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 September 29, 2001
AQUA CLARA BOTTLING AND DISTRIBUTION, INC.
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COLORADO EIN 84-1352529
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1315 Cleveland Street
Clearwater, Florida 33755-5102
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(727) 446-2999
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www.aquaclara.com
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Indicate by check mark whether the Registrant (1) has filed all reports
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 September 29, 2001, the registrant had 80,540,742 shares of common
stock outstanding at no par value.
1
Part I
Financial Information
Aqua Clara Bottling & Distribution, Inc. And Subsidiary
Consolidated Balance Sheet
(unaudited)
As of
September 29, 2001
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Assets
- ------
Current assets:
Cash and cash equivalents 5,576
Accounts receivable, net of allowance for
doubtful accounts 187,771
Inventories 69,540
Prepaid expenses and other current assets 647,850
-----------
Total current assets 910,737
Property, plant, and equipment,
net of accumulated depreciation 1,678,874
Other assets 43,534
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Total assets 2,633,145
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Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable, trade 225,181
Accrued expenses 139,631
Current maturities of long term debt 164,150
Current obligations under capital leases 5,589
Due to stockholders 303,331
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Total current liabilities 837,882
Obligation under capital lease, less current portion 6,836
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Total liabilities 844,718
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Stockholders' equity:
Preferred stock; no par value, 5,000,000 shares
authorized; 100 shares issued
and outstanding 74,602
Common stock; no par value, 100,000,000 shares
authorized; 80,540,742 shares
issued and outstanding 11,011,979
Additional paid in capital 3,010,793
Common stock subscription receivable (20,000)
Accumulated deficit (12,288,947)
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Total stockholders' equity 1,788,427
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Total liabilities and stockholders' equity 2,633,145
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See accompanying notes to consolidated financial statements.
2
Part 1
Financial Information
(Item 3)
Aqua Clara Bottling & Distribution, Inc. and Subsidiary
Consolidated Statements of Operations
(unaudited)
For The Three Months Ended For The Six Months Ended
Sept 29, 2001 Sept 30, 2000 Sept 29, 2001 Sept 30, 2000 30-Jun-01
------------- ------------- ------------- ------------- ----------
Sales 99,914 86,988 335,869 176,964 235,955
Cost of sales 80,834 129,266 271,355 190,680 190,521
----------- ----------- ---------- ---------- -----------
Gross profit (loss) 19,080 (42,278) 64,514 (13,716) 45,434
General, administrative, and sales expenses 514,610 480,832 699,702 830,931 185,092
Stock options forfeited 0 0 0 (410,020) 0
Operating loss (495,530) (523,110) (635,188) (434,627) (139,658)
Other expense:
Interest expense (19,331) (28,529) (21,867) (36,460) (2,536)
Interest and other income 0 0 0 0 0
Gain (loss) on sale of assets 0 0 0 0 0
Other expense 0 0 0 0 0
- - - -
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Net other expense (19,331) (28,529) (21,867) (36,460) (2,536)
----------- ----------- ---------- ---------- -----------
Net loss (514,861) (551,639) (657,055) (471,087) (142,194)
----------- ----------- ---------- ---------- -----------
Dividends on preferred stock: 0 0 0 29,196 0
Net loss applicable to common stock ( 514,861) (551,639) (657,055) (500,283) (142,194)
=========== =========== =========== ========== ===========
Basic loss per common share $ (0.00646) $ (0.00887) $ (0.00846) $ (0.00804) $ (0.00190)
=========== =========== =========== ========== ===========
Weighted average common shares outstanding 79,700,936 62,212,446 77,633,273 62,212,446 74,994,728
=========== =========== =========== ========== ===========
See accompanying notes to consolidated financial statements.
3
Part 1
Financial Information
Aqua Clara Bottling & Distribution, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(unaudited)
For The Three Months Ended For The Six Months Ended
Sept 29, 2001 Sept 30, 2000 Sept 29, 2001 Sept 30, 2000 30-Jun-01
------------- ------------- ------------- ------------- ----------
Operating activities:
Net loss $ (514,861) $ (551,639) $ (657,055) $ (471,087) (142,194)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 28,107 28,342 57,454 56,684 28,727
Issuance of stock options to employees 44,000 0 44,000 26,002 0
Forfeiture of stock options 0 0 0 (410,020)
Issuance of stock for services and fees 53,235 13,000 67,693 179,699 14,458
Increase/(decrease) in cash casued by changes in:
Accounts receivable 23,568 (11,527) (129,891) (23,618) (153,459)
Inventories (18,097) 75,092 27,359 84,500 46,076
Prepaid expenses & other current assets 103,285 209,130 114,706 326,157 11,421
Accounts payable (51,972) (46,036) 57,182 (10,788) 109,154
Deferred revenue 0 (1,476) 0 1,524
Accrued expenses (45,827) 56,535 (42,141) (126,133) 3,686
Other liabilities (38,900) 29,755 82,915 41,417 121,815
Stockholder salary accrual (25,355) (22,593) (25,355) (12,697)
----------- ----------- ----------- -----------
Net cash used in operating activities (442,817) (182,040) (403,133) (338,360)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment 28,667 0 (8,308) (2,247) (36,975)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 0 0 0 155,010 0
Payments on long-term debt (91,729) (1,437) (94,863) (2,952) (3,134)
Payments on capital lease obligations 0 (3,209) (6,418) (3,209) 0
Net proceeds from issuance of stock 533,873 180,000 511,624 180,000
----------- ----------- ----------- -----------
Net cash provided by financing
activities 442,144 175,354 410,343 328,849
Net decrease in cash (673) (6,686) (1,098) (11,758)
Cash, beginning of period 6,249 15,908 6,674 20,980
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Cash, end of period $ 5,576 $ 9,222 $ 5,576 $ 9,222
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See accompanying notes to consolidated 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.
5
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 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.
6
Inventories consist of the following at September 29, 2001:
Raw materials $ 68,659
Work in progress 181
Finished goods 700
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$ 69,540
Property, plant, and equipment consist of the following at September 29, 2001:
Land $ 90,000
Building 926,520
Machinery and equipment 1,034,012
Vehicles 22,392
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Total 2,072,924
Less accumulated depreciation (394,050)
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$ 1,678,874
=============
The Company has reviewed its long-lived assets for impairment and has
determined that no adjustments to the carrying value of long-lived
assets are required.
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 September 29, 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 $ 25,000
Note payable: interest at 10%, secured
by building 135,857
Installment note payable; interest at
10.5%; payments $461 per month including
interest; collateralized by a vehicle 3,293
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Long-term debt $ 164,150
Less current installments 164,150
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Long-term debt, less current installments $ 0
===========
7
The following is a schedule by year of the principal payments required
on long-term debt:
2002 $ 164,150
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$ 164,150
At September 29, 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
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Total lease payments $ 14,766
Less amount representing interest
(6.5% - 8%) 2,341
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Present value of lease payments 12,425
Less current obligation 5,589
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Long-term capital lease obligation $ 6,836
At September 29, 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.
8
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
-----------
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.
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
September 30, 2000 were $86,988.
9
Sales for the quarter ended September 29, 2001, were $99,914. This
increase over the same quarter last year was due to sales under the
SerVen Rich contract this quarter.
The gross profit for the quarterly period ended September 29, 2001 was
$19,080 with general and administrative, and selling expenses for the
period totaling $514,610
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 3rd 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 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 million of
dissolved 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
dissolved oxygen.
10
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 is reduced to 3-5 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 new products with natural flavoring 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 dissolved oxygen,
to be marketed at a higher price. The Company utilizes a distinctive bottle
and label for its water products.
11
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.
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 Spring of 2001, the Company entered into an arrangement with SerVen Rich,
Inc., for production of a co-labeled product to be promoted by Richard,
Venus and Serena Williams. While the product showed good market potential,
SerVen Rich, Inc., was not able to capitalize on the potential and reach the
market. Nor has it been able to pay its bills. At the end of the quarter,
SerVen Rich, Inc.'s, business doors were closed and its telephones were no
longer in service. The Company is continuing to explore future options
for the brand. The Company is also pursuing all legal recourse, both civil
and criminal.
In addition to several small and regional distributors, the Company has
entered into an arrangement with United Beverage Brands, LLC, for sales and
distribution of our 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.
12
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 was 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 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.
13
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.
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Part II
Other Information
Item 1
Legal Proceedings
14
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. As a result of recent admissions by Mr. Gray that he had
falsified his educational background when he originally applied for a
position with the Company, we have filed crosscomplaints to recover damages
from the plaintiff.
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. The
note to D. Robert Bradshaw has since been assigned to E. Douglas Cifers,
and the related motion has been withdrawn.
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. During the quarter
ended September 29, 2001, a settlement was reached with the plaintiff,
resolving this matter.
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 outstanding matters is slated to be accomplished
as part of a total refinancing scheduled for the near future.
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Part II
Other Information
Item 2
Changes in Securities
15
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.
16
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Part II
Other Information
Item 3
Defaults Upon Senior Securities
(NONE)
17
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Part II
Other Information
Item 4
Submission of Matter to a Vote of Security Holders
(NONE)
18
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 September 29, 2001:
Name Position Director Since Age
- ---- -------- -------------- ---
E. Douglas Cifers Chairman 2000 50
John C. Plunkett President and Chief 1997 53
Executive Officer
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.
Due to the conflict of interest inherent in the Company's anticipated
litigation against SerVen Rich, Inc., Lewis Graham was removed from the
Company's Board of Directors, effective September 7, 2001.
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.
19
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 September 29, 2001.
(1) Incorporated by reference to the original filing of the Registration
Statement on Form SB-2, File No. 333-44315 (the "Registration Statement")
20
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: November 18, 2001 AQUA CLARA BOTTLING & DISTRIBUTION, INC.
By: /s/John C. Plunkett
----------------------------------
John C. Plunkett
President, Chief Executive Officer
21
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ----------------------------
21.1 Subsidiaries
23