As filed with the Securities and Exchange Commission on August 13, 1999
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-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.)
1315 Cleveland Street John C. Plunkett, President
Clearwater, Florida 33755 1315 Cleveland Street
(727) 446-2999 Clearwater, Florida 33755
(Address, including zip code, and telephone number, including area code
of Registrant's principal executive offices)
(727) 446-2999
(Name, address, including zip code, and telephone
number, including area code, of agent for service
COPY TO:
Jehu Hand, Esq.
Hand & Hand
24351 Pasto Road, Suite B
Dana Point, California 92629
(949) 489-2400
Facsimile (949) 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, 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 this Form is a post-effective amendment filed pursuant to Rule
462(d) 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)....... 6,685,710 $ .35 $ 2,339,998.50 $ 690.30
Common Stock issuable upon
conversion of Series B
Convertible Secured 8% Debentures(3). 4,725,240 $ .35 $ 1,653,834 $ 487.88
Interest Shares on Debenture(4)........ 378,022 $ .35 $ 132,307.70 $ 39.03
Common Stock already outstanding....... 2,850,000 $ .35 $ 997,500 $ 294.26
Common Stock issuable upon
exercise of options...........at $.30 100,000 $ .35 $ 35,000 $ 10.33
................................at $.35 100,000 $ .35 $ 35,000 $ 10.33
................................at $.40 100,000 $ .40 $ 40,000 $ 11.80
................................at $.50 500,000 $ .50 $ 250,000 $ 73.75
................................at $.70 500,000 $ .70 $ 350,000 $ 103.25
................................at $.80 500,000 $ .80 $ 400,000 $ 118.00
................................at $.90 500,000 $ .90 $ 450,000 $ 132.75
...............................at $1.00 500,000 $1.00 $ 500,000 $ 147.50
Total.................................. 17,438,972 $ 7,183,364.20 $ 2,119.18
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(1) Estimated solely for purposes of calculating the registration fee. The
registration fee is based upon the closing sales price on August 6, 1999
of $.35, based on Rule 457(g) except for options exerciseable at higher
prices.
(2) Includes 6,685,750 shares of Common Stock which may be resold by the
selling stockholders upon conversion of 1,000 shares ($1,000,000
aggregate principal amount) of Series A Convertible Preferred Stock. The
Convertible Preferred Stock is convertible 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. For purposes of the
calculation of the registration fee, the Registrant has registered the
maximum number of shares of Common Stock which it reasonably believes
that will be issued upon conversion of the Convertible Preferred Stock,
on the assumption that the conversion price of the Convertible Preferred
Stock will not be less than $.2275 per share of Common Stock (65% of
$.35). The maximum offering price per share is based upon the estimated
sales price of the Common Stock assuming they are resold at the time of
conversion by the holders (in accordance with Rule 457(g)). The
Registrant makes no representations as to the price at which Series A
Convertible Preferred Stock will be converted. The offering price per
share is based upon the closing sales price of the Common Stock on May
17, 1999 of $.35.
(3) Includes 4,725,240 shares of Common Stock which may be resold by the
selling stockholders upon conversion of $1,075,000 aggregate
principal amount of Secured 8% Series B Debentures. The Debentures are
convertible at 65% of the closing bid price of the Common Stock
averaged over the five trading days prior to the date of conversion.
For purposes of the calculation of the registration fee, the Registrant has
registered the maximum number of shares of Common Stock which it
reasonably believes that will be issued upon conversion of the
Debentures, on the assumption that the conversion price of the
Convertible Preferred Stock will not be less than $.2275 per share of Common
Stock (65% of $.35). The maximum offering price per share is based upon
the estimated sales price of the Common Stock assuming they
are resold at the time of conversion by the holders (in accordance with
Rule 457(g)). The Registrant makes no representations as to the price
at which Debentures will be converted. The offering price per share is
based upon the closing sales price of the Common Stock on May 17,
1999 of $.35.
(4) Represents $86,000 of shares issuable in lieu of one year's interest on
the Debentures, at the conversion price ($.2275) assumed above.
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.
17,438,972 Shares of Common Stock
(no par value)
The estimated 17,438,972 shares (the "Shares") of Common Stock, no par
value (the "Common Stock") of Aqua Clara Bottling and Distribution, Inc., a
Colorado corporation ("Aqua Clara") are offered by the selling shareholders (the
"Selling Shareholders"), including 6,685,710 shares (assuming a market price at
the time of conversion of $.35 and conversion at a rate of $.2275 per share)
issuable upon conversion of 1,521 shares of Series A Convertible Preferred Stock
(the "Series A Preferred"), 4,725,240 shares issuable upon conversion of
$1,075,000 in principal amount of Secured 8% Series B Convertible Debentures
(the "Debentures") 378,022 shares issuable in lieu of interest on the Debentures
2,850,000 shares already outstanding and 2,800,000 shares issuable upon exercise
of options. The eventual number of Shares issuable upon exercise of the Series A
Preferred and Debentures will depend on market prices on the date of conversion.
Aqua Clara will not receive any proceeds from the sale of Common Stock by the
Selling Shareholders. See "Selling Shareholders" and "Description of
Securities." The expenses of the offering, estimated at $40,000, will be paid by
Aqua Clara.
The Common Stock currently trades on the Electronic Bulletin Board under
the symbol "AQCB" On May 17, 1999, the last sale price of the Common Stock as
reported on the Electronic Bulletin Board was $.35 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 August __, 1999.
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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 Aqua Clara. 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 Aqua Clara since the date hereof.
ADDITIONAL INFORMATION
Aqua Clara 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 Aqua Clara 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. Aqua Clara
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 Aqua Clara at 1315 Cleveland Street, Clearwater, Florida, 33755,
telephone (727) 446-2999.
Aqua Clara files 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, Aqua
Clara intends to make available to its shareholders annual reports, including
audited financial statements, unaudited semi-annual reports and such other
reports as Aqua Clara may determine.
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PROSPECTUS SUMMARY
The following is only a summary of the information, financial statements
and the notes included in this Prospectus.
Aqua Clara
Aqua Clara Bottling & Distribution, Inc., a Colorado corporation ("Aqua
Clara") produces, bottles and sells non-sparkling purified drinking water
products in PET (an acronym for polyethylene terephthalate, a premium clear
plastic) containers ranging from .5 to 1.5 liters in size.
Aqua Clara's sales have been limited since it has only recently found one
distributor for its products and has received no significant purchase orders.
Sales for the nine months ended January 2, 1998 were $116,491. We don't know if
we will ever be able to enjoy significant sales or make a profit. From April
1997 to March 1998 we had a 5 gallon home and office delivery business, but we
sold this business in March 1998. We intend to find a market niche in oxygen
enriched water (with 40 parts per million (ppm) of oxygen compared to 3 ppm for
tap water. Oxygen enriched water tastes light and crisp and we think its
healthier, although there is no scientific data to back this up.
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, we will not flavor our water. After the introduction of our
oxygen enriched bottled water product, we might introduce a new product with
natural flavoring. Likewise, we will consider the infusion of beneficial herbs.
We will also consider the production of super oxygen enriched sports drinks,
providing even higher levels of oxygen, to be marketed at a higher price. We
will utilize a distinctive bottle and label for our water products.
Our objective is to build product markets in Florida, concentrating on the
Tampa area, and then expand nationally, by entering into distribution agreements
with 2-4 non-affiliated partners. We intends to use these distributors, as well
as its own production/distribution facility, as operational models. We then
intend to expand into multiple markets.
Aqua Clara's oxygen enriched small package bottled water product will
primarily be sold through retail outlets, including convenience stores, gas
station markets, grocery stores, health food stores, and health spas. However,
secondary distribution will be effected through vending and private labeling.
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 we will distribute its own product in certain areas, primarily we
will sell to qualified third party distributors. These third party distributors
will have the right to distribute to retail outlets in defined geographic areas.
A large number of potential distributors have contacted us regarding potential
distribution of its oxygen enriched bottled water. We have entered into one
contract for distribution of its products in the Northeast United States.
Additional possible distribution channels are currently under development.
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.
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The corporate offices of Aqua Clara are located at 1315 Cleveland Street,
Clearwater, Florida 33755 and its telephone number is (727) 446-2999.
Securities Offered:..............................
17,438,972 shares of Common Stock, no par value per share,
including 6,685,710 shares issuable upon conversion of 1,000
shares of Series A Preferred Stock, 4,725,240 shares issuable
upon conversion of $1,075,000 in principal amount of Secured
8% Series B Convertible Preferred Stock, at a conversion price
per share of Preferred Stock equal to $1,000 divided by 65%
of the average closing bid price of the Common Stock on the
five trading days prior to conversion (or for the Series A
Preferred Stock, $1.875 if such price is lower) 378,022 shares
issuable in lieu of interest on the Debentures, 2,850,000 shares
already outstanding and 2,800,000 shares issuable upon
exercise of options;
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:..... 16,160,523(1) shares
Common Stock Outstanding After Offering:......... 30,749,495(1) shares
NASD Electronic Bulletin Board Symbol............ AQCB
(1) Based on shares outstanding as of April 3, 1999.
Risk Factors
The securities offered hereby are highly speculative and very risky.
Some of these risk factors follow. Before you buy consider the following risk
factors and the rest of this prospectus.
RISK FACTORS
The Common Stock for sale is a speculative investment and very risky.
You should especially consider these risk factors.
Control Dispute
On October 12, 1998, John S. McAvoy, the then President of Aqua Clara,
gave notice that he was converting 45,000 shares of his common stock into
4,500,000 shares of a new Series B Preferred Stock. In October, 1998, Mr. McAvoy
took the position that the other officers of Aqua Clara had resigned and on
October 28, 1998 he executed a Consent action, exercising his purported rights
as a holder of 1,800,000 shares of Common Stock and 4,500,000 shares of super
voting stock, removing Messrs. Plunkett, Gray and Guthrie from the Board of
Directors, and electing Donald Huggins and Gerald Couture. Aqua Clara's position
is that since the Colorado Business Corporation Act requires that shareholder
consent actions, to be valid, must be unanimous, that McAvoy's actions, assuming
he held any Series B Preferred, were insufficient to remove these three
directors. In November, the renegade board purportedly increased the number of
authorized Series B Preferred to 49,500,000 and issued options to purchase
3,600,000 shares of Common Stock at $.10 per share. On October 30, 1998 the
Board of Directors removed John S. McAvoy as President and elected Mr. Plunkett
as President. On December 15, 1998 Aqua Clara filed an Amendment to its Articles
of Incorporation with the Colorado Secretary of State to eliminate the Series B
Preferred as an authorized class of stock. The members of the Board of
Directors, being Messrs. Guthrie, Plunkett and Gray, have sued Messrs. McAvoy,
Gerald Huggins and Donald Couture, as set forth under "Business - Legal
Proceedings." Aqua Clara obtained a temporary restraining order against McAvoy,
Huggins and Couture. The lawsuit was dismissed against McAvoy upon his written
resignation. Management believes that Huggins and Couture
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have no standing as board members, but in the event they commence litigation and
prevail, a change of control could
occur. See "Business - Legal Proceedings."
Additional Financing Requirements of Aqua Clara
At June 2, 1999, Aqua Clara had working capital of approximately
$80,000. Aqua Clara's operations have been financed to date through a debt
offering and through sales of its equity, most recently through the sale of
1,150 shares of Series B Preferred Stock. Aqua Clara requires significant
capital for the expansion of its operations. Aqua Clara believes that the net
proceeds from the recent Debenture offering should be sufficient to fund its
operations at least until June 30, 2000. However, we might need additional funds
before then. If additional funds are required, but cannot be raised, it 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 Aqua Clara will have
to reduce or eliminate its planned expansion activities, which could otherwise
ultimately provide significant revenue to Aqua Clara. Even if such additional
financing is available on satisfactory terms, it, nonetheless, could entail
significant additional dilution of the equity ownership of Aqua Clara to
existing shareholders and the book value of their outstanding shares.
Raw Material Prices
Due to the wide range of beverages available to consumers, including
bottled water products, Aqua Clara has limited ability to raise prices for its
products. Aqua Clara could in the future be affected by higher prices for raw
materials including PET resin and corrugated boxes. Aqua Clara might be unable
to pass such higher costs to its customers. As a result, Aqua Clara's results of
operations may be adversely affected by future increases in raw material prices.
Product Liability
The bottling and distribution of bottled water products can lead to
product liability claims, including liability due to the presence of
contaminants in its products. Aqua Clara maintains insurance coverage against
the risk of product liability and product recall. However, the amount of the
insurance carried by Aqua Clara 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, Aqua Clara 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
Aqua Clara has obtained a trademark on the Aqua Clara trademark, and
has applied for federal registrations for other proposed trademarks. Aqua Clara
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
Aqua Clara's trademarks do not or will not violate the proprietary rights of
others, that they would be upheld if challenged or that Aqua Clara would, in
such an event, not be prevented from using the trademarks, any of which could
have a material adverse effect on Aqua Clara.
Government Regulation
Aqua Clara'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 Aqua Clara's operations in the future. Failure to comply with
such laws and regulations could result in fines against Aqua Clara, 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 Aqua Clara. See "Business -- Regulation."
Lack of Inventory
Aqua Clara intends to maintain a limited amount of finished product
inventory. An event causing Aqua Clara'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 Aqua Clara's revenues and
customer relations.
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Consumer Preferences
Aqua Clara 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
Aqua Clara has not paid any cash dividends on its capital stock. Aqua
Clara 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."
Nasdaq Stock Market and Market Illiquidity
Aqua Clara's Common Stock does not meet the current Nasdaq listing
requirements for the SmallCap(R) Market. If Aqua Clara 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 Aqua Clara'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 Aqua Clara, and lower prices for Aqua Clara's
securities than might otherwise be attained.
Potential Future Issuances of Securities
Aqua Clara'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 (43,478,378 Shares as of the date of this Prospectus) current
shareholders are subject to significant potential dilution in their ownership
interest in Aqua Clara, 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 Aqua Clara's planned marketing efforts and future
economic performance of Aqua Clara. The forward-looking statements and
associated risks set forth in this Prospectus include or relate to: (I) the
ability of Aqua Clara to obtain a meaningful degree of consumer acceptance for
its products and future products, (ii) the ability of Aqua Clara to market its
products and future products on a national basis at competitive prices, (iii)
the ability of Aqua Clara to develop brand-name recognition for its products and
future products, (iv) the ability of Aqua Clara to develop and maintain an
effective sales network, (v) success of Aqua Clara in forecasting demand for its
products and future products, (vi) the ability of Aqua Clara to maintain pricing
and thereby maintain adequate profit margins, (vii) the ability of Aqua Clara to
achieve adequate intellectual property protection for Aqua Clara's products and
future products and (viii) the ability of Aqua Clara 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 Aqua Clara will market and provide
products on a timely basis, that Aqua Clara will retain its customers, that
there will be no material adverse competitive or technological change in
conditions in Aqua Clara's business, that demand for Aqua Clara's products will
significantly increase, that Aqua Clara's President will remain employed as such
by Aqua Clara, that Aqua Clara's forecasts accurately anticipate market demand,
and that there will be no material adverse change in Aqua Clara's operations or
business or in governmental regulations affecting Aqua Clara 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 Aqua Clara's control. Accordingly, although Aqua Clara
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
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disclosed elsewhere in the "Risk Factors" section of this Prospectus, there are
a number of other risks inherent in Aqua Clara's business and operations which
could cause Aqua Clara'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 Aqua
Clara to alter its marketing, capital investment and other expenditures, which
may also materially adversely affect Aqua Clara'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 Aqua Clara or any other person that Aqua Clara's
objectives or plans will be achieved. See "Management's Discussion and Analysis"
and "Business."
DIVIDEND POLICY
Aqua Clara has not paid any dividends on its Common Stock. Aqua Clara
currently intends to retain any earnings for use in its business, and therefore
does not anticipate paying cash dividends in the foreseeable future.
Aqua Clara 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 Aqua Clara 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
Aqua Clara'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 May 17, 1999, the closing bid
price as reported by the Electronic Bulletin Board was $.35.
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
March 31, 1998 3.1875 3.125
June 30, 1998 1.8750 1.8125
October 3, 1998 1.8750 .94
January 2, 1998 .91 .15
April 3, 1999 .48 .08
As of April 3, 1999, there were approximately 231 record holders of
Company common stock.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Year Ended April 3, 1999.
The Company's sales commenced in April, 1997, with the introduction of
its 5-gallon bottled water service. In the year ended April 4, 1998, the Company
had $135,710 in sales from this business. Revenues were comprised of cooler
rentals and water sales, which terminated in March, 1998. With the proceeds from
its offering of Series A Preferred Stock, the Company entered the PET bottled
water market. The sales for the fiscal year ending April 3, 1999, are $184,952.
The lower than expected sales amount is the result of the Company's inability to
find a major distributor to purchase large quantities of product until March,
1999. This agreement was reached too late in the year to significantly affect
annual sales figures.
The Company's sales comparisons to previous years will not be an
indicator of any future growth patterns because the Company was still in the
development stage of launching its new product.
The Gross Profit for the fiscal year ended April 3, 1999, was $42,819.
The Selling and General Administrative expenses for the fiscal year were
$1,568,388. Non-recurring expenses included $400,000 for lead generation
corporate/relations contract from the prior year that was completely expensed in
the current year.
Sales of PET bottled water products did not commence until July, 1998.
The Company at that time had no agreements in place with distributors for its
products. While the Company has entered into a distribution agreement with a
significant distributor in the Northeast United States, there can be no
assurances that this distributor will be successful in promoting the product in
its geographic area or that sufficient other distribution can be accomplished to
provide adequate operating revenues from this business.
The Company does not intend to manufacture bottled water products
without firm orders in hand for its products. However, the Company intends to
expend costs over the next twelve months in advertising, marketing and
distribution, which amounts are expected to be expended prior to the receipt of
significant revenues. There can be no assurance as to when, if ever, the Company
will realize significant operating revenues or attain profitability.
Net Operating Losses
The Company has accumulated approximately $2,087,000 of net operating
loss carryforwards as of April 3, 1999, which may be offset against future
taxable income through the year 2011 when the carryforwards begin to expire. The
use of these losses to reduce future income taxes will depend on the generation
of sufficient taxable income prior to the expiration of the net operating loss
carryforwards. 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.
<TABLE>
<CAPTION>
April 3, 1999
Deferred tax assets:
<S> <C>
Start-up Costs $ 530,000
Net operating loss carryforwards $ 785,000
Gross deferred tax assets $ 1,315,000
Valuation allowance $ 1,315,000
Total deferred tax asset $ 0
</TABLE>
Since inception, substantial changes in ownership of the Company have
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 that have been limited
because of the change in ownership as
8
<PAGE>
described above, any other net operating losses will expire if not utilized
within 15 to 20 years of the year in which they were incurred.
Year Ended April 4, 1998.
General, administrative and sales expenses in the year ended April 4,
1998 increased to $2,084,099, approximately nine times the level of such
expenses in the year ended March 31, 1997. Such expenses in year ended April 4,
1998 include $1,401,250 for consulting services paid in stock, and $132,000 in
other non-recurring expense. The increased level of these expenses in the year
ended April 4, 1998 reflects the commitment of the delivery of bottled water
business and expenses related to establishing the PET water business.
Sales of PET products commenced in June 1998. The Company has few
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 to Clearidge, Inc., a
Tennessee corporation located in Nashville Tennessee and a competitor to the
Company. Neither the Company nor any of its officer or directors is affiliated
with Clearidge. The purchase price of approximately $352,394 was paid $186,400
in cash and $148,782 by the assumption of installment notes payable, and
includes accounts receivable, inventory, equipment and deposits. See notes 1 and
5 of the notes to Consolidated Financial Statements. If the 5-gallon water
business had not been in existence for the years ended April 4, 1998 and March
31, 1997, the Company would have had no sales in either year, and would have had
$1,870,524 in general and administrative expenses and $1,881,903 in net losses
in fiscal 1998, compared to $2,084,099 and $2,203,714 in general and
administrative expenses and net loss, respectively, and the Company's need for
cash to supplement cash from operations would have been accordingly reduced.
General and administrative expenses related to the expansion of the
Company's business are expected to be less than $10,000 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 expend 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.
Liquidity and Capital Resources
As of January 2, 1999, the Company had a working capital deficit of
approximately $840,000. At January 2, 1999, the Company's daily operating cash
needs were being supplied by the then Directors of the Company. The Directors
were making secured loans to the Company to fund the Company operations. The
Directors projected the ability to invest enough capital in the Company to keep
the Company open and operational until March, 1999.
On February 11, 1999, a group of the Company's shareholders loaned the
Company $250,000, which was the needed capital to continue operations until May,
1999. This loan was secured by the assets of the Company and is a demand note.
Subsequent to April 3, 1999, the Company raised $1,075,000 through the
issuance of a Class B Preferred Debenture. The proceeds of this raise were used
to retire the First Mortgage on the plant and real estate and the demand note
described in the above paragraph. The remainder of the raise will be used to
finance continued operation of the Company. It is anticipated that, in
conjunction with anticipated revenue, the current capital is sufficient to
support Company operations until June, 2000.
The Company has no plans or arrangements in place with respect to
additional capital sources at this time. The Company has no lines of credit
available to it at this time. There is no assurance that additional capital will
be available to the Company when or if required.
Although the Company expects to have continued losses in the first
quarter of fiscal year 2000, management believes that the losses will continue
to decrease and a break-even point could be reached in the first or second
quarter of this year. Inflation has not had a significant impact on the
Company's results of operations.
9
<PAGE>
Year 2000
The Company is conducting an ongoing review of its computer systems and
those of its vendors, suppliers and customers to determine compliance with the
Year 2000 issue. As of this date, it appears that all systems are in compliance
but there can be no complete assurance of this.
The Company will maintain the ability to conduct internal operations as
well as vendor and customer interactions manually should Year 2000 problems
arise. It is anticipated that current accounting and administrative staff are
sufficient to maintain operations until such problems can be resolved. The
Company plans to continue its ongoing investigations.
Risk Factors and Cautionary Statements
Forward-looking statements in this report are made pursuant to the
"safe-harbor" provisions of the Private Securities Litigation Reform Act of
1995. The Company wishes to advise readers that actual results may differ
substantially from such forward-looking statements. Forward-looking statements
involve risks and uncertainties that could cause actual results to differ
materially from those expressed in or implied by the statements, including, but
not limited to, the following: Changing economic conditions, interest rate
trends, continued acceptance of the Company's products in the marketplace,
competitive factors, and other risks detailed in the Company's periodic report
filings with the Securities and Exchange Commission.
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 Aqua Clara'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. Aqua Clara produces and sells non-sparkling purified drinking
and distilled and natural water products.
Since April 1997, Aqua Clara has generated revenues from its 5 gallon
home and office delivery business, which was sold in March 1998, and Aqua Clara
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 Aqua Clara 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.
People are drinking more non-sparkling water because of 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
10
<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 Aqua Clara 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 Aqua
Clara's business will be the production and distribution of oxygen enriched
water, Aqua Clara had an active 5 gallon home and office delivery business. Aqua
Clara 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. Aqua Clara
owned and rented state-of-the art water coolers, which it rented to its 5 gallon
customers. Aqua Clara began its 5 gallon distribution business in April, 1997.
Aqua Clara sold this business in March 1998.
Oxygen Enriched Bottled Water. Aqua Clara's primary focus will be the
production/distribution of oxygen enriched bottled water in small package, PET,
containers ranging in size from .5 liter to 1.5 liters. The points of purchase
will include grocery stores, convenience stores, gas station markets, health
spas and vitamin/health food stores.
11
<PAGE>
Aqua Clara'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.
Aqua Clara'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. Aqua Clara 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.
Aqua Clara'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, Aqua Clara'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, Aqua Clara'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 Aqua Clara'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, Aqua Clara 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, Aqua Clara will consider the infusion of beneficial herbs.
Aqua Clara will also consider the production of super oxygen enriched sports
drinks, providing even higher levels of oxygen, to be marketed at a higher
price. Aqua Clara will utilize a distinctive bottle and label for its water
products.
Strategy
Aqua Clara's objective is to build a product enriched water in Florida,
concentrating on the Tampa area, and then expand nationally. Aspects of Aqua
Clara's strategy include the following.
Aqua Clara intends to enter into distribution agreements with 2-4
non-affiliated partners. Aqua Clara intends to use these distributors, as well
as its own production/distribution facility, as operational models. Aqua Clara
then intends to expand into multiple markets.
Aqua Clara'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 Aqua Clara will distribute its own product in certain areas,
primarily Aqua Clara 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 Aqua Clara regarding potential distribution of its oxygen enriched
bottled water. In March 1999 Aqua Clara entered into an agreement with a major
distributor in the Northestern United States for distribution of their 20oz.
bottles of oxygenated water.
Production
The three components of production are the building, the water
processing and bottling equipment, and the labor force.
12
<PAGE>
Building. Aqua Clara currently owns a 10,800 sq. foot building located
on 2.1 acres in Clearwater. Aqua
Clara has already completed the remodel to utilize this building as a bottling
and distribution facility. Major
Building Company, a regional building contractor, completed the remodel at a
cost of $561,000.
Equipment. Aqua Clara 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. Aqua Clara has received all of the equipment purchased.
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, including material handling equipment,
bottling and labeling equipment, conveyor systems and water treatment systems,
was received and installed in 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. Aqua Clara uses FDA and International Bottled Water
Association approved water sources.
Upon delivery to Aqua Clara'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 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.
Aqua Clara will maintain exacting internal quality control standards.
Each shift's production is tested in Company laboratory facilities according to
FDA and IBWA standards, and random samples are submitted regularly to an
independent laboratory for confirmation testing.
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 Aqua Clara's competitors are more experienced, have greater
financial and management resources and have more established proprietary
trademarks and distribution networks than Aqua Clara. On a national basis, Aqua
Clara 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). Aqua Clara also competes
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with numerous regional bottled water companies located in the United States and
Canada. Aqua Clara 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, Aqua Clara's staffing and working capital requirements
will vary during the year.
Trademarks
Aqua Clara has registrations in the U.S. Patent and Trademark Office
for the trademarks that it uses, including Aqua Clara. Aqua Clara 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 Aqua Clara'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 Aqua Clara would, in
such an event, not be prevented from using the trademarks, any of which could
have an adverse effect on Aqua Clara.
Regulation
Aqua Clara'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. Aqua Clara's
bottled water must satisfy FDA standards, which may be periodically revised, for
chemical and biological purity. Aqua Clara's bottling operations must meet FDA
"good manufacturing practices," and the labels affixed to Aqua Clara'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.
Aqua Clara'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 Aqua Clara's operations in the future.
Although Aqua Clara 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 Aqua Clara.
Legal Proceedings
Aqua Clara is not a party to any material legal proceedings, except as
set forth below. Civil litigation in the Circuit Court of the Eighteenth
Judicial Circuit, in and for Seminole County, Florida, was filed by Mainstream
Construction Group, Inc., a Florida corporation, Plaintiff vs. Aqua Clara
Bottling & Distribution, Inc., Defendant, Case No. 98-2336-CA-15-B. The
complaint is a two-count complaint for Breach of an Oral Contract and Quantum
Merit. The Plaintiff seeks $236,938 alleging the Company failed to pay for
improvements to the corporation's production and office building. The Company
may be liable for $141,000 of improvements to the property. The dispute appears
to be centered on contested change orders. The matter is pending arbitration.
Employees
Aqua Clara currently employs approximately 3 full-time employees, none
of whom are covered by collective bargaining agreements. During peak production
periods, Aqua Clara supplements its full-time work force with part-time
employees. Aqua Clara 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 Aqua Clara. Each director holds such
position until the next annual meeting of Aqua Clara's shareholders and until
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his respective successor has been elected and qualifies. All officers devote
full time to Aqua Clara. Any of Aqua Clara's officers may be removed with or
without cause at any time by Aqua Clara's Board of Directors.
Directors and Executive Officers
The members of the Board of Directors of Aqua Clara 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 Aqua Clara.
John C. (Jack) Plunkett, 49, was a Director and the Vice
President/Chief Operating Officer and Secretary
of Aqua Clara since November 1, 1996. In December 1998 he was elected as
President. 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.
Robert Guthrie, 74, has served as Director of Aqua Clara since May,
1997 and Secretary since December
1998. Mr. Guthrie is an attorney licensed to practice in Florida with offices
in Seminole, Florida. Mr. Guthrie also
serves as a Director of the Rivellas Community Bank.
Renato P. Mariani, 40, Director since May 1999. President of Eagle
Diversified, Inc.
On January 20, 1998 Aqua Clara entered into one-year employment
agreements with each of Messrs. John A. McAvoy, Plunkett and Gray as amended,
providing for salaries of $77,000 each. Messrs. Plunkett & Gray's employment
agreements were extended for an additional year. 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 Aqua Clara's cash flow
permits. Aqua Clara also agreed to grant stock options to Mr. Plunkett and Mr.
Gray equivalent to those granted to Mr. McAvoy. In addition Aqua Clara has
issued 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. Mr. John A. McAvoy, Aqua Clara's former president,
resigned on November 24, 1998. Pursuant to the terms of the original Amended
Employment Agreements, dated January 20, 1998, Aqua Clara has reduced the
accrued and unpaid 1998 salaries of Messrs. Plunkett ($50,000) and Gray
($39,000) to promissory notes and secured their interest with the assets of Aqua
Clara. The promissory notes, dated December 15, 1998 are demand instruments, at
5% simple interest. A blanket Security Agreement on all of Aqua Clara's assets
and a UCC filing on Aqua Clara's non-realty assets secures each note. A second
mortgage on Aqua Clara's realty will also secure each note. Each note, security
agreement, UCC filing and second mortgage includes any future accrued and unpaid
salary.
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Executive Compensation
The following table sets forth the cash compensation of Aqua Clara'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 Aqua Clara 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 Aqua Clara'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 $25,000 or
10% of such officer's cash compensation.
<TABLE>
<CAPTION>
Summary Compensation Table
ANNUAL COMPENSATION LONG TERM COMPENSATION
-
-
-
-
-
-
-
-
-
-
Name and Other Annual Awards Payouts All
Principal Position Year Salary Bonus Compensation Other
Restricted Options/ LTIP
Stock ($)SARs(#) Payouts ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
John S. McAvoy(1) 1999 $32,000 0 0 0 0 0 0
President and CEO 1998 43,875 0 0 0 0 0
1997 0 0 0 0 0 0 0
Rand Gray(1) 1999 $30,000 0 0 125,000 0 0 0
Chief Financial Officer 1998 30,000 0 0 0 0 0 0
1997 0 0 0 0 0 0 0
John C. Plunkett(1) 1999 $28,000 0 0 250,000 0 0 0
Vice President 1998 43,875 0 0 0 0 0
Chief Operating Officer 1997 0 0 0 0 0 0 0
</TABLE>
(1) Mr. Plunkett is now the sole executive officer following the
resignations of Messrs. McAvoy and Gray.
------
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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 Aqua Clara to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock (ii) each of Aqua Clara's directors and
executive officers, and (iii) all of Aqua Clara's directors and executive
officers as a group. The Percentage After Offering assumes the conversion of all
shares of Series A Preferred and Debentures into 11,410,980 shares of common
stock. See "Selling Shareholders".
<TABLE>
<CAPTION>
Percentage Percentage
Name and Address(1) Common Stock Before Offering After Offering
<S> <C> <C> <C> <C>
John S. McAvoy(2) 1,796,400 11.1% 6.4%
1315 Cleveland Street
Clearwater, Florida 33755
Renato P. Mariani(3) 4,395,604 21.4% --
1315 Cleveland Street
Clearwater, Florida 33755
John C. Plunkett 1,250,000 2.8% 1.6%
1315 Cleveland Street
Clearwater, Florida 33755
Robert Guthrie 125,000 .4% .3%
1315 Cleveland Street
Clearwater, Florida 33755
Barry Seidman 1,758,241 9.8% --
16631 Avenida Molino Viejo
Rancho Santa Fe, CA 92067
Arnold Zousmer 1,868,131 10.4% --
6890 Avenida de la Ronda
Rancho Santa Fe, CA 92067
Gulf Atlantic Publishing, Inc.(4) 3,200,000 16.5% --
1947 Lee Road
Winter Park, FL 32789
All Directors and Executive 5,770,604 24.6% 1.9%
Officers as a Group (3 persons)
</TABLE>
(1) Unless otherwise noted below, Aqua Clara 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 1,445,250 shares held jointly with his spouse, 200,000 shares
held by his spouse and 32,650 shares
held by his son.
(3) Includes 4,395,604 shares issuable upon exercise of Series A Preferred
Stock. See "Selling Shareholders."
(4) Includes 2,500,000 shares issuable upon exercise of options.
17
<PAGE>
CERTAIN TRANSACTIONS
In December, 1997, Aqua Clara issued 20,000 restricted shares of common
stock to Olympus Capital for consulting services rendered prior to September 30,
1997. In October 1997, Aqua Clara paid $375,000 and agreed to issue 75,000
restricted shares to Olympus Capital, Inc. for the purpose of assisting Aqua
Clara in identifying investors willing to invest capital into Aqua Clara in
connection with the $2,500,000 private placement Management has netted theses
costs against the proceeds and has allocated a portion of the net proceeds as a
cost of the 75,000 shares issued.
In September, 1997, Aqua Clara 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 Trnouski.
Gulf Atlantic Publishing and Arrow Marketing purchased these 400,000
shares at $.25 per share pursuant to an option agreement.
On November 17, 1997 Aqua Clara entered into a Lead
Generation/Corporate Relations Agreement with Corporate Relations Group ("CRG")
pursuant to which Aqua Clara has paid CRG $400,000 and by which Aqua Clara has
agreed to pay CRG an additional $400,000 upon Aqua Clara raising its next
tranche of $2,500,000. Additionally, Aqua Clara agreed to issue options to
purchase 250,000 shares of common stock under the following terms:
<TABLE>
<CAPTION>
Number of Shares Exercise Price Expiration 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>
On March 29, 1999, CRG exercised the above options at a reduced price
of $0.10 per share, offered by the Company to raise operating capital.
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 (these shares have been issued). CRG was also granted
piggyback rights for these shares, which were subsequently disbursed when the
Company failed to meet the deadline for registration effectiveness. Under its
agreement with the Company, CRG has agreed to perform financial public relations
services for the Company, consisting of disseminating information about the
Company to the investing public, for $400,000 paid in cash in December, 1997.
Under the Core Broker program undertaken by CRG, the Company was required to
host a due diligence trip for up to ten retail brokers who demonstrated an
interest in the Company.
In August, 1998, the Company entered into two subscription agreements
to issue 250,000 shares for $250,000. Under the terms of these agreements, the
$250,000 was paid and the stock was issued and was included in the registration
which became effective October, 1998. 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 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. Mr. John McAvoy has (unsecured) deferred salary of $46,480 as
of April 3, 1999. Mr. John Plunkett's spouse is a significant stockholder in a
corporation which has an oral contract to distribute the Company's products.
Pursuant to the terms of the original Amended Employment Agreements
dated January 20, 1998, on December 15, 1998, the Company reduced the accrued
and unpaid 1997-98 salaries of Messrs. Plunkett ($50,000) and Gray ($39,000) to
promissory notes and secured their interest with the assets of the Company. On
January 21, 1999, the Company reduced the remainder of the accrued and unpaid
1997-98 salaries of Messrs. Plunkett ($8,881) and Gray ($9,948) to promissory
notes subject to the continuing security interests. The promissory notes are
demand instruments at 5% simple interest. A blanket Security Agreement on all of
the Company's assets, a UCC filing on the Company's non-realty assets, and a
mortgage on the Company's realty secures each note. Each note, security
agreement, UCC filing and mortgage includes any future accrued and unpaid
salary.
18
<PAGE>
During October through December, 1998, the Company received emergency
loans from Messrs. Plunkett ($11,839), Gray ($7,436) and Guthrie ($5,000), which
amounts were reduced to promissory notes and secured with the assets of the
Company. During January, 1999, the Company received emergency loans from Messrs.
Plunkett ($533) and Gray ($11,013), which amounts were reduced to promissory
notes on January 21, 1999, subject to the continuing security interests. The
promissory notes are demand instruments at 5% simple interest. A blanket
Security Agreement on all of the Company's assets, a UCC filing on the Company's
non-realty assets, and a mortgage on the Company's realty secures each note.
Each note, security agreement, UCC filingand mortgage includes any future
advancement of additional funds.
Subsequent to April 3, 1999, the Company issued Mr. Guthrie 50,000
shares of common stock in full payment of the secured note described above. The
Company issued Mr. Plunkett 750,000 shares of common stock in full payment of
the secured notes for accrued salary and moneys loaned the Company, described
above, retiring the notes.
The Company on January 21, 1999, reduced the legal fees and costs
($45,480) owed to its litigation counsel,
Mr. Michael C. Berry, and its corporate counsel, Mr. Michael Geo. F. Davis,
to a promissory note. The promissory
note is a demand instrument at 5% simple interest. A mortgage on the Company's
realty secures the note. The note,
security agreement, and mortgage include any future fees or costs advancements.
Subsequent to April 3, 1999, the Company paid the amounts owed Messrs.
Berry and Davis, retiring the note described above.
The Company on February 11, 1999, received a loan from a group of the
Company's shareholders, who are neither officers nor directors. Under the loan
terms $250,000 was made available over ninety days. The 10% interest rate is
payable in cash or stock. A blanket Security Agreement on all of the Company's
assets, a UCC filing on the Company's non-realty assets, and a mortgage on the
Company's realty secures the note. The note, security agreement, UCC filing and
mortgage include any future advancements of additional funds. Messrs. Plunkett,
Gray, Guthrie and Berry/Davis subordinated their mortgages, where filed, to the
mortgage of the loaning shareholders.
Subsequent to April 3, 1999, the Company on June 25, 1999, paid off the
loan described above, retiring the note.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Aqua Clara'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 Aqua Clara 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 Aqua Clara would continue as a going concern.
However, subsequent to the issuance of BDO Seidman's audit report, Aqua Clara
included the audit report, together with unaudited financial statements of Aqua
Clara 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 to Aqua Clara's President that
certain prepaid expenses were incorrectly capitalized as of October 4, 1997. The
Board of Directors did not itself discuss this issue of the capitalization of
expenses with BDO Seidman. 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. Aqua Clara did not
disagree with BDO Seidman as to the inaccuracies and expensed the prepaid
expenses in question, which were included in the $488,700 expensed for
consulting services in the year ended April 4, 1998. BDO Seidman has been
advised of the restatement. A letter from the former independent accountant for
Aqua Clara is attached as an exhibit to the Registration Statement of which this
Prospectus is a part. There have been no other transactions similar to the above
transaction in disagreement. On December 30, 1997 Aqua Clara engaged Pender
Newkirk & Company as its new independent accountants. Pender Newkirk & Company
had no discussions with BDO Seidman on the classification of expenses.
19
<PAGE>
The Company dismissed Pender Newkirk & Company on April 3, 1999.
Tedder, James Worden and Associates, P.A., Orlando, Florida were appointed as
the new independent accountants on April 3, 1999. 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.
SELLING SHAREHOLDERS
The shares of Common Stock of Aqua Clara 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 aggregate number of shares offered for
resale upon conversion of the Series A Preferred and the Debentures 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 shares of Series A Preferred and the Series B Debentures, 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 65% of
the closing bid price of the Common Stock on the Electronic Bulletin Board
NASDAQ averaged over the five trading days immediately prior to the date of
conversion, (or $1.875 for the Series A Stock if such price is lower.) Based
upon a market price of $.35 and an assumed conversion price of $.2275 per share,
4,395.6043 shares of Common Stock would be issuable per share of Series A
Preferred or each $1,000 in Debentures. 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 Aqua Clara and any Selling Stockholder is set forth below. The
Percentage Before Offering has been computed in accordance with Rule 13d-3 of
the Securities Exchange Act of 1934, by dividing the number of shares held by
each Selling Shareholder by the sum of the number of shares outstanding and the
number of shares, if any, issuable to the Selling Shareholder within 60 days
(but assuming no issuances to any other person).
20
<PAGE>
<TABLE>
<CAPTION>
Shares of Principal
Series A Amount of Common
Preferred Debentures Stock Percentage
<S> <C> <C> <C> <C> <C>
Olympus Capital, Inc.(1) 175 -- 1,169,230 4.5%
Barry Seidman(2) 300 100,000 1,758,241 9.8%
Arnold Zousmer(3) 425 1,868,131 10.4%
Agricola Coco Bohn SA(4) 150 100,000 1,098,900 6.4%
CA Opportunidad SA(5) 119 523,076 3.1%
Bruce R. Knox(6) 10 100,000 483,519 2.9%
Passy Holding(7) 100 439,560 2.6%
James Skalko(8) 172 756,044 4.5%
Ed Leinster(9) 70 307,692 1.9%
Eagle Diversified, Inc.(10) 1,000 4,395,604 21.4%
James W. Spratt II -- 25,000 109,890 *
Roy E. Leinster -- 50,000 219,780 *
Ronnie L. Williams, Sr. -- 50,000 219,780 *
Edwards Capital Corporation(11) -- 50,000 219,780 *
Peter Kertes -- 50,000 219,780 *
Frederick Lenz -- 50,000 219,780 *
Kimerly Dowda -- 75,000 329,670 *
Gotris, S.A.(12) -- 25,000 109,890 *
John T. Mitchell -- 50,000 219,890 *
Lighthouse Holdings, Inc.(13) -- 50,000 219,890 *
Joseph Sloves -- 25,000 109,890 *
Bryan King -- 25,000 109,890 *
Taurus Enterprises, Inc.(14) -- 25,000 109,890 *
Philip M. Holstein, Jr. -- 25,000 109,980 *
Carmen A. Danella -- 100,000 439,560 *
Gary Pereira -- 50,000 219,890 *
John Thomas -- 50,000 219,890 *
Norrstar Advertising(15) 600,000 3.6%
Tom Vinton 550,000 3.3%
Dennis Zweig 500,000 3.0%
Private Capital Group, Inc.(16) 100,000 *
Corporate Relations Group, Inc.(17) 300,000 1.8%
Gulf Atlantic Publishing, Inc.(18) 3,200,000 16.5%
Totals 1,521 1,075,000 16,560,980 97.9%
</TABLE>
*Less than 1%
(1) Includes 75 shares registered in the SB-2 and offered hereby and 100
shares which Eagle has an option. Also includes 100,000 shares of
Common Stock and 300,000 shares issuable upon exercise of options
(100,000 shares at each of $.30, $.35 and $.40. The control person of
Olympus Capital, Inc. is James W.
Spratt III.
(2) Includes 200 shares registered in the SB-2 and offered hereby and 100 shares
on which Eagle has an option. (3) Includes 25 shares registered in the SB-2 and
offered hereby and 400 shares on which Eagle has an option. (4) Includes 50
shares registered in the SB-2 and offered hereby and 100 shares on which Eagle
has an option.
The control person of Agricola Coco Bohn SA is Jose Antonio Gomez.
(5) Includes 19 shares registered in the SB-2 and offered hereby and 100
shares on which Eagle has an option.
The control person of CA Opportunidad is Jose Anotnio Gomez.
(6) Includes 10 shares registered in the SB-2 and offered hereby.
(7) Includes 50 shares registered in the SB-2 and offered hereby and 50
shares on which Eagle has an option.
The control person of Passy Holding is Ethel Schwartz.
(8) Includes 72 shares registered in the SB-2 and offered hereby and 50 shares
on which Eagle has an option. (9) Includes 20 shares registered in the SB-2 and
offered hereby and 50 shares on which Eagle has an option. (10) Represents 1,000
shares which Eagle has the option to acquire from other holders of Series A
Preferred.
(11) The control person of this Company is W. J. Mathews.
(12) The control person of this Company is Jose Antonio Gomez.
21
<PAGE>
(13) The control person of this Company is Clayton Been.
(14) The control person of this Company is Joseph Sloves.
(15) The control person of Norrstar is Raylen Parra.
(16) the control person of Private Capital Group is Don Huggins.
(17) The control person of Corporate Relations Group is Kevin Price and
Paul Serluco.
(18) The control person of Gulf Atlantic Publishing is Don Philipott.
Includes 700,000 shares of Common Stock
and 500,000 options to purchase Common Stock at $.50, $.70, $.80, $.90
and $1.00.
DESCRIPTION OF SECURITIES
Common Stock
Aqua Clara's Articles of Incorporation authorizes the issuance of
50,000,000 shares of Common Stock, no par value per share, of which 16,160,523
shares were outstanding as of April 3, 1999, including 100,000 shares held in
escrow. See "Certain Transactions." Aqua Clara 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 Aqua Clara, 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 and Series B Preferred Stock.
Holders of Common Stock have no preemptive rights to purchase Aqua Clara'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, including Shares issuable upon
conversion of the Preferred Stock.
Preferred Stock
Aqua Clara'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 Aqua Clara, Common Stock valued at the Conversion Rate. The
initial closing for the sale of the Series of Preferred Stock was on November
11, 1997. The holders of the Series A Preferred Stock have the right to receive,
at the time of conversion, additional penalty shares equal to (a) 5% if Aqua
Clara did not file a registration statement to register the underlying common
stock by January 15, 1998, (b) an additional 5% if the registration statement is
not declared effective by April 15, 1998, and (c) an additional 5% of Aqua Clara
does not deliver certificates representing the Common Stock within 5 days of the
date of conversion. Since the registration statement of which this Prospectus is
a part was filed by January 15, 1998 but not declared effective by April 15,
1998, the holders of Series A Preferred Stock are entitled to 5% additional
shares upon conversion.
Aqua Clara'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. Aqua Clara 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 Aqua Clara'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,
22
<PAGE>
in a series of securities outstanding that will have certain preferences with
respect to dividends and liquidation over the Common Stock which would result in
dilution of the income per share and net book value of the Common Stock.
Issuance of additional Common Stock pursuant to any conversion right which may
be attached to the terms of any series of preferred stock may also result in
dilution of the net income per share and the net book value of the Common Stock.
The specific terms of any series of preferred stock will depend primarily on
market conditions, terms of a proposed acquisition or financing, and other
factors existing at the time of issuance. Therefore, it is not possible at this
time to determine in what respect a particular series of preferred stock will be
superior to Aqua Clara's Common Stock or any other series of preferred stock
which Aqua Clara 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 Aqua Clara.
Aqua Clara 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 Olde Monmouth 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 Aqua
Clara by Hand & Hand, a law corporation, Dana Point, California.
EXPERTS
The audited financial statements included in this Prospectus as of
April 4, 1998 and for the years ended April 4, 1998 and March 31, 1997
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. The audited financial statements for the year ended April 3, 1999
audited by Tedder, James, Wordon & Associates, P.A., independent certified
public accountants, to the extent and for the period set forth in their report.
INDEMNIFICATION
Aqua Clara 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 Aqua Clara's articles of incorporation, and as
permitted under the Colorado General Business Act, directors are not liable to
Aqua Clara 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 Aqua Clara 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 Aqua
Clara 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 Aqua Clara where indemnification will be
required or permitted. Aqua Clara 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 Aqua Clara pursuant to the foregoing provisions, or otherwise, Aqua
Clara 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.
23
<PAGE>
In the event that a claim for indemnification against such liabilities
(other than the payment by Aqua Clara of expenses incurred or paid by a
director, officer or controlling person of Aqua Clara 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, Aqua
Clara 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.
24
<PAGE>
Independent Auditor's Report
Board of Directors
Aqua Clara Bottling & Distribution, Inc. and Subsidiary
Clearwater, Florida
We have audited the accompanying consolidated balance sheet of Aqua Clara
Bottling & Distribution, Inc. and Subsidiary as of April 3, 1999 and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
These standards require that we plan and perform the audit 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 audit provides 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 April 3, 1999 and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered losses from
operations and has negative working capital. Realization of a major portion of
the assets is dependent on the Company's ability to meet its future financing
requirements, and the success of future operations. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plan regarding these matters are also described in Note 1 to the
consolidated financial statements. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Tedder, James, Worden & Associates, P.A.
May 28, 1999, except as to Note 1 which is as of June 25, 1999 Orlando, FL
25
<PAGE>
Independent Auditors' Report
Board of Directors
Aqua Clara Bottling & Distribution, Inc.
and Subsidiary
Largo, Florida
We have audited the accompanying consolidated balance sheet of Aqua Clara
Bottling & Distribution, Inc. and Subsidiary as of April 4, 1998 and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the years ended April 4, 1998 and March 31, 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 financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
These standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 audit provides 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 April 4, 1998 and the results of its
operations and its cash flows for the years ended April 4, 1998 and March 31,
1997 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, realization of a major portion of the assets
is dependent on the Company's ability to meet its future financing requirements,
and the success of future operations. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
regarding these matters are also described in Note 1 to the consolidated
financial statements. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Pender Newkirk & Company
Certified Public Accountants
Tampa, Florida
May 27, 1998
26
<PAGE>
<TABLE>
<CAPTION>
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Consolidated Balance Sheets
April 3, 1999 April 4, 1998
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 9,960 $ 723,618
Accounts receivable, net of allowance for
doubtful accounts of $10,000 48,085 --
Inventories 62,729 26,948
Employee Advances -- 17,691
Prepaid Assets -- 400,800
Other current assets 26,586 --
Total Current Assets 147,360 1,169,057
Property, plant, and equipment,
net of accumulated depreciation 1,898,287 1,408,002
Other assets 1,506 40,577
$ 2,047,153 $ 2,617,636
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, trade $ 426,483 $ 209,481
Accrued expenses 248,348 99,112
Current maturities of long-term debt 18,149 34,135
Current obligation under capital lease 3,526 --
Due to stockholders 370,066 --
Other current liabilities 26,692 --
Total current liabilities 1,093,264 342,728
Long-term debt, less current maturities 261,976 279,514
Obligation under capital lease, less current portion 12,065 --
$ 1,367,305 $ 622,242
Stockholders' equity:
Preferred stock; no par value, 5,000,000 shares
authorized; 1,676 and 2,500 shares issued and outstanding 1,250,284 1,864,988
Common stock; no par value, 50,000,000 shares
authorized; 16,160,523 and 6,271,622
shares issued and outstanding
as of April 3, 1999 and April 4, 1998, respectively 3,670,870 2,781,166
Additional paid-in capital 1,417,391 1,417,391
Accumulated deficit (5,658,697) (4,068,151)
$ 679,848 $ 1,995,394
$ 2,047,153 $ 2,617,636
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE>
<TABLE>
<CAPTION>
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Consolidated Statements of Operations For
the years ended April 3, 1999, April 4, 1998 and March
31, 1997
Year Ended
April 3, 1999 April 4, 1998 March 31, 1997
<S> <C> <C> <C>
Sales $ 184,952 $ 135,710 $
Cost of sales 142,133 277,146
Gross profit 42,819 (141,436)
General, administrative, and sales expenses 1,568,388 2,084,099 315,985
Operating loss (1,525,569) (2,225,535) (315,985)
Other income (expense):
Interest expense (40,601) (38,968) (50,542)
Interest and other income 5,256 27,589
Gain (loss) on sale of assets (2,467) 33,200
Other expense (3,971) 0
Net other income (expense) (41,783) 21,821 (50,542)
Net loss before cumulative effect of a change in
accounting principle (1,567,352) (2,203,714) (366,527)
Cumulative effect of a change in
accounting principle (23,194) 0
Net loss (1,590,546) (2,203,714) (366,527)
Dividends on preferred stock:
Amortization of intrinsic value
of conversion rights 0 1,417,391
Unpaid 8.0% cumulative dividends 134,080 59,178
Net loss applicable to common stock $ (1,724,626) $ (3,680,283) $ (366,527)
Basic loss per common share $ (0.19)$ (0.62)$(0.13)
Weighted average common shares outstanding 8,911,295 5,962,307 2,787,931
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE>
<TABLE>
<CAPTION>
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Consolidated Statements of Stockholders'
Equity For the years ended April 3, 1999, April 4, 1998
and March 31, 1997
Additional
Preferred Stock Common Stock Paid-In AccumulatedSubscription
Shares Amount Shares Amount Capital Deficit Receivable
Balance,
<S> <C> <C> <C> <C>
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 279,500 139,750
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 (366,527)
Balances, March 31, 1997 -- -- 4,884,122 1,032,416 -- (447,046) (50,000)
Collection of subscription
receivable, April 1997 -- -- -- -- -- -- 50,000
Issuance of common stock
for services & $100,000 -- -- 1,312,500 1,501,250 -- -- --
Stock issued through regulation D
offering, December 1997 2,500 447,597 75,000 247,500 1,417,391 -- --
Amortization of the intrinsic
value of the conversion rights
of the preferred stock -- 1,417,391 -- -- -- (1,417,391) --
Net loss for the year -- -- -- -- -- (2,203,714) --
Balances, April 4, 1998 2,500 1,864,988 6,271,622 2,781,166 1,417,391 (4,068,151) --
Stock issued through Regulation D
offering August 1998 -- -- 250,000 250,000 -- -- --
Conversion of preferred
stock 824 (614,704) 9,388,901 614,704 -- -- --
Issuance of common stock
exercise of options -- -- 250,000 25,000 -- -- --
Net loss for the year -- -- -- -- -- (1,590,546) --
Balances, April 3, 1999 1,676 1,250,284 16,160,523 3,670,870 1,417,391 (5,658,697) --
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE>
<TABLE>
<CAPTION>
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Consolidated Statements of Cash
Flows For the years ended April 3, 1999, April
4, 1998 and March 31, 1997
Year Ended
April 3, 1999 April 4, 1998 March 31, 1997
Operating activities:
<S> <C> <C> <C>
Net loss $ (1,590,546) $ (2,203,714) $ (366,527)
Adjustments to reconcile net loss to net cash
used in operating activities:
Allowance for doubtful accounts 10,000 0
Loss (gain) on sales of assets 2,467 (33,200)
Depreciation and amortization 100,444 56,200
Cumulative effect of a change in
accounting principle 23,194 0
Issuance of common stock for services 0 1,326,250 139,750
(Increase) decrease in:
Accounts receivable (58,085) 0
Employee advances 17,691 0
Inventories (35,781) (26,948)
Prepaid expenses 400,800 (399,709) 2,427
Other current assets (26,586) 0
Increase (decrease) in:
Accounts payable 217,002 51,436 4,917
Accrued expenses 229,946 98,209 69,533
Other current liabilities 26,692 0
Stockholder salary accrual 118,533 0
Net cash used in operating activities (564,229) (1,131,476) (149,900)
Investing activities:
Proceeds from sale of assets 4,000 133,925
Proceeds from sale of investments 50,004
Purchase of property, plant and equipment (578,295) (942,892) (43,978)
Decrease in other assets 15,877 7,930 (65,977)
Net cash used in investing activities (558,418) (801,037) (59,951)
Financing activities:
Proceeds from borrowings 0 55,475 136,000
Proceeds from due to stockholders 155,822 0
Payments on borrowings (21,833) (53,113) (10,396)
Net proceeds from issuance of stock 275,000 2,262,488 475,148
Net cash provided by financing activities 408,989 2,264,850 600,752
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
<TABLE>
<CAPTION>
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Consolidated Statement of Cash Flows,
Continued For the years ended April 3, 1999,
April 4, 1998 and March 31, 1997
<S> <C> <C> <C>
Net increase (decrease) in cash & cash equivalents $ (713,658) $ 332,337 $ 390,901
Cash and cash equivalents, beginning of year 723,618 391,281 380
Cash and cash equivalents, end of year $ 9,960 $ 723,618 $ 391,281
Supplemental disclosures of cash flow information and noncash investing and
financing activities:
Cash paid for interest $ 39,134 $ 38,967 $ 56,010
During the year ended March 31, 1997, $323,500 of convertible debt was
converted to 796,500 shares of common stock.
During the year ended March 31, 1997, 100,000 shares of common stock
were issued for a $50,000 subscription receivable.
During the year ended April 3, 1999, 824 shares of preferred stock was
converted into 9,388,901 common shares.
During the year ended April 4, 1998, $1,401,250 of common stock was
issued in exchange for services to be performed.
During the year ended April 3, 1999, the Company incurred a capital
lease obligation of $18,900 when it acquired new equipment.
During the year ended April 4, 1998, the Company incurred a capital
lease obligation of $49,731 and debt of $107,563 when it acquired new equipment.
During the year ended April 4, 1998, the Company sold its five-gallon
water business. As a part of the terms of the sale, debt of $149,782 was assumed
by the purchaser.
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Notes to Consolidated Financial Statements
Years Ended April 3, 1999 and April 4, 1998
(1) ORGANIZATION, BACKGROUND, SALE OF ASSETS, AND GOING CONCERN
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.
On July 29, 1996, Aqua Clara Bottling & Distribution, Inc. (hereinafter
referred to as "Aqua Clara" or the "Company") 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.
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. 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
cumulative 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.
During the year ended April 4, 1998 the Company entered into a lead
generation/corporate relations agreement that required the Company to
pay $400,000. This was included in prepaid expenses at April 4, 1998
and was expensed during the year ended April 3, 1999.
During the year ended April 4, 1998, the Company began its five-gallon
water business. In February 1998, the Company sold this portion of the
business. The assets disposed of consist of certain receivables, a
vehicle, and various equipment used in the Company's bottled water
business. The total sales price was approximately $352,394, which
included the assumption of installment notes payable of approximately
$149,782 by the acquiring company. The Company recognized a gain of
approximately $33,000 on this sale.
32
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Notes to Consolidated Financial Statements - Continued
Years Ended April 3, 1999 and April 4, 1998
(1) ORGANIZATION, BACKGROUND, SALE OF ASSETS, AND GOING CONCERN, CONTINUED
The following is a pro forma statement of the operations (unaudited) as
if the five-gallon water business was not in existence for the years
ended April 4, 1998 and March 31, 1997:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
APRIL 4, 1998 MARCH 31, 1997
<S> <C> <C>
General and administrative expenses $ (1,870,524) $ (315,985)
Interest expense (38,968) (50,542)
Other income 27,589 --
Net loss $ (1,881,903) $ (366,527)
</TABLE>
During the year ended April 4, 1998 the revenues reflected in the
consolidated financial statements are from initial operations of a
five-gallon water business, which was discontinued in March 1998.
During the year ended April 3, 1999 the Company began producing 20oz
bottles of oxygenated water. The Company will need to generate
additional sales or obtain additional financing to fund its operations.
These factors, combined with the fact that the Company has not
generated any positive cash flows from operations, raise substantial
doubt about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets or amounts and
classifications of liabilities that might be necessary in the event the
Company cannot continue in existence.
In March 1999 the Company entered into an agreement with a major
distributor in the Northeastern UnitedStates for distribution of their
20oz. bottles of oxygenated water. Subsequent to April 3, 1999 the
Company raised $1,075,000 through the issuance of a Class B Preferred
Debenture. The proceeds of this debenture were used to retire the
mortgage on the building and the 90-day note to stockholders. The
remainder of the proceeds will be used to fund operations.
(2) SIGNIFICANT ACCOUNTING POLICIES
(A) ORGANIZATION
The consolidated financial statements include the accounts of Aqua
Clara Bottling & Distribution, Inc. and its wholly owned subsidiary,
Pocotopaug Investments, Inc. All significant intercompany accounts and
transactions have been eliminated.
The financial statements for previous years reflected the Company as
being in the development stage. The accompanying financial statements
present the Company as no longer being in the development stage.
(B) ESTIMATES
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.
33
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Notes to Consolidated Financial Statements - Continued
Years Ended April 3, 1999 and April 4, 1998
(2) SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(C) CASH EQUIVALENTS
Cash equivalents consist of all highly liquid debt instruments
purchased with a maturity of three months or less.
(D) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market.
(E) INCOME TAXES
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.
(F) PREFERRED STOCK
The Company charges to retained earnings and credits its additional
paid-in capital for the amortization of the intrinsic value of the
conversion feature of its preferred stock in accordance with the
statements issued by the Securities and Exchange Commission.
(G) COMMON STOCK
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.
(H) PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment are recorded at cost. Depreciation is
calculated by the straight-line methods over the estimated useful lives
of the assets. Property under capital leases is amortized over the
shorter of the lease terms or the estimated economic life of the
property.
34
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Notes to Consolidated Financial Statements - Continued
Years Ended April 3, 1999 and April 4, 1998
(2) SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(I) FAIR VALUE OF FINANCIAL INSTRUMENTS
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 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.
(J) BASIC LOSS PER COMMON SHARE
Basic loss per common share is based on the weighted average number of
common shares outstanding during each period. The Company implemented
SFAS No. 128 "Earnings Per Share" during the year ended April 4, 1998.
In computing dilutive earnings per share, the following were excluded
because their effects were antidilutive. Year ended April 3, 1999 -
Preferred shares convertible into common stock and 2,173,382
contingently issuable shares. Year ended April 4, 1998 - Preferred
shares convertible into common stock, options on 250,000 shares and
600,000 contingently issuable shares.
(K) ADVERTISING COSTS
Advertising costs are expensed, as incurred and amounted to $6,376,
$849,176 and $1,700 for the years ended April 3, 1999, April 4, 1998
and March 31, 1997, respectively.
(L) FISCAL YEAR
The Company's fiscal year ends with the first Saturday in April
beginning with the fiscal year ended April 4, 1998.
(3) CHANGES IN ACCOUNTING PRINCIPLE
During 1998 the AICPA issued Statement of Position (SOP) 98-5 that
requires companies to write-off start-up expenses in the year incurred
and any previously capitalized expenditures in the year adopted.
The Company adopted SOP 98-5 during the year ended April 3, 1999 and
recorded a $23,194 cumulative effect of a change in accounting
principle as required by the SOP ($0 per share).
(M) 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 at a cost of $400,000. The Company will
amortize these costs when services under the contract are rendered.
35
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Notes to Consolidated Financial Statements - Continued
Years Ended April 3, 1999 and April 4, 1998
(4) INVENTORIES
<TABLE>
<CAPTION>
Inventories consist of the following:
APRIL 3, 1999 APRIL 4, 1998
<S> <C> <C>
Raw materials $ 53,161 $ 26,948
Finished goods 9,568 0
---------- -----------
$ 62,729 $ 26,948
========== ===========
</TABLE>
(5) PROPERTY, PLANT, AND EQUIPMENT
<TABLE>
<CAPTION>
Property, plant, and equipment consist of the following:
APRIL 3, 1999 APRIL 4, 1998
<S> <C> <C>
Land $ 90,000 $ 90,000
Building 932,311 528,707
Machinery and equipment 959,423 763,951
Vehicles 22,393 30,392
2,004,127 1,413,050
Less accumulated depreciation 105,840 5,048
$ 1,898,287 $ 1,408,002
</TABLE>
For the years ended April 3, 1999 and April 4, 1998, depreciation
expense amounted to $100,444 and $5,048, respectively. The Company has
reviewed its long-lived assets for impairment and has determined that
no adjustments to the carrying value of long-lived assets is required.
(6) DUE TO STOCKHOLDERS'
Due to stockholders' consists of the following at April 3, 1999:
Notes payable to stockholders due on demand with
interest accrued at 5% to 10%
$ 174,690
Deferred salaries with interest accrued at 5%
195,376
----------
$ 370,066
==========
Included in notes payable to stockholders is a 90-day note that permits
the Company to borrow up to $250,000 at 10% interest payable in cash or
stock. The note is secured by Company assets and at April 3, 1999 has a
balance of $120,000. As additional consideration the Company will issue
125,000 common shares valued at $25,000 to the loaning stockholders.
The stock to be issued was reflected as a loan fee and the liability is
included in accrued expenses at April 3, 1999 (See note 11).
The remaining notes and the deferred salaries are secured by company
assets.
36
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Notes to Consolidated Financial Statements - Continued
Years Ended April 3, 1999 and April 4, 1998
(7) LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consists of: April 3, 1999 April 4, 1998
<S> <C> <C>
Mortgage payable; interest adjustable annually to prime (8.5% at
April 3, 1999); payable $2,954 per month including interest;
unpaid principal of approximately $238,000 due February 15, 2001;
collateralized by property and plant
$ 265,429 $ 277,409
Installment note payable; interest 10.5% (ranging from 10.5% to 11.5% as of 1998);
payments $462 per month as of 1999 and $6,340 as of 1998 including interest;
collateralized by vehicle(s) 14,221 21,240
Other note 475
Long-term debt 280,125 313,649
Less current installments 18,149 34,135
Long-term debt, less current installments $ 261,976 $ 279,514
</TABLE>
The following is a schedule by year of the principal payments required on
long-term debt:
2000 $ 18,149
2001 256,338
2002 5,232
2003 406
----------
$ 280,125
==========
During 1998, the Company sold the assets of their five-gallon water
business. The purchaser of these assets assumed the notes payable and
obligations under capital leases used by the Company to finance these
assets. The purchaser is responsible for making the payments on these
notes payable and obligations under capital leases, however, the Company
remains contingently liable. The principal payments required on these
notes payable and obligations under capital leases are approximately
$50,000 at April 3, 1999.
37
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Notes to Consolidated Financial Statements - Continued
Years Ended April 3, 1999 and April 4, 1998
(8) LEASE COMMITMENTS
At April 3, 1999 the Company is obligated under a long-term capital lease
for equipment. The following is a schedule by year of future minimum
lease payments under the capital lease.
2000 $ 4,439
2001 4,439
2002 4,439
2003 4,439
--------
Total lease payments 17,756
Less amount representing
interest (6.5%) 2,165
--------
Present value of lease
payments 15,591
Less current obligation 3,526
--------
Long-term capital lease
obligation $ 12,065
========
At April 3, 1999 the Company rented vehicles and equipment under
operating leases. The following is a schedule by year of future minimum
rental payments required under operating leases that have an initial or
remaining noncancellable lease term in excess of one year as of April 3,
1999.
2000 $ 5,990
2001 4,998
2002 800
---------
$ 11,788
=========
Rent expense amounted to $5,990 and $83,269 for the years ended April 3,
1999 and April 4, 1998, respectively.
(9) 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 $2,087,000, which begin to expire in years after 2011.
Temporary differences giving rise to the deferred tax assets consist
primarily of the deferral and amortization of start-up costs for tax
reporting purposes. Management has established a valuation allowance
equal to the amount of the deferred tax assets due to the uncertainty of
the Company's realization of this benefit.
38
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Notes to Consolidated Financial Statements - Continued
Years Ended April 3, 1999 and April 4, 1998
(9) INCOME TAXES, CONTINUED
The components of deferred tax assets consist of the following at April
3, 1999:
Deferred tax assets:
Start up costs $ 530,000
Net operating loss carryforwards 785,000
-----------
Gross deferred tax assets 1,315,000
Valuation allowance 1,315,000
-----------
Total deferred tax assets $ --
===========
Since inception, substantial changes of ownership of the Company have
occurred. Under federal tax law, these changes in ownership of the
Company will significantly restrict future utilization of the net
operating loss carryforwards. Other than the net operating losses, which
have been limited because of the change in ownership as described above,
any other net operating losses will expire if not utilized within
beginning in years after 2011.
(10) COMMITMENTS AND CONTINGENCIES
The Company had employment agreements with its officer and former
employees, which provided for a salary accrual. At April 3, 1999, the
Company accrued $178,618 in deferred salaries related to these
agreements. These amounts are included in due to stockholders in the
consolidated financial statements.
(11) STOCK
The Company entered into two agreements for services to be performed
during the year ended April 4, 1998. 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 and resulted in a total cash
consideration paid to the Company of $100,000. The cost of these
agreements was expensed because the services were performed.
In April 1997, the Company issued 812,500 shares of common stock to
directors, officers and employees for services rendered. These shares
were valued at $.50 per share, the fair market value of the common stock.
During the year ended April 4, 1998, 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
39
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Notes to Consolidated Financial Statements - Continued
Years Ended April 3, 1999 and April 4, 1998
(11) STOCK, CONTINUED
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 (i) $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:
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.
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 additional 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.
During the year ended April 3, 1999, 824 shares of the preferred stock
were converted into 9,388,901 common shares. This conversion includes the
5% increase as the Company failed to register the shares within the
120-day time frame and all unpaid dividends on the preferred stock. The
remaining preferred stock if converted using the aforementioned 65% of
the average of the market price of the common stock, at April 3, 1999,
would convert to a maximum of approximately 7,750,000 common shares which
reflects the 5% additional shares issuable and unpaid dividends on the
preferred stock.
Stock option activity from inception through April 4, 1998 consisted of
650,000 shares granted, 400,000 that were exercised leaving an
outstanding balance of of 250,000 shares.
At April 4, 1998 the Company had 250,000 options outstanding at exercise
prices ranging from $3.50 to $7.00. During March 1999 these options were
exercised at $.10 per share and resulted in a total cash consideration
paid to the Company of $25,000. The option price was reduced to reflect
the reduction in the market value of the common stock.
The weighted average fair value of the options at their grant date during
the year ended April 4, 1998 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
40
<PAGE>
The Company has entered into agreements to issue stock for services and
litigation settlements that occurred during the year ended April 3, 1999.
The stock to be issued is 2,173,382 shares at an estimated market value
of $375,126 and a liability for the stock to be issued has been reflected
in the consolidated financial statements.
41
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Notes to Consolidated Financial Statements - Continued
Years Ended April 3, 1999 and April 4, 1998
(12) LITIGATION
The Company is a party to legal actions. The Company has recorded an
estimated liability of $209,000 in connection with these actions in the
consolidated financial statements.
A former officer of the Company has asserted a claim for 500,000 shares
of the Company common stock in fulfillment of an oral separation
agreement, however, the Company has claims against the former officer
equal to or greater than the value of the stock. The Company does not
believe the former officer will prevail and has not reflected either
claim in the consolidated financial statements.
(13) SUBSEQUENT EVENT
The Company has entered into agreements to issue stock subsequent to
April 3, 1999 for services to be performed during fiscal year 2000. The
stock to be issued is 1,165,000 shares at an estimated market value of
approximately $463,000.
42
<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 Aqua
Clara. 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
AQUA CLARA BOTTLING AND
DISTRIBUTION, INC.
17,438,972 SHARES
PROSPECTUS
August __, 1999
<PAGE>
AQUA CLARA BOTTLING AND DISTRIBUTION, INC. PART II
Item 13. Other Expenses of Issuance and Distribution.
Filing fee under the Securities Act of 1933
Printing and engraving(1) $ 1,000.00
Legal Fees(1) $ 24,000.00
Auditing Fees(1) $ 12,000.00
Miscellaneous(1) $ 3,000.00
TOTAL $ 40,000.00
(1) Estimates
Item 14. Indemnification of Directors and Officers.
Aqua Clara 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 Aqua Clara's articles of incorporation,
and as permitted under the Colorado General Business Act, directors are not
liable to Aqua Clara 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 Aqua
Clara 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 Aqua Clara 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 Aqua Clara where indemnification will be
required or permitted. Aqua Clara is not aware of any threatened litigation or
proceeding that may result in a claim for indemnification by any director or
officer.
Item 15. 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.
<PAGE>
<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
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).
<PAGE>
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.
<PAGE>
In December 1996, Aqua Clara 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, Aqua Clara 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, Aqua Clara issued 20,000 restricted shares of
common stock to Olympus Capital for consulting services rendered prior to
September 30, 1997. In December, 1997, Aqua Clara 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, Aqua Clara 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 Aqua Clara entered into a Lead
Generation/Corporate Relations Agreement with Corporate Relations Group ("CRG")
pursuant to which Aqua Clara has paid CRG $400,000 and by which Aqua Clara has
agreed to pay CRG an additional $400,000 upon Aqua Clara raising its next
tranche of $2,500,000. Additionally, Aqua Clara 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). This option is exercisable the later of
certain existable dates or when such tranche is raised.
Aqua Clara agreed to issue 100,000 restricted shares to CRG, such
shares to be returned should Aqua Clara file and cause to be effective a
registration statement for the shares underlying
<PAGE>
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 Aqua Clara's
legal counsel.
In December, 1997 Aqua Clara 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."
In June 1999 the Company sold $1,075,000 in Series B Debentures to 20
persons.
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
Aqua Clara.
In July 1998 Aqua Clara sold 500,000 shares at a price of $1.00 per
share to each of Thomas G. Vinton and Dennis J. Zweig, payable with promissory
notes. These individuals represented, and Aqua Clara believes it resonably
relied on the representation, to be "accredited investors" as such term is
defined in Regulation D and a restrictive legend was placed on the share
certificates. The offering was exempt under Section 4(6) of the Securities Act
of 1933. In October 1998 these investors and Aqua Clara mutually agreed to
cancel the 375,000 shares not yet paid for by each of these individuals and to
cancel the remaining $375,000 note obligation of each individual.
Item 16. Exhibits and Financial Schedules
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.(6)
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)
10.5 Extract of Board Resolutions dated April 3, 1997 and
letter agreement with
respect to Plunkett and Gray consulting agreements(3)
10.6 Installment secured promissary notes(3)
<PAGE>
10.7 Modification of Installment secured promissory notes(4)
10.8 Series B Convertible Debentures(6)
16.1 Letter from BDO Seidman(3)
16.2 Letter from Pender Newkirk & Company(5)
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(6) 23.2 Consent
of Tedder, James Worden and Associates, P.A.(6) 23.3
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 of the Company's Registration Statement on
Form SB-2, file
No. 33-44315 (the "SB-2").
(2) Included with Amendment Number 1 to the SB-2.
(3) Included with Amendment Number 2 to the SB-2.
(4) Included with Amendment No. 4 to the SB-2.
(5) Incorporated by reference to the exhibit filed with the Company's
Current Report on Form 8-K dated April 8, 1999.
(6) Filed herewith.
All other Exhibits called for by Rule 601 are not
applicable to this
filing.
(b) Financial Statement Schedules
All schedules are omitted because they are not applicable or because
the required information is included in the financial statements or notes
thereto.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)
(3) of the
Securities Act of 1933;
<PAGE>
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement, including
(but not limited to) any addition or election of a managing underwriter.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities offered at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(g) The undersigned registrant hereby undertakes to provide to the underwriters
at the closing, specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
(h) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
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 registrant 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
registrant 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.
(i) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, 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 it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Item 18. Financial Statements and Schedules.
Not Applicable.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Clearwater,
State of Florida on July 24, 1999.
AQUA CLARA BOTTLING AND
DISTRIBUTION, INC.
By: /s/ John C. Plunkett
John C. Plunkett
President
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 July 24, 1999.
By: /s/ John C. Plunkett President, CEO and Director
John C. Plunkett (principal executive officer, principal
accounting and financial officer)
By: * Secretary and Director
Robert F. Guthrie
By: * Director
Renato Mariani
By: *
/s/ John C. Plunkett, attorney in fact
<PAGE>
August 6, 1999
Aqua Clara Bottling & Distribution, Inc.
1315 Cleveland Street, Clearwater, Florida 33755
Re: Registration Statement on
Form S-1 (the "Registration Statement")
Gentlemen:
You have requested our opinion as to the legality of the issuance by
you (the "Corporation") of an estimated 17,439,002 shares of common stock
("Shares") including 2,850,000 Shares currently outstanding; an estimated
6,685,710 Shares issuable upon conversion of the Series A Convertible Preferred
Stock ("Series A Stock"), an estimated 4,725,240 Shares issuable upon conversion
of the Series B Debentures ("Debentures") and 378,022 shares issuable in lieu of
interest thereon, and options to purchase 2,800,000 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. The Designation pertaining to the Debentures.
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.
August 6, 1999
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 options if the 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>
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF
SECURED 8% SERIES B CONVERTIBLE DEBENTURES
OF
AQUA CLARA BOTTLING AND DISTRIBUTION, INC.
----------------
Pursuant to the General Corporation Law of the State of Colorado
----------------
Aqua Clara Bottling and Distribution, Inc., a corporation organized
and existing under the General Corporation Law of the State of Colorado (the
"Corporation"), hereby certifies that the following resolutions were adopted by
the Board of Directors of the Corporation on May 24, 1999 pursuant to authority
of the Board of Directors as required by the General Corporation Law of the
State of Colorado;
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (the oBoard of Directors" or the "Board")
in accordance with the provisions of its Certificate of Incorporation, the Board
of Directors hereby authorizes a 8% Series of the Corporation's Convertible
Debentures, Secured 8% Series oBo Convertible Debenture (the "Convertible
Debenture"), and hereby states the designation and number of shares, and fixes
the relative rights, preferences, privileges, powers and restrictions thereof as
follows:
Secured 8% Series oBo Convertible Debenture
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. The terms defined in this Article whenever used in this
Certificate of Designations have the following respective meanings:
<PAGE>
oAdditional Capital Shareso has the meaning set forth in Section
6.1(c).
(b) oAffiliateo has the meaning ascribed to such term in Rule 12b-2
under the Securities Exchange Act of 1934, as amended.
(c) oBusiness Dayo means a day other than Saturday, Sunday or any day
on which banks located in the State of Florida are authorized or obligated to
close.
(d) oCapital Shareso means the Common Shares and any other
shares of any other class or 8% Series of common stock, whether now or hereafter
authorized and however designated, which have the right to participate in the
distribution of earnings and assets (upon dissolution, liquidation or
winding-up) of the Corporation.
(e) oClosing Dateo means May 31, 1999
(f) oCommon Shareso or oCommon Stocko means shares of common
stock, no par value, of the Corporation.
(g) oCommon Stock Issued at Conversiono when used with reference to
the securities issuable upon conversion of the Secured 8% Series B Convertible
Debenture, means all Common Shares now or hereafter Outstanding and securities
of any other class or Secured 8% Series into which the Secured 8% Series oBo
Convertible Debenture hereafter shall have been changed or substituted, whether
now or hereafter created and however designated.
(h) oConversion Dateo means any day on which all or any portion of
shares of the 8% Series B Convertible Debenture is converted in accordance with
the provisions hereof.
(i) oConversion Noticeo has the meaning set forth in Section 6.2.
(j) oConversion Priceo means on any date of determination the
applicable price for the conversion of shares of Secured 8% Series oBo
Convertible Debenture into Common Shares on such day as set forth in Section
6.1.
(k) oConversion Ratioo on any date means of determination the
applicable percentage of the Market Price for conversion of shares of Secured 8%
Series oBo Convertible Debenture into Common Shares on such day as set forth in
Section 6.1.
(1) oCorporationo means Aqua Clara Bottling and Distribution, Inc., a
Colorado corporation, and any successor or resulting corporation by way of
merger, consolidation, sale or exchange of all or substantially all of the
CorporationAEs assets, or otherwise.
(m) oCurrent Market Priceo on any date of determination means the
closing price of a Common Share on such day as reported on the Over The Counter
Bulletin Board system (oOTCBBo).
(n) oDefault Interest Rateo shall be equal to the Convertible Debenture
Interest Rate plus an additional 8% per annum.
<PAGE>
(o) oHoldero means any Person to whom the Secured 8% Series
oBo Convertible Debenture is subsequently transferred in accordance with the
provisions hereof.
(p) oMarket Disruption Evento means any event that results in a material
suspension or limitation of trading of Common Shares on the OTCBB.
(q) oMarket Priceo per Common Share means the average of the
closing prices of the Common Shares as reported on the OTCBB for the five
Trading Days in any Valuation Period.
(r) oMaximum Rateo has the meaning set forth in section 7.3(b).
(s) oOutstandingo when used with reference to Common Shares or
Capital Shares (collectively, "Shares"), means, on any date of determination,
all issued and outstanding Shares, and includes all such Shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in such Shares; provided, however, that any such Shares directly or
indirectly owned or held by or for the account of the Corporation or any
Subsidiary of the Corporation shall not be deemed "Outstanding" for purposes
hereof.
(t) oPersono means an individual, a corporation, a partnership, an
association, a limited liability company, an unincorporated business
organization, a trust or other entity or organization, and any government or
political subdivision or any agency or instrumentality thereof.
(u) oRegistration Rights Agreemento means that certain Registration Rights
Agreement dated a date even herewith between the Corporation and.the Investor.
(v) oSECo means the United States Securities and Exchange Commission.
(w) oSecurities Acto means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder, all as in effect at the
time.
oSecurities Purchase Agreement" means that certain Securities Purchase
Agreement dated a date even herewith between the Corporation and the Investor.
oSecurity Agreemento means the Trust Deed, Mortgage and Security
Agreement, executed by the Company, as set forth in Section 8.2.
(z) oSecured 8% Series oBo Convertible Debentureo means the Secured 8%
Series oBo Convertible Debenture of the Corporation or such other Convertible
Debenture exchanged therefor as provided in Section 2.1.
(aa) oStated Valueo has the meaning set forth in Article 2.
(bb) oSubsidiaryo means any entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are owned
directly or indirectly by the Corporation. <PAGE>
(cc) oTrading Dayo means any day on which purchases and sales of
securities authorized for quotation on the OTCBB are reported thereon and on
which no Market Disruption Event has occurred.
(dd) oValuation Evento has the meaning set forth in Section 6.1.
(ee) oValuation Periodo means the five Trading Day period
immediately preceding the Conversion Date.
All references to "cash" or o$o herein means currency of the United
States of America.
ARTICLE 2
DESIGNATION AND AMOUNT
SECTION 2.1
The designation of this Secured 8% Series, which consists of 46 shares
of Secured 8% Series oBo Convertible Debenture (the "Secured 8% Series B
Convertible Debenture") and the stated value shall be Twenty-Five Thousand
Dollars ($25,000.00) per unit (the "Stated Value") for an aggregate amount of
One Million One Hundred Fifty Thousand ($1,150,000.00) Dollars.
ARTICLE 3
RANK
SECTION 3.1
The Secured 8% Series oBo Convertible Debenture shall rank (i) prior to
the Common Stock; (ii) prior to any class or Secured 8% Series of capital stock
of the Corporation hereafter created other than "Pari Passu Securities"
(collectively, with the Common Stock, "Junior Securitieso); and (iii) pari passu
with any class or Secured 8% Series of capital stock of the Corporation
hereafter created specifically ranking on parity with the Secured 8% Series oBo
Convertible Debenture ("Pari Passu Securities").
ARTICLE 4
INTEREST
SECTION 4.1
(a) (i) The Holder shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available for the
payment of Interest, Interest (subject to Sections 4(a)(ii) hereof) at the rate
of 8% per annum (computed on the basis of a 360-day year) (the "Interest Rate")
on the Liquidation Value (as defined below) of each share of Secured 8% Series
oBo Convertible Debenture on and as of the most recent Interest Payment Due Date
(as defined below) with respect to each Interest Period (as defined below).
Interest on the Secured
<PAGE>
8% Series oBo Convertible Debenture shall be cumulative from the date of issue,
whether or not declared for any reason, including if such declaration is
prohibited under any outstanding indebtedness or borrowings of the Corporation
or any of its Subsidiaries, or any other contractual provision binding on the
corporation or any of its Subsidiaries, and whether or not there shall be funds
legally available for the payment thereof.
(ii) Each Interest shall be payable in equal quarterly amounts on each
August 1, November 1, February 1, and May 1 of each year ("Interest Payment Due
Date"), commencing August 1, 1999 to the holders of record of shares of the
Secured 8% Series oBo Convertible Debenture, as they appear on the stock records
of the Corporation at the close of business on any record date, not more than 60
days or less than 10 days preceding the payment dates thereof, as shall be fixed
by the Board of Directors. For the purposes hereof, "Interest Period" means the
quarterly period commending on and including the day after the immediately
preceding Interest Payment Date and ending on and including the immediately
subsequent Interest Payment Date. Accrued and unpaid Interest for any past
Interest Period may be declared and paid at any time, without reference to any
Interest Payment Due Date, to holders of record on such date, not more than 15
days preceding the payment date thereof, as may be fixed by the Board of
Directors.
(iii) At the option of the Corporation, the Interest shall be paid in
cash or through the issuance of duly and validly authorized and issued, fully
paid and non-assessable shares of the Common stock valued at the Market Price.
The Common Stock to be Issued in lieu of cash payments shall be registered for
resale in the Registration Statement to be filed by the Corporation to register
the Common Stock issuable upon conversion of the shares of Secured 8% Series oBo
Convertible Debenture as set forth in the Registration Rights Agreement.
Notwithstanding the foregoing, until such Registration statement has been
declared effective under the Securities Act by the SEC, payment of Interest on
the Secured 8% Series oBo Convertible Debenture shall be in cash.
(b) The Holder shall not be entitled to any Interest in excess of
the cumulative Interest, as herein provided, on the Secured 8% Series oBo
Convertible Debenture. Except as provided in this Article 4, no interest, or sum
of money in lieu of interest, shall be payable in respect of any Interest
payment or payments on the Secured 8% Series oBo Convertible Debenture that may
be in arrears.
(c) So long as any shares of the Secured 8% Series oBo Convertible
Debenture are outstanding, no Interest, except as described in the next
succeeding sentence, shall be declared or paid or set apart for payment on Pari
Passu Securities for any period unless full cumulative Interest required to be
paid in cash have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for such payment on the
Secured 8% Series oBo Convertible Debenture for all Interest Periods terminating
on or prior to the date of payment of the Interest on such class or Secured 8%
Series of Pari Passu Securities. When Interest are not paid in full or a sum
sufficient for such payment is not set apart, as aforesaid, all
<PAGE>
Interest declared upon shares of the Secured 8% Series oBo Convertible Debenture
and all Interest declared upon any other class or Secured 8% Series of Pari
Passu Securities shall be declared ratably in proportion to the respective
amounts of Interest accumulated and unpaid on the Secured 8% Series oBo
Convertible Debenture and accumulated and unpaid on such Pari Passu Securities.
(d) So long as any shares of the Secured 8% Series B Convertible
Debenture are outstanding, no Interest shall be declared or paid or set apart
for payment or other distribution declared or made upon Junior Securities, nor
shall any Junior Securities be redeemed, purchased or otherwise acquired (other
than a redemption, purchase or other acquisition of shares of Common Stock made
for purposes of an employee incentive or benefit plan (including a stock option
plan) of the Corporation or any subsidiary, (all such Interest, distributions,
redemptions or purchases being hereinafter referred to as a "Junior Securities
Distribution") for any consideration (or any moneys be paid to or made available
for a sinking fund for the redemption of any shares of any such stock) by the
Corporation, directly or indirectly, unless in each case (i) the full cumulative
Interest required to be paid in cash on all outstanding shares of the Secured 8%
Series oBo Convertible Debenture and any other Pari Passu Securities shall have
been paid or set apart for payment for all past Interest Periods with respect to
the Secured 8% Series oBo Convertible Debenture and all past Interest periods
with respect to such Pari Passu Securities, and (ii) sufficient funds shall have
been paid or set apart for the payment of the Interest for the current Interest
Period with respect to the Secured 8% Series B Convertible Debenture and the
current Interest period with respect to such Pari Passu Securities.
ARTICLE 5
LIQUIDATION PREFERENCE
SECTION 5.1
(a) If the Corporation shall commence a voluntary case under
the Federal bankruptcy laws or any other applicable Federal or State bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or make an assignment
for the benefit of its creditors, or admit in writing its inability to pay its
debts generally as they become due, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy laws or any
other applicable Federal or state bankruptcy insolvency or similar law resulting
in the appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of thirty (30) consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up (each such event being considered a
oLiquidation Evento), no distribution shall be made to the holders of any shares
<PAGE>
of capital stock of the Corporation upon liquidation, dissolution or winding up
unless prior thereto, the holders of shares of Secured 8% Series oBo Convertible
Debenture, subject to Article 5, shall have received the Liquidation Preference
(as defined in Article 5(c)) with respect to each share. If upon the occurrence
of a Liquidation Event, the assets and funds available for distribution among
the holders of the Secured 8% Series oBo Convertible Debenture and holders of
Pari Passu Securities shall be insufficient to permit the payment to such
holders of the preferential amounts payable thereon, then the entire assets and
funds of the Corporation legally available for distribution to the Secured 8%
Series oBo Convertible Debenture and the Pari Passu Securities shall be
distributed ratably among such shares in proportion to the ratio that the
Liquidation Preference payable on each such share bears to the aggregate
liquidation Preference payable on all such shares.
At the option of each Holder, the sale, conveyance of disposition
of all or substantially all of the assets of the Corporation, the effectuation
by the Corporation of a transaction or Secured 8% Series of related transactions
in which more than 50% of the voting power of the Corporation is disposed of, or
the consolidation, merger or other business combination of the corporation with
or into any other Person (as defined below) or Persons when the corporation is
not the survivor shall either; (i) be deemed to be a liquidation, dissolution or
winding up of the Corporation pursuant to which the Corporation shall be
required to distribute, upon consummation of and as a condition to, such
transaction an amount equal to 120% of the Liquidation Preference with respect
to each outstanding share of Secured 8% Series oBo Convertible Debenture in
accordance with and subject to the terms of this Article 5 or (ii) be treated
pursuant to Article 5(c)(iii) hereof; provided, that all holders of Secured 8%
Series oBo Convertible Debenture shall be deemed to elect the option set forth
in cause (i) hereof if at least a majority in interest of such holders elect
such option. "Person" shall mean any individual, corporation, Limited Liability
Company, partnership, association, trust or other entity or organization.
(c) For purposes hereof, the "Liquidation Preference" with
respect to a share of the Secured 8% Series oBo Convertible Debenture shall mean
an amount equal to the sum of (i) the Stated Value thereof, plus (ii) an amount
equal to thirty percent (30%) of such Stated Value, plus (iii) the aggregate of
all accrued and unpaid Interest on such share of Secured 8% Series oBo
Convertible Debenture until the most recent Interest Payment Date; provided
that, in the event of an actual liquidation, dissolution or winding up of the
Corporation, the amount referred to in clause (iii) above shall be calculated by
including accrued and unpaid Interest to the actual date of such liquidation,
dissolution or winding up, rather than the Interest Payment Due Date referred to
above.
ARTICLE 6
CONVERSION OF CONVERTIBLE DEBENTURE
<PAGE>
SECTION 6.1 Conversion: Conversion Price. At the option of the Holder, the
shares of Convertible Debenture may be converted, either in whole or in part,
into Common Shares (calculated as to each such conversion to the nearest 1/100th
of a share), at any time, and from time to time following the date of issuance
of the Secured 8% Series oBo Convertible Debenture (the "Issue Date") at a
conversion Price equal to 65% of the market Price; provided, however, that the
Holder shall not have the right to convert any portion of the Secured 8% Series
oBo Convertible Debenture to the extent that the issuance to the Holder of
Common Shares upon such conversion would result in the Holder being deemed the
obeneficial ownero of 5% or more of the then outstanding Common Shares within
the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended. At
the Corporations option, the amount of accrued and unpaid Interest as of the
Conversion Date shall not be subject to conversion but instead may be paid in
cash as of the Conversion Date if the Corporation elects to convert the amount
of accrued and unpaid Interest at the Conversion Date into Common Stock, the
Common Stock issued to the Holder shall be valued at the Conversion Price.
Notwithstanding the previous sentence, in no event shall the Holder have the
right to convert that portion of the 8% Series B Convertible Debenture to the
extent that the issuance of Common Shares upon the conversion of such 8% Series
B Convertible Debenture, when combined with shares of Common Stock received upon
other conversions of Secured 8% Series oBo Convertible Debenture by such Holder
and any other holders of Secured 8% Series oBo Convertible Debenture, would
exceed 19.99% of the Common stock outstanding on the Closing Date. Within ten
(10) Business Days after the receipt of the Conversion Notice which upon
conversion would, when combined with shares of Common Stock received upon other
conversions of Secured 8% Series oBo Convertible Debenture by such Holder and
any other holders of Secured 8% Series oBo Convertible Debenture exceed 19.99%
of the Common Stock outstanding on the Closing Date, the Corporation shall
redeem all remaining outstanding shares of Secured 8% Series oBo Convertible
Debenture at one hundred twenty-five percent (125%) of the Stated Value thereof,
together with all accrued and unpaid Interest thereon, in cash, to the date of
redemption.
The number of shares of Common Stock due upon conversion of Secured 8%
Series oBo Convertible Debenture shall be (i) the Stated Value of the Secured 8%
Series oBo Convertible Debenture divided by (iii) the applicable Conversion
Price.
Within two (2) Business Days of the occurrence of a Valuation Event,
the Corporation shall send notice (the "Valuation Event Notice") of such
occurrence to the Holder. Notwithstanding anything to the contrary contained
herein, if a Valuation Event occurs during any Valuation Period, a new Valuation
Period shall begin on the Trading Day immediately following the occurrence of
such Valuation Event and end on the Conversion Date; provided that, if a
Valuation Event occurs on the fifth day of any Valuation Period, then the
Conversion Price shall be the Current Market Price of the Common Shares on such
day; and provided further, that the Holder may, in its discretion, postpone such
Conversion Date to a Trading Day which is no more than five (5) Trading Days
<PAGE>
after the occurrence of the latest Valuation Event by delivering a notification
to the Corporation within two (2) Business Days of the receipt of the Valuation
Event Notice. In the event that the Holder deems the Valuation Period to be
other than the five (5) Trading Days immediately Prior to the Conversion Date,
the Holder shall give written notice of such fact to the Corporation in the
related Conversion
Notice at the time of conversion.
For purposes of this Section 6.1, a "Valuation Event" shall mean an
event in which the Corporation at any time during a Valuation Period takes any
of the following actions:
(a) subdivides or combines its Capital Shares;
(b) makes any distribution of its Capital Shares;
(c) issues any additional Capital Shares (the "Additional Capital
Shareso), otherwise than as provided in the foregoing Sections 6.1(a) and 6.1(b)
above, at a price per share less, or for other consideration lower, than the
Current Market Price in affect immediately prior to such issuances, or without
consideration, except for issuances under employee benefit plans consistent with
those presently in effect and issuances under presently outstanding warrants,
options or convertible securities;
(d) issues any warrants, options or other rights to subscribe for or
purchase any Additional Capital Shares and the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the Current Market
Price in effect immediately prior to such issuance;
issues any securities convertible into or exchangeable or exercisable
for Capital Shares and the consideration per share for which Additional Capital
Shares may at any time thereafter be issuable pursuant to the terms of such
convertible, exchangeable or exercisable securities shall be less than the
Current Market Price in effect immediately prior to such issuance;
(f) makes a distribution of its assets or evidences of indebtedness to
the holders of its Capital Shares as a Interest in liquidation or by way of
return of capital or other than as a Interest payable out of earnings or surplus
legally available for the payment of Interest under applicable law or any
distribution to such holders made in respect of the sale of all or substantially
all of the Corporation's assets (other than under the circumstances provided for
in the foregoing Sections 6.1(a) through 6.1(e)); or
(g) takes any action affecting the number of outstanding Capital Shares,
other than an action described in any of the foregoing Sections 6.1(a) through
6.1(f) hereof, inclusive, which in the opinion of the Corporation's Board of
Directors, determined in good faith, would have a material adverse affect upon
the rights of the Holder at the time of a conversion of the Convertible
Debenture.
SECTION 6.2 Exercise of Conversion Privilege. (a) Conversion of the
Secured 8% Series oBo Convertible Debenture may be exercised, in whole or in
part, by the
<PAGE>
Holder by telecopying an executed and completed notice of conversion in the form
annexed hereto as Annex I (the o Conversion Noticeo) to the Corporation. Each
date on which a Conversion Notice is telecopied to and received by the
Corporation in accordance with the provisions of this Section 6.2 shall
constitute a Conversion Date. The Corporation shall convert the Convertible
Debenture and issue the Common Stock issued at Conversion effective as of the
Conversion Date. The Conversion Notice also shall state the name or names (with
addresses) of the persons who are to become the holders of the Common Stock
Issued at Conversion in connection with such conversion. The Holder shall
deliver the shares of Secured 8% Series oBo Convertible Debenture to the
Corporation by express courier within 30 days following the date on which the
telecopied Conversion Notice has been transmitted to the Corporation. Upon
surrender for conversion, the Convertible Debenture shall be accompanied by a
proper assignment hereof to the Corporation or be endorsed in blank. As promptly
as practicable after the receipt of the Conversion Notice as aforesaid, but in
any event not more than five Business Days after the Corporation's receipt of
such Conversion Notice, the Corporation shall (i) issue the Common Stock issued
at Conversion in accordance with the provisions of this Article 6, and (ii)
cause to be mailed for delivery by overnight courier to the Holder (X) a
certificate or certificates representing the number of Common Shares to which
the Holder is entitled by virtue of such conversion, (Y) cash, as provided in
Section 6.3, in respect of any fraction of a Share issuable upon such conversion
and (Z) cash in the amount of accrued and unpaid Interest as of the Conversion
Date. Such conversion shall be deemed to have been effected at the time at which
the Conversion Notice indicates so long as the Convertible Debenture shall have
been surrendered as aforesaid at such time, and at such time the rights of the
Holder of the Convertible Debenture, as such, shall cease and the Person and
Persons in whose name or names the Common Stock Issued at Conversion shall be
issuable shall be deemed to have become the holder or holders of record of the
Common Shares represented thereby. The Conversion Notice shall constitute a
contract between the Holder and the Corporation, whereby the Holder shall be
deemed to subscribe for the number of Common Shares which it will be entitled to
receive upon such conversion and, in payment and satisfaction of such
subscription (and for any cash adjustment to which it is entitled pursuant to
Section 6.4), to surrender the Convertible Debenture and to release the
Corporation from all liability thereon. No cash payment aggregating less than
$1.50 shall be required to be given unless specifically requested by the Holder.
(b) If, at any time (i) the Corporation challenges, disputes or
denies the right of the Holder hereof to effect the conversion of the
Convertible Debenture into Common Shares or otherwise dishonors or rejects any
Conversion Notice delivered in accordance with this Section 6.2 or (ii) any
third party who is not and has never been an Affiliate of the Holder commences
any lawsuit or proceeding or otherwise asserts any claim before any court or
public or governmental authority which seeks to challenge, deny, enjoin, limit,
modify, delay or dispute the right of the Holder hereof to effect the conversion
of the Preferred Stock into Common Shares, then the Holder shall have the right,
by written notice to the Corporation, to require the Corporation to
<PAGE>
promptly redeem the Secured 8% Series oBo Convertible Debenture for cash at a
redemption price equal to one hundred thirty-five percent (135%) of the Stated
Value thereof together with all accrued and unpaid Interest thereon (the
"Mandatory Purchase Amount"). Under any of the circumstances set forth above,
the Corporation shall be responsible for the payment of all costs and expenses
of the Holder, including reasonable legal fees and expenses, as and when
incurred in disputing any such action or pursuing its rights hereunder (in
addition to any other rights of the Holder).
SECTION 6.3 Fractional Shares. No fractional Common Shares or scrip representing
fractional Common Shares shall be issued upon conversion of the Secured 8%
Series oBo Convertible Debenture. Instead of any fractional Common Shares which
otherwise would be issuable upon conversion of the Secured 8% Series oBo
Convertible Debenture, the Corporation shall pay a cash adjustment in respect of
such fraction in an amount equal to the same fraction. No cash payment of less
than $1.50 shall be required to be given unless specifically requested by the
Holder.
SECTION 6.4 Reclassification, Consolidation, Merger or Mandatory Share Exchange.
At any time while the Secured 8% Series oBo Convertible Debenture remains
outstanding and any shares thereof has not been converted, in case of any
reclassification or change of outstanding Common Shares issuable upon conversion
of the Secured 8% Series oBo Convertible Debenture (other than a change in par
value, or from par value to no par value per share, or from no par value per
share to par value or as a result of a subdivision or combination of outstanding
securities issuable upon conversion of the Secured 8% Series oBo Convertible
Debenture) or in case of any consolidation, merger or mandatory share exchange
of the Corporation with or into another corporation (other than a merger or
mandatory share exchange with another corporation in which the Corporation is a
continuing corporation and which does not result in any reclassification or
change, other than a change in par value, or from par value to no par value per
share, or from no par value per share to par value, or as a result of a
subdivision or combination of Outstanding Common Shares upon conversion of the
Secured 8% Series oBo Convertible Debenture), or in the case of any sale or
transfer to another corporation of the property of the Corporation as an
entirety or substantially as an entirety, the Corporation, or such successor,
resulting or purchasing corporation, as the case may be, shall, without payment
of any additional consideration therefor, execute a new Secured 8% Series oBo
Convertible Debenture providing that the Holder shall have the right to convert
such new Secured 8% Series oBo Convertible Debenture (upon terms and conditions
not less favorable to the Holder than those in effect pursuant to the Secured 8%
Series oBo Convertible Debenture) and to receive upon such exercise, in lieu of
each Common Share theretofore issuable upon conversion of the Secured 8% Series
oBo Convertible Debenture, the kind and amount of shares of stock, other
securities, money or property receivable upon such reclassification, change,
consolidation, merger, mandatory share exchange, sale or transfer by the holder
of one Common Share issuable upon conversion of the Secured 8% Series oBo
Convertible Debenture had the Secured 8% Series oBo Convertible Debenture been
converted
<PAGE>
immediately prior to such reclassification, change, consolidation, merger,
mandatory share exchange or sale or transfer. The provisions of this Section 6.4
shall similarly apply to successive reclassifications, changes, consolidations,
mergers, mandatory share exchanges and sales and transfers.
SECTION 6.5 Adjustments to Conversion Ratio. For so long as any shares of the
Secured 8% Series oBo Convertible Debenture are outstanding, if the Corporation
(i) issues and sells pursuant to an exemption from registration under the
Securities Act (A) Common Shares at a purchase price on the date of issuance
thereof that is lower than the Conversion Price, (B) warrants or options with an
exercise price representing a percentage of the Current Market Price with an
exercise price on the date of issuance of the warrants or options that is lower
than the agreed upon exercise price for the Holder, except for employee stock
option agreements or stock incentive agreements of the Corporation, or (C)
convertible, exchangeable or exercisable securities with a right to exchange at
lower than the Current Market Price on the date of issuance or conversion, as
applicable, of such convertible, exchangeable or exercisable securities, except
for stock option agreements or stock incentive agreements; and (ii) grants the
right to the purchaser(s) thereof to demand that the Corporation register under
the Securities Act such Common Shares issued or the Common Shares for which such
warrants or options may be exercised or such convertible, exchangeable or
exercisable securities may be, converted, exercised or exchanged, then the
Conversion Ratio shall be reduced to equal the lowest of any such lower rates.
SECTION 6.6 Optional Redemption Under Certain Circumstances. At anytime after
the date of issuance of the Secured 8% Series oBo Convertible Debenture until
the Mandatory Conversion Date (as defined below), the Corporation, upon notice
delivered to the Holder as provided in Section 6.7, may redeem the Secured 8%
Series oBo Convertible Debenture (but only with respect to such shares as to
which the Holder has not theretofore furnished a Conversion Notice in compliance
with Section 6.2), at one hundred thirty-five percent (135%) of the Stated Value
thereof (the "Optional Redemption Price"), together with all accrued and unpaid
Interest thereon to the date of redemption (the "Redemption Date"); provided,
however, that the Corporation may only redeem the Secured 8% Series oBo
Convertible Debenture under this Section 6.6 if the Current Market Price is less
than the Current Market Price on the Closing Date. Except as set forth in this
Section 6.6, the Corporation shall not have the right to prepay or redeem the 8%
Series B Convertible Debenture.
SECTION 6.7 Notice of Redemption. Notice of redemption pursuant to Section 6.6
shall be provided by the Corporation to the Holder in writing (by registered
mail or overnight courier at the Holder's last address appearing in the
Corporation's security registry) not less than ten (10) nor more than fifteen
(15) days prior to the Redemption Date, which notice shall specify the
Redemption Date and refer to Section 6.6 (including, a statement of the Market
Price per Common Share) and this Section 6.7.
<PAGE>
SECTION 6.8 Surrender of Convertible Debenture. Upon any redemption of the
Secured 8% Series oBo Convertible Debenture pursuant to Sections 6.6 or 6.7, the
Holder shall either deliver the Secured 8% Series oBo Convertible Debenture by
hand to the Corporation at its principal executive offices or surrender the same
to the Corporation at such address by express courier. Payment of the Optional
Redemption Price specified in Section 6.6 shall be made by the Corporation to
the Holder against receipt of the Secured 8% Series oBo Convertible Debenture
(as provided in this Section 6.8) by wire transfer of immediately available
funds to such account(s) as the Holder shall specify to the Corporation. If
payment of such redemption price is not made in full by the Mandatory Redemption
Date or the Redemption Date, as the case may be, the Holder shall again have the
right to convert the Secured 8% Series oBo Convertible Debenture as provided in
Article 6 hereof.
SECTION 6.9 Mandatory Conversion. On the third anniversary of the date of this
Agreement (the "Mandatory Conversion Date"), the Corporation shall convert all
Secured 8% Series oBo Convertible Debenture outstanding at the Conversion Price.
Notwithstanding the previous sentence, in no event shall the Corporation convert
that portion of the Secured 8% Series oBo Convertible Debenture to the extent
that the issuance of Common Shares upon the conversion of such Secured 8% Series
oBo Convertible Debenture, when combined with shares of Common Stock received
upon other conversions of Secured 8% Series oBo Convertible Debenture by such
Holder and any other holders of Secured 8% Series oBo Convertible Debenture and
Warrants, would exceed 19.99% of the Common Stock outstanding on the Closing
Date. Within ten (10) Business Days after the Mandatory Conversion Date, the
Corporation shall redeem all remaining outstanding Secured 8% Series oBo
Convertible Debenture at one hundred and thirty-five percent (135%) of the
Stated Value thereof, together with all accrued and unpaid Interest thereon, in
cash, to the date of redemption.
ARTICLE 7
VOTING RIGHTS
The holders of the Secured 8% Series oBo Convertible Debenture have no
voting power, except as otherwise provided by the General Corporation Law of the
State of Colorado (oGCLSCo), in this Article 7, and in Article 8 below.
Notwithstanding the above, the Corporation shall provide each
holder of Secured 8% Series oBo Convertible Debenture with prior notification of
any meeting of the shareholders (and copies of proxy materials and other
information sent to shareholders). In the event of any taking by the Corporation
of a record of its shareholders for the purpose of determining shareholders who
are entitled to receive payment of any Interest or other distribution, any right
to subscribe for, purchase or otherwise acquire (including by way of merger,
consolidation or recapitalization) any share of any class or any other
securities or property, or to receive any other right, or for the purpose of
determining shareholders who are entitled to vote in connection with any
proposed liquidation, dissolution or winding up of the Corporation, the
Corporation shall mail a notice to each
<PAGE>
holder, at least thirty (30) days prior to the consummation of the transaction
or event, whichever is earlier), of the date on which any such action is to be
taken for the purpose of such Interest, distribution, right or other event, and
a brief statement regarding the amount and character of such Interest,
distribution, right or other event to the extent known at such time.
To the extent that under the GCLSC the vote of the holders of the
Secured 8% Series oBo Convertible Debenture, voting separately as a class or
Secured 8% Series as applicable, is required to authorize a given action of the
Corporation, the affirmative vote or consent of the holders of at least a
majority of the shares of the Secured 8% Series oBo Convertible Debenture
represented at a duly held meeting at which a quorum is present or by written
consent of a majority of the shares of Secured 8% Series oBo Convertible
Debenture (except as otherwise may be required under the GCLSC) shall constitute
the approval of such action by the class. To the extent that under the GCLSC
holders of the Secured 8% Series oBo Convertible Debenture are entitled to vote
on a matter with holders of Common Stock, voting together as one class, each
share of Secured 8% Series oBo Convertible Debenture shall be entitled to a
number of votes equal to the number of shares of Common Stock into which it is
then convertible using the record date for the taking of such vote of
shareholders as the date as of which the Conversion Price is calculated. Holders
of the Secured 8% Series oBo Convertible Debenture shall be entitled to notice
of all shareholder meetings or written consents (and copies of proxy materials
and other information sent to shareholders) with respect to which they would be
entitled tonight, which notice would be provided pursuant to the CorporationAEs
bylaws and the GCLSC.
ARTICLE 8
PROTECTIVE PROVISIONS
8.1 So long as shares of Secured 8% Series oBo Convertible Debenture are
outstanding, the Corporation shall not, without first obtaining the approval (by
vote or written consent, as provided by the GCLSC) of the holders of at least a
majority of the then outstanding shares of Secured 8% Series oBo Convertible
Debenture:
alter or change the rights, preferences or privileges of the Secured 8%
Series oBo Convertible Debenture;
create any new class or Secured 8% Series of capital stock having a
preference over the Secured 8% Series oBo Convertible Debenture as to
distribution of assets upon liquidation, dissolution or winding up of the
Corporation ("Senior Securities") or alter or change the rights, preferences or
privileges of any Senior Securities so as to affect adversely the Secured 8%
Series oBo Convertible Debenture;
increase the authorized number of shares of Secured 8% Series oBo
Convertible Debenture; or
<PAGE>
do any act or thing not authorized or contemplated by this Certificate of
Designation which would result in taxation of the holders of shares of the
Secured 8% Series oBo Convertible Debenture under Section 305 of the Internal
Revenue Code of 1986, as amended (or any comparable provision of the Internal
Revenue Code as hereafter from time to time amended).
In the event holders of at least a majority of the then outstanding
shares of Secured 8% Series oBo Convertible Debenture agree to allow the
Corporation to alter or change the rights, preferences or privileges of the
shares of Secured 8% Series oBo Convertible Debenture, pursuant to subsection
(a) above, so as to affect the Secured 8% Series oBo Convertible Debenture, then
the Corporation will deliver notice of such approved change to the holders of
the 8% Series B Convertible Debenture that did not agree to such alteration or
change (the "Dissenting Holders") and Dissenting Holders shall have the right
for a period of thirty (30) days to convert pursuant to the terms of this
Certificate of Designation as they exist prior to such alteration or change or
continue to hold their shares of Secured 8% Series oBo Convertible Debenture.
8.2 Deed of Trust, Mortgage and Security Agreement. So as to provide
additional Security for the payment of the amounts due pursuant to the
Debenture, the Company shall execute a Deed of Trust, Mortgage and Security
Agreement, in favor of all Debenture holders, encumbering all real estate owned
by the Company, and to also include all personal property owned by the Company.
The Company shall also execute and cause to be filed a UCC-1 financing statement
covering all said personal property.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 Loss, Theft, Destruction of Convertible Debenture. Upon receipt of
evidence satisfactory to the Corporation of the loss, theft, destruction or
mutilation of shares of Secured 8% Series oBo Convertible Debenture and, in the
case of any such loss, theft or destruction, upon receipt of indemnity or
security reasonably satisfactory to the Corporation, or, in the case of any such
mutilation, upon surrender and cancellation of the Secured 8% Series oBo
Convertible Debenture, the Corporation shall make, issue and deliver, in lieu of
such lost, stolen, destroyed or mutilated shares of Secured 8% Series oBo
Convertible Debenture, new shares of Secured 8% Series oBo Convertible Debenture
of like tenor. The Secured 8% Series oBo Convertible Debenture shall be held and
owned upon the express condition that the provisions of this Section 10.1 are
exclusive with respect to the replacement of mutilated, destroyed, lost or
stolen shares of Secured 8% Series oBo Convertible Debenture and shall preclude
any and all other rights and remedies notwithstanding any law or statute
existing or hereafter enacted to the contrary with respect to the replacement of
negotiable instruments or other securities without the surrender thereof.
SECTION 9.2 Who Deemed Absolute Owner. The Corporation may deem the Person in
whose name the Secured 8% Series oBo Convertible Debenture shall be registered
<PAGE>
upon the registry books of the Corporation to be, and may treat it as, the
absolute owner of the Secured 8% Series oBo Convertible Debenture for the
purpose of receiving payment of Interest on the Secured 8% Series oBo
Convertible Debenture, for the conversion of the Secured 8% Series oBo
Convertible Debenture and for all other purposes, and the Corporation shall not
be affected by any notice to the contrary. All such payments and such conversion
shall be valid and effectual to satisfy and discharge the liability upon the
Secured 8% Series oBo Convertible Debenture to the extent of the sum or sums so
paid or the conversion so made.
SECTION 9.3 Notice of Certain Events. In the case of the occurrence of any event
described in Sections 6.1, 6.6 or 6.7 of this Certificate of Designations, the
Corporation shall cause to be mailed to the Holder of the Secured 8% Series oBo
Convertible Debenture at its last address as it appears in the Corporation's
security registry, at least twenty (20) days prior to the applicable record,
effective or expiration date hereinafter specified (or, if such twenty (20) days
notice is not possible, at the earliest possible date prior to any such record,
effective or expiration date), a notice stating (x) the date on which a record
is to be taken for the purpose of such Interest, distribution, issuance or
granting of rights, options or warrants, or if a record is not to be taken, the
date as of which the holders of record of Secured 8% Series oBo Convertible
Debenture to be entitled to such Interest, distribution, issuance or granting of
rights, options or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of Secured 8% Series oBo Convertible
Debenture will be entitled to exchange their shares for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale transfer, dissolution, liquidation or winding-up.
SECTION 9.4 Register. The Corporation shall keep at its principal office a
register in which the Corporation shall provide for the registration of the
Secured 8% Series oBo Convertible Debenture. Upon any transfer of the 8% Series
B Convertible Debenture in accordance with the provisions hereof, the
Corporation shall register such transfer on the Secured 8% Series oBo
Convertible Debenture register.
The Corporation may deem the person in whose name the Secured 8%
Series oBo Convertible Debenture shall be registered upon the registry books of
the Corporation to be, and may treat it as, the absolute owner of the Secured 8%
Series oBo Convertible Debenture for the purpose of receiving payment of
Interest on the Secured 8% Series oBo Convertible Debenture, for the conversion
of the Secured 8% Series oBo Convertible Debenture and for all other purposes,
and the Corporation shall not be affected by any notice to the contrary. All
such payments and such conversions shall be valid and effective to satisfy and
discharge the liability upon the Secured 8% Series oBo Convertible Debenture to
the extent of the sum or sums so paid or the conversion or conversions so made.
SECTION 9.5 Withholding. To the extent required by applicable law, the
Corporation may withhold amounts for or on account of any taxes imposed or
levied by or on behalf of any
<PAGE>
taxing authority in the United States having jurisdiction over the Corporation
from any payments made pursuant to the Secured 8% Series oBo Convertible
Debenture.
SECTION 9.6 Headings. The headings of the Articles and Sections of this
Certificate of Designations are inserted for convenience only and do not
constitute a part of this Certificate of Designations.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations, Preferences and Rights to be signed by its duly authorized
officers on this _____ day of _______________, 1999.
AQUA CLARA BOTTLING AND DISTRIBUTION,
INC.
By:_____________________________
Name: John C. Plunkett
Title: President and Director
By:_____________________________
Name: Robert Guthrie
Title: Director
1
<PAGE>
[FORM OF CONVERSION NOTICE]
TO: _________________________________
=================================
The undersigned owner of this 8% Series B 8% Convertible Convertible
Debenture (the "Secured 8% Series oBo Convertible Debenture") issued by Aqua
Clara Bottling and Distribution, Inc. (the "Corporation") hereby irrevocably
exercises its option to convert _________ units of the Secured 8% Series oBo
Convertible Debenture into shares of the common stock, $.00l par value, of the
Corporation ("Common Stock"), in accordance with the terms of the Certificate of
Designations. The undersigned hereby instructs the Corporation to convert the
number of shares of the Secured 8% Series oBo Convertible Debenture specified
above into Shares of Common Stock Issued at Conversion in accordance with the
provisions of Article 6 of the Certificate of Designations. The undersigned
directs that the Common Stock issuable and certificates therefor deliverable
upon conversion, the Secured 8% Series oBo Convertible Debenture recertificated,
if any, not being surrendered for conversion hereby, together with any check in
payment for fractional Common Stock, be issued in the name of and delivered to
the undersigned unless a different name has been indicated below. All
capitalized terms used and not defined herein have the respective meanings
assigned to them in the Certificate of Designations.
Amount of Debenture Converted $25,000.00 x ___ (number of Units) =
$___________ Conversion Price: _________ Total amount $_______________
divided by Conversion Price = ___________ (shares)
Dated:______________________________
- -----------------------------------
Signature
Fill in for registration of Secured 8% Series oBo
Convertible Debenture:
Please print name and address
(Including zip code):________________________________________________________
<PAGE>
2
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We have previously issued our report dated May 27, 1998 on the consolidated
financial statements of Aqua Clara Bottling & Distribution, Inc. and Subsidiary.
Our report covered the financial position of Aqua Clara Bottling and Distribu-
tion, Inc. and Subsidiary as of April 4, 1998 and the results of its operations
and its cash flows for the years ended April 4, 1998 and March 31, 1997. We
hereby consent to the incorporation by reference of said report in the Registra-
tion Statement on Form S-1 being filed with the Securities & Exchange Commission
by the Registrant.
Pender Newkirk & Company
Certified Public Accountants
Tampa, Florida
A+ugust 17, 1999
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in the Prospectus constituting part of the
Registration Statement on Form S-1, and any amendments thereto, to be filed by
Aqua Clara Bottling & Distributing, Inc. of our Auditors' Report dated May 28,
1998, except as to Note 1 which is as of June 25, 1999, accompanying the
Financial Statements of Aqua Clara Bottling & Distributing, Inc. and Subsidiary
as of April 3, 1999, and to the use of our name under the caption "Experts" in
the Prospectus.
Tedder, James, Worden & Associates, P.A.
Certified Public Accountants
Orlando, Florida
August 6, 1999
