<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
AQUA CLARA BOTTLING AND DISTRIBUTION, INC. AND SUBSIDARY
FLORIDA EIN 84-1352529
1315 Cleveland Street
Clearwater, Florida 33755-5102
(727) 446-2999
www.aquaclara.com
Indicate by check mark whether the Registrant (1) has filed all report required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [x] No [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of September 30, 2000, the registrant had 64,614,924 shares of common stock
outstanding at no par value.
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Part 1
Financial Information
(Item 1)
Aqua Clara Bottling & Distribution, Inc. and Subsidiary
Consolidated Balance Sheets
(unaudited)
As Of
September 30, 2000
Assets
Current assets:
Cash and cash equivalents 9,222
Accounts receivable 34,441
Inventories 205,645
Prepaid expenses and other current assets 72,028
-----------
Total Current Assets 321,306
Property, plant, and equipment,
net of accumulated depreciation 1,778,232
Other assets 1,506
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Total Assets 2,101,044
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, trade 121,269
Accrued expenses 110,940
Current maturities of long term debt 215,027
Current obligations under capital leases 5,589
Deferred revenue 1,524
Due to stockholders 321,456
Other current liabilities 41,417
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Total current liabilities 817,222
Long-term debt, less current maturities 157,331
Obligation under capital lease, less current portion 11,803
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Total Liabilities 986,356
Stockholders' equity:
Preferred stock; no par value, 5,000,000 shares
authorized; 100 shares issued
and outstanding 74,601
Common stock; no par value, 100,000,000 shares
authorized; 64,614,924 shares
issued and outstanding 9,079,024
Additional paid in capital 2,070,924
Accumulated deficit (10,109,861)
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Total Stockholders' Equity 1,114,688
Total Liabilities and Stockholders' Equity 2,101,044
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See accompanying notes to consolidated financial statements.
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Part 1
Financial Information
(Item 3)
Aqua Clara Bottling & Distribution, Inc. and Subsidiary
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
For The Three Months Ended For The Six Months Ended
Sept 30, 2000 Oct 2, 1999 Sept 30, 2000 Oct 2, 1999
<S> <C> <C> <C> <C>
Sales 86,988 74,434 176,964 177,908
Cost of sales 129,266 37,246 190,680 100,203
---------- ---------- ----------- -----------
Gross profit (42,278) 37,188 (13,716) 77,705
General, administrative, and sales expenses 480,832 372,692 830,931 902,980
Stock Options Forfeited 0 0 (410,020) 0
Operating profit / (loss) (523,110) (335,504) (434,627) (825,275)
Other income (expense):
Interest expense (28,529) 5,996 (36,460) (8,067)
Interest and other income 0 0 0 0
Gain (loss) on sale of assets 0 0 0 (10,415)
Other expense 0 (8,009) 0 (256)
---------- ---------- ----------- -----------
Net other income (expense) (28,529) (2,013) (36,460) (18,738)
Net income / (loss) (551,639) (337,517) (471,087) (844,013)
Dividends on preferred stock: 0 0 29,196 0
Net income / (loss) applicable to common stock (551,639) (337,517) (500,283) (844,013)
Basic loss per common share $ (0.36123) $ (0.06) $ (0.00804) $ (0.07)
Weighted average common shares outstanding 1,527,118 5,316,481 62,212,446 11,609,063
</TABLE>
See accompanying notes to consolidated financial statements.
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Part 1
Financial Information
(Item 5)
Aqua Clara Bottling & Distribution, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
Sept 30, 2000 Oct 2, 1999 Sept 30, 2000 Oct 2, 1999
<S> <C> <C> <C> <C>
Operating activities:
Net income / (loss) $(551,639) $(337,517) $(471,087) $ (844,013)
Adjustments to reconcile net loss to net cash
used in operating activities:
Allowance for doubtful accounts 0 10,000 0 10,000
Loss (gain) on sales of assets 0 4,837 0 10,415
Depreciation 28,342 26,160 56,684 53,288
Issuance of stock options to employees 13,000 0 26,002 0
Forfiture of stock options 0 0 (410,020) 0
Issuance of stock options for S-1 0 298,000 0 298,000
Beneficial conversion feature of debentures 0 530,129 0 530,129
Issuance of common stock for services 39,377 66,993 179,699 825,038
(Increase) decrease in cash caused by changes in:
Accounts receivable (11,527) (8,293) (23,618) 24,995
Inventories 75,092 (41,090) 84,500 (59,805)
Prepaid expenses & other current assets 209,130 (101,334) 326,157 (388,838)
Accounts payable (46,036) (244,205) (10,788) (343,022)
Accrued expenses 56,535 2,000 (126,133) (234,352)
Deferred revenue (1,476) 0 1,524 0
Other current liabilities 29,755 (7,510) 41,417 (19,969)
Stockholder salary accrual (22,593) 226 (12,697) (214,352)
--------- --------- --------- ----------
Net cash used in operating activities (182,040) 198,396 (338,360) (352,486)
Investing activities:
Purchase of property, plant and equipment 0 (35,121) (2,247) (35,121)
--------- --------- --------- ----------
Financing activities:
Proceeds from borrowings 0 75,000 155,010 1,150,000
Payments on borrowings (1,437) (428,332) (2,952) (678,131)
Payments on capital lease obligations (3,209) 0 (3,209) 0
Net proceeds from issuance of stock 180,000 0 180,000 0
--------- --------- --------- ----------
Net cash provided by financing activities 175,354 (353,332) 328,849 471,869
--------- --------- --------- ----------
Net (decrease) increase in cash (6,686) (190,057) (11,758) 84,262
Cash, beginning of period 15,908 284,279 20,980 9,960
--------- --------- --------- ----------
Cash, end of period $ 9,222 $ 94,222 $ 9,222 $ 94,222
</TABLE>
See accompanying notes to consolidated financial statements.
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Part 1
Financial Information
(Item 1)
Aqua Clara Bottling & Distribution, Inc. And Subsidiary
Notes To The Unaudited Consolidated Financial Statements
Interim Consolidated Financial Statements
The accompanying unaudited interim consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission for reporting on Form 10-QSB. Accordingly, certain principles for
complete financial statement are not applied within these statements. They have
been prepared on a consistent basis including normal recurring adjustments and
should be read in conjunction with the consolidated financial statements and
related notes contained in the Annual Report for the fiscal year ended April 1,
2000.
Organization, Background, Sale of Assets, and Going Concern
(1) Description of Business, Going Concern and Management Plans and Intentions
The accompanying consolidated financial statements of Aqua Clara Bottling &
Distribution, Inc. (the "Company") include the financial statements of its
wholly owned subsidiary, Pocotopaug Investment, Inc. Intercompany
transactions and accounts have been eliminated upon consolidation.
The Company is engaged in the production, bottling, selling and
distribution of non-sparkling purified drinking water products in
containers ranging from .5 to 1.5 liters in size. During the year ended
April 3, 1999, the Company began producing oxygenated water. It is the
Company's intent to find a market niche in oxygen-enriched water.
The Company continues to experience net losses and a working capital
deficit. These factors, combined with the fact that the Company has not
generated positive cash flows from operations, raise substantial doubt
about the Company's ability to continue as a going concern. Management
intends to fund its operations through the offering of additional shares of
common stock for sale, refinancing its existing debt and obtaining a line
of credit. 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.
During the period ended July 1, 2000, the Company raised $55,000 through a
private offering of its common stock. During the period ended September 30,
2000, the Company raised an additional $125,000 as part of the same
offering. The proceeds from the offering are being used to fund operations.
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(2) Inventories
Inventories consist of the following at September 30, 2000:
Raw materials $ 57,142
Work in progress 182
Finished goods 148,321
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$ 205,645
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(3) Property, Plant, and Equipment
Property, plant, and equipment consist of the following at September 30,
2000:
Land $ 90,000
Building 926,520
Machinery and equipment 1,015,091
Vehicles 22,393
----------
Total 2,054,004
Less accumulated depreciation (275,772)
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$1,778,232
==========
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.
(4) Due To Stockholders
Due to stockholders consists of notes payable and due upon demand.
Interest on these notes accrues at rates between 5% to 8%.
(5) Long-Term Debt
Long-term debt at September 30, 2000 consists of:
Note payable: Secured 8% Series B Convertible Debenture was raised in
June 1999. The Company anticipates that the remainder of the note will
be converted into common stock.
<TABLE>
<S> <C>
Series B Convertible Debentures $ 75,000
Note payable: interest at 10%, secured by building 134,655
Note payable: Interest at 5%, secured by building 155,010
Installment note payable; interest at 10.5%; payments $461 per
month including interest; collateralized by a vehicle 7,693
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Long-term debt $ 372,358
Less current installments 215,027
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Long-term debt, less current installments $ 157,331
=========
</TABLE>
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(5) Long-Term Debt (continued)
The following is a schedule by year of the principal payments required on long-
term debt:
2001 $ 215,027
2002 157,331
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$ 372,358
(6) Lease Commitments
Obligations Under Capital Lease
At September 30, 2000, the Company is obligated under a long-term capital
lease for equipment. The following is a schedule by year of future minimum
lease payments under these capital leases.
2001 $ 5,589
2002 6,791
2003 6,791
2004 919
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Total lease payments $20,090
Less amount representing interest (6.5% - 8%) 2,698
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Present value of lease payments 17,392
Less current obligation 5,589
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Long-term capital lease obligation $11,803
=======
Operating Leases
At April 1, 2000, 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
non-cancellable lease term in excess of one year as of April 1, 2000.
2001 $ 4,998
2002 400
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$ 5,398
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 $4,600,000, which will begin to expire in years after 2011.
Temporary differences giving rise to the deferred tax assets consist primarily
of the deferral and amortization of start-up costs for tax reporting purposes.
Management has established a valuation allowance equal to the amount of the
deferred tax assets due to the uncertainty of the Company's realization of this
benefit.
(7) Commitments and Contingencies
A former officer of the Company filed suit against the Company for
approximately $80,000 of accrued wages and loans that took the form of a
mortgage on the property. This claim also seeks 1,350,000 shares of the
Company's common stock. The Company has accrued $80,000, relating to the
accrued wages and loans, in the accompanying financial statements.
However, the Company asserts that all or a majority of the number of common
shares due is a frivolous claim and has not included any amount related to
these shares in the accompanying financial statements.
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Aqua Clara Bottling & Distribution, Inc. And Subsidiary
Part II
Management's Discussion and Analysis
Of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
The gross profit for the 6 month period ended September 30, 2000 was ($434,627)
with general and administrative, and selling expenses totaling $804,929. Sales
for the period were $176,964. The period performance was significantly affected
by charges for prepaid and professional services and for previously committed
services.
The Company intends to increase spending over the next six months in
advertising, marketing and distribution, which amounts are expected to be
expended prior to the receipt of significant revenues. There can be no
assurance as to when, if ever, the Company will realize significant operating
revenues or attain profitability.
LIQUIDITY AND CAPITAL RESOURCES
During the period ending July 1, 2000, the Company raised $55,000 through a Rule
506 Offering. Subsequent to July 1, the Company raised an additional $125,000
via the same Offering. The proceeds of this raise have being used to fund
continued operation of the Company.
The Company has no plans or arrangements in place with respect to additional
capital sources at this time. The Company has no significant lines of credit
available to it at this time. There are no assurances that additional capital
will be available to the Company when or if required.
Although the Company expects to experience losses in the 3rd quarter of fiscal
year 2001 (ended December 30, 2000), management believes that the losses will
continue to decrease and a break-even point could be reached in the near term.
Inflation has not had a significant impact on the Company's results of
operations.
BUSINESS AND PLAN OF OPERATION
GENERAL
Prior information pertaining to Aqua Clara Bottling & Distribution, Inc. can be
found in the Annual Report for the fiscal year ended April 1, 2000, and in the
Quarterly report for the period ended July 1, 2000.
During the year ending April 3, 1999, the Company began producing 20-oz. bottles
of oxygenated water packaged in a PET container. The Company's oxygen enriched
water contains approximately 32 parts per million of oxygen. Normal tap water
contains approximately 3 parts per million of dissolved oxygen. As such, the
company's oxygen enriched bottled water contains approximately 800% more oxygen.
During the year ended April 1, 2000, the Company expanded its product line to
include 1 Liter and 1.5 Liter packages, and introduced a six-pack to the market.
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Part II
Other Information
Item 1
Legal Proceedings
LEGAL PROCEEDINGS
The Company is not a party to legal proceedings except as set forth below.
Civil Litigation in the Circuit Court of the Sixth Judicial Circuit in and for
Pinellas County - Rand L. Gray and Kathleen Gray v. Aqua Clara Bottling &
Distribution, Inc. et al., Pinellas County, Case No. 00-2122-C1-021. This case
arises out of an alleged breach of an employment contract. An Amended Complaint
was filed by the Plaintiffs on June 26, 2000. The Amended Complaint alleges 6
counts: Count I - Foreclosure of Mortgage; Count II - Foreclosure of Security
Interest on Personal Property; Count III - Damages on Promissory Note; Count IV
- Damages for Breach of Employment Agreement; Count V - Damages for Breach of
Severance Agreement; and Count VI - Damages for Breach of Indemnity Agreement.
Our response to Plaintiffs' Amended Complaint was filed August 1, 2000.
Settlement offers have been filed by both sides.
<PAGE>
Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Part II
Other Information
Item 2
Changes In Securities
Regulation D, Rule 506 Offering
During the period ended July 1, 2000, the Company issued 532,173 shares of
common stock in exchange for $55,000 as part of a Limited Offering exempt from
registration under Rule 506 of Regulation D. During the period ended September
30, 2000, the Company issued an additional 1,209,485 common shares in exchange
for an additional $125,000 as part of the same offering.
Preferred stock
The Company's Board of Directors has authority, without action by the
shareholders, to issue all or any portion of the authorized but unissued
preferred stock in one or more series and to determine the voting rights,
preferences as to dividends and liquidation, conversion rights, and other rights
of such series. The Company considers it desirable to have preferred stock
available to provide increased flexibility in structuring possible future
acquisitions and financing and in meeting corporate needs which may arise. If
opportunities arise that would make desirable the issuance of preferred stock
through either public offering or private placements, the provisions for
preferred stock in the Company's Articles of Incorporation would avoid the
possible delay and expense of a shareholder's meeting, except as may be required
by law or regulatory authorities. Issuance of the preferred stock could result,
however, in a series of securities outstanding that will have certain
preferences with respect to dividends and liquidation over the Common Stock
which would result in dilution of the income per share and net book value of the
Common Stock. Issuance of additional Common Stock pursuant to any conversion
right, which may be attached to the terms of any series of preferred stock, may
also result in dilution of the net income per share and the net book value of
the Common Stock. The specific terms of any series of preferred stock will
depend primarily on market conditions, terms of a proposed acquisition or
financing, and other factors existing at the time of issuance. Therefore, it is
not possible at this time to determine in what respect a particular series of
preferred stock will be superior to the Company's Common Stock or any other
series of preferred stock, which the Company may issue. The Board of Directors
may issue additional preferred tock in future financing, but has no current
plans to do so at this time.
The issuance of Preferred Stock could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company.
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Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Part II
Other Information
Item 3
Defaults Upon Senior Securities
(NONE)
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Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Part II
Other Information
Item 4
Submission of Matter to a Vote of Security Holders
(NONE)
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Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Part II
Other Information
Item 5
Other Information
(NONE)
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Aqua Clara Bottling & Distribution, Inc.
And Subsidiary
Part II
Other Information
Item 6
Exhibits and Reports
Exhibits and Reports on Form 8-K
(a) Exhibits
21.1 Subsidiaries
27 Financial Data Schedules
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the three
month period ended September 30, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 17, 2000 AQUA CLARA BOTTLING & DISTRIBUTION, INC.
By: /s/ John C. Plunkett
-----------------------------------
John C. Plunkett
President, Chief Executive Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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21.1 Subsidiaries
27 Financial Data Schedules
