<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 1, 1999.
------------------------
RECENT DEVELOPMENTS
------------------------
The instrument governing the Series A Preferred provides that, unless
stockholder approval has previously been obtained, no shares of Common Stock may
be issued upon conversion of the Series A Preferred, if such issuance, together
with all prior issuances upon conversion of or as dividends on the Series A
Preferred or upon exercise of the Warrant, would exceed 19.9% (approximately
812,000 shares) of the number of shares outstanding at the time of the initial
issuance of the Series A Preferred. This matter was submitted to and approved by
the stockholders at the 1999 Annual Meeting of Stockholders, held in June 1999.
The Series A Preferred investor initially invested $750,000 and committed to
invest an additional $500,000, subject to certain conditions. Pending receipt of
the second investment, the conversion price of the Series A Preferred was fixed
at $3.00 per share. In August 1999, the Series A Preferred investor completed
the second ($500,000) investment. In connection with this investment, the
exercise price of the Warrant issued to the investor was reduced from $3.625 to
$1.25 per share.
Based upon the foregoing, as of August 30, 1999, all of the Series A
Preferred will be convertible, in whole or in part at the election of the
holder, into Common Stock at a variable price based upon the closing bid price
of the Common Stock during a specified period prior to each conversion date.
There will be no restrictions on the number of shares of Common Stock issuable
upon any such conversion. See "The Private Offering--The Series A Preferred."
In May 1999, the Company was notified that its securities would be delisted
from the Nasdaq SmallCap Market for failure to satisfy certain continued listing
requirements. The Company appealed this decision, which automatically stayed the
delisting action pending the outcome of a hearing before an independent panel.
This hearing was held in July 1999; and the panel issued its decision in August
1999. Pursuant to this decision, the Company was granted a temporary exception
to the continuing listing requirements, subject to certain conditions, which
must be met by September 30, 1999. These conditions include proof of a specified
minimum in net tangible assets, as well as compliance with all general Nasdaq
requirements for continued listing. Although the Company believes that it can
meet these conditions, there is no assurance that it will do so. There is also
no assurance that the Company will meet the requirements for continued listing
on Nasdaq thereafter. So long as the temporary exception is in effect, the
Company's Common Stock will trade under the symbol "HNWCC," and its public
warrants will trade under the symbol "HNWWC."
------------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS AUGUST 25, 1999.
<PAGE>
PROSPECTUS
1,405,000 SHARES
HAWAIIAN NATURAL WATER COMPANY, INC.
COMMON STOCK
NO PAR VALUE
---------------------
Two selling stockholders are offering up to 1,405,000 shares of Common Stock
of the Company pursuant to this Prospectus.
The selling stockholders will receive all of the proceeds from the sale of
these shares.
The selling stockholders may elect to sell the shares at various times, as
determined by the selling stockholders, in their discretion. The Company's
Common Stock is quoted on the Nasdaq SmallCap Market under the symbol "HNWC." On
May 19, 1999, the closing sales price of the Common Stock was $ 19/32.
------------------------
PURCHASE OF THE SHARES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 4.
---------------------
The Company is paying the cost of registering the shares and various related
expenses, but the selling stockholders are responsible for all selling
commissions, transfer taxes and other such costs.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
THE DATE OF THIS PROSPECTUS IS JUNE 1, 1999.
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain information contained in, or incorporated by reference into, this
Prospectus includes "forward-looking statements" as defined by the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are
indicated by the use of terms such as "may," "will," "expect," "believe,"
"estimate," "anticipate," "intend" or other similar terms or the negative of
such terms. These statements discuss the Company's expectations concerning
future financial results, capital requirements, market growth, new product
introductions, potential acquisitions and the like. The Company's expectations
are based upon information currently available and are subject to various risks
and uncertainties that could cause actual results to differ materially from
those anticipated. The principal risks and uncertainties are set forth under the
heading "Risk Factors" beginning on page 4 of this Prospectus.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (the "Registration
Statement") with respect to the shares offered pursuant to this Prospectus. This
Prospectus does not contain all of the information included in the Registration
Statement. Please refer to the Registration Statement and the exhibits and
schedules for further information about the Company and the shares offered
hereby. This Prospectus also does not contain a full description of all
significant contracts or other documents related to the Company's business. You
should refer to the contracts or other documents filed as exhibits to the
Registration Statement or incorporated by reference into it. You may inspect and
copy the Registration Statement at the Public Reference Room maintained by the
Commission at 450 Fifth Street, N.W., Washington D.C. 20549. You may obtain
information concerning the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. You may also access a copy of the Registration
Statement electronically by means of the Commission's home page on the Internet
at http.//www.sec.gov.
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"). Accordingly, the Company files
periodic reports, proxy statements and other information with the Commission.
You may inspect or copy these materials at the public reference facilities of
the Commission described above or at the regional offices of the Commission
located at 7 World Trade Center, Suite 1300, New York, New York 10048, and at
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The Company's
filings are also available to the public from the Commission's website at
http.//www.sec.gov. The Company distributes to its stockholders annual reports
containing audited financial statements. You may also access information
concerning the Company electronically by means of the Company's home page on the
Internet at http.//www.hawaiiansprings.com.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by the Company with the Commission
under the Exchange Act are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1998;
(2) The Company's Quarterly Report on Form 10-QSB for the fiscal quarter
ended March 31, 1999; and
(3) The description of the Company's Common Stock contained in the Company's
registration statement on Form 8-A dated April 21, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this offering are also incorporated by reference into this
Prospectus. Later documents automatically update or supersede earlier documents.
2
<PAGE>
You may obtain a copy of any or all of the information that has been
incorporated by reference into, but not delivered with, this Prospectus, without
charge, by writing or calling the Company at:
Hawaiian Natural Water Company, Inc.
248 Mokauea Street
Honolulu, Hawaii 96819
Attention: Chief Financial Officer
Telephone Number: (808) 832-4550.
THE COMPANY
The Company bottles, markets and distributes "natural water" under the name
"Hawaiian Springs-TM-." The term "natural water" signifies that the bottled
water retains the same chemical composition and mineral content as the water at
the source. Natural water is distinguished from "purified" water, from which
certain chemicals and minerals have been removed by means of reverse osmosis
filtration. There are several purified Hawaiian waters currently on the market;
however, the Company's product is the only bottled natural water available from
Hawaii.
The Company draws its water from a well located at the base of the Mauna Loa
mountain range in Kea'au, on the Big Island of Hawaii. The water is "bottled at
the source" in polyethylene terephthalate ("PET") plastic bottles, which are
manufactured at the Company's bottling facility. The term "bottled at the
source" signifies that the water is pumped directly from the source to the
bottling facility, thereby eliminating handling and transportation procedures
which might lead to contamination. The proprietary source of the Company's
product further distinguishes it from competing purified waters, which are
typically drawn from municipal water supplies.
The Company currently offers its product only in PET plastic bottles of 1.5
liters or less; however, the Company has recently installed a new five liter PET
bottling line and expects to begin shipping product in this package during the
second quarter of 1999. In addition, the Company is currently in discussions
with various parties concerning the possible acquisition of a five gallon home
and office delivery business and expects to enter this market by the end of
1999, subject to receipt of additional financing.The PET "premium" category
(bottles of two liters or less are considered "premium") is currently the
fastest growing segment of the non-sparkling water market in the United States,
accounting for approximately 983 million gallons in 1998, up 31% from 1997.
The Company began commercial operations in February 1995, selling initially
in the Hawaiian market exclusively. The Company continues to market its product
primarily in Hawaii but has since developed a limited presence on the U.S.
Mainland and in certain international markets (currently Japan, Thailand, Guam,
Taiwan and the Middle East). In 1998, sales in Hawaii accounted for
approximately 76% of the Company's net sales; international sales accounted for
approximately 17%; and sales to the U.S. Mainland accounted for approximately
7%. The Company expects continued growth in international sales, especially in
the Pacific Rim. In 1998, the Company entered into new distribution arrangements
in Thailand and Japan, which are expected to generate significant sales growth
in these major foreign markets.
A majority of the Company's product is sold through retail channels, such as
convenience stores and supermarkets, although the Company also sells through
food service outlets, such as restaurants, bars, airlines, hotels and country
clubs. Food service distribution was the fastest growing segment of the
Company's business in 1998. The Company markets its water on the basis of
superior quality and taste and on the worldwide reputation of Hawaii.
The Company was incorporated in Hawaii in September 1994. The Company's
principal executive offices are located at 248 Mokauea Street, Honolulu, Hawaii
96819; the Company's telephone number is (808) 832-4550. The Company has no
subsidiaries and no ownership interest in any other company or business.
3
<PAGE>
RISK FACTORS
These shares are very risky. You should carefully consider the risk factors
set forth below before deciding to purchase any of these shares. In addition,
this section includes or refers to certain forward-looking statements. You
should refer to the explanation of such forward-looking statements discussed on
page 2 of this Prospectus.
THE COMPANY'S OPERATIONS HAVE BEEN UNPROFITABLE. The Company has lost money
each year since it began operations. The Company lost approximately $3,266,000
($0.83 per share) in 1998 and approximately an additional $417,000 ($0.10 per
share) in the first quarter of 1999. As of March 31, 1999, the Company had an
accumulated deficit of approximately $8,312,000. Based upon its current business
plan, the Company expects to continue losing money through at least 1999. The
Company's operations may never become profitable.
THE COMPANY NEEDS ADDITIONAL FUNDING TO CONTINUE ITS OPERATIONS. At March
31, 1999, the Company had less than $450,000 in cash on hand. Although the
Company currently has a commitment for an additional $500,000 in financing, this
increase in funds will not enable the Company to cover its projected losses
through 1999. Therefore, without additional financing, the Company will probably
not be able to continue its operations. The Company is currently evaluating the
financing alternatives available to it and soliciting capital from a number of
sources. However, the Company has not received any firm commitments and may not
obtain the necessary financing. Any future financing will likely involve
additional dilution and could contain other terms adverse to the interests of
existing stockholders. Therefore, any such financing could have a negative
effect on the market price of the Common Stock.
THE COMPANY COULD BE DELISTED FROM NASDAQ. The Company's Common Stock is
currently quoted on the Nasdaq Small Cap Market. In order to maintain this
listing, the Company must meet certain maintenance criteria established by
Nasdaq on an ongoing basis. Failure to meet such criteria could result in a
delisting of the Common Stock by Nasdaq. In May 1999, Nasdaq notified the
Company that it was not in compliance with certain maintenance criteria and that
its securities would be delisted. The Company has appealed this decision, which
automatically stays the delisting action, pending the outcome of a hearing
before an independent panel. This hearing is currently expected to occur in July
1999. The Company believes that its business prospects are improving, although
the Company continues to incur operating losses, which have reduced the
Company's net worth below Nasdaq's minimum requirement of $2 million. The
Company is currently seeking to raise additional capital, which would enable it
to meet this net worth requirement as well as fund future developments. However,
there is no assurance that the Company will complete any additional financing or
that its appeal will be successful.
If the Company were removed from Nasdaq, trading in the Common Stock would
have to be conducted in the over-the-counter market in the so-called "pink
sheets" or, if then available, Nasdaq's OTC Bulletin Board. As a result, holders
of the Common Stock would find it more difficult to dispose of their shares. In
addition, if the Company were delisted from Nasdaq and the trading price of the
Common Stock were less than $5.00 per share, trading in the Common Stock would
become subject to the requirements of Rule 15g-9 under the Exchange Act. Under
this Rule, broker-dealers who recommend such low priced securities to persons
other than established customers or accredited investors must satisfy special
sales practice requirements, including the requirement that they make an
individualized written suitability determination for the purchaser and receive
the purchaser's written consent to the transaction. The Securities Enforcement
Remedies and Penny Stock Reform Act of 1990 also requires additional disclosure
in connection with trades involving a stock defined as a penny stock (generally,
any equity security not traded on an exchange or quoted on Nasdaq that has a
market price of less than $5.00 per share). Such requirements could severely
limit the liquidity of the Common Stock.
4
<PAGE>
THE SERIES A CONVERTIBLE PREFERRED STOCK (THE "SERIES A PREFERRED") IS
CONVERTIBLE INTO COMMON STOCK AT A DISCOUNT TO THE MARKET PRICE. THE INTEREST OF
OTHER COMMON STOCKHOLDERS COULD BE SUBSTANTIALLY DILUTED. Assuming the holder of
the Series A Preferred completes the second ($500,000) portion of its investment
in the Company, the conversion price of the Series A Preferred will become a
variable price, equal to the lesser of (i) $4.00 per share, or (ii) 80% of the
market price of the Common Stock (as defined) at the time of conversion. See
"The Private Offering--The Series A Preferred." The market price on the date of
this Prospectus was $ 39/64. If all of the Series A Preferred shares were
converted at the conversion price calculated as of this date $( 31/64), the
number of shares issuable would be 2,580,645, or approximately 38.7% of the
currently outstanding shares, after giving effect to such issuance. Since,
however, the actual conversion price will depend upon future market conditions,
the aggregate number of Common shares issuable upon conversion of the Series A
Preferred is currently indeterminable and could be even greater than indicated
above. Generally, the lower the market price at the time of conversion, the
greater the dilution to other stockholders. Depending upon market conditions,
the sale of shares by a selling stockholder following a partial conversion could
depress the market price at the time, thereby further increasing the dilution to
other stockholders upon a subsequent conversion.
THE COMPANY IS REQUIRED TO OBTAIN STOCKHOLDER APPROVAL FOR ADDITIONAL
ISSUANCES OF COMMON STOCK ABOVE 19.9%. Under the terms of the Series A
Preferred, unless stockholder approval has previously been obtained, the Company
may not issue to the holder any shares of Common Stock if such issuance,
together with all prior issuances upon conversion of, or as dividends on, the
Series A Preferred or upon exercise of the holder's warrant, would exceed 19.9%
(approximately 812,000 shares) of the number of shares of Common Stock
outstanding at the time the Series A Preferred was initially issued. The Company
has agreed to submit the matter to a vote of its stockholders at the 1999 Annual
Meeting currently scheduled for June 17, 1999. If stockholder approval is not
obtained, the Company will be required to redeem any conversion shares in cash,
to the extent that such conversion would result in a cumulative issuance in
excess of 19.9%.
MANAGEMENT MAY CHANGE THE COMPANY'S OPERATING STRATEGY WITHOUT STOCKHOLDER
APPROVAL. NEW STRATEGIES MAY NOT PRODUCE RESULTS AS EXPECTED. Management is
currently planning several new developments in the Company's business. These
developments include (i) expanding the Company's product line to include PET
five liter bottles; (ii) entering the nutriceutical beverage market; and (iii)
acquiring one or more five gallon home and office delivery businesses. These
developments may be effected without stockholder approval. Each development will
require the Company to commit some portion of its scarce financial resources,
which will impact the Company's ability to pursue other opportunities. For
example, cash used for acquisitions or capital expenditures will not be
available for working capital. In addition, the negotiation of these
arrangements requires substantial management effort. Such effort may not result
in completed transactions. Even if the desired transactions are completed, they
may not produce positive results for the Company.
THE COMPANY'S BUSINESS IS PRIMARILY IN HAWAII. Although the Company's
objective is to distribute its product internationally, a substantial majority
of the Company's sales still occur in the Hawaiian market. The Company's
principal distributor in Hawaii, Paradise Beverages ("Paradise") currently
accounts for approximately half of the Company's net sales. The Company's
distribution agreement with Paradise is based upon an oral understanding, which
is terminable at will by either party. If this agreement were terminated, the
Company's business in Hawaii could be hurt.
CURRENCY FLUCTUATIONS AND ECONOMIC WEAKNESS ABROAD COULD HURT THE COMPANY'S
SALES AND IMPEDE EXPANSION INTO FOREIGN MARKETS, ESPECIALLY IN ASIA. The
Company hopes to grow its business through international expansion, especially
in developed countries in Asia. Several of these countries have experienced
economic downturns and weakening of their currencies relative to the U.S.
dollar. Revenues have not been directly affected by currency fluctuations in
these markets, since the Company
5
<PAGE>
prices all of its product in U.S. dollars. However, currency fluctuations can
lessen demand for the Company's product in foreign markets by making the product
more expensive in local currency. To date, the Company has not been prevented
from expanding distribution into target Asian markets as a result of the
strength of the U.S. dollar. However, further economic weakness and/or
strengthening of the U.S. dollar could hurt the Company's sales in these
markets.
THE COMPANY LEASES ITS WATER SOURCE AND BOTTLING FACILITY PURSUANT TO A
LONG-TERM LEASE AGREEMENT WITH A PRINCIPAL STOCKHOLDER. This lease agreement
requires the Company to make rental payments on a monthly basis at a rate equal
to the greater of (i) a specified base rent of at least $5,000 per month, or
(ii) 2% of the Company's net revenues, as defined. This rental expense is
reflected in the Company's cost of goods sold. In addition, the lease contains
various restrictions on the Company's operations. The lessor is entitled to make
use of the premises (other than the existing structures) for the manufacture of
other beverages (except natural water) and is entitled to draw up to 50% of the
water flow from the leased well for such purposes. The lessor currently conducts
no such activity on the premises.
THE COMPANY IS HIGHLY DEPENDENT UPON THE EFFORTS OF ITS PRESIDENT. Marcus
Bender, the Company's President and Chief Executive Officer has designed and
managed the implementation of the Company's business strategy to date. In
October 1996, the Company entered into an employment agreement with Mr. Bender,
employing him as President for a five year term. The Company has also obtained
$1.0 million in key man life insurance on his life. Nevertheless, the loss of
Mr. Bender's services would have a material adverse effect on the Company.
THE COMPANY IS DEPENDENT UPON THE EFFORTS OF INDEPENDENT DISTRIBUTORS AND
BROKERS FOR THE SALE OF ITS PRODUCT. These parties may de-emphasize or
discontinue the sale of the Company's product based upon their own financial
condition, operating strategy or other internal considerations, which the
Company may have no ability to influence or control. A distributor in Hawaii
once stopped representing the Company's product when the distributor
discontinued all sales of bottled water and other non-beer products. Other
distributors have been terminated for failure to meet agreed performance
standards. Such unforeseen changes in the Company's distribution network have a
detrimental effect on the development of the Company's business.
THE BOTTLED WATER BUSINESS IS HIGHLY COMPETITIVE. There are numerous
products available, which are often perceived as generic by consumers. The
Company competes primarily with large, established foreign and domestic
companies. The Company's principal foreign competitors include Great Brands of
Europe, a French company which distributes under the "Evian," "Volvic" and
"Dannon Natural Spring Water" names, and Perrier, S.A., a French company, which
distributes through its U.S. subsidiary, the Perrier Group, under the
"Arrowhead" and "Poland Springs" names, among others. The Company's principal
domestic competitors include Crystal Geyser Water Co., which distributes under
the "Crystal Geyser" name, Nora Beverage Co., which distributes Canadian source
water under the "Naya" name, and Mountain Valley Water Co., which distributes
under the "Mountain Valley" name. All of these companies have large marketing
budgets which enable them to operate in mass consumer markets, such as
supermarket chains. In California, the largest U.S. market, supermarkets often
charge new entrants substantial "slotting fees" for shelf space. The Company has
not had the financial resources to compete in these markets and has therefore
pursued a niche marketing strategy on the U.S. Mainland. The Company markets its
product on the basis of superior quality and taste and the worldwide reputation
of Hawaii.
THE COMPANY MUST MEET STRICT GOVERNMENTAL REGULATIONS CONCERNING THE
BOTTLING AND PACKAGING OF ITS WATER. The bottled water industry is highly
regulated both in the United States and abroad. State and Federal regulations
require the Company to monitor each aspect of its production process, to ensure
the quality of its water and the truthfulness of its labeling. Governmental
regulations in foreign jurisdictions are generally similar to, and in certain
respects more stringent than, U.S. regulations.
6
<PAGE>
Failure to meet applicable regulations in the U.S. or foreign markets could lead
to costly recalls, loss of certification to sell product or, even in the absence
of governmental action, loss of sales due to negative publicity. In 1995, the
Company was halted in its early efforts to distribute its product in Japan, when
the Japanese Ministry of Health and Welfare ordered a total recall of all
bottled water stocked by certain competitors. Although the Company's product was
not specifically covered by this order, the Company's Japanese distributor
terminated its representation of the Company due to adverse market conditions.
As a result, the Company's efforts to penetrate the Japanese market were impeded
for some time. Similar events could occur again in the U.S. or abroad. The
Company's business could be severely damaged by such events.
MANY SHARES PREVIOUSLY RESTRICTED ARE NOW AVAILABLE FOR SALE IN THE PUBLIC
MARKET. Sales of these shares could depress the market price of the Company's
Common Stock. All of the shares of Common Stock held by founding stockholders of
the Company (1,599,212 shares at the time of the Company's initial public
offering) are currently eligible for sale without registration pursuant to Rule
144 under the Securities Act ("Rule 144"), subject to the limitations set forth
in such Rule. Lock-up agreements relating to these shares terminated on November
13, 1998. In addition, the Company's financial public relations adviser holds
options to purchase 515,000 shares, which the Company has registered for resale
under the Securities Act. Employees of the Company also hold options to purchase
shares, which may be resold pursuant to the Company's registration statement on
Form S-8.
THE MARKET PRICE OF THE COMMON STOCK COULD DECLINE PRECIPITOUSLY. The
trading price of the Common Stock could become depressed as a result of sales of
shares by the selling stockholders or others (as described above). Stock price
volatility may also occur in response to actual or anticipated developments
relating to the Company or its competitors or as a result of general market
conditions. Small capitalization stocks have generally experienced extreme
fluctuations in trading price and volume in recent years, often without regard
to the operating performance of these companies. The trading prices and volume
of the Company's Common Stock have fluctuated widely over its trading history.
Such volatility could continue in the future.
THE COMPANY'S ARTICLES OF INCORPORATION CONTAIN CERTAIN ANTI-TAKEOVER
PROVISIONS. These provisions enable the Board of Directors to issue preferred
stock in one or more series, with such rights as the Board of Directors may
determine without any further vote or action by the stockholders. In addition,
ss.415-172 of the Hawaii Revised Statutes requires stockholder approval before
the completion of a "control share acquisition" resulting in beneficial
ownership by an acquiring person of in excess of 10% of the voting power of a
public corporation incorporated in Hawaii with at least 100 stockholders and its
principal place of business or substantial assets located in Hawaii. These
provisions could reduce the probability of any change of control or acquisition
of the Company without Board approval. While such provisions are intended to
enable the Board of Directors to maximize stockholder value, they may have the
effect of discouraging takeovers which could be in the best interest of
stockholders.
THE COMPANY DOES NOT PAY DIVIDENDS ON ITS COMMON STOCK. The Company has
never paid any dividends on its Common Stock and does not expect to pay any such
dividends. The outstanding Series A Preferred has, and any additional preferred
stock issued in the future will likely have, a priority in the payment of
dividends.
7
<PAGE>
THE PRIVATE OFFERING
On March 3, 1999, the Company completed the first $750,000 installment of an
aggregate $1,250,000 private offering of Series A Convertible Preferred Stock
(the "Series A Preferred") and warrant (the "Warrant") to purchase an additional
100,000 shares of Common Stock of the Company. The second installment of
$500,000 is due following the effective date of the Registration Statement. The
offering was placed with a single institutional investor. This investor and a
financial advisor in connection with the transaction are the selling
stockholders in this offering.
THE SERIES A PREFERRED
The Series A Preferred is entitled to cumulative dividends at the annual
rate of 4%, payable quarterly, commencing May 31, 1999, in cash or Common Stock,
at the election of the Company.
The Series A Preferred is convertible into Common Stock, in whole or in part
at the election of the holder, at a conversion price of $3.00 per share until
the closing of the second ($500,000) installment. Thereafter, the conversion
price will be a variable price equal to the lesser of (i) $4.00 per share or
(ii) 80% of the Market Price (defined as the average of the three lowest closing
bid prices for the Common Stock during a period of 22 consecutive trading days
ending immediately prior to the date of conversion). A portion of the Series A
Preferred will be convertible at such variable price commencing June 1, 1999 (90
days following the initial closing). Additional shares will become convertible
in increments (on a cumulative basis) such that all of the Series A Preferred
will be convertible within 180 days of the initial closing. The Company will be
entitled to require the holder to convert all (but not less than all) of the
shares of Series A Preferred outstanding on or after March 1, 2001, or, at the
Company's election, to repurchase such shares for cash.
Since the Series A Preferred will be convertible into Common Stock at a
price determined by future market conditions, the precise number of shares into
which the Series A Preferred will be converted is currently indeterminable. The
instrument governing the Series A Preferred provides that, unless stockholder
approval has previously been obtained, no shares of Common Stock may be issued
upon conversion of the Series A Preferred, if such issuance, together with all
prior issuances upon conversion of or as dividends on the Series A Preferred, or
upon exercise of the Warrant, would exceed 19.9% (approximately 812,000 shares)
of the number of shares of Common Stock outstanding at the time of the initial
closing. The Company has agreed to submit the matter to a stockholder vote at
its 1999 Annual Meeting of Stockholders. In the event that stockholder approval
is not obtained, the Company will be required to redeem any conversion shares in
cash, to the extent that such conversion would otherwise result in an issuance
of Common Stock in excess of 19.9%. The instrument governing the Series A
Preferred also provides that the holder will have no right to convert any shares
of Series A Preferred if and to the extent that any such conversion would result
in the holder being deemed the "beneficial owner" of more than 9.9% of the then
outstanding shares of Common Stock within the meaning of Section 13(d) of the
Exchange Act.
The Series A Preferred is redeemable, at the election of the Company, at any
time or from time to time prior to conversion, provided that the Market Price of
the Common Stock does not exceed 150% of the Market Price on the date of the
initial closing.
The Company agreed to pay certain financial advisors 6% of the gross
proceeds of the offering in cash and to issue to them an aggregate of 5,000
shares of Common Stock and warrants to purchase 25,000 shares of Common Stock,
exercisable at $2.50 per share.
THE WARRANT
The Warrant is exercisable in whole or in part, at the election of the
holder, for a period of three years ending February 28, 2002. The exercise price
of the Warrant is $3.625 per share, subject to adjustment in the event of stock
dividends, stock splits and the like.
8
<PAGE>
USE OF PROCEEDS
All of the shares are being offered for the account of the selling
stockholders. The Company will not directly receive any proceeds from the sale
of these shares; however, the Company could receive aggregate proceeds of up to
$362,500 from the exercise of the Warrant, if exercised in full. The actual
amount received, if any, will equal the number of shares purchased, multiplied
by the exercise price of the Warrant ($3.625 per share). See "The Private
Offering--The Warrant." The Warrant is exercisable by the holder in its sole
discretion. The Company cannot predict whether or when the holder will exercise
the Warrant. The Company will use any proceeds received from the exercise of the
Warrant for working capital and general corporate purposes.
THE SELLING STOCKHOLDERS
The following table sets forth certain information concerning the selling
stockholders and their beneficial ownership of the Company:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED PRIOR
TO THE OFFERING(1) SHARES SHARES BENEFICIALLY
---------------------------------- OFFERED OWNED AFTER THE
NAME OF SELLING STOCKHOLDER CLASS AMOUNT % OF CLASS(2) HEREBY OFFERING(3)
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<S> <C> <C> <C> <C> <C>
Amro International, SA(4)............. Series A Preferred 1,250(5) 100% -- --
Common Stock --(6) --(6) 1,400,000(7) --
Trinity Capital Advisors, Inc......... Common Stock 5,000 < 1% 5,000 --
</TABLE>
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(1) A person is deemed to be the beneficial owner of securities that can be
acquired within 60 days through the exercise of any option, warrant or
right.
(2) Shares of Common Stock subject to options, warrants or rights that are
currently exercisable or exercisable within 60 days are deemed outstanding
for purposes of computing the percentage ownership of the person holding
such options, warrants or rights, but are not deemed outstanding for
purposes of computing the percentage ownership of any other person.
(3) Assumes that the selling stockholders convert all shares of Series A
Preferred and sell all of the shares offered hereby. The selling
stockholders may elect to sell some, all or none of the shares offered
hereby, in their sole discretion. The Company is unable to predict the
actual number of shares which will be sold by the selling stockholders.
(4) Amro International, S.A. ("Amro") is an investment account managed by Ultra
Finanz, a Swiss investment management company. The sole authorized
signatories at Ultra Finanz responsible for the Amro account are H.U.
Bachofen and Michael Klee. Ultra Finanz and Messrs. Bachofen and Klee may be
deemed to be the beneficial owners of the shares held by Amro.
(5) Amro currently holds 750 shares of Series A Preferred and has committed to
purchase an additional 500 shares.
(6) In addition to the Series A Preferred, Amro holds a Warrant to purchase
100,000 shares. The Warrant is currently exercisable and the 750 Series A
Preferred shares currently held by Amro are convertible into an aggregate of
250,000 shares of Common Stock. Therefore, Amro would be deemed the
beneficial owner of the shares underlying the Warrant and these Series A
Preferred shares (aggregating 350,000 shares or approximately 7.9% of the
outstanding class). Assuming Amro completes the purchase of an additional
500 shares of Series A Preferred (see footnote 5 above), the conversion
price of all Series A Preferred will be a variable price based upon a
discount to the Market Price of the Common Stock (as defined) at the time of
conversion. Since this price is a variable price based upon future market
conditions, the total number of Shares issuable upon conversion is currently
indeterminable. If all of the Series A Preferred were
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converted into Common Stock at the conversion price in effect on the date
hereof ($ 31/64 per share) Amro would be the holder of 2,580,645 shares or
approximately 38.7% of the outstanding class, after giving effect to such
issuance. See "The Private Offering." Pursuant to applicable provisions of
the Company's Articles of Incorporation, holder may not convert the Series A
Preferred, and the Series A Preferred will not be convertible, to the extent
that holder would be deemed the beneficial owner of more than 9.9% of the
outstanding shares of Common Stock.
(7) Includes (i) 100,000 shares issuable upon exercise of the Warrant, (ii) up
to 1,250,000 shares issuable upon conversion of the Series A Preferred, and
(iii) up to 50,000 shares issuable as dividends on the Series A Preferred.
The Series A Preferred is convertible into Common Stock at a conversion
price based upon a discount to the Market Price of the Common Stock (as
defined) at the time of conversion. In order to provide for possible
fluctuations in the Market Price of the Common Stock, the number of shares
offered hereby has been determined based upon an assumed conversion price of
$1.00 per share. See "The Private Offering" above.
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PLAN OF DISTRIBUTION
This Prospectus covers the resale by the selling stockholders of up to
1,405,000 shares of Common Stock currently held or issuable in the future upon
conversion of, or as dividends on, the Series A Preferred or upon exercise of
the Warrant described above. See "The "Private Offering." The selling
stockholders may elect to sell some, all or none of the shares, in their sole
discretion.
The selling stockholders may, from time to time, sell all or a portion of
the shares on the Nasdaq SmallCap Market in privately negotiated transactions or
otherwise, at fixed prices that may be changed, at market prices prevailing at
the time of sale, at prices related to such market prices or at negotiated
prices. The shares may be sold by the selling stockholders by one or more of the
following methods, without limitation: (a) block trades in which the broker or
dealer so engaged will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction, (b)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this Prospectus, (c) ordinary brokerage transactions
and transactions in which the broker solicits purchasers, (d) privately
negotiated transactions, and (e) a combination of any such methods of sale. In
effecting sales, brokers and dealers engaged by the selling stockholders may
arrange for other brokers or dealers to participate. Brokers or dealers may
receive commissions or discounts from the selling stockholders (or, if any such
broker-dealer acts as agent for the purchaser of such shares, from such
purchaser) in amounts to be negotiated which are not expected to exceed those
customary in the types of transactions involved. Broker-dealers may agree with
the selling stockholders to sell a specified number of such shares at a
stipulated price per share, and, to the extent such broker-dealers are unable to
do so acting as agents for the selling stockholders, to purchase as principal
any unsold shares at the price required to fulfill the broker-dealer commitment
to the selling stockholders. Broker-dealers who acquire shares as principal may
thereafter resell such shares from time to time in transactions (which may
involve block transactions and sales to and through other broker-dealers,
including transactions of the nature described above) in the over-the-counter
market or otherwise at prices and on terms then prevailing at the time of sale,
at prices then related to the then-current market price or in negotiated
transactions and, in connection with such resale, may pay to or receive from the
purchasers of such shares commissions as described above. The selling
stockholders may also sell the shares in accordance with Rule 144 under the
Securities Act, rather than pursuant to this Prospectus.
The selling stockholders and any broker-dealers or agents that participate
with the selling stockholder in sales of the shares may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales. In such event, any commissions received by such broker-dealers or agents
and any profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, except for fees and disbursements of counsel to the
selling stockholders. The selling stockholder will bear all brokerage
commissions or other similar selling expenses related to the sale of the shares.
The Company has agreed to indemnify the selling stockholders against certain
losses, claims, damages and liabilities, including liabilities under the
Securities Act.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act covering the offering of the shares. Pursuant to a
Registration Rights Agreement, the Company agreed to file the Registration
Statement and to keep it effective until all of the shares have been sold or are
eligible for sale without restriction under Rule 144.
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LEGAL MATTERS
The validity of the securities offered hereby has been passed upon for the
Company by Graham & James LLP, Los Angeles, California. Richard P. Manson, Of
Counsel to Graham & James, currently holds options to purchase 50,000 shares of
Common Stock of the Company.
EXPERTS
The financial statements incorporated by reference in this Prospectus and
elsewhere in the Registration Statement, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report. Reference is made to said report, which includes
an explanatory paragraph with respect to the uncertainty regarding the Company's
ability to continue as a going concern as discussed in Note 1 to the Financial
Statements.
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PROSPECTIVE PURCHASERS OF THESE SHARES SHOULD RELY ONLY ON INFORMATION
CONTAINED IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE INTO IT. NEITHER THE
COMPANY NOR THE SELLING STOCKHOLDERS HAVE AUTHORIZED ANYONE TO PROVIDE DIFFERENT
INFORMATION. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THESE SHARES BY ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
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TABLE OF CONTENTS
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PAGE
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Forward Looking Statements................................................ 2
Available Information..................................................... 2
Documents Incorporated by Reference....................................... 2
The Company............................................................... 3
Risk Factors.............................................................. 4
The Private Offering...................................................... 8
Use of Proceeds........................................................... 9
The Selling Stockholders.................................................. 9
Plan of Distribution...................................................... 11
Legal Matters............................................................. 12
Experts................................................................... 12
</TABLE>
HAWAIIAN NATURAL
WATER COMPANY, INC.
1,405,500 SHARES
COMMON STOCK
NO PAR VALUE
---------------------
PROSPECTUS
---------------------
JUNE 1, 1999
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