6 counts: Count I - Foreclosure of Mortgage; Count II - Foreclosure of Security Interest on Personal Property; Count III - Damages on Promissory Note; Count IV - - Damages for Breach of Employment Agreement; Count V - Damages for Breach of Severance Agreement; and Count VI - Damages for Breach of Indemnity Agreement. Our response to Plaintiffs' Amended Complaint was filed August 1, 2000. Settlement offers have been filed by both sides. Subsequent to June 30, 2001, the following actions have been brought against the Company: Motions for Summary Judgement by Cross-complainants Mainstream Construction and D. Robert Bradshaw have been filed in the above case. These Cross-complaints allege default on notes inferior to the Gray mortgage referenced above, inherent in the foreclosure action brought by Gray. Civil Litigation in the Circuit Court of the Sixth Judicial Circuit in and for Pinellas County - MariJo A. Beck v. Aqua Clara Bottling & Distribution, Inc., Pinellas County, Case No. 01-5380-CI-015. This case represents a claim for accrued salaries allegedly due a former employee. Civil Litigation in the Civil Court of the City of New York, County of New York - Bowne of New York City, LLC, v Aqua Clara Bottling & Distribution, Inc. This case alleges damages for nonpayment for services. Resolution of all the above matters is slated to be accomplished as part of a total refinancing scheduled for the near future. 13 Aqua Clara Bottling & Distribution, Inc. And Subsidiary Part II Other Information Item 2 Changes In Securities Preferred A stock The Company's Board of Directors has authority, without action by the shareholders, to issue all or any portion of the authorized but unissued preferred stock in one or more series and to determine the voting rights, preferences as to dividends and liquidation, conversion rights, and other rights of such series. The Company considers it desirable to have preferred stock available to provide increased flexibility in structuring possible future acquisitions and financing and in meeting corporate needs which may arise. If opportunities arise that would make desirable the issuance of preferred stock through either public offering or private placements, the provisions for preferred stock in the Company's Articles of Incorporation would avoid the possible delay and expense of a shareholder's meeting, except as may be required by law or regulatory authorities. Issuance of the preferred stock could result, however, in a series of securities outstanding that will have certain preferences with respect to dividends and liquidation over the Common Stock which would result in dilution of the income per share and net book value of the Common Stock. Issuance of additional Common Stock pursuant to any conversion right, which may be attached to the terms of any series of preferred stock, may also result in dilution of the net income per share and the net book value of the Common Stock. The specific terms of any series of preferred stock will depend primarily on market conditions, terms of a proposed acquisition or financing, and other factors existing at the time of issuance. Therefore, it is not possible at this time to determine in what respect a particular series of preferred stock will be superior to the Company's Common Stock or any other series of preferred stock, which the Company may issue. The Board of Directors may issue additional preferred tock in future financing, but has no current plans to do so at this time. The issuance of Preferred Stock could have the effect of making it more difficult for a third party to acquire a majority of the outstanding voting stock of the Company. 14 Aqua Clara Bottling & Distribution, Inc. And Subsidiary Part II Other Information Item 3 Defaults Upon Senior Securities (NONE) 15 Aqua Clara Bottling & Distribution, Inc. And Subsidiary Part II Other Information Item 4 Submission of Matter to a Vote of Security Holders (NONE) 16 Aqua Clara Bottling & Distribution, Inc. And Subsidiary Part II Other Information Item 5 Other Information Management The following table sets forth the names, offices held with the Company, and age of its directors and executive officers as of June 30, 2001: Name Position Director Since Age - ---- -------- -------------- --- E. Douglas Cifers Chairman 2000 50 Lewis C. Graham Director 2001 48 John C. Plunkett President and Chief Executive Officer 1997 52 All directors hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified. There are no agreements with respect to the election of directors. Any non-employee director of the Company is reimbursed for reasonable expenses incurred for attendance at meetings of the Board of Directors and any committee of the Board of Directors. The Executive Committee of the Board of Directors, to the extent permitted under Colorado law, exercises all of the power and authority of the Board of Directors in the management of the business and affairs of the Company between meetings of the Board of Directors. Each executive officer serves at the discretion of the Board of Directors. The business experience of each of the persons listed above during the past five years is as follows: Mr. Cifers is President of Florida Media, Inc., Florida's largest statewide magazine publishing company. Mr. Cifers entrepreneurial bent and unusual relationship-based business practices have been the focus of a Wall Street Journal article. Mr. Graham has served as Director of the Company since May, 2001. Mr. Graham is the President of Lewis Graham Landscaping, Inc., and Vice President of SerVen Rich, Inc. Mr. Plunkett is the President and Chief Executive Officer of the Company. Mr. Plunkett has over 20 years experience in the engineering consulting industry and 10 years experience in real estate management. Mr. Plunkett has been associated with the Company as an officer and director since its inception and became President in 1998. The Company does not have a bonus, profit sharing, or deferred compensation plan for the benefit of its employees, officers or directors. 17 Aqua Clara Bottling & Distribution, Inc. And Subsidiary Part II Other Information Item 6 Exhibits and Reports Exhibits and Reports on Form 8-K (a)	Exhibits 3.1 Articles of Incorporation (1) 3.2	Bylaws (1) 21.1	Subsidiaries (b)	Reports on Form 8-K: The Company did not file any reports on Form 8-K during the three month period ended June 30, 2001. (1) Incorporated by reference to the original filing of the Registration Statement on Form SB-2, File No. 333-44315 (the "Registration Statement") 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: August 20, 2001 AQUA CLARA BOTTLING & DISTRIBUTION, INC. By:____/s/John C. Plunkett_______________ John C. Plunkett President, Chief Executive Officer 19 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ------- ----------- 21.1 Subsidiaries 20