As filed with the Securities and Exchange Commission on April 14, 1998
Registration No. 333-44315
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2/A
(Amendment No. 1)
REGISTRATION STATEMENT
Under
The Securities Act of 1933
AQUA CLARA BOTTLING AND DISTRIBUTION, INC.
(Name of registrant as specified in its charter)
Colorado 84-1352529
(State or Jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10720 72nd Street North, Suite 305 John H. McAvoy, President
Largo, Florida 33777 10720 72nd Street North, Suite 305
(813) 548-7105 Largo, Florida 33777
(Address, including zip code, and telephone number, including area code
(813) 548-7105
of Registrant's principal executive offices)(Name, address, including zip code,
and
telephone number, including area code,
of agent for service)
COPY TO:
Jehu Hand, Esq.
Hand & Hand
24901 Dana Point Harbor Drive, Suite 200
Dana Point, California 92629
(714) 489-2400
Facsimile (714) 489-0034
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after the effective date of this registration
statement.
If the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant
to Rule 415 under the Securities Act of 1933 other than securities offered only
in connection with dividend or
interest reinvestment plan, please check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(C) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box:
[ ]
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CALCULATION OF REGISTRATION FEE
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to Offering Price Aggregate Amount of
Securities to be Registered Be Registered Per Share(1) Offering Price Registration Fee
Common Stock issuable upon
conversion of Series A
<S> <C> <C> <C> <C> <C>
Convertible Preferred Stock(2)....... 1,333,334 $2.875 $ 3,833,335 $ 1,130.83
Common Stock offered by
selling shareholders(3).............. 952,500 $1.84 $ 1,752,600 $ 517.02
Total(4)............................... 2,285,834 $ 5,585,935 $ 1,647.85
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(1) Estimated solely for purposes of calculating the registration fee.
(2) Includes 1,333,334 shares issuable upon conversion of 2,500 shares
($2,500,000 aggregate principal amount) of Series A Convertible Preferred
Stock at the lower of 65% of the closing bid price of the Common Stock
averaged over the five trading days prior to the date of conversion, or
$1.875. The maximum offering price per share is based upon the closing
price of the Common Stock on January 13, 1998, or $2.875 since it is
higher than the estimated conversion price per share of the Series A
Convertible Preferred Stock (in accordance with Rule 457(g)).
(3) The maximum offering price per share is based on the closing price of the
Common Stock on April 2, 1998 of $1.84 per share.
(4) $1,718.78 previously paid.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION
PROSPECTUS
AQUA CLARA BOTTLING AND DISTRIBUTION, INC.
2,285,834 Shares of Common Stock
(no par value)
The estimated 2,285,834 shares (the "Shares") of Common Stock, no par
value (the "Common Stock") of Aqua Clara Bottling and Distribution, Inc., a
Colorado corporation (the "Company") are being offered by the selling
stockholders (the "Selling Shareholders") and include an estimated 1,333,334
shares issuable upon conversion of $2,500,000 in principal amount of Series A
Convertible Preferred Stock (the "Series A Preferred"), 952,500 shares currently
outstanding. The Company will not receive any proceeds from the sale of Common
Stock by the Selling Shareholders. See "Selling Shareholders." The expenses of
the offering, estimated at $42,000, will be paid by the Company.
The Common Stock currently trades on the Electronic Bulletin Board under
the symbol "AQCB" On April 2, 1998, the last sale price of the Common Stock as
reported on the Electronic Bulletin Board was $1.84 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PURCHASE OF THESE SECURITIES INVOLVES RISKS.
See "Risk Factors" on page 4.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
The date of this Prospectus is April 2, 1998
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No person has been authorized in connection with this offering to give any
information or to make any representation other than as contained in this
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any
securities covered by this Prospectus in any state or other jurisdiction to any
person to whom it is unlawful to make such offer or solicitation in such state
or jurisdiction. Neither the delivery of this Prospectus nor any sales made
hereunder shall, under any circumstances, create an implication that there has
been no change in the affairs of the Company since the date hereof.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement under the Securities Act
with respect to the securities offered hereby with the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549. This Prospectus, which is a part of the
Registration Statement, does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto, certain items of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement,
including all exhibits and schedules thereto, which may be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at its Regional Offices
located at 7 World Trade Center, New York, New York 10048, and at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 at
prescribed rates during regular business hours. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or document filed as an exhibit to the Registration Statement, each
such statement being qualified in its entirety by such reference. The Company
will provide, without charge upon oral or written request of any person, a copy
of any information incorporated by reference herein. Such request should be
directed to the Company at 10720 72nd Street North, Largo, Florida, 33777,
telephone (813) 548-7105.
As of the date of this Prospectus, the Company became a reporting company
under the Exchange Act and in accordance therewith in the future will file
reports and other information with the Commission. All of such reports and other
information may be inspected and copied at the Commission's public reference
facilities described above. The Commission maintains a web site that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission. The address of such site
is http://www.sec.gov. In addition, the Company intends to make available to its
shareholders annual reports, including audited financial statements, unaudited
semi-annual reports and such other reports as the Company may determine.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
more detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus.
The Company
Aqua Clara Bottling & Distribution, Inc., a Colorado corporation (the
"Company") produces, bottles and sells non-sparkling purified drinking,
distilled and natural spring water products.
According to Beverage Marketing, published by Beverage Marketing Corp.,
located at 2670 Commercial Avenue, Mingo Junction, Ohio 43938, the total U.S.
market for bottled water has grown from 1.6 billion gallons sold in 1987 to over
3.1 billion gallons in 1996, and accounted for approximately $3.6 billion in
wholesale sales during 1996. Non-sparkling water comprises over 87% of the U.S.
bottled water market and generated $2.7 billion of wholesale sales in 1996, and
is expected to continue to grow in the future. PET (an acronym for polyethylene
terephthalate, a premium clear plastic) packaged products comprise approximately
39% of the domestically produced non-sparkling water market and have grown from
approximately 83 million gallons in 1987 to approximately 580 million gallons in
1996, representing a compounded annual growth rate of approximately 24%.
PET-packaged products accounted for approximately $921 million of wholesale
sales in 1996. According to Beverage Marketing, PET bottled water is among the
fastest growing beverage categories in the United States. Contributing to the
growth in consumption of non-sparkling water are consumer trends including
health and fitness awareness, municipal tap water quality concern and maturing
soft drink demand, as well as consumer demand for convenience and innovative
packaging. Since April 1997, the Company has generated revenues from its 5
gallon home and office delivery business, which was sold by the Company in March
1998, and the Company now intends to focus its growth in PET containers ranging
from .5 liter to 1.5 liters, and to specialize in oxygen enriched water; with 40
parts per million (ppm) of oxygen, compared to 7 ppm for tap water. Oxygen
richness imparts a light and crisp taste and management believes that oxygen
enriched water is healthier, although no studies have been made to underlie this
conclusion.
The corporate offices of the Company are located at 10720 72nd Street
North, Largo, Florida 33777 and its telephone number is (813) 548-7105.
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<S> <C>
Securities Offered:.............................. An estimated 2,285,834 shares of Common Stock, no par
value per share, including an estimated 1,333,334 shares
issuable upon conversion of 2,500 shares of Series A Preferred
Stock at a conversion price per share of Preferred Stock equal
to $1,000 divided by the lower of $1.875 or 65% of the
average closing bid price of the Common Stock on the five
trading days prior to conversion; 952,500 shares currently
outstanding.
Risk Factors..................................... The securities offered hereby involve a high degree of risk and
immediate substantial dilution and should not be purchased by
investors who cannot afford the loss of their entire investment.
See "Risk Factors."
Common Stock Outstanding(1) Before Offering:..... 6,271,622(1) shares
Common Stock Outstanding After Offering:......... 7,604,956(1) shares
NASD Electronic Bulletin Board Symbol............ AQCB
(1) Based on shares outstanding as of February 20, 1998.
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Risk Factors
The securities offered hereby are highly speculative and involve a high
degree of risk, including, but not necessarily limited to the risk factors
described below. Prospective purchasers should carefully consider the following
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risk factors, among others, as well as the remainder of this prospectus, prior
to making an investment in the Company.
RISK FACTORS
An investment in the securities offered hereby is speculative in nature
and involves a high degree of risk. In addition to the other information in this
Prospectus, the following factors should be considered carefully in evaluating
the Company and its business.
Limited History of Business Operations; Management of Growth
The Company has limited operating history, having commenced operations
in April 1997. The Company's operating history to date has been limited to the
5-gallon delivery market, which has been sold and the Company has no experience
in the PET market. The Company will be required to build a management
infrastructure as it devotes significant managerial resources to build its PET
business. As a result of the increase in operating expenses caused by this
expansion, operating results may be adversely affected if sales do not
materialize, whether due to increased competition or otherwise. The can be no
assurance that the Company will achieve significant sales or achieve
profitability. As a result, the Company believes that period to period
comparisons of its results of operation are not necessarily meaningful and
should not be relied upon as an indication of future performance.
Additional Financing Requirements of the Company
At December 31, 1997, the Company had working capital of approximately
$1,560,000. The Company's operations have been financed to date through a debt
offering and through sales of its common stock, most recently through the sale
of 2,500 shares of Series A Preferred Stock. The Company requires significant
capital for the expansion of its operations. The Company believes that the net
proceeds from this Preferred Stock offering should be sufficient to fund its
operations until at least until the end of calendar 1998. However, no assurance
can be given that additional funds will not be required prior to the expiration
of such period or that any funds which may be required will be available, if at
all, on acceptable terms. If additional funds are required, the inability of the
Company to raise such funds will have an adverse effect upon its operations. To
the extent that additional funds are obtained by the sale of equity securities,
the stockholders may sustain significant dilution. If adequate capital is not
available the Company will have to reduce or eliminate its planned expansion
activities, which could otherwise ultimately provide significant revenue to the
Company. Even if such additional financing is available on satisfactory terms,
it, nonetheless, could entail significant additional dilution of the equity
ownership of the Company to existing shareholders and the book value of their
outstanding shares.
Competition
The bottled water industry is highly competitive. Nearly all of the
Company's competitors have more experience in the U.S. bottled water market,
have greater financial and management resources and have more established
proprietary trademarks and distribution networks than the Company. The Company
currently competes with respect to bottled water with established national
companies such as The Perrier Group of America, Inc. (whose brands include
Arrowhead Mountain Spring Water, Poland Spring, Ozarka Spring Water, Great Bear,
Deer Park, Ice Mountain and Zephyrhills Natural Spring Water) and Great Brands
of Europe (whose brands include Evian Natural Spring Water and Dannon Natural
Spring Water), as well as numerous regional bottled water companies located in
the United States and Canada. The Company competes not only with other bottled
water producers, but also with producers of other beverages, including, but not
limited to, soft drinks, coffee, juices, beer, liquor and wine. The bottled
water industry also competes for the same consumer who may, when choosing to
drink water, drink tap water or use a home filtration system to filter tap water
for drinking. There can be no assurance that the Company can compete
successfully. See "Business -- Competition."
Ability to Manage Growth
In order to penetrate its bottled water business, the Company must meet
its strategic objectives to produce high quality oxygenated water products,
build its customer base, build its product line and add new distribution
channels. The Company's ability to meet these objectives depends upon (a) the
successful development and equipping of its Clearwater plant (b) the successful
marketing and distribution of its products, (C) the securing of sources of water
(d) the degree to which the Company loses sales to competing water suppliers,
(e) the availability
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of capital, (f) consumer acceptance of oxygenated water and (g) general economic
and other factors beyond the Company's control. The Company has never produced
and marketed PET packaged products. No assurance can be given as to the future
growth in the Company's business or as to its profitability. Further growth of
the Company will require employment and training of new personnel, expansion of
facilities and expansion of management information systems. If the Company is
unable to manage its growth effectively, the Company's profitability and its
ability to achieve its strategic objectives may likely be materially adversely
affected.
Fluctuations in Quarterly Operating Results
The Company's revenues are subject to several factors which may result
in fluctuations in the Company's operating results. The bottled water business
is highly seasonal, with increased sales during warmer months. Inclement weather
may negatively impact the Company's business, particularly summers which are
unusually cool or rainy. Fluctuations in retail prices and raw material prices
may produce corresponding fluctuations in the Company's profits. In addition,
the Company expects to make significant investments from time to time in capital
improvements to, among other things, increase capacity. Costs associated with
such improvements may cause an immediate reduction in profit margins unless and
until sales volume increases. The Company's product and packaging mix may change
from time to time and, depending on certain factors, may negatively impact
profit margins. The Company is subject to competitive pricing pressures which
may affect its financial results. Due to all the foregoing factors, it is
possible that in some future quarter or quarters, the Company's operating
results would likely be below the expectations of securities analysts and
investors. In such event, the price of the Common Stock would likely be
materially adversely affected.
Dependence on Key Personnel
The continued success of the Company is largely dependent on the
personal efforts and abilities of
management, including Mr. John S. McAvoy, President and Chief Executive Officer
of the Company, John C. (Jack)
Plunkett, Chief Operating Officer, and Mr. Rand L. Gray, Chief Financial Officer
of the Company. The Company
has entered into employment agreements with these persons but has no key man
life insurance in place. The loss
of any of these executive's services could have a material adverse effect on the
Company. See "Management."
Dependence upon Supplier
The Company currently obtains the water from Silver Springs, in Ocala
Florida. Occurrences beyond the control of the Company including, but not
limited to, drought, and other occurrences, such as water contamination,
geological changes which could interfere with operation or failure of the water
supply to comply with all applicable governmental requirements for mineral and
chemical concentration, could have a material adverse effect on the business of
the Company. The Company believes that adequate supplemental commercial sources
of water exist, but there is no assurance that such commercial sources will be
available in sufficient amounts or if available, obtainable on commercially
reasonable terms. See "Business."
Dependence on Key Suppliers
All of the Company's water products will be expected to be offered in
premium PET bottles. PET bottles are manufactured by a limited number of
suppliers. While the Company believes that it will be able to obtain bottles,
there can be no assurance that the Company will be able to obtain PET bottles
from its suppliers on commercially reasonable terms, particularly at periods of
peak demand. Failure to obtain the necessary packaging materials could have a
material adverse effect on the business of the Company. The Company has no
agreements in place securing a supply of PET bottles. In the event the Company's
requirements for PET bottles are not met, there may be a material adverse effect
on the Company until alternative supplies of PET bottles are found.
Raw Material Prices
Due to the wide range of beverages available to consumers, including
bottled water products, the Company has limited ability to raise prices for its
products. The Company could in the future be affected by higher prices for raw
materials including PET resin and corrugated boxes. The Company might be unable
to pass such higher costs to its customers. As a result, the Company's results
of operations may be adversely affected by future increases in raw material
prices.
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Product Liability
The bottling and distribution of bottled water products entails a risk
of product liability, including liability due to the presence of contaminants in
its products. The Company maintains insurance coverage against the risk of
product liability and product recall. However, the amount of the insurance
carried by the Company is limited, the insurance is subject to certain
exclusions and may or may not be adequate. In addition to direct losses
resulting from product liability and product recall, the Company may suffer
adverse publicity and damage to its reputation in the event of contamination
which could have a material adverse effect on sales and profitability.
Dependence on Trademarks
The Company has obtained a trademark on the Aqua Clara trademark, and
has applied for federal registrations for other proposed trademarks. The Company
believes that its registered and common law trademarks have significant value
and goodwill and that some of these trademarks are instrumental in its ability
to create demand for and to market its products. There can be no assurance that
the Company's 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 a material adverse effect on the Company.
Government 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. These laws and
regulations and their interpretation and enforcement are subject to change.
There can be no assurance that additional or more stringent requirements will
not be imposed on the Company's operations in the future. Failure to comply with
such laws and regulations could result in fines against the Company, a temporary
shutdown of production, recalls of the product, loss of certification to market
the product or, even in the absence of governmental action, loss of revenue as a
result of adverse market reaction to negative publicity. Any such event could
have a material adverse effect on the Company. See "Business -- Regulation."
Lack of Inventory
The Company intends to maintain a limited amount of finished product
inventory. An event causing the Company's facilities to shut down, even for a
short period, would result in an inability to fill customer orders and
accordingly would have a material adverse effect on the Company's revenues and
customer relations.
Consumer Preferences
The Company believes that the most important factor in the growth of
natural water products has been a change in consumer preferences. Consumer
preferences may be influenced, however, by the availability and appeal of
alternative beverages or packaging as well as general economic conditions, among
other things. No assurance can be given that consumer demand for oxygen enriched
water will exist, grow or will not diminish in the future.
No Cash Dividends
The Company has not paid any cash dividends on its capital stock. The
Company anticipates that its future earnings, if any, will be retained for use
in the business, or for other corporate purposes, and it is not anticipated that
any cash dividends on the Common Stock will be paid in the foreseeable future.
See "Dividend Policy" and "Description of Securities."
Control by Current Shareholders; Anti-Takeover Devices
Upon the consummation of this Offering, and assuming the conversion of
all of the shares into the underlying Common Stock at the rate of $1.875 per
share, management will own 34% of the outstanding shares of Common Stock.
Accordingly, such persons, acting in concert, may be able to elect all of the
Company's directors, increase the Company's authorized capital, dissolve, merge
or sell the assets of the Company and generally direct the affairs of the
Company. See "Principal Shareholders."
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In addition, certain provisions in the Company's Articles of
Incorporation and certain provisions of
applicable Colorado law may, under certain circumstances, have the effect of
discouraging, delaying or preventing
a change in control of the Company. See "Description of Securities -- Preferred
Stock."
No Prior Public Broad Market
Prior to this Offering, the Company's Common Stock has traded on the
NASDAQ OTC Bulletin Board under the symbol "AQCB." Although the Company intends
to apply at some future time to have the Common Stock included in the Nasdaq
SmallCap(R) Market, it does not currently meet the requirements for such listing
and there can be no assurance that the application will be successful nor that a
broad market in the Common Stock will develop, or, if such a market develops,
that it will be sustained. There can therefore be no assurance as to when, if at
all, investors will be able to liquidate their investment in the Company.
Nasdaq Stock Market and Market Illiquidity
The Company's Common Stock does not meet the current Nasdaq listing
requirements for the SmallCap(R) Market. If the Company is unable to satisfy
Nasdaq's requirements for listing, trading, if any, the Common Stock will
continue to be conducted on the NASD's OTC Bulletin Board, established for
securities that do not meet the Nasdaq SmallCap(R) Market listing requirements.
Consequently, the liquidity of the Company's securities could be impaired, not
only in the number of securities which could be bought and sold, but also
through delays in the timing of transactions, reduction in security analysts'
and the news media's coverage of the Company, and lower prices for the Company's
securities than might otherwise be attained.
Risks of Low-priced Stocks; Penny Stock Regulations
Until such time, if any, that the Company's securities are listed on
The Nasdaq SmallCap(R) Market or a registered U.S. securities exchange they will
continue to be subject to Rule 15g-9 under the 1934 Act, which imposes
additional sales practice requirements on broker-dealers which sell such
securities to persons other than established customers and institutional
accredited investors. For transactions covered by this rule, a broker-dealer
must make a special suitability determination for the purchaser and have
received the purchaser's written consent to the transaction prior to sale.
Consequently, the rule may affect the ability of broker-dealers to sell the
Company's Common Stock and may affect the ability of purchasers in this Offering
to sell any of the Common Stock acquired pursuant to this Memorandum in the
secondary market. The Commission's regulations define a "penny stock" to be any
equity security that has a market price (as therein defined) less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to certain
exceptions. The penny stock restrictions will not apply to the Company's Common
Stock if the Common Stock is listed on The Nasdaq SmallCap(R) Market and has
certain price and volume information provided on a current and continuing basis,
or meets certain minimum net tangible assets and other criteria. There can be no
assurance that the Company's securities will qualify for exemption from these
restrictions. If the Company's Common Stock continues to be subject to the rules
on penny stocks, the market liquidity for the Common Stock could be severely
adversely affected.
Shares Eligible for Future Sale
All but 2,823,850 of the presently issued and outstanding shares of
Common Stock are "restricted securities" as that term is defined under Rule 144
promulgated under the Securities Act. Rule 144 governs resales of such
restricted securities for the account of any person (other than an issuer), and
restricted and unrestricted securities for the account of an "affiliate" of the
issuer. Restricted securities generally include any securities acquired directly
or indirectly from an issuer of its affiliates which were not issued or sold in
connection with a public offering registered under the Securities Act. An
affiliate of the issuer is any person who directly or indirectly controls, is
controlled by, or is under common control with, the issuer. Affiliates of the
Company may include its directors, executive officers and persons directly or
indirectly owning 10% or more of the outstanding Common Stock. Under Rule 144
unregistered resales of restricted Common Stock cannot be made until it has been
held for one year from the later of its acquisition from the Company or an
affiliate of the Company. Thereafter, the remaining 3,447,772 shares of Common
Stock (49% of the current outstanding) may be resold without registration
subject to Rule 144's volume limitation, aggregation, broker transaction, notice
filing requirements, and requirements concerning publicly available information
about the Company (the "Applicable Requirements"). The majority of the
outstanding "restricted securities" have currently been held more than one year
and are immediately resaleable under Rule 144 and the applicable Requirements.
Resales by the Company's affiliates of restricted and unrestricted Common Stock
are subject to the Applicable Requirements. The volume limitations provide that
a person (or persons who must
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aggregate their sales) cannot, within any three-month period, sell more than the
greater of (I) one percent of the then outstanding shares, or (ii) the average
weekly reported trading volume during the four calendar weeks preceding each
such sale. A person who is not deemed an "affiliate" of the Company and who has
beneficially owned shares for at least one year would be entitled to sell such
shares under Rule 144 without regard to the Applicable Requirements. If a broad
public market develops for the Company's Common Stock, sales made under Rule
144, or other sales may have an adverse effect upon the then prevailing market
price of the Common Stock or the ability of purchasers in this offering to
resell their shares.
Potential Future Issuances of Securities
The Company's Board of Directors has the power, without the consent of
the shareholders, to issue additional shares of common stock or preferred stock
for such consideration as may be permitted under the Colorado Business
Corporation Act. Preferred stock may be issued with preferences or rights as to
dividends, voting or liquidation which are superior to those of holders of
common stock. In view of the large number authorized but unissued shares of
common stock (42,145,044) as of the date of this Prospectus) current
shareholders are subject to significant potential dilution in their ownership
interest in the Company, see "Description of Securities."
Risks Associated with Forward-looking Statements
This Prospectus contains certain forward-looking statements regarding
the plans and objectives of management for future operations, including plans
and objectives relating to the Company's planned marketing efforts and future
economic performance of the Company. The forward-looking statements and
associated risks set forth in this Prospectus include or relate to: (I) the
ability of the Company to obtain a meaningful degree of consumer acceptance for
its products and future products, (ii) the ability of the Company to market its
products and future products on a national basis at competitive prices, (iii)
the ability of the Company to develop brand-name recognition for its products
and future products, (iv) the ability of the Company to develop and maintain an
effective sales network, (v) success of the Company in forecasting demand for
its products and future products, (vi) the ability of the Company to maintain
pricing and thereby maintain adequate profit margins, (vii) the ability of the
Company to achieve adequate intellectual property protection for the Company's
products and future products and (viii) the ability of the Company to obtain and
retain sufficient capital for its future operations.
The forward-looking statements herein are based on current expectations
that involve a number of risks and uncertainties. Such forward-looking
statements are based on assumptions that the Company will market and provide
products on a timely basis, that the Company will retain its customers, that
there will be no material adverse competitive or technological change in
conditions in the Company's business, that demand for the Company's products
will significantly increase, that the Company's President will remain employed
as such by the Company, that the Company's forecasts accurately anticipate
market demand, and that there will be no material adverse change in the
Company's operations or business or in governmental regulations affecting the
Company or its suppliers. The foregoing assumptions are based on judgments with
respect to, among other things, future economic, competitive and market
conditions, and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the Company's
control. Accordingly, although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, any such assumption
could prove to be inaccurate and therefore there can be no assurance that the
results contemplated in forward-looking statements will be realized. In
addition, as disclosed elsewhere in the "Risk Factors" section of this
Prospectus, there are a number of other risks inherent in the Company's business
and operations which could cause the Company's operating results to vary
markedly and adversely from prior results or the results contemplated by the
forward-looking statements. Growth in absolute and relative amounts of cost of
goods sold and selling, general and administrative expenses or the occurrence of
extraordinary events could cause actual results to vary materially from the
results contemplated by the forward-looking statements. Management decisions,
including budgeting, are subjective in many respects and periodic revisions must
be made to reflect actual conditions and business developments, the impact of
which may cause the Company to alter its marketing, capital investment and other
expenditures, which may also materially adversely affect the Company's results
of operations. In light of significant uncertainties inherent in the
forward-looking information included in this Prospectus, the inclusion of such
information should not be regarded as a representation by the Company or any
other person that the Company's objectives or plans will be achieved.
See "Management's Discussion and Analysis" and "Business."
8
<PAGE>
DIVIDEND POLICY
The Company has not paid any dividends on its Common Stock. The Company
currently intends to retain any earnings for use in its business, and therefore
does not anticipate paying cash dividends in the foreseeable future.
The Company is obligated to pay to holders of Series A Preferred Stock
an 8% annual dividend, equal to $80.00 per share, payable on each July 1
commencing on July 1, 1998. In the option of the Company it may pay such
dividend in shares of Common Stock valued at the Conversion Rate in effect on
July 1, 1998. No dividends may be paid on the Common Stock unless dividends have
been paid to the holders of Series A Preferred Stock.
MARKET PRICE OF COMMON STOCK
The Company's Common Stock has been listed on the NASD OTC Electronic
Bulletin Board sponsored by the National Association of Securities Dealers, Inc.
under the symbol "AQCB" since August 21, 1997. On April 2, 1998 the closing bid
price as reported by the Electronic Bulletin Board was $1.84.
The following table sets forth the high and low bid prices for the
Common Stock as reported on the Electronic Bulletin Board for each quarter since
August 21, 1997, for the periods indicated. Such information reflects inter
dealer prices without retail mark-up, mark down or commissions and may not
represent actual transactions.
Quarter Ended High Low
September 30, 1997 4.50 1.8437
December 31, 1997 4.0625 2.00
As of February 20, 1998, there were 178 record holders of Company
common stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
The Company's sales commenced in April 1997 with the introduction of
its 5 gallon bottled water service. In the nine months ended December 31, 1997
the Company had $120,367 in sales from this business. Revenues are comprised of
cooler rentals and water sales, which terminated in March 1998. The Company
intends with the proceeds of its recent offering of Series A Preferred Stock to
enter the PET bottled water market.
General, administrative and sales expenses in the nine months ended
December 31, 1997 increased to $1,182,794, approximately ten times the level of
such expenses in the year ended March 31, 1997. Such expenses in the December
31, 1997 period include $488,700 for consulting services paid in stock, $75,000
and $57,000 in other non-recurring expense. The increased level of these
expenses in the December 31, 1997 period reflects the commitment of the delivery
of bottled water business and expenses related to establishing the PET water
business.
It is anticipated that sales of PET products will not commence until
April 1998. The Company has no agreements in place with distributors for its PET
bottled water products and there can be no assurance as to future operating
revenues from this business. The Company sold its 5 gallon water business in
March 1998.
General and administrative expenses related to the expansion of the
Company's business are expected to be less than $30,000 per month. The Company
does not intend to manufacture PET water products without firm orders in hand
for its products. However, the Company intends to expand approximately $300,000
over the next twelve months in advertising, marketing and distribution costs,
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 nor attain profitability, if ever.
9
<PAGE>
Liquidity and Capital Resources
As of December 31, 1997, the Company had working capital of
approximately $1,560,000, most of which was comprised of cash. In December 1997
the Company completed a private offering of Series A Convertible Preferred
Stock. The proceeds of the offering were and are being used to refurbish its
Clearwater facility ($500,000), acquire water treatment and processing
equipment, and oxygen enhancement and bottling equipment ($950,000) and
marketing and general and administrative expenses and working capital.
Management believes that the cash on hand, together with cash generated from
operations, will be sufficient to meet the Company's cash requirements until at
least December 31, 1998. However, in the event the Company's business expands
beyond the Company's internal projections, or in the event the Company
encounters unforeseen difficulties occasioned by increased competition,
inability to obtain distribution contracts, or other factors, the Company may be
required to obtain additional capital on terms which cannot be foreseen at this
time. The Company has no plans or arrangements with respect to additional
capital sources.
The Company has no lines of credit available to it at this time.
Inflation has not had a significant impact on the Company's results of
operations.
Prepaid expenses as of December 31, 1997 include $400,000 in public
relations expenses for a contract to be performed over twelve months commencing
January 1998. This contract was paid out of the Company's preferred stock
offering.
BUSINESS AND PLAN OF OPERATION
General
Aqua Clara Bottling & Distributors, Inc., a Colorado corporation (the
"Company") organized on July 29, 1996 is the successor to Pocotopaug Investment,
Inc., a Florida corporation and the Company's operating subsidiary
("Pocotopaug"). Pocotopaug was organized in August 1995 by John S. McAvoy to
investigate the feasibility of producing and marketing non-sparkling drinking
water products. The Company produces and sells non-sparkling purified drinking
and distilled and natural water products.
Since April 1997, the Company has generated revenues from its 5 gallon
home and office delivery business, which was sold in March 1998, and the Company
now intends to focus its future operations in the sale of oxygen enriched water
packaged in PET containers ranging from .5 liter to 1.5 liters, and to
specialize in oxygen enriched water; with 40 parts per million (ppm) of oxygen,
compared to 7 ppm for tap water. Oxygen richness imparts a light and crisp taste
and management believes that oxygen enriched water is healthier, although no
studies have been made to underlie this conclusion.
According to Beverage Marketing (published by Beverage Marketing
Corp., located at 2670 Commercial Avenue, Mingo Junction, Ohio 43938), the total
U.S. market for bottled water has grown from 1.6 billion gallons sold in 1987 to
over 3.1 billion gallons in 1996, and accounted for approximately $3.6 billion
in wholesale sales during 1996 and non-sparkling water comprises over 87% of the
U.S. bottled water market and generated $2.7 billion of wholesale sales in 1996,
and is expected to continue to grow in the future (Beverage Marketing has no
affiliation with the Company or any of its affiliates). PET (an acronym for
polyethylene terephthalate, a premium clear plastic) packaged products comprise
approximately 39% of the domestically produced non-sparkling water market and
have grown from approximately 83 million gallons in 1987 to approximately 580
million gallons in 1996, representing a compounded annual growth rate of
approximately 24%. PET-packaged products accounted for approximately $921
million of wholesale sales in 1996. According to Beverage Marketing, PET bottled
water is among the fastest growing beverage categories in the United States.
Contributing to the growth in consumption of non-sparkling water are consumer
trends including health and fitness awareness, municipal tap water quality
concern and maturing soft drink demand, as well as consumer demand for
convenience and innovative packaging.
Industry Overview
The U.S. bottled water market is comprised of three segments:
domestically produced non-sparkling water, domestically produced sparkling water
and imported water, which constituted approximately 65%, 21% and 14%,
respectively, of 1996 U.S. bottled water wholesale sales, according to Beverage
Marketing. The domestically produced non-sparkling water category includes
natural spring water obtained from naturally occurring springs, well
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<PAGE>
water, distilled water and purified water. Unlike other beverages, bottled water
serves both as a tap water substitute and a refreshment beverage.
Consumer Trends. Contributing to the growth in consumption of
non-sparkling water are consumer trends including health and fitness awareness,
municipal tap water quality concern and maturing soft drink demand, as well as
consumer demand for convenience and innovative packaging. Bottled water,
particularly when packaged in premium PET bottles with sport caps, appeals to
consumers who are sports enthusiasts or whose lifestyles are oriented to health
and fitness. According to Beverage Marketing, consumers' concern over the
quality of municipal water supplies has contributed to an increase in bottled
water consumption. Bottled water has also become an alternative to other
beverages, including soft drinks. According to Information Resources, Inc.
("IRI"), total U.S. gallons sold of soft drinks through food store channels has
increased approximately 10% from 1994 through 1996. (Information Resources Inc.,
is located at 150 Clinton Street, Chicago, Illinois 60661 and has no affiliation
with the Company or any affiliate thereof.) Over the same time period, gallons
sold of ready-to-drink juices have increased approximately 1%. In contrast,
non-sparkling bottled water gallons sold have increased approximately 21% from
1994 to 1996, according to Beverage Marketing. Bottled spring water is natural
and caffeine and additive free. These attributes and the increased availability
of convenient packaging for natural spring water have contributed to the
increase in bottled water consumption.
Distribution Channels. Non-sparkling bottled water is generally sold
to end users through four channels. According to Beverage Marketing, the total
share of the bottled water market for each channel is as follows: (I)
off-premise retail, which consists of supermarket, convenience store and drug
store chains and other similar retail outlets (44.9%); (ii) home and office
delivery which primarily consists of 5 gallon containers (39.0%); (iii)
on-premise retail, which includes restaurants, delicatessens and other similar
sites (8.3%); and (iv) vending (7.8%).
Non-sparkling bottled water is generally delivered to customer
locations through direct-store-delivery ("DSD") or warehouse distribution
systems. DSD involves delivery of the product directly to the store's location
where consumers may purchase the product. Warehouse distribution systems involve
the delivery of truckloads of palletized products to the warehouses of regional
customers which, in turn, deliver the product directly to the customer's retail
sales locations.
Private Label. Private label products have become increasingly popular
among retailers and other customers. For example, supermarket sales of private
label products grew 8.5% in 1996 versus 1.4% growth among branded products,
according to IRI. Retailers benefit from having a range of private label and
branded products as well as from the customer affinity developed from the
reinforcement of the retailer's own brand. Other non-retailing customers find it
more efficient to source products from a private label manufacturer than to
produce the products themselves. Both types of customers often choose private
label bottled water producers on the basis of price, consistent product quality,
packaging capability, distribution capability and customer service.
Consolidation. The trend toward consolidation in the bottled water
industry is evidenced by the reduction in the number of bottled water filling
locations and the corresponding increase in volume produced at most locations
over the past ten years. According to Beverage Marketing, in 1996 there were
approximately 350 filling locations in the United States versus approximately
425 in 1986, a decrease of 17.6%. The number of filling locations with sales
over $75 million doubled to eight from 1995 to 1996. Larger companies are
seeking to expand their share within a market, obtain broader distribution and
achieve economies of scale with larger volume production.
Products
Five Gallon Home and Office Delivery. Although the focus of the
Company's business will be the production and distribution of oxygen enriched
water, the Company had an active 5 gallon home and office delivery business. The
Company delivered spring, purified drinking and distilled waters to Pinellas
County businesses and homeowners. Pinellas County is located approximately six
miles west of Tampa, Florida on the west central coast of Florida. The Company
owned and rented state-of-the art water coolers, which it rented to its 5 gallon
customers. The Company began its 5 gallon distribution business in April, 1997.
The Company sold this business in March 1998.
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
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<PAGE>
points of purchase will include grocery stores, convenience stores, gas station
markets, health spas and vitamin/health food stores.
The Company's oxygen enriched bottled water will be 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 will be 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 will be of distilled quality, although the distillation
process will not be 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.
There are no significant competitors producing oxygen enriched bottled
water. The Company knows of two other entities that are attempting to produce
and distribute oxygen enriched bottled water. None of the well-established
traditional bottled water distributors has an oxygen enriched bottled water
product.
The Company's oxygen enriched water will contain approximately 40
parts per million of oxygen. Normal water contains approximately 7 parts per
million of oxygen. As such, the Company's oxygen enriched bottled water will
contain approximately 500 - 600% more 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 can be no
assurance, however, that the Company's products will achieve consumer
acceptance. Consumer preferences are inherently subjective and subject to
change.
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.
Initially, the Company will not carbonate or flavor its water. After
the introductions of 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 will utilize a distinctive bottle and label for its
water products.
Strategy
The Company's objective is to build a product enriched water 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 distribution agreements with 2-4
non-affiliated partners. No distribution agreements have been entered into as of
the date of this prospectus. 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 packaged 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.
Neither vending nor private labeling have the attendant costs of direct
retailing, while they do have the benefit of increasing the production volume
and thereby increasing the production margins.
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 already
contacted the Company regarding
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<PAGE>
potential distribution of its oxygen enriched bottled water. The Company is
discussing distribution possibilities at this time but has no contracts for
distribution.
Production
The three components of production are the building, the water
processing and bottling equipment, and the labor force.
Building. The Company currently owns a 10,800 sq. foot building
located on 2.1 acres in Clearwater. The Company has already obtained the
necessary permitting and exemptions to remodel and use its building as a
bottling and distribution facility. The demolition and the insignificant amount
of asbestos abatement required to be performed have been completed.
Architectural renderings are completed and paid for. Major Building Company, a
regional building contractor, has been hired to remodel the Company's bottling
facility.
Equipment. The Company has investigated and inspected various
equipment to comprise various sized plants. The equipment can be divided into
two general categories - water processing and bottling. The water processing
equipment will not vary significantly from plant to plant, while the bottling
equipment will vary depending on the size of the plant to be constructed. A
medium size plant is capable of producing 3,200 cases per 8 hour shift, while
running at 80% capacity. The Company is under contract for delivery of all of
the equipment.
Water processing and bottling equipment for a medium size plant costs
approximately $750,000. These costs include shipping, installation and initial
technical training. The equipment has been ordered, and is scheduled to be
received and installed at the end of April, 1998.
Labor Force
The larger and faster the bottling line, the less manpower is required
due to increased automation. In general, the bottling facility will require four
employees per shift.
Water Sources
Under FDA guidelines, bottled water must contain fewer than 500 parts
per million ("ppm") in total dissolved solids. Varying amounts of solids provide
different tastes to water. The Company uses FDA and International Bottled Water
Association approved water sources.
Upon delivery to the Company's facilities, water is filtered through 0.2
micron filters and then ozonated during storage in stainless steel storage
tanks. Ozone is an unbalanced form of oxygen which, unlike regular oxygen, kills
bacteria and micro-organisms 3,000 times faster than chlorine. Unlike chlorine,
ozone naturally breaks down to simple oxygen in a few hours and leaves no traces
or residues. At the Clearwater facility, the source water runs through a number
of filtration, ion exchange, and reverse osmosis processes by which it is
reduced to a very pure 1-2 parts per million of total dissolved solids. Water is
oxygenated by first removing dissolved gasses from the water following which
medical grade oxygen is infused through a proprietary process. The water is then
piped to the clean room bottling area where the various products are filled and
capped. The residual ozone in the bottled products sanitizes the containers as
well as the water, making certain the water is pure. The clean room is filled
and pressurized with air from two high-volume HEPA (High-Efficiency Particulate
Air) air handlers that filter 99.97% of particulates out of the air.
The manufacturing process is designed to be highly automated. Bottles are
mechanically de-palletized, cleaned, rinsed, filled and capped. The bottles are
automatically labeled, tamper banded, assembled 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 a warehouse for future shipment.
Most products are shipped within 48 to 72 hours after production via outside
carriers.
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The Company will maintain exacting internal quality control standards.
Each batch of water will be tested according to FDA and International Bottled
Water Association standards.
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.
According to "Beverage Marketing", the ten largest bottled water companies
accounted for approximately 58.4% of wholesale dollar sales in 1996. 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. AquaPenn has chosen to
compete by focusing on innovative packaging, customer service and pricing.
Seasonality
The market for bottled water is seasonal, with approximately 70% of sales
taking place in the seven months of April through October inclusive. 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 current products satisfy Florida and Federal requirements
and its proposed products will satisfy all applicable state and federal
requirements 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.
Legal Proceedings
The Company is not a party to any material legal proceedings, except as
set forth below. On November 5, 1997 Life International Products, Inc., a
competitor of the Company, filed a complaint in the Circuit Court of Collier
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County Florida against the Company and Corporate Relations Group alleging false
and unfair competition under the Lanham Act, false and misleading advertising
under Florida law and common law unfair competition. The Complaint seeks
unspecified monetary damages and injunctive relief. In summary, the complaint
alleges that the Company has made claims about its current and future business
plans. The Company believes that the lawsuit is wholly without merit, and is
procedurally defective in that the plaintiffs lack standing to file suit, among
other defects. The Company has filed a motion to dismiss the lawsuit. Which was
granted on February 17, 1997. The motion was granted without prejudice so Life
International may refile in the future.
Employees
The Company currently employs approximately 11 full-time employees, none
of whom are covered by collective bargaining agreements. During peak production
periods, the Company supplements its full-time work force with part-time
employees. The Company believes that its relations with its employees are good.
MANAGEMENT
The following table sets forth certain information with respect to the
executive officers and directors of the Company. Each director holds such
position until the next annual meeting of the Company's shareholders and until
his respective successor has been elected and qualifies. All officers devote
full time to the Company. Any of the Company's officers may be removed with or
without cause at any time by the Company's Board of Directors.
Directors and Executive Officers
The members of the Board of Directors of the Company serve until the next
annual meeting of stockholders, or until their successors have been elected. The
officers serve at the pleasure of the Board of Directors. The following are the
directors and executive officers of the Company.
John S. McAvoy, 48, has served as President and CEO of the Company since
its inception in August 1995 and
has been an integral part of the development of this project. Mr. McAvoy had
been a practicing attorney for 20
years. Mr. McAvoy formerly ran a 2,000 acre farm in California which employed
25 to 150 employees, depending
on the season. Mr. McAvoy is a former owner of Property Management, Inc. in San
Francisco, which was
responsible for the operation and maintenance of a ten-story San Francisco
office building.
John C. (Jack) Plunkett, 49, has been a Director and the Vice
President/Chief Operating Officer and Secretary
of the Company since November 1, 1996. Mr. Plunkett is a graduate of the U. S.
Naval Academy where he received
a degree in naval engineering in 1970. Since 1984 Mr. Plunkett has served as a
consulting engineer with Science
Applications International Corporation, a two-billion dollar per year
employee-owned consulting firm in the defense,
space, energy, medical and transportation fields. Mr. Plunkett was responsible
for business development and project
management of multi-million dollar contracts. Additionally, Mr. Plunkett is the
principal in Sea Trails Shoppes, Inc.,
a commercial real estate development consisting of retail, office and restaurant
space and since 1995 has served as
President and Managing Partner of this entity.
Rand L. Gray, 50, has been Chief Financial Officer since July 1997. Mr.
Gray is a graduate of Western Michigan University and attended Notre Dame
University Graduate School. Mr. Gray served as Chief Financial Officer/Senior
Vice President with Felicione International, a wholesale fish distributor, from
1990 to 1996, and was Executive Vice President/Chief Financial Officer with
Behstev Inc., International, a modified asphalt manufacturer and distributor,
from 1985 to 1989. From 1979 to 1985 he was a Divisional Vice
President/Controller for Diamond International (Fortune 500), a printed products
manufacturer and distributor; and Litton Industries (Fortune 400), a printed
products manufacturer and distributor and as Vice President of Finance/CFO for
D.H.C., Inc., a manufacturer and distributor of modular homes. Mr. Gray has been
an accountant and business manager for over twenty-five years.
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Robert Guthrie, 74, has served as Director of the Company since May,1997
Mr. Guthrie is an attorney
licensed to practice in Florida with affairs in Seminole, Florida. Mr. Guthrie
also serves as a Director of the Pinellas
Community Bank.
Executive Compensation
The following table sets forth the cash compensation of the Company's
executive officers and directors during each of the last three fiscal years. The
remuneration described in the table does not include the cost to the Company of
benefits furnished to the named executive officers, including premiums for
health insurance and other benefits provided to such individual that are
extended in connection with the conduct of the Company's business. The value of
such benefits cannot be precisely determined, but the executive officers named
below did not receive other compensation in excess of the lesser of $25,000 or
10% of such officer's cash compensation.
<TABLE>
<CAPTION>
Summary Compensation Table
ANNUAL COMPENSATION LONG TERM COMPENSATION
Name and Other Annual Awards Payouts All
Principal Position Year Salary Bonus Compensation Other
RestrictedOptions/ LTIP
Stock ($)SARs(#) Payouts ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John S. McAvoy 1997 $31,875 0 0 0 0 0 0
President and CEO 1996 0 0 0 0 0 0
1995 0 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Rand Gray(1) 1997 $18,000 0 0 25,000 0 0 0
Chief Financial Officer
1996 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
John C. Plunkett(1) 1997 $31,875 0 0 50,000 0 0
Vice President
Chief Operating Officer 1996 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0
</TABLE>
(1) Does not include shares issued to these persons as consultanst as discussed
below.
The Company also retains consultants with experience in the bottled water
industry experience on the issues of processing and bottling. All consulting
contracts are oral and at will and the total amount incurred the consulting fees
is less than $20,000.
The Company has entered into one-year employment agreements with each of
Messrs. McAvoy, Plunkett and Gray as amended, providing for salaries of $77,000
each. Mr. McAvoy and Mr. Plunkett have orally agreed and Mr. Gray has agreed in
his written employment contracts to defer $25,000 of such compensation until
such time as the Company's cash flow permits. The Company also agreed to grant
stock options to Mr. Plunkett and Mr. Gray equivalent to those granted to Mr.
McAvoy. In addition the Company has agreed to issue to Messrs. Plunkett and
Gray, 500,000 and 250,000 shares, respectively, in connection with a prior
consulting agreements approved by the Board of Directors in December, 1996.
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PRINCIPAL SHAREHOLDERS
The following table sets forth information relating to the beneficial
ownership of Company Common Stock as of the date of this Prospectus by (i) each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock (ii) each of the Company's directors and
executive officers, and (iii) all of the Company's directors and executive
officers as a group. The Percentage After Offering assumes the conversion of all
shares of Series A Preferred into 1,333,334 shares of common stock and the
exercise of all options.
<TABLE>
<CAPTION>
Percentage Percentage
Name and Address(1) Common Stock Before Offering After Offering
<S> <C> <C> <C>
John S. McAvoy 1,837,900 29.3% 24.2%
10720 72nd Street North
Largo, Florida 33777
John C. Plunkett 580,000 9.2% 7.6%
10720 72nd Street North
Largo, Florida 33777
Rand L. Gray(2) 250,000 3.8% 3.3%
10720 72nd Street North
Largo, Florida 33777
Robert Guthrie 25,000 .4% .3%
10720 72nd Street North
Largo, Florida 33777
Corporate Relations Group, Inc.(3) 350,000 5.4% 4.6%
1801 Lee Road, Suite 301
Winter Park, Florida 32709
All Directors and Executive 2,692,900 48.1% 35.4%
Officers as a Group (4 persons)
</TABLE>
(1) Unless otherwise noted below, the Company believes that all persons
named in the table have sole voting and investment power with respect
to all shares of Common Stock beneficially owned by them. For purposes
hereof, a person is deemed to be the beneficial owner of securities
that can be acquired by such person within 60 days from the date hereof
upon the exercise of warrants or options or the conversion of
convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that any such warrants, options or convertible
securities that are held by such person (but not those held by any
other person) and which are exercisable within 60 days from the date
hereof, have been exercised.
(2) Includes 230,000 shares held jointly with his spouse and 20,000 shares
held by the children of Mr. and Mrs.
Gray.
(3) Includes options to purchase 250,000 shares. See Note 4 to the table
under the caption "Selling
Shareholders."
CERTAIN TRANSACTIONS
Mr. McAvoy founded Pocotopaug Investment, Inc. ("Pocotopaug") as a
Florida Corporation in August 1995.
(Pocotopaug means "Clearwater" in a local Indian dialect). Pocotopaug was
capitalized in 1996 by $323,500 in
bridge loans. Jack C. Plunkett, an officer and director, invested $20,000 in
bridge loans.
Aqua Clara Bottling and Distribution, Inc., was incorporated on July
29, 1996 in the State of Colorado and issued 835,000 shares of common stock
(including 192,650 shares to Mr. McAvoy) and 27,500 shares of preferred
17
<PAGE>
stock to various investors for total consideration of $3,167.50. The preferred
stock has since been retired. The offering was made under Rule 504 as an
offering exempt from registration under the Securities Act of 1933.
On November 1, 1996, the director and officer of Aqua Clara, Danny L.
Wey, resigned and was replaced by Messrs. McAvoy and Plunkett. On November 23,
1996, Aqua Clara issued 1,645,250 shares of common stock to Mr. McAvoy in
exchange for all of the outstanding shares of Pocotopaug and issued 44,872
shares to Danny L. Wey. Mr. Wey subsequently has sold all of his unrestricted
shares on the public market and continues to hold the remaining 104,706
restricted shares held by him pursuant to Rule 144. Unless otherwise noted, all
references to the Company in this Prospectus include the consolidated entity of
Aqua Clara and Pocotopaug.
On March, 1997, the Pocotopaug bridge investors exchanged their
$323,500 in convertible debt into 796,500 shares of Company common stock under
Rule 504, including Mr. Plunkett who received 80,000 shares. In December 1996,
the Company issued 1,022,000 shares to 7 persons for services rendered valued at
$100,950. From December 27, 1996 to March 1997, the Company issued 1,283,000
shares of common stock in an offering under Rule 504 for $.50 per share, to 35
persons.
In December, 1997, the Company issued 20,000 restricted shares of
common stock to Olympus Capital for consulting services rendered prior to
September 30, 1997. In December, 1997, the Company issued 75,000 restricted
shares of common stock to Olympus Capital for consulting services rendered
pursuant to a one-year consulting contract dated October 30, 1997.
In September, 1997, the Company issued 200,000 shares of restricted
common stock to each of Gulf Atlantic Publishing and Arrow Marketing for
advertising services and creative design of marketing materials respectively,
and issued 25,000 shares for services to each of Robert Guthrie (a director) and
Richard Chrzanowski.
Gulf Atlantic Publishing and Arrow Marketing purchased these 400,000
shares of $.25 per share pursuant to an option agreement.
On November 17, 1997 the Company entered into a Lead
Generation/Corporate Relations Agreement with Corporate Relations Group ("CRG")
pursuant to which the Company has paid CRG $400,000 and by which the Company has
agreed to pay CRG an additional $400,000 upon the Company raising its next
tranche of $2,500,000. Additionally, the Company agreed to issue options to
purchase 250,000 shares of common stock under the following terms (these options
are exercisable at the later of certain exercisable dates or when such tranche
is raised):
<TABLE>
<CAPTION>
Number of Shares Exercise Price Exercise Date
<C> <C> <C>
50,000 $ 3.50 11/17/98
50,000 4.20 11/17/99
50,000 4.70 11/17/00
50,000 5.60 11/17/01
50,000 7.00 11/17/02
</TABLE>
At this time the Company does not anticipate requiring any additional
financing, and under the terms of the agreement the Company would therefore have
no further obligations to CRG.
The Company agreed to issue 100,000 restricted shares to CRG, such
shares to be returned should the Company file and cause to be effective a
registration statement for the shares underlying the options within 120 days of
the date of the agreement. CRG was also granted piggyback rights for these
shares which have been escrowed with the Company's legal counsel. Under its
agreement with the Company, CRG has agreed to perform financial public relations
services for the Company. Under the agreement, the Company will be required to
host a due diligence trip for up to ten retail brokers who demonstrate an
interest in the Company's Common Stock.
Mr. John McAvoy has loaned the Company amounts for working capital.
The loans are represented by
promissory notes due on demand and bearing interest of 6%. None of the loans
have been repaid. The total owed
18
<PAGE>
is $15,000 with $1,500 loaned on March 15, 1996, $9,000 loaned on April 17,1996,
$4,000 loaned on July 19, 1996, and $500 loaned without a formal promissory
note.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company's former independent accountant BDO Seidman, LLP ("BDO
Seidman") resigned from that capacity on December 29, 1997. The report by BDO
Seidman on the financial statements of the Company dated November 10, 1997,
including a balance sheet as of March 31, 1997 and the statements of operations,
cash flows and statement of stockholders' equity for the eight months ended
March 31, 1997 and the period inception (August 17, 1995) through March 31, 1997
did not contain an adverse opinion or a disclaimer of opinion, or was qualified
or modified as to uncertainty, audit scope or accounting principles, except as
to the uncertainty as to whether the Company would continue as a going concern.
During the period covered by the financial statements through the date of
resignation of the former accountant, there were no disagreements with the
former accountant on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure. However, subsequent to the
issuance of BDO Seidman's audit report, the Company included the audit report,
together with unaudited financial statements of the Company as of and for the
six months ended October 4, 1997, in a private placement memorandum relating to
the offering of the Series A Preferred Stock. BDO Seidman did not consent to the
use of the audit report in the private placement memorandum, and did not have
the opportunity to review the private placement memorandum or the unaudited
financial statements until after the close of the offering, at which time BDO
Seidman indicated that certain prepaid expenses were incorrectly capitalized as
of October 4, 1997. BDO Seidman resigned as a result of what it considered to be
an unauthorized dissemination of its audit report coupled with the inaccuracies
in the unaudited financial statements. The Company did not disagree with BDO
Seidman as to the inaccuracies and expensed the prepaid expenses in question. A
letter from the former independent accountant for the Company is attached as an
exhibit to the Registration Statement of which this Prospectus is a part. On
December 30, 1997 the Company engaged Pender, Newkirk & Company as its new
independent accountants.
19
<PAGE>
SELLING SHAREHOLDERS
The shares of Common Stock of the Company offered by the Selling
Shareholders (the "Shares") will be offered at market prices, as reflected on
the Electronic Bulletin Board, or on the Nasdaq Small Cap Market if the Common
Stock is then traded on Nasdaq. The shares include 952,500 shares currently
outstanding as well as shares being offered by the holders upon conversion of
the Series A Preferred and 250,000 shares issuable upon exercise of options. The
aggregate number of shares offered for resale upon conversion of the Series A
Preferred will be based on the conversion rate in effect at the time of
conversion. It is anticipated that registered broker-dealers will be allowed the
commissions which are usual and customary in open market transactions. There are
no other arrangements or understandings with respect to the distribution of the
Common Stock.
The number of shares of Common Stock issuable upon conversion of each
of the 2,500 shares of Series A Preferred, and the consequent number of shares
of Common Stock available for resale under this Prospectus, is based upon a
conversion ratio which is $1,000 divided by the lower of (a) 65% of the closing
bid price of the Common Stock on NASDAQ averaged over the five trading days
immediately prior to the date of conversion, or (b) $1.875. Based upon an
assumed conversion price of $1.875 per share, 533.33 shares of Common Stock
would be issuable per share of Series A Preferred. Except as noted, the Selling
Shareholders do not own any Common Stock except as registered hereby and will
own no shares after the completion of the offering. The relationship, if any,
between the Company and any Selling Stockholder is set forth below.
<TABLE>
<CAPTION>
Number of
Shares of Number of Percent
Series A Common Shares Before
Shareholder Preferred Offered Offering
<S> <C> <C> <C>
Olympus Capital, Inc.(1) 200 201,667 3.1%
Barry Seidman 500 266,667 4.1%
Arnold Zousmer 500 266,667 4.1%
James W. Spratt II(1) 25 13,333 *
Hassan Abdul SA(2) 250 133,333 2.1%
C.A. Opportunidad SA(2) 250 133,333 2.1%
Joseph Sloves 25 13,333 *
Philip Holstein, Jr.(3) 20 10,667 *
Castle Creek Valley Ranch
Defined Benefit Pension Plan(3) 20 10,667 *
Peak Financial, Inc. 30 16,000 *
Lee & Rick's Oyster Bar #2, Inc. 50 26,667 *
Bruce R. Knox 75 40,000 *
Frederic A. Lenz 75 40,000 *
Tom Richardson 15 8,000 *
Charles Kerr 15 8,000 *
Passy Holding 150 80,000 1.3%
James Skalko 200 106,667 1.6%
Ed Leinster 100 53,333 *
Corporate Relations Group, Inc.(4) 0 350,000 5.4%
Edward Foster 5,000 *
Richard Foster 2,500 *
Jack C. Plunkett(5) 500,000 7.5%
Rand L. Gray(6) 250,000 3.7%
TOTAL 2,500 2,535,834 28.8%
</TABLE>
* Less than 1%
(1) The controlling shareholder of Olympus Capital, Inc. is James W. Spratt
III, the son of James W. Spratt II.
Includes 95,000 shares of Common Stock already held by Olympus Capital,
Inc.
(2) Jose Antonio Gomez is the principal shareholder of Hassan Abdul SA and
C.A. Opportunidad, S.A.
20
<PAGE>
(3) Mr. Holstein is the trustee of the Castle Creek Valley Ranch Defined
Benefit Pension Plan.
(4) Messrs. Joe H. Landis and Paul Serluco are the officers of Corporate
Relations Group, Inc. Includes 100,000
shares held in escrow (see "Certain Transactions") and options to
purchase 250,000 shares.
(5) Mr. Plunkett owns 80,000 shares not offered hereby.
(6) Includes 230,000 shares held by Mr. Gray and his spouse and 20,000
shares held by their minor children.
DESCRIPTION OF SECURITIES
Common Stock
The Company's Articles of Incorporation authorizes the issuance of
50,000,000 shares of Common Stock, no par value per share, of which 6,271,622
shares were outstanding as of February 20, 1998, including 100,000 shares held
in escrow. See "Certain Transactions." The Company has no plans to sell
additional shares of common stock at this time, but reserves the right to do so
to meet future operating requirements. Holders of shares of Common Stock are
entitled to one vote for each share on all matters to be voted on by the
stockholders. Holders of Common Stock have no cumulative voting rights. Holders
of shares of Common Stock are entitled to share ratably in dividends, if any, as
may be declared, from time to time by the Board of Directors in its discretion,
from funds legally available therefor. In the event of a liquidation,
dissolution or winding up of the Company, the holders of shares of Common Stock
are entitled to share pro rata all assets remaining after payment in full of all
liabilities and the liquidation preference to holders of Series A Preferred
Stock. Holders of Common Stock have no preemptive rights to purchase the
Company's common stock. There are no conversion rights or redemption or sinking
fund provisions with respect to the common stock. All of the outstanding shares
of Common Stock are, and the shares of Common Stock will be, when issued and
delivered, fully paid and non-assessable issuable upon conversion of the
Preferred Stock.
Preferred Stock
The Company's Articles of Incorporation authorize the issuance of
5,000,000 shares of preferred stock, no par value, of which 2,500 shares of
Series A Preferred Stock are outstanding. The Series A Preferred Stock is
convertible, at the option of the holder, into shares of common stock at an
initial Conversion Rate, subject to adjustments, at a number of shares of Common
Stock equal to $1,000 divided by the lower of (I) Sixty-Five Percent (65%) of
the average Market Price of the Common Stock for the five trading days
immediately prior to the Conversion Date (defined below) or (ii) $1.875,
increased proportionally for any reverse stock split and decreased
proportionally for any forward stock split or stock dividend. Market Price for
any date shall be the closing bid price of the Common Stock on such date, as
reported by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), or the closing bid price in the over-the-counter market if
other than Nasdaq. The holders of Series A Preferred have no voting rights, and
have a liquidation preference of $1,300 per share over the Common Stock.
Dividends on the Series A Preferred are payable at the rate of 8% per annum ($80
per share of Series A Preferred Stock) payable on each July 1, in either cash,
or in the option of the Company, Common Stock valued at the Conversion Rate. 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
financings 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
21
<PAGE>
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 stock in future
financings, 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.
The Company intends to furnish holders of its common stock annual
reports containing audited financial statements and to make public quarterly
reports containing unaudited financial information.
Transfer Agent
The transfer agent for the Common Stock is Jersey Transfer and Trust
Company, 201 Bloomfield Avenue, Verona, New Jersey 07044 and its telephone
number is (973) 239-2712.
LEGAL MATTERS
The legality of the Shares offered hereby will be passed upon for the
Company by Hand & Hand, a law corporation, Dana Point, California.
EXPERTS
The audited financial statements included in this Prospectus as of and
for the years ended March 31, 1997 and the period Inception (August 17, 1995) to
March 31, 1996 have been audited by Pender Newkirk & Company, independent
certified public accountants, to the extent and for the periods set forth in
their report thereon and are included in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
INDEMNIFICATION
The Company has adopted provisions in its articles of incorporation
and bylaws that limit the liability of its directors and provide for
indemnification of its directors and officers to the full extent permitted under
the Colorado General Business Act. Under the Company's articles of
incorporation, and as permitted under the Colorado General Business Act,
directors are not liable to the Company or its stockholders for monetary damages
arising from a breach of their fiduciary duty of care as directors. Such
provisions do not, however, relieve liability for breach of a director's duty of
loyalty to the Company or its stockholders, liability for acts or omissions not
in good faith or involving intentional misconduct or knowing violations of law,
liability for transactions in which the director derived as improper personal
benefit or liability for the payment of a dividend in violation of Colorado law.
Further, the provisions do not relieve a director's liability for violation of,
or otherwise relieve the Company or its directors from the necessity of
complying with, federal or state securities laws or affect the availability of
equitable remedies such as injunctive relief or recision.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding that may result in a claim for indemnification by any director or
officer.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to
directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful
22
<PAGE>
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
23
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
and Subsidiary
(A Development Stage Enterprise)
Consolidated Financial Statements
Periods August 17, 1995 (Date of Inception)
Through December 31, 1997
<TABLE>
<CAPTION>
Contents
<S> <C>
Independent Auditors' Report on Consolidated Financial Statements F-2
Consolidated Financial Statements:
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Changes in Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 to F-13
</TABLE>
F-1
<PAGE>
Independent Auditors' Report
Board of Directors
Aqua Clara Bottling & Distribution, Inc.
and Subsidiary (A Development Stage Enterprise)
Largo, Florida
We have audited the accompanying consolidated balance sheet of Aqua Clara
Bottling & Distribution, Inc. and Subsidiary (a development stage enterprise) as
of March 31, 1997 and the related consolidated statements of operations, changes
in stockholders' equity, and cash flows for the year then ended and for the
periods August 17, 1995 (date of inception) through March 31, 1996 and 1997.
These consolidated financial statements are the responsibility of the management
of Aqua Clara Bottling & Distribution, Inc. and Subsidiary. Our responsibility
is to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Aqua Clara Bottling
& Distribution, Inc. and Subsidiary as of March 31, 1997 and the results of its
operations and its cash flows for the year then ended and for the periods August
17, 1995 (date of inception) through March 31, 1996 and 1997 in conformity with
generally accepted accounting principles.
As discussed in Note 12 to the consolidated financial statements, certain errors
resulting in the understatement of expenses and common stock as of March 31,
1997 were discovered by management of the Company during the current year.
Accordingly, the March 31, 1997 consolidated financial statements have been
restated to correct this error.
Pender Newkirk & Company
Certified Public Accountants
Tampa, Florida
January 9, 1998, except for Note 11 to which the date is February 26, 1998
F-2
<PAGE>
<TABLE>
<CAPTION>
Aqua Clara Bottling & Distribution, Inc.
and Subsidiary
(A Development Stage Enterprise)
Consolidated Balance Sheets
March 31, December 31,
1997 1997
Assets (Unaudited)
Current assets:
<S> <C> <C>
Cash $ 391,281 $ 1,253,633
Accounts receivable, trade 47,024
Investment securities 1,000
Inventory 3,684
Prepaid assets 1,091 413,888
Fixed assets sold subsequently
to December 31, 1997 160,000
Total current assets $ 393,372 $ 1,878,229
Property, plant, and equipment, net of accumulated
depreciation 460,227 589,845
Other assets:
Organizational costs, net of accumulated amortization 37,356 25,596
Deposits and other assets 35,760 334,493
Total other assets 73,116 360,089
$ 926,715 $ 2,828,163
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, trade $ 11,667 $ 47,232
Accrued expenses 903 21,076
Customer deposits 17,016
Note payable and current maturities of long-term debt 26,342 232,801
Total current liabilities 38,912 318,125
Long-term debt, less current maturities 277,433 360,244
Stockholders' equity:
Preferred stock; no par value; 5,000,000 shares
authorized; 2,500 shares issued and outstanding 1,864,988
Common stock; no par value; 50,000,000 shares
authorized; 4,884,122 and 5,579,122 shares issued
and outstanding at March 31, 1997 and December 31,
1997, respectively 993,616 2,196,116
Additional paid-in capital 1,417,391
Deficit accumulated during development stage (333,246) (2,967,022)
Subscription receivable (50,000) (306,250)
Total stockholders' equity 610,370 2,205,223
$ 926,715 $ 2,828,163
</TABLE>
Read independent auditors' report. The accompanying
notes are an integral part of the consolidated
financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
Aqua Clara Bottling & Distribution, Inc.
and Subsidiary
(A Development Stage Enterprise)
Consolidated Statements of Operations
Period
August 17, 1995 From Inception
(Date of Inception) Nine Months Ended (August 17, 1995)
Year Ended Through December 31, to
March 31, 1997 March 31, 1996 1997 1996 December 31, 1997
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Sales $ $ $ 120,367 $ 120,367
Costs and expenses:
Cost of sales 122,092 122,092
General, administrative, and sales expenses $ 202,185 $ 71,645 $ 1,182,794 $ 110,008 $ 1,456,624
Interest expense 50,542 8,874 31,866 23,752 91,282
252,727 80,519 1,336,752 133,760 1,669,998
Net loss $ 252,727 $80,519 1,216,385 133,760 1,549,631
Net loss per share $ .08 $ .03 $ .21 $ .05 $ .41
Weighted average common shares outstanding 3,034,506 2,525,122 5,890,031 2,640,754 3,808,344
</TABLE>
Read independent auditors' report. The
accompanying notes are an integral part of
the consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
Aqua Clara Bottling & Distribution, Inc.
and Subsidiary
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Equity
Periods August 17, 1995 (Date of Inception)
Through December 31, 1997
Deficit Subscription
Accumulated Receivable
Additional During and
Common Stock Preferred Stock Paid-In Development Prepaid
Shares Amount Shares Amount Capital Stage Services
Issuance of common stock,
<S> <C> <C> <C> <C> <C> <C> <C>
August 1995 500,000 $ 5,000 $ $ 15,250 $ $
Issuance of common stock
for services,
August 1995 500,000 5,000 15,250
Net loss for period (80,519)
Balance,
March 31, 1996 1,000,000 10,000 30,500 (80,519)
Adjustment for
recapitalization,
December 1996 1,525,122 33,668 (30,500)
Issuance of common
stock for services,
December 1996 1,029,500 100,950
Common stock issued for
conversion of notes
payable, March 1997 796,500 323,500
Common stock issued through
Regulation D offering,
March 1997 1,283,000 525,498 (50,000)
Net loss for period (252,727)
Balance,
March 31, 1997 5,634,122 993,616 0 (333,246) (50,000)
Collection of subscription receivable,
April 1997 (unaudited) 50,000
Issuance of common stock for
previous and future services
and $100,000 (unaudited) 470,000 955,000 (306,250)
Stock issued through Regulation
D offering, December 1997
(unaudited) 75,000 247,500 2,500 $ 447,597 1,417,391
Amortization of the intrinsic
value of the conversion
rights of the preferred
stock (unaudited) 1,417,391 (1,417,391)
Net loss for period
(unaudited) (1,291,385)
Balance,
December 31, 1997
(unaudited) 6,179,122 $ 2,196,116 2,500 $ 1,864,988 $ 1,417,391 $ (2,967,022) $ (306,250)
</TABLE>
Read independent auditors' report. The
accompanying notes are an integral part of
the consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
Aqua Clara Bottling & Distribution, Inc.
and Subsidiary
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
Period
August 17, 1995 From Inception
(Date of Inception) Nine Months Ended (August 17, 1995)
Year Ended Through December 31, to
March 31, 1997 March 31, 1996 1997 1996 December 31, 1997
Operating Activities (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Net loss $ (252,727) $(80,519) $(1,216,385) $(133,760) $(1,549,631)
--------- -------- ----------- --------- -----------
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on investment 1,000 1,000
Depreciation and amortization 58,340 58,340
Issuance of common stock for services 100,950 20,250 548,750 25,950 669,950
Incurrence of debt for compensation 60,517 60,517
Effect of pooling 3,518 3,518 3,518
(Increase) decrease in:
Accounts receivable (47,024) (47,024)
Prepaid assets (1,091) (412,797) (413,888)
Inventory (3,684) (3,684)
Increase (decrease) in:
Accounts payable 4,917 42,315 41,525 47,232
Accrued expenses (5,467) 6,370 20,173 21,158 21,076
Total adjustments 102,827 26,620 267,590 92,151 397,037
Net cash used in operating activities (149,900) (53,899) (948,795) (41,609) (1,152,594)
Investing activities
Deferred offering costs (20,000)
Purchase of investments (51,004) (51,004)
Proceeds from sale of investment 50,004 5,004 50,004
Purchase of property, plant and equipment (43,978) (109,499) (185,654) (30,041) (339,131)
Increase in other assets (65,977) (7,139) (298,733) (41,657) (371,849)
Net cash used for investing activities (59,951) (167,642) (484,387) (86,694) (711,980)
Financing activities
Proceeds from customer deposits 17,016 17,016
Proceeds from notes payable to stockholder and
incurrence of convertible debt 136,000 202,500 328,757 136,000 667,257
Payments of long-term debt and obligations
under capital lease (10,396) (829) (312,727) (7,726) (323,952)
Net proceeds from issuance of stock 475,148 20,250 2,262,488 2,757,886
Net cash provided by financing activities 600,752 221,921 2,295,534 128,274 3,118,207
Net increase (decrease) in cash 390,901 380 862,352 (29) 1,253,633
Cash, beginning of period 380 0 391,281 380 0
Cash, end of period $ 391,281 $ 380 $ 1,253,633 $ 351 $ 1,253,633
Supplemental disclosures of cash flow information
and noncash investing and financing activities
Cash paid for interest $ 56,010 $ 3,407 $ 26,866 $ 2,247 $ 86,283
</TABLE>
During the year ended March 31, 1997, $323,500 of convertible debt was
converted to 796,500 shares of common stock.
During the period ended March 31, 1996, the Company entered into a purchase
money mortgage of $300,000 in connection with the acquisition of property,
plant, and equipment.
The Company owed $6,750, $26,816, and $20,687 on property, plant, and
equipment as of March 31, 1997, March 31, 1996, and December 31, 1996,
respectively.
During the year ended March 31, 1997, 100,000 shares of common stock were
issued for a $50,000 subscription receivable. During the period ended
December 31, 1997, $306,250 of common stock was issued in exchange for
services to be performed.
During the period ended December 31, 1997, the Company incurred a capital
lease obligation of $49,731 and debt of $107,563 when the Company acquired
new equipment.
Read independent auditors' report. The
accompanying notes are an integral part of
the consolidated financial statements.
F-6
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
Periods August 17, 1995 (Date of Inception)
Through December 31, 1997
1. Organization, Background and Subsequent Event
On August 17, 1995, Pocotopaug Investment, Inc. (hereinafter referred to as
"Pocotopaug") was incorporated under the laws of Florida
for the purpose of raising capital to fund the development of products for
subsequent entry into the bottled water industry. Pocotopaug
has been in the development stage since its formation.
On July 29, 1996, Aqua Clara Bottling & Distribution, Inc. (hereinafter referred
to as "Aqua Clara") was incorporated under the laws of Colorado for the purpose
of raising capital to fund the development of products for subsequent entry into
the bottled water industry. Aqua Clara has been in the development stage since
its formation and was virtually inactive until the time of its combination with
Pocotopaug, as described below.
In December 1996, the stockholders of Pocotopaug gained control of Aqua Clara
and Aqua Clara acquired Pocotopaug in a business combination accounted for as a
reorganization of Pocotopaug. Pocotopaug became a wholly owned subsidiary of
Aqua Clara through the exchange of 1,690,122 shares of Aqua Clara's common stock
for all 1,000,000 shares of the outstanding stock of Pocotopaug. Upon the
execution of this transaction, Aqua Clara had 2,525,122 shares outstanding. The
accompanying consolidated financial statements have been based on the assumption
that the companies were combined for all periods presented.
In December 1997, the Company issued 2,500 shares of convertible preferred stock
through a private placement memorandum. The Company raised $2,500,000 and
incurred offering costs of $387,512. The Company issued 75,000 shares of common
stock as compensation to a promoter of this offering. These shares were valued
at their trading price of other common stock and amounted to $247,500.
Subsequent to December 31, 1997, the Company sold the assets used in its
five-gallon water business. The assets disposed of consist of certain
receivables, a vehicle, and various equipment used in the Company's bottled
water business. The net carrying value of these assets at December 31, 1997 was
as follows:
Accounts receivable $ 47,000
Inventory 3,700
Equipment 160,000
Deposits 10,000
$ 220,700
The total sales price for the above assets was approximately $326,000 which
includes the assumption of installment notes payable of approximately $134,000.
The Company lost approximately $800,000 during the period ended December 31,
1997 in connection with the operations of these assets.
2. Significant Accounting Policies
The significant accounting policies followed are:
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.
Read independent auditors' report. The
accompanying notes are an integral part of
the consolidated financial statements.
F-7
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
Periods August 17, 1995 (Date of Inception)
Through December 31, 1997
2. Significant Accounting Policies (continued)
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 could differ from those estimates.
The Company maintains cash balances in excess of the $100,000 insured
by the Federal Deposit Insurance Corporation.
Inventory is 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.
Organizational costs are amortized over a period of 60 months.
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 declining-balance and straight-line methods over the estimated
useful lives of the assets. Maintenance and repairs are charged to operations
when incurred. Betterments and renewals are capitalized. When property, plant,
and equipment are sold or otherwise disposed of, the asset account and related
accumulated depreciation account are relieved and any gain or loss is included
in operations. No depreciation has been taken as of March 31, 1997 since the
property, plant, and equipment have not yet been placed in service.
The Company applies APB Opinion 25 in accounting for its stock options.
The exercise price of these options exceeded the fair value of the underling
common stock on the grant date and, therefore, there are no compensation costs
included in the accompanying financial statements.
Fair value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management. The respective
carrying value of certain on-balance-sheet financial instruments approximated
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 and their carrying amounts approximate fair values 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 on the current rates offered to the Company for debt of the same
remaining maturities.
The Company charges to retain 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 SEC.
Read independent auditors' report. The
accompanying notes are an integral part of
the consolidated financial statements.
F-8
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
Periods August 17, 1995 (Date of Inception)
Through December 31, 1997
2. Significant Accounting Policies (continued)
Loss per share is based on the weighted average number of common shares
outstanding during each period after giving effect to the recapitalization
described in Note 1. The Company has implemented SFAS No. 128. There is no
effect on the prior loss per share amounts based on this statement. In computing
diluted earnings per share, the following were excluded because their effects
were antidilutive: options on 250,000 shares; preferred shares convertible into
1,333,334 common shares; and 600,000 contingently issuable shares.
Advertising costs are expensed as incurred and amounted to
approximately $421,000 (unaudited) and $1,700 for the period ended December 31,
1997 and the year ended March 31, 1997, respectively.
In the opinion of management, all adjustments, consisting only of
normal recurring adjustments necessary for a fair statement of (a) the results
of operations for the nine-month periods ended December 31, 1997 and 1996, (b)
the financial position at December 31, 1997, and (c) cash flows for the
nine-month periods ended December 31, 1997 and 1996, have been made.
3. Prepaid Assets
Prepaid assets consist principally of a lead generation/corporate
relations agreement entered into by the Company. The terms of this agreement are
for 12 months starting in January 1998 at a cost of $400,000, which was paid
prior to year-end. The Company amortizes these services on a straight-line
method over the life of the agreement.
4. Property, Plant, and Equipment
Property, plant, and equipment consist of:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1997
(Unaudited)
<S> <C> <C>
Land $ 90,000 $ 90,000
Building (not yet placed in service) 310,000 310,000
Building improvements in process 60,227 73,870
Machinery and equipment 245,399
Vehicles 77,156
460,227 796,425
Less accumulated depreciation 46,580
460,227 749,845
Less assets treated as current 160,000
$ 460,227 $ 589,845
</TABLE>
Included in deposits is a deposit of approximately $312,000 on
machinery which has a total cost of approximately $1,247,000, which the
Company plans to pay for subsequent to December 31, 1997.
Read independent auditors' report. The
accompanying notes are an integral part of
the consolidated financial statements.
F-9
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
Periods August 17, 1995 (Date of Inception)
Through December 31, 1997
4. Property, Plant, and Equipment (continued)
Included in the above are assets sold subsequent to year-end which were
used in the Company's five-gallon water business. The assets had a net
book value of approximately $160,000 as of December 31, 1997. Due to
this sale, the net book value of the assets have been treated as
current assets in the accompanying consolidated financial statements as
of December 31, 1997.
Substantially all of the Company's property, plant, and equipment is
pledged as collateral on notes payable as of December 31, 1997.
5. Notes Payable and Long-Term Debt
Notes payable and long-term debt consist of:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1997
(Unaudited)
Mortgage payable; interest adjustable annually to prime (8.5% at March
31, 1997); payable $2,954 per month including interest; unpaid
principal of approximately $238,000 due January 15, 2001;
<S> <C> <C>
collateralized by property and plant $ 288,775 $ 280,334
Stockholder notes payable; 6.0%; due on
demand; unsecured 15,000 15,000
Officers unformalized notes payable; interest
at 6.0%; due on demand; unsecured 60,517
Installment notes payable; interest ranging
from 10.5% to 11.5%; payments aggregating
$6,340 per month including interest;
collateralized by vehicles and equipment 137,708
Obligations under capital lease; payments of
$2,283 per month 44,057
303,775 537,616
Less amounts currently due 26,342 232,801
$ 277,433 $ 304,815
</TABLE>
Read independent auditors' report. The
accompanying notes are an integral part of
the consolidated financial statements.
F-10
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
Periods August 17, 1995 (Date of Inception)
Through December 31, 1997
5. Notes Payable and Long-Term Debt (continued)
The following is a schedule (unaudited) by year of the principal
payments required on these notes payable and long-term debt (excluding
the obligations under capital lease):
<TABLE>
<CAPTION>
<S> <C> <C>
1998 $ 232,801
==============
1999 $ 24,320
==============
2000 $ 24,410
==============
2001 $ 256,083
==============
2002 $ 3,410
==============
</TABLE>
Included above are rental obligations capitalized under a lease of equipment.
The obligations, which mature in 1999, represent the total present value of
future rental payments discounted at the interest rates implicit in the leases.
The total future minimum lease payments under this capital lease amounted to
$47,943 and interest imputed amounted to $3,886.
Installment notes with an aggregate outstanding balance of $89,842 and the
obligation under capital lease with outstanding balance of $44,056 were assumed
by the purchaser of the Company's five-gallon water business subsequent to
December 31, 1997 and, hence, have been treated as current liabilities in the
accompanying consolidated financial statements as of December 31, 1997.
6. Lease Commitments
The Company rents its operating facility and vehicles under operating leases
that expire at various dates from 1998 through 2004. The following is a schedule
by year of future minimum rental payments required under operating leases that
have an initial or remaining noncancelable lease term in excess of one year as
of December 31, 1997 (unaudited):
<TABLE>
<CAPTION>
<S> <C> <C>
1998 $ 49,600
1999 15,900
2000 15,100
2001 9,500
Thereafter 22,900
</TABLE>
$ 113,000
Rent expense amounted to approximately $5,000 and $27,000 for the year ended
March 31, 1997 and the period ended December 31, 1997 (unaudited), respectively.
There was no rent for the periods ended March 31, 1996 or December 31, 1996
(unaudited).
Read independent auditors' report. The
accompanying notes are an integral part of
the consolidated financial statements.
F-11
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
Periods August 17, 1995 (Date of Inception)
Through December 31, 1997
7. Income Taxes
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 $1,370,000, expiring in 2011 and 2012. 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:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1997
(Unaudited)
Deferred tax assets:
<S> <C> <C>
Start up costs $ 72,000 $ 60,000
Net operating loss carryforwards 99,000 515,000
Gross deferred tax assets 171,000 575,000
Valuation allowance (171,000) (575,000)
Total deferred tax assets $ 0 $ 0
</TABLE>
During 1996 and in 1997, substantial changes of ownership of the Company
occurred. Under federal tax law, this change 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 15 years of the year they were
incurred.
8. Commitments and Contingencies
During the period ended December 31, 1997, the Company entered into employment
agreements with terms ranging from one to five years with its officers which
provide for minimum annual salaries. The one-year agreement has automatic
renewal provisions. The total salary commitment under these agreements amounts
to $216,000 per year.
During the period ended December 31, 1997, the Company entered into a lead
generation/corporate relations agreement with a term of one year, which required
the Company to pay $400,000 on execution of the agreement, and an additional
$400,000 on May 1, 1998, that is contingent on the Company raising an additional
$2,500,000 in a future common stock offering. The initial $400,000 payment is
reflected as a prepaid asset as of December 31, 1997.
Read independent auditors' report. The
accompanying notes are an integral part of
the consolidated financial statements.
F-12
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
Periods August 17, 1995 (Date of Inception)
Through December 31, 1997
9. Stock
The Company entered into two agreements for services to be performed which were
executed prior to December 31, 1997. Each agreement contained options to acquire
200,000 shares of common stock at $.25. These services were valued at the
difference between the fair market value of the underlying common stock of the
options on the date of grant and the $.25 per share exercise price. These
options were exercised prior to December 31, 1997 which resulted in a total cash
consideration paid to the Company of $100,000. One of the agreements was for
services to be provided over a 12-month period beginning in November 1997. The
unamortized portion is reflected as a reduction of equity rather than as a
current asset. The cost of the other agreement was expensed because the services
were performed prior to December 31, 1997.
In April 1997, the Company issued 70,000 shares of common stock to directors and
employees for services rendered. These shares were valued at $.50 per share, the
fair market value of the common stock.
The following is a summary of common stock issued for services, and $100,000
received on the execution of the options during the period ended December 31,
1997 (unaudited):
<TABLE>
<CAPTION>
Number Subscriptions
Month of Shares Amount Receivable
<S> <C> <C> <C>
April 1997 70,000 $ 35,000
September 1997 (including
$100,000 received) 400,000 920,000 $ (306,250)
470,000 $ 955,000 $ (306,250)
</TABLE>
During the period ended December 31, 1997, the Company issued 2,500 shares of
Series A convertible preferred stock. These shares are nonvoting, and the
holders are entitled to receive an eight percent annual dividend and have a
liquidation preference of $1,300 per share. These preferred shares are
convertible at any time at the option of the holder into common shares equal to
$1,000 divided by the lower of (i) 65 percent of the average market price of the
common stock for the five trading days prior to the conversion date, or (ii)
$1.875. The Series A preferred shares contain a provision that the Company shall
increase the conversion rate by five percent for each of the following
occurrences:
Read independent auditors' report. The
accompanying notes are an integral part of
the consolidated financial statements.
F-13
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
Periods August 17, 1995 (Date of Inception)
Through December 31, 1997
9. Stock (Continued)
1. Failure to file a registration statement under the Securities Act of
1933 covering the common stock within 30 days of closing
date;
2. Failure of the registration to become effective within 120 days of
closing date; and
3. Failure to issue the common shares within the time limits set forth
in the amended articles of incorporation.
These shares, if converted using the aforementioned $1.875, would convert to a
maximum of 1,333,334 common shares.
Considering the beneficial conversion feature of the 2,500 Series A convertible
preferred shares, the Company allocated $1,417,391 of the proceeds raised from
the issuance of these shares, which represents the intrinsic value of the
conversion feature to paid in capital. The amortization of this discount is
charged against retained earnings and increases preferred stock analogous to a
dividend distribution based on the demand conversion.
10. Stock Options
As part of a "lead generation/corporate relations agreement," the Company issued
250,000 options to acquire common stock. These options are exercisable the later
of 50,000 annually over the next five years, or upon the company's raising its
next tranche of $2,500,000. The terms of this agreement also call for the
Company to issue an additional 100,000 shares should the Company fail to
complete the registration of these options within 120 days of this agreement.
As indicated in Note 2, the Company applies APB Opinion 25 in accounting for its
stock options. The exercise price of these options exceeded the fair value of
the underlying common stock on the grant date and, therefore, there are no
compensation costs recognized under APB Opinion 25.
The options issued were for future services. Had compensation cost for the
options granted been determined based on the fair value at the grant date under
methods prescribed by FASB Statement No. 123, the Company would have recorded a
prepaid asset of approximately $359,000. This would be amortized as compensation
cost over the next five years as the services are provided to the Company.
Following is a summary of stock option activity for the period ended December
31, 1997 (unaudited):
<TABLE>
<CAPTION>
Weighted
Number of Average
Shares Exercise Price
<S> <C>
Outstanding at March 31, 1997 0
Granted during the period ended
December 31, 1997 650,000 $ 2.08
-------- ------------
Executed 400,000 $ .25
======== ============
Outstanding at December 31, 1997 250,000 $ 5.00
======== ============
</TABLE>
Read independent auditors' report. The
accompanying notes are an integral part of
the consolidated financial statements.
F-14
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
Periods August 17, 1995 (Date of Inception)
Through December 31, 1997
10. Stock Options (continued)
The following is a summary of options outstanding at December 31, 1997
(unaudited):
<TABLE>
<CAPTION>
Weighted
Exercise Number Average Remaining
Price of Shares Contractual Life Exercise Date
<S> <C> <C> <C> <C> <C> <C>
$3.50 50,000 1 November 17, 1998
$4.20 50,000 2 November 17, 1999
$4.70 50,000 3 November 17, 2000
$5.60 50,000 4 November 17, 2001
$7.00 50,000 5 November 17, 2002
</TABLE>
The exercise date of the above options is the later of the above dates, or the
Company's raising its next tranche of $2,500,000. The weighted average fair
value of the options at their grant date during 1997 was $4.14. The estimated
fair value of each option granted is calculated using the Black-Scholes
option-pricing model. The following summarizes the weighted average of the
assumptions used in the model:
Risk-free interest rate 5.79%
Expected years until exercise 3
11. Revised Consolidated Financial Statements
During the year ended March 31, 1997, the Company committed to two individuals
to issue them a total of 750,000 shares of stock for their consulting services.
These shares were valued at an estimated fair market value of $.10 per share and
were not originally recorded as of March 31, 1997. The consolidated financial
statements have been restated to reflect this transaction.
Read independent auditors' report. The
accompanying notes are an integral part of
the consolidated financial statements.
F-15
<PAGE>
No dealer, salesman or other person is authorized to give any
information or to make any representations not contained in this Prospectus in
connection with the offer made hereby, and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell or a solicitation
to an offer to buy the securities offered hereby to any person in any state or
other jurisdiction in which such offer or solicitation would be unlawful.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that the information contained herein
is correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
Page
Additional Information...................... 2
Prospectus Summary.......................... 3
Risk Factors................................ 4
Dividend Policy............................. 8
Market Price of Common Stock................ 9
Management's Discussion and Analysis........ 9
Business and Plan of Operation.............. 10
Management.................................. 15
Principal Shareholders...................... 16
Certain Transactions........................ 16
Selling Shareholders........................ 18
Description of Securities................... 19
Legal Matters............................... 20
Experts..................................... 20
Financial Statements........................ 21
<PAGE>
AQUA CLARA BOTTLING AND DISTRIBUTION, INC.
PART II
Item 24. Indemnification of Directors and Officers.
The Company has adopted provisions in its articles of incorporation and
bylaws that limit the liability of its directors and provide for indemnification
of its directors and officers to the full extent permitted under the Colorado
General Business Act. Under the Company's articles of incorporation, and as
permitted under the Colorado General Business Act, directors are not liable to
the Company or its stockholders for monetary damages arising from a breach of
their fiduciary duty of care as directors. Such provisions do not, however,
relieve liability for breach of a director's duty of loyalty to the Company or
its stockholders, liability for acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, liability for transactions
in which the director derived as improper personal benefit or liability for the
payment of a dividend in violation of Colorado law. Further, the provisions do
not relieve a director's liability for violation of, or otherwise relieve the
Company or its directors from the necessity of complying with, federal or state
securities laws or affect the availability of equitable remedies such as
injunctive relief or recision.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding that may result in a claim for indemnification by any director or
officer.
Item 25. Other Expenses of Issuance and Distribution.
Filing fee under the Securities Act of 1933 $ 3.016.61
Printing and engraving(1) 500.00
Legal Fees(1) 12,000.00
Auditing Fees(1) 26,000.00
Miscellaneous(1) 403.39
TOTAL $ 42,000.00
(1) Estimates
Item 26. Recent Sales of Unregistered Securities.
Aqua Clara Bottling and Distribution, Inc., was incorporated on July
29, 1996 in the State of Colorado and issued 835,000 shares of common stock and
27,500 shares of preferred stock to the following investors for total
consideration of $3,167.50. The preferred stock has since been retired. The
offering was made under Rule 504 as an offering exempt from registration under
the Securities Act of 1933.
<TABLE>
<CAPTION>
NAME SHARES
<S> <C>
Deborah J. Bouer 250
Clark Burch 250
Walter B. Conley 250
Corporate Relations Group, Inc. 16,700
Michael Cruse 250
EDR Financial, Inc. 37,250
Edward D. Hawkins 250
John R. Hawkins 250
Susan Lawrence 250
John McAvoy 192,650
Dan Wey 192,650
David R. Reitsema 250
PRS Consultants, Inc. 16,250
David R. Reitsema Trustee 250
James D. Reitsema 250
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Jeremy Reitsema 250
Matthew Reitsema 250
Shanon/Rosenblom Marketing, Inc. 375,000
Michael V. Sicola 250
Linda Sliva 250
Carol Spykstra 250
Don L. Swickard 250
Sharon Swickard 250
Robert R. Turner 250
Total 835,000
</TABLE>
On November 1, 1996, the directors and officers of Aqua Clara resigned
and were replaced by Messrs. McAvoy and Plunkett. On November 23, 1996, Aqua
Clara issued 1,645,250 shares of common stock to Mr. McAvoy in exchange for all
of the outstanding shares of Pocotopaug and issued 44,872 shares to Danny L.
Wey. This offering was made under the exemption offered by Section 4(2).
On March, 1997, the following Pocotopaug bridge investors exchanged
their $323,500 in convertible debt into 796,500 shares of Company common stock
under Rule 504.
<TABLE>
<CAPTION>
NAME SHARES
<S> <C>
Foster Hayes 20,000
Genevieve Carriere- 24,000
Diane Bordner 40,000
Alex Avramis 12,000
Madeline Goudos 160,000
Pierre & Anna Morin 10,000
Larry Plunkett 50,000
Tom and Adele Richoll 20,000
George Kickliter/
Charles McArthur Dairy 120,000
Don Plunkett 10,000
John C. Plunkett* 80,000
Phil Manquen 10,000
Dwight and Deborah Mason 20,000
Bob & Suzanne Carrol 6,000
Mina Morgan 2,500
John O'Donnell 20,000
Bill Smith 2,000
Robert Adams 10,000
Joan and Bernard Herman 20,000
Michael Wiza 20,000
Millennium Investment, Inc. 140,000
796,500
</TABLE>
* Restricted as John C. Plunkett is an officer and director.
II-2
<PAGE>
In December 1996, the Company issued 259,500 shares to the following
persons for services rendered valued at $25,950.
<TABLE>
<CAPTION>
NAME SHARES
<S> <C>
Kenneth L. Solzer 10,000
Marijo A. Beck 10,000
Cypress Log Homes, Inc. 142,500
Harry Edward Dougherty 17,000
Patricia L. Nolen 45,000
Madeline M. Goudos 10,000
Gregory G. Schultz 25,000
259,500
</TABLE>
From December 27, 1996 to March 1997, the Company issued 1,283,000
shares of common stock in an offering under Rule 504 for $.50 per share to 35
persons.
In December 1996 the Board of Directors agreed to issue to two
consultants, issue to John C. Plunkett and Rand L. Gray, 500,000 and 250,000
shares of common stock under Rule 701 as compensation for services. These
individuals subsequently became officers and directors.
In December, 1997, the Company issued 20,000 restricted shares of
common stock to Olympus Capital for consulting services rendered prior to
September 30, 1997. In December, 1997, the Company issued 75,000 restricted
shares of common stock to Olympus Capital for consulting services rendered
pursuant to a one-year consulting contract dated October 30, 1997. These shares
were offered under the exemption provided by Section 4(2).
In September, 1997, the Company issued 200,000 shares of restricted
common stock to each of Gulf Atlantic Publishing and Arrow Marketing for
advertising services and creative design of marketing materials respectively,
and issued 25,000 shares to each of Robert Guthrie, a director, and Richard
Trnouski for services. These shares were offered under the exemption provided by
Section 4(2).
Gulf Atlantic Publishing and Arrow Marketing purchased these 400,000
shares of $.25 per share pursuant to an option agreement. These shares were
offered under the exemption provided by Section 4(2).
On November 17, 1997 the Company entered into a Lead
Generation/Corporate Relations Agreement with Corporate Relations Group ("CRG")
pursuant to which the Company has paid CRG $400,000 and by which the Company has
agreed to pay CRG an additional $400,000 upon the Company raising its next
tranche of $2,500,000. Additionally, the Company agreed to issue options to CRG
to purchase 250,000 shares of common stock. These shares were offered under the
exemption provided by Section 4(2). These options are exercisable at the later
of certain exercisable dates or when such tranche is raised.
The Company agreed to issue 100,000 restricted shares to CRG, such
shares to be returned should the Company file and cause to be effective a
registration statement for the shares underlying the options within 120 days of
the date of the agreement. CRG was also granted piggyback rights for these
shares, which have been escrowed with the Company's legal counsel.
In December, 1997 the Company issued 2,500 shares of Series A
Convertible Preferred Stock for $2,500,000 in gross proceeds to twenty-two
purchasers in an offering made under Section 4(2). Each purchaser executed a
subscription agreement and consented to the imprinting of a restrictive legend
on the stock certificate. The identity of the purchasers is set forth in the
prospectus under the caption "Selling Shareholders."
Except as to offerings under Rule 504, all of the transactions
referred to above are exempt from the registration requirements of the
Securities Act of 1933, as amended, by virtue of Section 4(2) thereof covering
transactions not involving any public offering or involve no "offer" or "sale."
No underwriter was involved. As a condition precedent to each sale, the
respective purchaser was required to execute an investment letter and consent to
the imprinting of a restrictive legend on each stock certificate received from
the Company.
II-3
<PAGE>
Item 27. Exhibits
3. Certificate of Incorporation and Bylaws
3.1. Articles of Incorporation(1)
3.2 Articles of Amendment for Series A Preferred Stock(1)
3.3 Bylaws(1)
5. Opinion of Hand & Hand as to legality of securities being registered.(2)
10. Material Contracts
10.1 Amended Employment Agreement with John McAvoy(1)
10.2 Amended Employment Agreement with John C. Plunkett(2)
10.3 Amended Employment Agreement with Rand L. Gray(2)
10.4 Lead Generation/Corporate Relations Agreement dated
November 17, 1997 with Corporate Relations Group, Inc.(1)
16.1 Letter from Coopers & Lybrand LLP(2)
21. Subsidiaries of the small business issuer-Pocotopaug Investment, a Florida
Corporation, is the only subsidiary. It does business under the
same trade name as the Registrant.
23. Consents of Experts and Counsel
23.1 Consent of Pender Newkirk & Company(2)
23.2 Consent of Hand & Hand included in Exhibit 5 hereto
24. Powers of Attorney
24.1 Powers of Attorney are included on signature page(1)
(1) Included in original filing
(2) Filed herewith.
All other Exhibits called for by Rule 601 of Regulation S-B are not
applicable to this filing.
Item 28. Undertakings.
(a) The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(I) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii)
Reflect in the prospectus any facts or events which, individually or together
represent a fundamental change in the information in the registration statement;
(iii)
II-4
<PAGE>
Include any material or changed information the plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities as at that time to be the initial
bona fide offering thereof.
(3) File a post effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
(d) To provide to the underwriter at the Closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as may be required by the underwriter to permit prompt delivery to each
purchaser.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel that matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(f) The undersigned small business issuer hereby undertakes that
it will:
(1) For purposes of determining any liability under the
Securities Act that the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be a part of this
registration statement as of the time the Commission declared it effective.
(2) For the purpose of determining any liability under the
Securities Act, that each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities offered in the
registration statement, and that offering of the securities at that time as the
initial bona fide offering of those securities.
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Largo, State of Florida on April 13, 1998.
AQUA CLARA BOTTLING AND DISTRIBUTION, INC.
By: /s/ John S. McAvoy
John S. McAvoy
President
The undersigned officer and/or director of Aqua Clara Bottling and
Distribution, a Colorado corporation (the "Corporation"), hereby constitutes and
appoints John S. McAvoy and Rand L. Gray, and each of them, with full power of
substitution and resubstitution, as attorney to sign for the undersigned in any
and all capacities this Registration Statement and any and all amendments
thereto, and any and all applications or other documents to be filed pertaining
to this Registration Statement with the Securities and Exchange Commission or
with any states or other jurisdictions in which registration is necessary to
provide for notice or sale of all or part of the securities to be registered
pursuant to this Registration Statement and with full power and authority to do
and perform any and all acts and things whatsoever required and necessary to be
done in the premises, as fully to all intents and purposes as the undersigned
could do if personally present. The undersigned hereby ratifies and confirms all
that said attorney-in-fact and agent, or any of his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof and incorporate such
changes as any of the said attorneys-in-fact deems appropriate.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on April 13, 1998.
By: /s/ John S. McAvoy President, CEO and Director
John S. McAvoy (principal executive officer)
By: /s/Rand L. Gray Treasurer, CFO and Director
Rand L. Gray (principal accounting and financial officer)
By: /s/John C. Plunkett Secretary, COO and Director
John C. Plunkett
March 26, 1998
Aqua Clara Bottling & Distribution, Inc.
10720 72nd Street, North, Suite 305
Largo, Florida 33777
Re: Registration Statement on
Form SB-2, File No. 333-44315 (the "Registration Statement")
Gentlemen:
You have requested our opinion as to the legality of the issuance by
you (the "Corporation") of an estimated 2,535,834 shares of common stock
("Shares") including 952,500 Shares currently outstanding; an estimated
1,333,334 Shares issuable upon conversion of the Series A Convertible Preferred
Stock ("Series A Stock"), and options to purchase 250,000 shares of common
stock, all as further described in the Registration Statement in the form to be
filed with the U.S. Securities and Exchange Commission.
As your counsel, we have reviewed and examined:
1. The Articles of Incorporation of the Corporation;
2. The Bylaws of the Corporation;
3. A copy of certain resolutions of the corporation;
4. The Registration Statement;
5. The Designation filed with the Colorado Secretary of State
describing the terms
of the Series A Stock; and
6. Corporate Relations/Lead Generation Agreement between the
Company and
Corporate Relations Group.
In giving our opinion, we have assumed without investigation the
authenticity of any document or instrument submitted us as an original, the
conformity to the original of any
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
March 26, 1998
Page -2-
document or instrument submitted to us as a copy, and the genuineness of all
signatures on such
originals or copies.
Based upon the foregoing, we are of the opinion that the Shares to be
offered pursuant to the Registration Statement, if sold as described in the
Registration Statement (and as to shares issuable upon warrants as options if
the warrants or options are exercised in accordance with their terms), will be
legally issued, fully paid and nonassessable, provided that no less than par
value is paid for any Shares.
No opinion is expressed herein as to the application of state securities
or Blue Sky laws.
This opinion is furnished by us as counsel to you and is solely for your
benefit. Neither this opinion nor copies hereof may be relied upon by, delivered
to, or quoted in whole or in part to any governmental agency or other person
without our prior written consent.
Notwithstanding the above, we consent to the reference to our firm name
in the Prospectus filed as a part of the Registration Statement and the use of
our opinion in the Registration Statement. In giving these consents, we do not
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities and Exchange Commission promulgated
thereunder.
Very truly yours,
HAND & HAND
<PAGE>
AMENDED EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
this 20th day of April, 1997, and is effective as of its execution (the
"effective date") between AQUA CLARA BOTTLING & DISTRIBUTION, INC., a Colorado
for profit corporation registered to do business in Florida, (the "Company"),
and JOHN C. PLUNKETT, (the "Employee").
WHEREAS, the Company is a Colorado for profit corporation
registered to do business in Florida; and
WHEREAS, the Company's business plan calls for it to engage in the
bottling and distribution of water to the general public and the acquisition of
water treatment companies; and
WHEREAS, the Employee is an Engineer who has significant
business experience; and
WHEREAS, the Company is desirous of continuing to employ as its
Secretary under the below-described terms and conditions; and
WHEREAS, the Employee is desirous of continued employment by
the Company and the Company is desirous of Employee's continued
employment; and
WHEREAS, it is the intent of the Company that all officers and
management employees will execute an employment agreement as a condition of the
employment; and
WHEREAS, it is the intent of the Company that this Agreement shall
supersede all prior Employment Agreements, amendments, or clarifications
thereto; and
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Company and Employment do hereby agree as follows:
1.Employment. The Company hereby employs the Employee, and Employee
hereby accepts employment, upon the terms and conditions hereinafter set forth.
2.Authority and Power During Employment Period. The duties of Employee
shall be subject to the discretion and direction of the Company's officers and
directors. Employee shall devote full attention to and render exclusive full
time services to the Company and shall be employed solely by the Company
according to the terms of this Agreement.
3.Term. The term of the employment hereunder will commence upon
execution of this Agreement and shall continue for one (1) year. Such term shall
automatically be extended for each successive year thereafter, unless i) the
parties mutually agree in writing to alter or amend the terms of the Agreement,
or ii) one or goth of the Paries exercise their rights, pursuant to Paragraph 9
herein, to terminate this employment relationship.
<PAGE>
4. Compensation.
a. Salary. For all services rendered
by Employee, pursuant to the terms of this Agreement, and in consideration of
the execution of this Agreement by Employee, the Company shall pay Employee
Seventy Seven Thousand Dollars ($77,000) per year which salary shall be paid as
follows:
i. Fifty-two thousand ($52,000)
of which shall be paid in cash on a twice monthly basis; and
ii. Twenty-five thousand dollars
($25,000) of which will be accrued, which accrual shall be secured and upon
which shall be paid at a reasonable interest rate.
iii. Salary Accruals - Employee
has been advised that John McAvoy and Rand Gray, are also being paid the Seventy
Seven Thousand Dollars ($77,000) per year and are also accruing Twenty Five
Thousand Dollars ($25,000) per year. It has been specifically agreed that any
accruals owed employee shall be paid upon the same percentages of the accrued
amounts as any accruals paid to either John McAvoy or Rand Gray, and that said
accrual shall be paid at the same time as the accruals are paid to either John
McAvoy or Rand Gray. In the event that either John McAvoy or Rand Gray are
offered the opportunity to convert their accrued wages into equity, then
Employee shall be offered the same right of conversion upon the same terms and
conditions.
iv. Salary Increases. Employee
has been advised and acknowledged and said he is aware the John McAvoy and Rand
Gray, have like salaries accruing in like amounts. It has been specifically
agreed that employee will receive a salary increase at the same time that John
MvAvoy and/or Rand Gray receive a salary increase and that Employee's first
salary increase shall be equal to that awarded to John McAvoy or Rand Gray.
5.ESOP and ESAP. The Company agrees that Employee shall be entitled to
awards of common stock pursuant to any stock award or stock option program
offered by the Company.
6.Benefits. Employee shall be entitled to participate in the Company's
benefit programs maintained by the Company for the benefit of employees, in
general, in accordance with and pursuant to the terms of all such plans.
Employee shall also be entitled to receive any other benefits as may, from time
to time, be awarded to him by the Board of Directors.
7.Expenses. The Company shall reimburse Employee for all authorized and
reasonable expenses incurred by Employee during his employment by the Company.
Employee shall be reimbursed expenses a reasonable time after submitting an
expense report in the form provided by and in compliance with the Company's
policies.
8.Covenant Not to Compete and Non-Disclosure of Information.
a. Covenant Not to Compete.
Employee acknowledges and recognizes the highly competitive nature
<PAGE>
of Company's business, and that the goodwill, continued patronage, information
and business contacts, including clients, constitute a substantial asset of the
Company having been acquired through considerable time, money and effort.
Accordingly, in consideration of the execution of this Agreement, Employee
agrees to the following: i.During the Restrictive Period (as hereinafter
defined), within the Restricted Area (as hereinafter defined), Employee will not
individually, or in conjunction with others, directly or indirectly engage in
any business activities, whether as an officer, director, proprietor, employer,
partner, independent contractor, investor (other than as a holder of less than
five percent (5%) of the outstanding capital stock of the corporation),
consultant, advisor, agent or otherwise, which conflict with the Company's
business or Employee's duties.
ii.During the Restrictive Period and within the Restricted Area, Employee will
not directly or indirectly compete with the Company by soliciting, inducing or
influencing any individuals having business or prospective relationships with
the Company to discontinue or reduce the extent of such relationship with the
Company, or to support any business ventures by Employee in violation of this
Agreement.
iii.During the Restrictive Period and within the Restrictive Area,
Employee will not (a) directly or indirectly recruit, solicit or otherwise
influence any employee or agent of the Company to discontinue such employment or
agency relationship with the Company, or (b) employ or seek to employ, or cause,
assist, or permit any business which competes directly or indirectly with the
Company to employ or seek to employ, any agent or employee of the Company.
iv. During the Restrictive Period, Employee will not interfere with or disrupt
or attempt to disrupt any past, present or prospective relationship, contractual
or otherwise, between the Company and any customer, employer or agent of the
Company.
v. This covenant is a restrictive covenant and Employee has knowingly and
willingly granted this to the Company and that, further, the entire Employment
Agreement is contingent upon said covenant.
b.Non-Disclosure of Information. Employee acknowledges that the
Company's trade secrets, private or secret processes, methods and ideas, as they
exist from time to time, customer lists and information concerning the Company's
products, services, training methods, development, technical information,
marketing activities and procedures, credit and financial data concerning the
Company, access to and knowledge of the industry in which the Company's business
is and will be conducted, Employee agrees that all Proprietary Information
heretofore or in the future obtained by the Employee as a result of the
Employee's association with the Company shall be considered confidential.
<PAGE>
In recognition of this fact, Employee agrees that Employee will never
use or disclose any of such Proprietary Information for the Employee's own
purposes or for the benefit of any person or other entity or organization
(except the Company) under any circumstances, unless the Employee is compelled
by court order to disclose such Proprietary Information, or unless Employee
obtains prior written permission from the Company to disclose such Proprietary
Information.
c.Documents. "Documents" shall mean all original written, recorded or
graphic matters whatsoever, and any and all copies thereof, including, but not
limited to: paper; books; records; tangible things; correspondence;
communications; telex messages; memoranda; work-papers; reports; affidavits;
statements; summaries; analysis; evaluations; client records and information;
agreements; agendas; advertisements; instructions; charges; manuals; brochures;
publications; directories; industry lists; schedules; price lists; client lists;
statistical records; training manuals; books of accounts; records and invoices
reflecting business operations; E-mail; computer printouts; computer disks; and
all things similar to any of the foregoing however denominated.
d.Restrictive Period. "Restrictive Period" shall be deemed to be during
the Term of this Agreement and any extension thereof, and for a period of
twenty-four (24) months following termination of this Agreement, regardless of
the reason(s) for termination.
e.Restricted Area. "Restricted Area" shall be deemed to mean within the
State of Florida, Costa Rica, or any other geographical locale that the Company
is doing business in or has plans to do business in, including Central America,
the Caribbean, and the Southeast United States.
It is understood by and between the Company and Employee that the
foregoing covenants in Paragraphs 7a. and 7b. are essential elements of this
Agreement, and that but for the agreement by employee to comply with such
covenants the Company would not have agreed to enter into this Agreement. Such
covenants by Employee shall be construed to be agreements independent of any
other provisions of this Agreement, and shall survive the termination of this
Agreement and Employees employment with the Company for a period of twenty-four
(24) months after the termination of Employee's employment or five (5) years
from the execution of this Agreement, whichever is longer. The existence of any
other claim or cause of action, whether predicated on any other provision of
this Agreement, or otherwise, as a result of the relationship between the
Parties, shall not constitute a defense to the enforcement of such covenants
against Employee.
f.Remedies.
i.Employee acknowledges and agrees that the Company's remedy at law
for a breach or threatened breach of any of the provisions of
Paragraphs 7a. and 7b. herein would be inadequate and the breach
shall be deemed as causing irreparable harm to the Company. In
recognition of this fact, in the event of a breach by Employee of
<PAGE>
any of the provisions of Paragraphs 7a. and 7b., Employee agrees that, in
addition to any remedy at law available to the Company, including, but not
limited to, monetary damages, all rights of Employee to payment or otherwise
under this Agreement and all amounts then or thereafter due Employee from the
Company under this Agreement may be terminated and the Company, without posting
any bond, shall be entitled to obtain and Employee agrees not to oppose the
Company's request for equitable relief in the form of specific performance,
temporary restraining order, temporary or permanent injunction, or any other
equitable remedy which may be then available to the Company.
ii.Employee acknowledges that the granting of a temporary injunction,
temporary restraining order or permanent injunction, merely prohibiting the use
of Proprietary Information would not get an adequate remedy upon breach or
threatened breach of Paragraphs 7a. and 7b. and consequently agrees, upon proof
of any such breach, to the granting of injunction relief prohibiting any form of
competition with the Company. Nothing herein contained shall be construed as
prohibiting the Company from pursuing any other remedies available to it for
such breach or threatened breach.
g.Attorney's Fees. Employee agrees that in the event the Company is required to
engage an attorney to enforce the terms of the covenants in Paragraphs 8a. and
8b. of this Agreement, Employee shall pay all costs and expenses, whether or not
a suit or complaint is filed in any court of competent jurisdiction, including a
reasonable attorney's fee for the Company's attorney.
9.Working Conditions. Employee shall have an office and support staff, including
stenographic help and other facilities and services as are suitable and
appropriate for the performance of his duties. Employee shall keep normal
business hours and conduct business at the Company's offices.
10.Termination.
a. Termination Without Cause. the Company and the Employee may terminate this
Agreement without cause upon giving sixty (60) days prior written notice. During
such sixty (60) day period, Employee shall continue to perform his duties
pursuant to this Agreement, and the Company shall continue to compensate
Employee in accordance with this Agreement. The Company and the Employee agree
that during Employee's probationary period the written notice requirement shall
be reduced to a period of thirty (30) days prior to written notice.
b.Mutual Agreement.The Company and Employee may terminate this
Agreement by mutual agreement.
c.Immediate Termination. This Agreement may be terminated
immediately by the Company upon the occurrence of any of the
following events:
i. Any material violation of this Agreement; or
ii. The death of Employee; or
<PAGE>
iii. The disability or incapacity of Employee; or iv. The willful engagement and
misconduct that is materially injurious to the Company, monetarily or otherwise;
or v. Employee's commission of any act or acts constituting a felony under the
laws of the United States or any State thereof. d.Termination After Failure to
Cure Breach. If the Employee commits a material breach of any provision of this
Agreement, the Company may terminate the Agreement at any time, if after
providing written notice to Employee of the alleged breach or failure, the
breach or failure remains uncured for a period of ten (10) days after receipt of
such notice.
11.Notices.Any notice required or permitted to be given under the terms of this
Agreement shall be sufficient if in writing and if sent postage prepaid by
registered or certified mail, return receipt requested; by overnight delivery;
by courier; or by confirmed telecopy, in the case of the Employee to the
Employee's last place of business or residence as shown on the records of the
Company, or in the case of the Company to its principal office, or such other
place as the Company may designate.
12.Miscellaneous.
a.Further Assurances.At any time, and from time to time, each Party will execute
such additional instruments and take such action as may be reasonably requested
by the other Party to confirm or perfect title to any property transferred
hereunder or otherwise to carry out the intent and purposes of this Agreement.
b.Costs and Expenses.Each Party hereto agrees to pay its own costs and expenses
incurred in negotiating this Agreement and consummating the transactions
described herein.
c.Time.Time is of the essence.
d.Entire Agreement.This Agreement constitutes the entire Agreement between the
Parties hereto with respect to the subject matter hereof. It supersedes all
prior negotiations, letters and understandings relating to the subject matter
hereof.
e.Amendment.This Agreement may not be amended, supplemented or modified in whole
or in part except by an instrument in writing signed by the Party or Parties
against whom enforcement of any such amendment, supplement of modification is
sought.
f.Choice of Law.This Agreement will be interpreted, construed and enforced in
accordance with the laws of the State of Florida.
g.Headings.The section and subsection headings in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
h.Pronouns.All pronouns and any variation thereof shall be deemed to refer to
the masculine, feminine, neuter, singular, or plural as the context may require.
<PAGE>
i.Construction.This Agreement shall be construed neither against nor in favor of
either of the Parties hereto, but rather in accordance with the fair meaning
thereof.
j.Effect of Waiver.The failure of any Party at any time or times to require
performance of any provision of this Agreement will in no manner affect the
right to enforce the same. The waiver by any Party of any breach of any
provision of this Agreement will not be construed to be a waiver by ant such
Party of any succeeding breach of that provision or a waiver by such Party of
any breach of any other provision.
k.SeverabilityThe invalidity, illegality or unenforceability of any provision or
provisions of this Agreement will not affect any other provision of this
Agreement, which will remain in full force and effect, nor will the invalidity,
illegality or unenforeceability of a portion of any provision of this Agreement
affect the balance of such provision. In the event that any one or more of the
provisions contained in this Agreement or any portion thereof shall for any
reason be held to be invalid, illegal or unenforceable provision had never been
contained herein. If any court determines that any provision of Paragraph eight
(8) hereof is unenforceable because of the duration or scope of such provision,
such court shall have power to reduce the scope or duration of such provision,
as the case may be, and, in its reduced form, such provision shall then be
enforceable.
l.Binding Nature.This Agreement will be binding upon and will inure to the
benefit of any successors of the Company.
m.Counterparts. This Agreement may be executed in one or more counterparts, each
of which will be deemed an original and all of which together will constitute
one and the same instrument.
Employee acknowledges that he has read all of the terms of this Agreement, fully
understands them, has made a voluntary decision to execute this Agreement and
agrees to abide by its terms and conditions.
II-13
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first written in Pinellas County, Florida.
WITNESSES: AQUA CLARA BOTTLING & DISTRIBUTION, INC.,
a Colorado corporation
Print: By: John S. McAvoy
Its: President
(Corporate Seal)
Print: JOHN C. PLUNKETT, JR.
"EMPLOYEE"
II-14
<PAGE>
AMENDED EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into this
20th day of July, 1997, and is effective as of its execution (the "effective
date") between AQUA CLARA BOTTLING & DISTRIBUTION, INC., a Colorado for profit
corporation registered to do business in Florida, (the "Company"), and Rand L.
Gray (the "Employee").
WHEREAS, the Company is a Colorado for profit corporation
registered to do business in Florida; and
WHEREAS, the Company's business plan calls for it to engage in the
bottling and distribution of water to the general public and the acquisition of
water treatment companies; and
WHEREAS, the Employee is an accountant who has significant
business experience;
WHEREAS, the Company is desirous of employing Employee as its
Treasurer under the below-described terms and conditions; and
WHEREAS, the Employee is desirous of being employed by the
Company under the below-described terms and conditions; and
WHEREAS, it is the intent of the Company that all officers and management
employees will execute an employment agreement as a condition of their
employment; and
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Company and Employment do hereby agree as follows:
1. Employment. The Company hereby employs the Employee, and
Employee hereby accepts employment, upon the terms and conditions
hereinafter set forth.
2. Authority and Power During Employment Period. The duties of Employee
shall be subject to the discretion and direction of the Company's officers and
directors. Employee shall devote full attention to and render exclusive full
time services to the Company and shall be employed solely by the Company
according to the terms of this Agreement.
The employee is being retained to hold the office of Treasurer of Aqua
Clara Bottling & Distribution, Inc. The Company has made Employee aware, and the
Employee agrees, that his duties will not be limited strictly to financial
matters and that his opinions and secondary duties may also include human
resources, employee benefits, customer service, marketing, advertising and
promotion, and general operations where Employee's experience can be used to
best benefit the Company and its shareholders.
3. Term. The term of the employment hereunder will commence
upon execution of this Agreement and shall continue for one (1)
year. Such term shall automatically be extended for each
<PAGE>
successive year thereafter, unless i) the parties mutually agree in writing to
alter or amend the terms of the Agreement, or ii) one or goth of the Paries
exercise their rights, pursuant to Paragraph 9 herein, to terminate this
employment relationship.
4. Compensation.
a. Salary. For all services rendered by Employee, pursuant to the terms of
this Agreement, and in consideration of the execution of this Agreement by
Employee, the Company shall pay Employee Seventy Seven Thousand Dollars
($77,000) per year which salary shall be paid as follows:
i. Fifty-two thousand ($52,000) of which shall be paid in cash
on a twice monthly basis; and
ii. Twenty-Five thousand dollars ($25,000) of which will be accrued, which
accrual shall be secured and upon which shall be paid at a reasonable interest
rate.
iii. Salary Increases. Employee has been advised that John McAvoy and John
Plunkett, II, are also being paid the Seventy Seven Thousand Dollars ($77,000)
per year and are also accruing Twenty Five Thousand Dollars ($25,000) per year.
It has been specifically agreed that employee shall be paid upon the same
percentages of the accrued amounts as any accruals paid to either John McAvoy or
John Plunkett, II, and that said accrual shall be paid at the same time as the
accruals are paid to either John McAvoy or John Plunkett, II. In the event that
either John McAvoy or John Plunkett, II, are offered the opportunity to convert
their accrued wages into equity, then Employee shall be offered the same right
of conversion upon the same terms and conditions.
iv. Salary Increases. Employee has been advised and acknowledged and said
he is aware that John McAvoy and John Plunkett, II, have like salaries accruing
in like amounts. It has been specifically agreed that employee will receive a
salary increase at the same time that John McAvoy and/or John Plunkett, II,
receive a salary increase and that Employee's first salary increase shall be
equal to that awarded to John McAvoy or John Plunkett, II.
5. ESOP and ESAP. The Company agrees that Employee shall be
entitled to awards of common stock pursuant to any stock award or
stock option program offered by the Company.
6. Benefits. Employee shall be entitled to participate in the Company's
benefit programs maintained by the Company for the benefit of employees, in
general, in accordance with and pursuant to the terms of all such plans.
Employee shall also be entitled to receive any other benefits as may, from time
to time, be awarded to him by the Board of Directors.
7. Expenses. The Company shall reimburse Employee for all
authorized and reasonable expenses incurred by Employee during his
employment by the Company. Employee shall be reimbursed expenses
<PAGE>
a reasonable time after submitting an expense report in the form provided by and
in compliance with the Company's policies.
8. Covenant Not to Compete and Non-Disclosure of Information.
a. Covenant Not to Compete. Employee acknowledges and
recognizes the highly competitive nature of Company's business, and that the
goodwill, continued patronage, information and business contacts, including
clients, constitute a substantial asset of the Company having been acquired
through considerable time, money and effort. Accordingly, in consideration of
the execution of this Agreement, Employee agrees to the following:
i. During the Restrictive Period (as hereinafter defined),
within the Restricted Area (as hereinafter defined), Employee will
not individually, or in conjunction with others, directly or
indirectly engage in any business activities, whether as an officer,
director, proprietor, employer, partner, independent contractor,
investor (other than as a holder of less than five percent (5%) of
the outstanding capital stock of the corporation), consultant,
advisor, agent or otherwise, which conflict with the Company's
business or Employee's duties.
ii. During the Restrictive Period and within the Restricted
Area, Employee will not directly or indirectly compete with the
Company by soliciting, inducing or influencing any individuals
having business or prospective relationships with the Company to
discontinue or reduce the extent of such relationship with the
Company, or to support any business ventures by Employee in
violation of this Agreement.
iii. During the Restrictive Period and within the Restrictive
Area, Employee will not (a) directly or indirectly recruit, solicit
or otherwise influence any employee or agent of the Company to
discontinue such employment or agency relationship with the Company,
or (b) employ or seek to employ, or cause, assist, or permit any
business which competes directly or indirectly with the Company to
employ or seek to employ, any agent or employee of the Company.
iv. During the Restrictive Period, Employee will not interfere
with or disrupt or attempt to disrupt any past, present or
prospective relationship, contractual or otherwise, between the
Company and any customer, employer or agent of the Company.
v. This covenant is a restrictive covenant and Employee has
knowingly and willingly granted this to the Company and that,
further, the entire Employment Agreement is contingent upon said
covenant.
b. Non-Disclosure of Information. Employee acknowledges that
the Company's trade secrets, private or secret processes, methods
<PAGE>
and ideas, as they exist from time to time, customer lists and information
concerning the Company's products, services, training methods, development,
technical information, marketing activities and procedures, credit and financial
data concerning the Company, access to and knowledge of the industry in which
the Company's business is and will be conducted, Employee agrees that all
Proprietary Information heretofore or in the future obtained by the Employee as
a result of the Employee's association with the Company shall be considered
confidential.
In recognition of this fact, Employee agrees that Employee will never use
or disclose any of such Proprietary Information for the Employee's own purposes
or for the benefit of any person or other entity or organization (except the
Company) under any circumstances, unless the Employee is compelled by court
order to disclose such Proprietary Information, or unless Employee obtains prior
written permission from the Company to disclose such Proprietary Information.
c. Documents. "Documents" shall mean all original written, recorded or
graphic matters whatsoever, and any and all copies thereof, including, but not
limited to: paper; books; records; tangible things; correspondence;
communications; telex messages; memoranda; work-papers; reports; affidavits;
statements; summaries; analysis; evaluations; client records and information;
agreements; agendas; advertisements; instructions; charges; manuals; brochures;
publications; directories; industry lists; schedules; price lists; client lists;
statistical records; training manuals; books of accounts; records and invoices
reflecting business operations; E-mail; computer printouts; computer disks; and
all things similar to any of the foregoing however denominated.
d. Restrictive Period. "Restrictive Period" shall be deemed to
be during the Term of this Agreement and any extension thereof, and
for a period of twenty-four (24) months following termination of
this Agreement, regardless of the reason(s) for termination.
e. Restricted Area. "Restricted Area" shall be deemed to be
during the Term of his Agreement and any extension thereof, and for
a period of twenty-four (24) months following termination of this
Agreement, regardless of the reason(s) for termination.
It is understood by and between the Company and Employee that the
foregoing covenants in Paragraphs 7a. and 7b. are essential elements of this
Agreement, and that but for the agreement by employee to comply with such
covenants the Company would not have agreed to enter into this Agreement. Such
covenants by Employee shall be construed to be agreements independent of any
other provisions of this Agreement, and shall survive the termination of this
Agreement and Employees employment with the Company for a period of twenty-four
(24) months after the termination of Employee's employment or five (5) years
from the execution of this Agreement, whichever is longer. The existence of any
other claim or cause of action, whether predicated on any other provision of
this Agreement, or otherwise, as a result of the relationship
<PAGE>
between the Parties, shall not constitute a defense to the enforcement of such
covenants against Employee.
f. Remedies.
i. Employee acknowledges and agrees that the Company's remedy at
law for a breach or threatened breach of any of the provisions of
Paragraphs 7a. and 7b. herein would be inadequate and the breach
shall be deemed as causing irreparable harm to the Company. In
recognition of this fact, in the event of a breach by Employee of
any of the provisions of Paragraphs 7a. and 7b., Employee agrees
that, in addition to any remedy at law available to the Company,
including, but not limited to, monetary damages, all rights of
Employee to payment or otherwise under this Agreement and all
amounts then or thereafter due Employee from the Company under this
Agreement may be terminated and the Company, without posting any
bond, shall be entitled to obtain and Employee agrees not to oppose
the Company's request for equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent
injunction, or any other equitable remedy which may be then
available to the Company.
ii. Employee acknowledges that the granting of a temporary
injunction, temporary restraining order or permanent injunction,
merely prohibiting the use of Proprietary Information would not get
an adequate remedy upon breach or threatened breach of Paragraphs
7a. and 7b. and consequently agrees, upon proof of any such breach,
to the granting of injunction relief prohibiting any form of
competition with the Company. Nothing herein contained shall be
construed as prohibiting the Company from pursuing any other
remedies available to it for such breach or threatened breach.
g. Attorney's Fees. Employee agrees that in
the event the Company is required to engage an attorney to enforce
the terms of the covenants in Paragraphs 7a. and 7b. of this
Agreement, Employee shall pay all costs and expenses, whether or
not a suit or complaint is filed in any court of competent
jurisdiction, including a reasonable attorney's fee for the
Company's attorney.
9. Working Conditions. Employee shall have an
office and support staff, including stenographic help and other
facilities and services as are suitable and appropriate for the performance of
his duties. Employee shall keep normal business hours and conduct business at
the Company's offices.
10. Termination.
a. Termination Without Cause. the Company and the Employee may
terminate this Agreement without cause upon giving sixty (60) days
prior written notice. During such sixty (60) day period, Employee
shall continue to perform his duties pursuant to this Agreement,
and the Company shall continue to compensate Employee in accordance
<PAGE>
with this Agreement. The Company and the Employee agree that during Employee's
probationary period the written notice requirement shall be reduced to a period
of thirty (30) days prior written notice.
b. Mutual Agreement. The Company and Employee may terminate
this Agreement by mutual agreement.
c. Immediate Termination. This Agreement may be terminated
immediately by the Company upon the occurrence of any of the
following events:
i. Any material violation of this Agreement; or
ii. The death of Employee; or
iii. The disability or incapacity of Employee; or
iv. The willful engagement and misconduct that is
materially injurious to the Company, monetarily or
otherwise; or
v. Employee's commission of any act or acts constituting
a felony under the laws of the United States or any State
thereof.
d. Termination After Failure to Cure Breach. If the Employee
commits a material breach of any provision of this Agreement, the
Company may terminate the Agreement at any time, if after providing
written notice to Employee of the alleged breach or failure, the breach or
failure remains uncured for a period of ten (10) days after receipt of such
notice.
11. Notices. Any notice required or permitted to be given under the terms
of this Agreement shall be sufficient if in writing and if sent postage prepaid
by registered or certified mail, return receipt requested; by overnight
delivery; by courier; or by confirmed telecopy, in the case of the Employee to
the Employee's last place of business or residence as shown on the records of
the Company, or in the case of the Company to its principal office, or such
other place as the Company may designate.
12. Miscellaneous.
a. Further Assurances.At any time, and from time to time, each Party will
execute such additional instruments and take such action as may be reasonably
requested by the other Party to confirm or perfect title to any property
transferred hereunder or otherwise to carry out the intent and purposes of this
Agreement.
b. Costs and Expenses.Each Party hereto agrees to pay its own costs and
expenses incurred in negotiating this Agreement and consummating the
transactions described herein.
c. Time. Time is of the essence.
d. Entire Agreement.This Agreement constitutes the entire Agreement
between the Parties hereto with respect to the subject matter hereof. It
supersedes all prior negotiations, letters and understandings relating to the
subject matter hereof.
II-20
<PAGE>
e. Amendment.This Agreement may not be amended, supplemented or modified
in whole or in part except by an instrument in writing signed by the Party or
Parties against whom enforcement of any such amendment, supplement of
modification is sought.
f. Choice of Law.This Agreement will be interpreted, construed
and enforced in accordance with the laws of the State of Florida.
g. Headings.The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
h. Pronouns.All pronouns and any variation thereof shall be deemed to
refer to the masculine, feminine, neuter, singular, or plural as the context may
require.
i. Construction.This Agreement shall be construed neither against nor in
favor of either of the Parties hereto, but rather in accordance with the fair
meaning thereof.
j. Effect of Waiver.The failure of any Party at any time or times to
require performance of any provision of this Agreement will in no manner affect
the right to enforce the same. The waiver by any Party of any breach of any
provision of this Agreement will not be construed to be a waiver by ant such
Party of any succeeding breach of that provision or a waiver by such Party of
any breach of any other provision.
k. SeverabilityThe invalidity, illegality or unenforceability of any
provision or provisions of this Agreement will not affect any other provision of
this Agreement, which will remain in full force and effect, nor will the
invalidity, illegality or unenforeceability of a portion of any provision of
this Agreement affect the balance of such provision. In the event that any one
or more of the provisions contained in this Agreement or any portion thereof
shall for any reason be held to be invalid, illegal or unenforceable provision
had never been contained herein. If any court determines that any provision of
Paragraph eight (8) hereof is unenforceable because of the duration or scope of
such provision, such court shall have power to reduce the scope or duration of
such provision, as the case may be, and, in its reduced form, such provision
shall then be enforceable.
l. Binding Nature.This Agreement will be binding upon and will
inure to the benefit of any successors of the Company.
m. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of
which together will constitute one and the same instrument.
Employee acknowledges that he has read all of the terms of this Agreement,
fully understands them, has made a voluntary decision to execute this Agreement
and agrees to abide by its terms and conditions.
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first written in Pinellas County, Florida.
WITNESSES: AQUA CLARA BOTTLING & DISTRIBUTION, INC.,
a Colorado corporation
Print: By: John S. McAvoy
Its: President
(Corporate Seal)
Print: Rand L Gray
"EMPLOYEE"
<PAGE>
BDO Seidman, L.L.P.
Accountants and Consultants
201 S. Orange Avenue, Suite 950
Orlando, Florida 32801-3421
Telephone: (407) 841-6930
Fax: (407) 841-6347
FAX COVER SHEET
Date: February 28, 1998 Number of Pages: 1
From: Melanie Fernandez Sender's Tel No. (407) 841-6930
To: Company: Fax Number:
John McAvoy Aqua Clara (813) 548-7109
COMMENTS:
I have reviewed the "Changes and Disagreements with Accountants" paragraph to be
included in the amended SB-2 Registration Statement and have no comments or
questions.
<PAGE>
Pender Newkirk & Company
Certified Public Accountants
100 South Ashley Drive
Suite 1650
Tampa, Florida 33602
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in the prospectus constituting part of the
Registration Statement on Form SB-2, and any amendments hereto, to be filed by
Aqua Clara Bottling & Distributing, Inc. of our Auditors' Opinion dated January
9, 1998 (except as to note 12, as to which the date is February 26, 1998),
accompanying the Financial Statements of Aqua Clara Bottling & Distributing,
Inc. and Subsidiary as of March 31, 1997, and to the use of our name under the
caption "Experts" in the Prospectus.
Pender Newkirk & Company
Certified Public Accountants
Tampa, Florida
April 13, 1998
<PAGE>
