<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
(MARK ONE)
/S/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 0-29280
HAWAIIAN NATURAL WATER COMPANY, INC.
(Exact name of small business issuer as specified in its charter)
HAWAII 99-031484
(State or jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
98-746 Kuahao Place
Pearl City, Hawaii 96782
(Address of principal executive offices)
(808) 483-0520
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
The issuer had issued and outstanding 7,676,561 shares of Common Stock on
November 10, 2000.
Transitional Small Business Disclosure Format (check one):
YES NO X
--- ---
<PAGE>
Hawaiian Natural Water Company, Inc.
Balance Sheet
September 30, 2000
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $233,408
Inventories 555,167
Trade accounts receivable, net of allowance for doubtful
accounts of $76,468 422,975
Other current assets 129,468
------------
Total Current Assets 1,341,018
PROPERTY AND EQUIPMENT, net of accumulated depreciation
and amortization of $904,293 2,317,946
CO-PACKING AGREEMENT, net of accumulated amortization
Of $30,000 120,000
INTANGIBLE ASSET, net of accumulated amortization of $33,832 125,317
------------
Total Assets $ 3,904,281
------------
------------
LIABILITIES, MANDATORILY-REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,201,641
Accrued professional fees 56,216
Accrued vacation 44,279
Accrued payroll and related taxes 44,413
Accrued commissions and billbacks 233,657
Accrued other 167,620
Notes payable - current portion 523,493
Capital lease obligation - current portion 32,027
------------
Total Current Liabilities 2,303,346
------------
NON-CURRENT LIABILITIES:
Notes payable - net of current portion 314,771
Capital lease obligation - net of current portion 24,187
Other 41,380
------------
Total Non-Current Liabilities 380,338
------------
Total Liabilities 2,683,684
------------
MANDATORILY-REDEEMABLE PREFERRED STOCK:
Series B Convertible Preferred - 100 shares issued and
Outstanding with conversion rights and aggregate
Liquidation preference of $100,000 100,000
STOCKHOLDERS' EQUITY:
Preferred Stock, $1.00 par value; 5,000,000 shares
authorized; 140 shares issued and outstanding with
conversion rights and aggregate liquidation
preference of $140,000 64,216
Common stock, no par value; 20,000,000 shares authorized;
7,676,561 shares issued and outstanding 9,575,601
Common stock warrants and options; 5,762,225 issued
and outstanding 3,715,938
Accumulated Deficit (12,235,158)
------------
Total Stockholders' Equity 1,220,597
------------
Total Liabilities, Mandatorily-Redeemable
Preferred Stock, and Stockholders' Equity $ 3,904,281
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements
PAGE 2
<PAGE>
Hawaiian Natural Water Company, Inc.
Statements of Operations
For the Three and Nine Months Ended September 30, 1999 and 2000
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
----------------------- -----------------------
1999 2000 1999 2000
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
NET SALES $ 929,880 944,999 $ 2,158,424 $ 3,143,112
COST OF SALES 709,988 661,677 1,675,579 2,417,623
----------- ----------- ----------- -----------
Gross Margin 219,812 283,322 482,845 725,489
EXPENSES:
Selling and Marketing 169,342 217,451 493,708 759,650
General and Administrative 423,584 281,420 1,052,615 1,183,575
----------- ----------- ----------- -----------
592,926 498,871 1,546,323 1,943,225
OPERATING LOSS (373,034) (215,549) (1,063,478) (1,217,736)
OTHER INCOME (EXPENSE)
Interest and Other Income 3,933 -- 8,490 --
Interest Expense (18,223) 24,076 (58,323) (53,601)
Impairment Charge -- (122,841) -- (1,025,935)
----------- ----------- ----------- -----------
(14,290) (98,765) (49,833) (1,079,536)
NET LOSS $ (387,324) $ (314,314) (1,113,311) (2,297,272)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic and Diluted
Net Loss Per Share: $ (0.09) $ (0.04) $ (0.27) $ (0.35)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted Average Common
Shares Outstanding 4,395,155 7,032,242 4,183,931 6,559,193
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements
PAGE 3
<PAGE>
Hawaiian Natural Water Company, Inc.
Statement of Stockholders' Equity
For the Nine Months Ended September 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
COMMON STOCK WARRANTS
COMMON STOCK AND OPTIONS PREFERRED STOCK
----------------------- ---------------------- ------------------ TOTAL
NUMBER OF NUMBER OF NUMBER OF ACCUMULATED STOCKHOLDERS
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT DEFICIT EQUITY
------------ -------- ---------------------- --------- ------- ----------- ----------
<S> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1999 5,536,727 $8,076,886 5,709,458 $3,705,529 319 $205,755 $(9,894,059) $ 2,094,111
Issuance of common stock and
warrants to chief executive
officer
January 1, 2000 100,000 53,097 166,667 46,903 - - - 100,000
Issuance of common stock
and common stock warrants in
private offering
February 1, 2000 50,000 26,548 83,333 23,452 - - - 50,000
February 20, 2000 50,000 26,548 83,333 23,452 - - - 50,000
Issuance of common stock
and common stock warrants
to professional advisor
February 1, 2000 10,000 5,310 16,667 4,690 - - - 10,000
February 15, 2000 10,000 5,310 16,667 4,690 - - - 10,000
March 17, 2000 50,000 50,000 - - - - - 50,000
March 31, 2000 - - 12,500 12,500 - - - 12,500
Issuance of common stock
in acquisition of Aloha
Water Company, Inc.
March 20, 2000 750,000 937,500 - - - - - 937,500
Issuance of preferred stock
to private investor
March 3, 2000 - - - - 100 100,000 - 100,000
Redemption of preferred stock
February 7, 2000 - - - - (50) (39,536) (10,464) (50,000)
March 6, 2000 - - - - (50) (39,536) (10,464) (50,000)
May 1, 2000 - - - - (35) (27,675) (7,325) (35,000)
May 26, 2000 - - - - (15) (11,861) (3,139) (15,000)
June 29, 2000 - - - - (29) (22,931) (6,069) (29,000)
Exercise of stock options by
institutional investor
March 3, 2000 100,000 1,000 (100,000) - - - - 1,000
Exercise of common stock
Warrants by
Private investor
March 3, 2000 50,000 50,000 (50,000) - - - - 50,000
May 1, 2000 35,000 35,000 (35,000) - - - - 35,000
May 25, 2000 15,000 15,000 (15,000) - - - - 15,000
June 1, 2000 14,600 14,600 (14,600) - - - - 14,600
June 16, 2000 35,000 35,000 (35,000) - - - - 35,000
June 29, 2000 15,000 15,000 (15,000) - - - - 15,000
July 21, 2000 26,000 26,000 (26,000) - - - - 26,000
August 25, 2000 40,000 40,000 (40,000) - - - - 40,000
Issuance of common stock
options to non-employee
directors
February 16, 2000 - - 900 486 - - - 486
May 11, 2000 - - 900 486 - - - 486
June 13, 2000 - - 600 - - - - -
August 8, 2000 - - 900 - - - - -
September 28, 2000 - - 900 - - - - -
Issuance of common stock
To marketing consultants
March 31, 2000 20,000 20,000 - - - - - 20,000
April 12, 2000 3,000 3,000 - - - - - 3,000
June 30, 2000 2,250 2,250 - - - - - 2,250
August 31, 2000 6,750 6,750 - - - - - 6,750
September 30, 2000 10,000 10,000 - - - - - 10,000
Issuance of common stock
Pursuant to Co-Packing
Agreement
May 5, 2000 3,490 3,490 - - - - - 3,490
June 30, 2000 2,618 2,618 - - - - - 2,618
July 31, 2000 2,643 512 - - - - - 512
September 13, 2000 700,000 106,250 - (106,250) - - - -
September 30, 2000 4,483 869 - - - - - 869
Issuance of common stock
For U.S. Mainland office rental
June 5, 2000 1,000 406 - - - - - 406
June 30,000 1,000 438 - - - - - 438
July 3, 2000 1,000 406 - - - - - 406
September 30, 2000 1,000 188 - - - - - 188
Issuance of common stock to
key management executives
as incentive compensation
August 31, 2000 30,000 5,625 - - - - - 5,625
Accrued dividends to
preferred shareholder - - - - - - (6,366) (6,366)
Net Loss - - - - - - (2,297,272) (2,297,272)
---------- ---------- --------- ---------- --- -------- ------------ -----------
BALANCE AT
September 30, 2000 7,676,561 $9,575,601 5,762,225 $3,715,938 240 $164,216 $(12,235,158) $ 1,220,597
---------- ---------- --------- ---------- --- -------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial statements
PAGE 4
<PAGE>
Hawaiian Natural Water Company, Inc.
Statements of Cash Flows
For the Nine Months Ended September 30, 1999 and 2000
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 2000
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,113,311) $(2,297,272)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 193,366 286,227
Amortization of debt discount 50,740 25,974
Impairment charge - 1,025,935
Net income from subsidiary - (18,435)
Issuance of stock and options to
consultants and distributors 52,627 63,427
Issuance of stock options to
non-employee directors 8,037 972
Issuance of common stock to employees - 5,625
Net (increase) decrease in current assets (498,453) 121,505
Net increase in current liabilities 262,978 415,599
Net increase in other liabilities 41,380 -
------------ ------------
Net cash used in operating
activities (1,002,636) (370,443)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (247,963) (78,293)
Decrease in deposits on equipment (47,238) -
------------ ------------
Net cash used in investing
activities (295,201) (78,293)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of preferred stock
and common stock warrants 1,146,239 100,000
Exercise of common stock options by financial
public relations advisor 125,000 -
Net proceeds from private placement of common
Stock and common stock warrants 795,000 -
-
Exercise of common stock warrants by private
Investors - 431,600
Proceeds from note payable 22,995 350,000
Redemption of preferred stock (250,000) (179,000)
Repayments of notes payable (128,131) (7,060)
Repayment of principal on capital leases (49,645) (22,384)
----------- ------------
Net cash provided by financing
activities 1,661,458 673,156
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 363,621 $ 224,420
CASH AND CASH EQUIVALENTS, beginning of period 320,289 8,988
----------- ------------
CASH AND CASH EQUIVALENTS, end of period $ 683,910 $ 233,408
------------ ------------
------------ ------------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Aquisition of certain assets of Ali'i Water
Bottling, Inc. for common stock $ 312,359 $ -
----------- ------------
----------- ------------
Proceeds from addition of capital leases $ 54,336 $ 17,243
----------- ------------
----------- ------------
Preferred shareholder dividends paid in cash $ - $ 37,461
----------- ------------
----------- ------------
Preferred shareholder dividends accrued $ 23,190 $ 6,366
----------- ------------
----------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements
PAGE 5
<PAGE>
HAWAIIAN NATURAL WATER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
(UNAUDITED)
1. GENERAL
The accompanying unaudited financial statements of Hawaiian Natural Water
Company, Inc. (the "Company") should be read in conjunction with the audited
financial statements for the year ended December 31, 1999 and notes thereto as
filed with the Securities and Exchange Commission in the Company's Annual Report
on Form 10-KSB. The auditor's report on those financial statements included an
explanatory fourth paragraph indicating that there is substantial doubt about
the Company's ability to continue as a going concern.
In the opinion of management, the accompanying financial statements reflect
all adjustments (which consist primarily of normal recurring adjustments)
considered necessary to fairly present the financial position of the Company
at September 30, 2000, the results of its operations for the three and nine
month periods ended September 30, 1999 and 2000, and the cash flows for the
nine month periods ended September 30, 1999 and 2000, in accordance with
accounting principles generally accepted in the United States and the rules
and regulations of the Securities and Exchange Commission. The results of
operations for interim periods are not necessarily indicative of results to
be achieved for full fiscal years. Certain amounts from prior periods have
been reclassified to conform to their current period presentation.
As shown in the accompanying financial statements, the Company has incurred
significant losses since inception. Management expects that the Company will
continue to incur additional losses until the Company achieves significantly
higher levels of sales. Subsequent to September 30, 2000 the Company entered
into a merger agreement with Amcon Distributing Company ("Amcon") (see Note
13), pursuant to which the Company has agreed to merge with and become a
wholly owned subsidiary of Amcon. The merger is subject to various
conditions. If the merger does not become effective for any reason, it is
likely that the Company will not be able to continue as a going concern. The
Company has been advised by its independent public accountants that should
there be an indication at year end that the merger will not become effective,
the auditor's report on those financial statements will be modified for that
contingency.
ORGANIZATION
Hawaiian Natural Water Company, Inc. was incorporated in the state of Hawaii on
September 13, 1994. The Company was formed for the purpose of bottling,
marketing and distributing Hawaiian natural water in Hawaii, the U.S. Mainland
and foreign markets. The Company's initial product introduction occurred in the
first quarter of 1995.
In June 1999, the Company acquired certain assets of Ali'i Water Bottling Inc.,
which extended the Company's product line into the home and office delivery
market. The majority of this business is concentrated in the Kailua-Kona area of
the Big Island of Hawaii.
In January 2000, the Company expanded its product line beyond the water category
through the introduction of a line of herbal beverages under the "East Meets
West XEN-TM-" name (see Note 6).
In November 2000, the Company entered into a merger agreement pursuant to
which, subject to stockholder approval and certain other conditions, the
Company would become a wholly owned subsidiary of Amcon. See Note 13.
PAGE 6
<PAGE>
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 at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION. The Company recognizes revenue on the accrual method of
accounting when title to product transfers to the buyer upon shipment. The
Company issues refunds to customers or replaces goods which are rejected. The
Company's policy is to provide a reserve for estimated uncollectible trade
accounts receivable. The Company also provides a reserve for estimated sales
returns and related disposal costs. Net sales revenue reflects reductions for
the reserve for sales returns, discounts and freight-out.
GROSS MARGIN. The Company's plant currently has a normal production capacity
of approximately 180,000 cases per calendar quarter. The Company is currently
operating its plant at approximately 82% percent of this capacity. Since a
significant portion of the Company's cost of sales includes fixed production
costs, the Company anticipates higher gross margins as production and sales
increase.
2. LOSS PER SHARE
Basic and Diluted Loss Per Share is computed by dividing the Net Loss by the
Weighted Average Common Shares Outstanding during the period. The Weighted
Average Common Shares Outstanding during the three month periods ended September
30, 1999 and 2000 were 4,395,155 and 7,032,242 respectively, and for the nine
month periods ended September 30, 1999 and 2000 were 4,183,931 and 6,559,193
respectively.
The Company's Basic and Diluted Loss Per Share is the same for the third quarter
and first nine months of both 1999 and 2000 in that any exercise of stock
options or warrants would have been anti-dilutive.
3. CASH AND CASH EQUIVALENTS
Cash and cash equivalents include savings accounts and investments in a money
market account with original maturities less than 90 days.
4. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market. As of September 30, 2000, inventories were comprised of the following:
<TABLE>
<CAPTION>
<S> <C>
Raw materials $346,045
Finished goods 209,122
--------
$555,167
--------
--------
</TABLE>
Raw materials inventory consists of PET "pre-forms", caps, labels and various
packaging and shipping materials. Finished goods inventory includes materials
and conversion costs.
PAGE 7
<PAGE>
5. CO-PACKING AGREEMENT
In June 1999, the Company entered into a five year agreement with an
independent bottler in Los Angeles, California (the "Bottler") for the
production, warehousing, and shipment of herbal beverages. On September 13,
1999, the Company issued 100,000 shares of common stock to the principals of
the Bottler in partial consideration for these services. The agreement was
recorded as an asset on the Company's accounting records in the amount of
$150,000. Initially, $43,750 was allocated to the common stock account (based
on the aggregate market value of the 100,000 common shares issued) and the
balance ($106,250) was allocated to common stock options. The agreement
provides that in the event the market price (as defined) of the Company's
common stock on the first anniversary of the date of issuance is less than
$1.50 per share, the Company will issue, for no additional consideration,
sufficient additional shares of common stock to bring the then market value
of all shares issued (including the initial 100,000 shares) up to $150,000.
Pursuant to this provision, on September 13, 2000, the Company issued an
additional 700,000 shares of common stock to the principals of the Bottler.
Upon issuance of these additional 700,000 shares, the $106,250 initially
allocated to common stock options was transferred to the common stock account.
6. ACQUISITION OF INTANGIBLE ASSET
In June 1999, the Company purchased for $150,000 the beverage products,
trademarks and all other rights related to a line of herbal beverages. The
acquisition cost and related trademark registration expenses (approximately
$9,000) have been capitalized and are being amortized over a 5 year period.
The Company introduced this product line to selected markets in January 2000.
7. ACQUISITION OF ALOHA WATER COMPANY, INC. AND IMPAIRMENT CHARGE
On March 20, 2000 the Company acquired Aloha Water Company, Inc., ("Aloha") a
distributor of purified water to the home and office delivery market. The
acquisition was accomplished through a merger of Aloha into a wholly owned
subsidiary of the Company formed for this purpose. The purchase price for
Aloha consisted of an aggregate of (i) 750,000 shares of common stock of the
Company and (ii) a promissory note of the Company in the amount of $500,000
(the "Aloha note") to the stockholders of Aloha. Interest on the note was
payable monthly at the annual rate of 10%. The entire principal amount was
due on April 1, 2001. The Aloha note was secured by a first priority security
interest on all of the capital stock of Aloha.
In August, 2000 the holders of the Aloha note declared a default for failure
to make certain interest payments, and foreclosed on their collateral, which
was all of the stock of Aloha. As a result of this action the Company
recorded at June 30, 2000 a provision for estimated impairment of the
purchase price in excess of book value ($903,904). As of September 30, 2000,
the Company has written off its investment in Aloha, the related goodwill and
the Aloha note. During the third quarter of 2000, the Company revised its
estimate of the impairment charge and recorded an additional impairment
charge of $122,841.
PAGE 8
<PAGE>
8. NOTES PAYABLE
In anticipation of acquiring the Company, Amcon has provided certain debt
financing to the Company for working capital and other general corporate
purposes. Amcon advanced $350,000 in September 2000, and an additional
$400,000 in October 2000. These loans are evidenced by secured promissory
notes (the "Amcon notes") bearing interest at a rate of 10% per annum,
payable quarterly. The Amcon notes are convertible at the election of Amcon,
under certain circumstances, into Series C Convertible preferred stock
bearing dividends, payable quarter, of 10% per annum. The Amcon notes are
secured by a lien on all of the Company's assets.
In September 1997, the Company acquired certain bottle making equipment used
in its bottling operations. The consideration for the equipment was an
aggregate of $1.2 million, a portion of which was paid through the issuance
of a promissory note in the original principal amount of $825,000, payable in
installments, as defined. The Company discounted this equipment note payable
using an estimated weighted average cost of capital of 12%, and amortized the
resulting discount to interest expense using the effective interest method
over the term of the loan. As of September 30, 2000 the remaining principal
amount due was $495,000, payable in three equal installments, plus accrued
interest as of such date aggregating $24,768. In October 2000, the Company
renegotiated the payment terms for this outstanding amount ($519,768) as
follows:
<TABLE>
<S> <C>
Six monthly installments, commencing
October 15, 2000, bearing interest
at 8% per annum on $189,768 $189,768
October 1, 2001 installment, bearing interest
at 5% per annum on $330,000 165,000
October 1, 2002 installment, bearing interest
at 5% per annum on $165,000 165,000
--------
Total $519,768
--------
--------
</TABLE>
In September 1999, the Company acquired a prefabricated warehouse, which it
assembled and installed on its property in Keaau. The warehouse was purchased
for $24,995 with a down payment of $2,000 and a 5 year note, with monthly
payments, comprising $22,995.
The following summarizes the Company's notes payable as of September 30, 2000:
<TABLE>
<CAPTION>
<S> <C>
Equipment note payable $495,000
PAGE 9
<PAGE>
Less: Unamortized discount (28,708)
---------
Net equipment note payable 466,292
First Amcon note 350,000
Vehicle installment note payable 4,940
Warehouse note payable 17,032
---------
Subtotal - notes payable 838,264
Less: Current portion (523,493)
---------
Non-current portion $ 314,771
---------
---------
</TABLE>
9. FINANCIAL PUBLIC RELATIONS ADVISORY AGREEMENT
In July 1998, the Company granted to its financial public relations advisor
options to purchase an aggregate of 565,000 shares of Common Stock. These
options were valued, in accordance with SFAS 123 (using the Black-Scholes
options pricing model), at $772,913. In January 1999 the holder exercised 50,000
of these options at an aggregate exercise price of $125,000. 250,000 options
expired unexercised in August 1999, and the remaining 265,000 options expired
unexercised in July 2000.
10. STOCK OPTIONS
The total number of Common Stock warrants and options shown at September 30,
2000 excludes an aggregate of 443,167 options outstanding at such date held by
officers and employees of the Company. Stock options granted to employees are
accounted for under APB Opinion No. 25, under which compensation expense is
recognized only if the exercise price is less than the market price at the date
of grant. All employee stock options outstanding at September 30, 2000 had an
exercise price of $2.00 per share. None of these were granted at an exercise
price below market.
The Company accounts for stock options granted to non-employees in accordance
with Statement of Financial Accounting Standards No. 123 (SFAS 123) "Accounting
for Stock-Based Compensation," which requires that these transactions be
accounted for based upon the fair value of consideration received or the fair
value of the equity instruments issued, whichever is
more reliably determinable. The exercise price of options held by all active
consultants at September 30, 2000 had an exercise price of $2.00 per share.
11. SALES BY BUSINESS SEGMENT
For the three month periods ended September 30, 1999 and 2000, the Company had
the following sales by business segment:
<TABLE>
<CAPTION>
1999 % 2000 %
-------- --- ---------- ---
<S> <C> <C> <C> <C>
PET products $851,007 92 $ 808,315 86
Home & office delivery 78,873 8 86,395 9
XEN herbal beverage
products - - 50,289 5
-------- --- ---------- ---
$929,880 100 $ 944,999 100
-------- --- ---------- ---
-------- --- ---------- ---
</TABLE>
For the nine month periods ended June 30, 1999 and 2000, the Company had the
following sales by business segment:
PAGE 10
<PAGE>
<TABLE>
<CAPTION>
1999 % 2000 %
--------- --- ---------- ---
<S> <C> <C> <C> <C>
PET products $2,079,551 96 $2,334,242 74
Home & office delivery 78,873 4 531,958 17
XEN herbal beverage
products - - 276,912 9
--------- --- ---------- ---
$2,158,424 100 $3,143,112 100
--------- --- ---------- ---
--------- --- ---------- ---
</TABLE>
Included in the home and office delivery sales for the nine month period
ended September 30, 2000 are $280,132 of sales of Aloha products (see Note
7). The Aloha operations were divested in the third quarter of 2000.
12. EQUITY TRANSACTIONS
a. Series A Convertible Preferred Stock
In 1999, the Company issued an aggregate of 1,250 shares ($1.25
million in aggregate liquidation preference amount) of Series A convertible
preferred stock to an institutional investor. The Company also issued to this
investor for no additional consideration warrants to purchase 100,000 shares
of common stock at an original exercise price of $3.625 per share.
Each share of Series A preferred stock has a liquidation preference
of $1,000, and is entitled to cumulative dividends at an 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 stock is convertible into
common stock, in whole or in part at the election of the holder, at a
variable conversion price based upon a discount to the market price (as
defined) of the common stock as of each conversion date.
In August 1999, the investor converted six shares of Series A
preferred stock into an aggregate of 11,429 shares of common stock. In
September 1999, the Company entered into a standstill agreement with the
investor, pursuant to which the investor agreed not to convert any additional
shares of Series A preferred stock and granted the Company an option to
redeem the outstanding shares. This standstill agreement was extended on
several occasions, most recently through November 2, 2000. Pursuant to this
standstill arrangement, the Company redeemed an aggregate of (i) 925 shares
of Series A preferred stock for an aggregate of $808,750 in 1999, and an
additional (ii) 100 shares for an aggregate of $100,000 during the first
quarter of 2000, (iii) 79 shares for an aggregate of $79,000 during the
second quarter of 2000, and (iv) the remaining 140 shares for an aggregate of
$140,000 in October 2000.
As partial consideration for the extension(s) of the standstill
agreement, the Company reduced the exercise price of the warrants held by the
investor in several increments to $.01 per share. The investor exercised
these warrants in full in March, 2000.
b. Private Offering of Common Stock and Warrants
In September 1999, the Company raised $850,000 ($830,000 net of
offering expenses) through a private offering of 850,000 Units at a purchase
price of $1.00 per Unit. Each Unit consisted of (i) one share of common stock,
(ii) one five year warrant to purchase one share of common stock at an exercise
price of $1.00 per share (a $1.00 warrant), and (iii) one five year warrant to
purchase 2/3 of one share of common stock at an exercise price of $1.50 per
share. An investment of $750,000 was received from two unaffiliated private
investors (and certain of their affiliated entities), and an additional
investment of $100,000 was received from the Company's Chief Executive Officer.
The unaffiliated investors purchased an additional 200,000 Units in December
1999 and 100,000 Units in February 2000 for an
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aggregate additional investment of $300,000. The Company's Chief Executive
Officer purchased an additional 100,000 Units in January 2000 for $100,000. The
unaffiliated investors exercised (i) 50,000 $1.00 warrants for an aggregate of
$50,000 in the first quarter of 2000, (ii) an additional 114,600 $1.00 warrants
for an aggregate of $114,600 in the second quarter of 2000, and (iii) an
additional 66,000 $1.00 warrants for an aggregate of $66,000 in the third
quarter of 2000.
c. Series B Convertible Preferred Stock
In March 2000, the Company issued 100 shares ($100,000 aggregate
liquidation preference amount) of Series B convertible preferred stock to a
private investor. Each share of Series B preferred stock has a liquidation
preference of $1,000. The Series B preferred stock is mandatorily redeemable,
at the election of the holder, at any time within 90 days following the first
anniversary date of the date of issuance in the event that the market price
(as defined) of the common stock is less than $1.50 per share on the first
anniversary date. The redemption price in such event is $1,500 per share.
d. Common Stock Issued Pursuant to Co-Packing Agreement
The Company has entered into a Co-Packing Agreement with a Los
Angeles area bottler (the "Bottler") pursuant to which the Bottler has agreed
to perform certain bottling services with respect to the Company's herbal
beverage products (see Note 5). In September 1999, the Company issued 100,000
shares of common stock to the principals of the Bottler in partial
consideration for these services. The Co-Packing Agreement provides that in
the event the market price (as defined) of the Company's stock on the first
anniversary of the date of issuance is less than $1.50 per share, the Company
will issue, for no additional consideration, sufficient additional shares of
common stock to bring the then market value of all shares issued (including
the 100,000 shares initially issued) up to $150,000. Pursuant to this
provision, in September 2000, the Company issued an additional 700,000 shares
of common stock to the Bottler, based upon the then market price of the
common stock.
13. SUBSEQUENT EVENT--MERGER AGREEMENT
In November 2000, the Company entered into a merger agreement with
Amcon, pursuant to which the Company has agreed to merge with and into, and
thereby become, a wholly-owned subsidiary of Amcon. The merger consideration
values the entire common equity interest in the Company at $2,865,348,
payable in common stock of Amcon, which will be priced at not less than $6.00
or more than $8.00 per share, based on a 20 trading day measuring period
ending three trading days before the date of the Company's stockholder vote
on the merger. As a result, Amcon will issue an aggregate of not less than
358,168 or more than 477,558 shares, representing between 11.6% and 14.9% of
Amcon's outstanding shares after giving effect to the merger. Holders of
outstanding options and warrants of the Company would receive comparable
options and warrants of Amcon but with the exercise price and number of
shares covered.
The merger is expected to qualify as a tax-free reorganization. The
merger is subject to various conditions, including the effectiveness of a
registration statement covering the shares to be issued in the merger, the
listing of such shares on the American Stock Exchange, and the approval of
the Company's stockholders. All of the Company's officers and directors and
any of their affiliated entities that own shares of the Company's common
stock (constituting approximately 40% of the currently outstanding shares)
have agreed to vote their shares in favor of the merger. It is expected that
the merger will be consummated on or before March 31, 2001.
Pending completion of the merger, Amcon has provided the Company with
certain interim debt financing (See Note 8).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
GENERAL
THE FOLLOWING DISCUSSION MAY BE DEEMED TO CONTAIN CERTAIN
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995, AS 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. FORWARD-LOOKING STATEMENTS
CONTAINED HEREIN MAY INCLUDE, WITHOUT LIMITATION, STATEMENTS CONCERNING:
ANTICIPATED CHANGES IN REVENUE, COST OF MATERIALS, EXPENSE ITEMS, INCOME OR
LOSS, EARNINGS OR LOSS PER SHARE, CAPITAL EXPENDITURES, CAPITAL STRUCTURE AND
OTHER FINANCIAL ITEMS; PLANS OR OBJECTIVES OF THE COMPANY WITH RESPECT TO THE
COMPANY'S GROWTH STRATEGY, INTRODUCTION OF NEW PRODUCTS, AND PROPOSED
ACQUISITIONS OF ASSETS OR BUSINESSES; POSSIBLE ACTIONS BY CUSTOMERS,
SUPPLIERS, COMPETITORS OR REGULATORY AUTHORITIES; AND ASSUMPTIONS UNDERLYING
THE FOREGOING. THESE FORWARD-LOOKING STATEMENTS ARE BASED UPON THE COMPANY'S
CURRENT EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES,
INCLUDING WITHOUT LIMITATION: THE PROSPECT FOR CONTINUING LOSSES AND THE
COMPANY'S POSSIBLE INABILITY TO CONTINUE AS A GOING CONCERN BASED UPON ITS
EXISTING CAPITAL RESOURCES; THE COMPANY'S NEED FOR ADDITIONAL CAPITAL AND THE
POSSIBLE UNAVAILABILITY OF SUCH CAPITAL ON ACCEPTABLE TERMS AND CONDITIONS;
POSSIBLE ADVERSE CONDITIONS, INCLUDING VOLATILITY, IN THE MARKET FOR THE
COMPANY'S SECURITIES AND THE POSSIBLE ADVERSE IMPACT OF SUCH CONDITIONS ON
THE COMPANY'S ABILITY TO RAISE ADDITIONAL CAPITAL AS NEEDED; POSSIBLE ADVERSE
CHANGES IN THE MARKET FOR THE COMPANY'S PRODUCTS, INCLUDING AS A RESULT OF
ADVERSE ECONOMIC CONDITIONS, SUCH AS THOSE CURRENTLY AFFECTING CERTAIN
FOREIGN TARGET MARKETS; POSSIBLE ADVERSE EFFECTS OF CHANGES IN CURRENCY
EXCHANGE RATES; POSSIBLE ADVERSE CHANGES IN THE COMPANY'S DISTRIBUTOR
NETWORK; POSSIBLE ADVERSE DEVELOPMENTS IN THE EXECUTION OF THE COMPANY'S
EXISTING BUSINESS STRATEGY OR IN THE IMPLEMENTATION OF CHANGES THERETO;
POSSIBLE ADVERSE CHANGES IN THE COMPANY'S COST OF MATERIALS OR SOURCES OF
SUPPLY; POSSIBLE ADVERSE DEVELOPMENTS IN THE COMPANY'S ABILITY TO ATTRACT AND
RETAIN KEY PERSONNEL; POSSIBLE ADVERSE DEVELOPMENTS IN GOVERNMENTAL
REGULATION IN THE U.S. OR ABROAD; POSSIBLE ADVERSE DEVELOPMENTS IN THE
COMPETITIVE ENVIRONMENT FOR THE COMPANY'S PRODUCT AND POSSIBLE TERMINATION OF
THE MERGER AGREEMENT DESCRIBED BELOW. MANY OF THESE RISKS AND UNCERTAINTIES
ARE BEYOND THE ABILITY OF THE COMPANY TO PREDICT OR CONTROL. SHOULD ANY
UNANTICIPATED CHANGES OCCUR IN THE COMPANY'S BUSINESS, OR SHOULD MANAGEMENT'S
OPERATING ASSUMPTIONS PROVE INCORRECT, THE COMPANY'S ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY THESE FORWARD-LOOKING STATEMENTS.
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
FINANCIAL STATEMENTS INCLUDED HEREWITH AND THE NOTES THERETO.
RESULTS OF OPERATIONS
RECENT DEVELOPMENTS.
In November 2000, the Company entered into a merger agreement with Amcon
Distributing Company ("Amcon"), pursuant to which the Company has agreed to
merge with and into, and thereby become, a wholly-owned subsidiary of Amcon
(the "Merger"). The Merger is expected to be consummated on or before March
31, 2001. Pending completion of the Merger, the Company expects to institute,
with Amcon's consent, significant changes in its operations, including
possible increases in capital expenditures and marketing expenses designed to
improve the Company's manufacturing and sales operations. Any such
improvements will require assistance from Amcon in the form of direct
financing or guarantees. To date, Amcon has provided the Company with an
aggregate of $750,000 in interim debt financing, and Amcon may in its
discretion provide additional financing upon request from the Company in
appropriate circumstances. Amcon has not committed to provide any additional
financing pending the Merger, and there can be no assurance that such
financing, if requested, will be obtained. See Notes 8 and 13 to the
Financial Statements.
In August 2000, the holders of the promissory note (the "Aloha Note")
issued in connection with the acquisition of Aloha Water Company ("Aloha")
declared a default for failure by the Company to make current interest
payments. The Aloha Note was secured by all of the stock of Aloha; and the
holders took action to foreclose on the collateral. Such foreclosure
effectively constituted a divestiture of Aloha. Since its acquisition in
March 2000, Aloha accounted for a majority of the Company's home and office
delivery sales. Therefore, sales and gross margin in this category were
substantially lower in the most recently completed quarter than in the prior
quarter. As a result of the divestiture of Aloha, the Company does not
anticipate that home and office delivery sales will constitute a significant
portion of the Company's overall business in the immediate forseeable future.
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THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
Net Sales. Net Sales increased 2% to approximately $945,000 for the
three months ended September 30, 2000 (the "2000 Quarter") from approximately
$930,000 for the three months ended September 30, 1999 (the "1999 Quarter").
$808,000 (86%)of net sales for the 2000 Quarter were derived from sales of
PET products. The remaining $137,000 in net sales were comprised of $87,000
(9%) in home and office delivery sales and $50,000 (5%) in East Meets West
XEN-TM- ("XEN") herbal beverage sales. The sales of XEN products have been
substantially lower than originally projected, largely due to limitations on
the Company's marketing budget, as well as increased competition, including
price competition, from other manufacturers. Case sales of PET products in
the 2000 Quarter rose approximately 8% to 147,000 from approximately 136,000
cases in the 1999 Quarter. The net sales price of PET products decreased
approximately $.75 per case in the 2000 Quarter as compared to the 1999
Quarter as a greater percentage of PET sales in the 2000 Quarter were more
heavily discounted due to increased sales to high volume customers. The
Company began the quarter with a significant backlog of sales orders, and in
the third quarter was able to reduce, but not eliminate, this backlog due to
intermittent manufacturing equipment breakdowns. Sales in Hawaii accounted
for 68% of PET sales in the 2000 Quarter compared to 95% in the 1999 Quarter.
U.S. Mainland sales accounted for 21% of 2000 Quarter sales as compared to
4% in the 1999 Quarter. International sales accounted for the remaining 11%
of PET sales in the 2000 Quarter, as compared to 1% in the 1999 Quarter. All
of the 2000 Quarter XEN sales were made in the U.S. Mainland.
Cost of Sales. The Company's aggregate cost of sales decreased 7% to
approximately $662,000 in the 2000 Quarter from approximately $710,000 in the
1999 Quarter. Included in the 2000 Quarter are $47,000 of costs related to
home and office delivery sales, and $39,000 of costs associated with XEN
sales. There were no XEN sales in the 1999 Quarter. PET average case costs
decreased approximately 8% in the 2000 Quarter compared to the 1999 Quarter,
primarily as a result of an increase in plant utilization, a reduction in
plant costs, and a reduction in raw materials costs, which the Company
anticipates maintaining in future quarters.
Gross Margin. Gross margin increased 29% to approximately $283,000 in
the 2000 Quarter from approximately $220,000 in the 1999 Quarter.
Approximately $12,000 of this increase in the 2000 Quarter is attributable to
XEN sales and approximately $39,000 is attributable to home and Office sales.
There were no XEN sales in the 1999 Quarter. The remaining increase of
approximately $232,000 is related to PET sales and is the result of reduced
plant and raw materials costs, partially offset by a decreased average net
sales price. Plant utilization improved in the 2000 Quarter to 82% of
capacity, as compared to 76% in the 1999 Quarter.
Selling and Marketing. Selling and marketing expenses increased 28% to
$217,000 in the 2000 Quarter from approximately $169,000 in the 1999 Quarter.
The majority of this increase is attributable to $54,000 of expenses
associated with the XEN product line, partially offset by a reduction in PET
selling and marketing expenses of $6,000 in the 2000 Quarter compared to the
1999 Quarter. The Company did not have any sales of XEN products in the 1999
Quarter.
General and Administrative. General and administrative expenses
decreased 33% to approximately $281,000 in the 2000 Quarter from
approximately $424,000 in the 1999 Quarter. This decrease resulted primarily
from a $107,000 reduction in professional fees, a $23,000 reduction in
salaries and related taxes, and an overall $13,000 reduction in general
overhead expenses in the 2000 Quarter compared to the 1999 Quarter.
Professional fees, in the 1999 Quarter were substantially higher than normal
due to non-recurring expenses associated with investment activities and the
Company's failed effort to maintain its NASDAQ listing. The Company
anticipates further reductions in general and administrative expenses by
terminating the lease of its existing headquarter facility, relocation of
accounting and administration activities to its manufacturing facility on the
Big Island, and a reduction in personnel.
Other (Expense). Net Other (Expense) was approximately $(99,000) in the
2000 Quarter compared to approximately $(14,000) in the 1999 Quarter. This
increase is primarily due to a provision for additional impairment of
purchase price in excess of book value due to the divestiture Aloha (see Note
7).
Net Loss and Net Loss Per Share. Due to the foregoing, the Company incurred
a net loss of $(314,314), or $(0.04) per share, in the 2000 Quarter compared to
a net loss of $(387,324), or $(0.09) per share, in the 1999
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Quarter. Weighted Average Shares Outstanding were 7,032,242 in the 2000
Quarter compared to 4,395,155 in the 1999 Quarter.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 2000
Net Sales. Net sales increased 46% to approximately $3,143,000 for the
nine months ended September 30, 2000 (the "2000 First Three Quarters") from
approximately $2,158,000 for the nine months ended September 30, 1999 (the
"1999 First Three Quarters"). $2,334,000 (74%) of net sales for the 2000
First Three Quarters were derived from sales of PET products. The remaining
$809,000 in net sales were comprised of $532,000 (17%) in home and office
delivery sales (of which $280,000 related to Aloha sales) and $277,000 (9%)
in XEN sales. Home and office delivery sales will be substantially reduced in
subsequent periods due to the divestiture of Aloha in August 2000. PET sales
in the 2000 First Three Quarters increased 12% over PET sales of $2,080,000
in the 1999 First Three Quarters. PET case sales increased 19% to 403,000
cases in the 2000 First Three Quarters, compared to 338,000 cases in the 1999
First Three Quarters. PET sales in Hawaii accounted for 88% of sales in the
2000 First Three Quarters, compared to 85% in the 1999 First Three Quarters.
International sales accounted for 4% of PET sales in the 2000 First Three
Quarters, compared to 12% in the 1999 First Three Quarters. U.S. Mainland
sales accounted for 8% of PET sales in the 2000 First Three Quarters,
compared to 3% in the 1999 First Three Quarters. 64% of the 2000 First Three
Quarters XEN sales were made in the U.S. Mainland, 32% were made in Hawaii,
and 4% were made in Guam.
Cost of Sales. The Company's aggregate cost of sales increased 44% to
approximately $2,418,000 in the 2000 First Three Quarters from approximately
$1,676,000 in the 1999 First Three Quarters. 2000 First Three Quarters costs
are comprised of $1,960,000 related to PET sales, $240,000 related to home
and office sales (of which $83,000 was associated with Aloha sales), and
$218,000 related to XEN sales. There were no XEN sales in the 1999 First
Three Quarters. Home and office costs in 1999 First Three Quarters were
$51,000. Home and office sales commenced in the 1999 Third Quarter. PET
average case costs increased approximately 6% in the 2000 First Three
Quarters compared to the 1999 First Three Quarters, primarily due to
unusually high raw materials costs in the first half of 2000 compared to the
1999 First Three Quarters, partially offset by an increase in plant
utilization in the 2000 First Three Quarters.
Selling and Marketing. Selling and marketing expenses increased 54% to
approximately $760,000 in the 2000 First Three Quarters from approximately
$494,000 in the 1999 First Three Quarters. The majority of this increase is
attributable to expenses associated with the XEN ($184,000) and Aloha
($84,000)home and office product lines.
General and Administrative. General and administrative expenses
increased 12% to approximately $1,184,000 in the 2000 First Three Quarters
from approximately $1,053,000 in the 1999 First Three Quarters. This change
resulted from an increase of expenses associated with XEN($53,000) and home
and office delivery ($140,000) product lines, a $100,000 bonus paid to the
Company's Chief Executive Officer, approximately $23,000 in amortization
expenses associated with the Co-Packing Agreement, and approximately $21,000
of amortization of the XEN name trademark, partially offset by an
approximately $208,000 reduction in corporate general and administrative
expenses.
Other (Expense). Other (Expense) increased to approximately ($1,080,000)
in the 2000 First Three Quarters from approximately ($50,000) in the 1999
First Three Quarters. Substantially all of this increase is due to a
provision for impairment of purchase price in excess of book value resulting
from the divestiture of Aloha (see Note 7).
Net Loss and Net Loss Per Share. Due to the foregoing, the Company
incurred a net loss of $(2,297,272), or $(0.35) per share, in the 2000 First
Three Quarters compared to a net loss of $(1,113,311), or $(0.27) per share,
in the 1999 First Three Quarters. Weighted Average Shares Outstanding were
6,559,193 in the 2000 First Three Quarters compared to 4,183,931 in the 1999
First Three Quarters.
LIQUIDITY AND CAPITAL RESOURCES
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Cash and cash equivalents were approximately $233,000 at September 30,
2000, compared to approximately $9,000 at December 31, 1999. During the first
nine months of 2000, the Company received financing proceeds aggregating
approximately $882,000 offset by redemptions of outstanding securities
($179,000), losses from operating activities ($370,000), purchase of property
and equipment ($78,000) and repayment of notes and capital leases ($29,000).
In September 2000, the Company received a $350,000 loan from Amcon for
working capital and general corporate purposes pending completion of the
Merger. In October 2000, the Company received an additional $400,000 loan
from Amcon. These loans (the "Amcon Loans") are due on March 31, 2001. They
bear interest at the annual rate of 10%, payable quarterly commencing January
2001, and are secured by a lien on all of the Company's assets. See Note 8 to
the Financial Statements.
The Company has used the proceeds of the Amcon Loans to reduce
outstanding payables and to redeem the balance of the outstanding Series A
preferred shares. As a result, there are currently no shares of Series A
preferred stock outstanding. The reduction in outstanding payables has
enhanced the Company's standing with trade creditors and thereby enabled the
Company to reduce its raw materials costs, resulting in improved
manufacturing efficiencies. The Company has recently undertaken additional
initiatives in order to reduce operating deficits and conserve cash. The
Company has terminated its Honolulu headquarters lease as of December 1,
2000, and has begun to consolidate administrative functions at its bottling
facility on the Big Island. The Company is also contemplating the purchase or
lease of new blow molding equipment, which would increase the speed and
efficiency of its bottling operations. Any such purchase or lease would
require additional financing or guarantees from Amcon. In October 2000, the
Company renegotiated the terms of a $165,000 installment (plus $25,000 in
accrued interest) then due on its existing blow molding equipment and
rescheduled the payment of these obligations over a six month period. See
Note 8 to the Financial Statements.
The Company is substantially dependent upon Amcon for interim financing
pending completion of the Merger. If Amcon declines to make additional
funding available, the Company may not be able to improve its operations as
anticipated. If the Merger agreement is terminated for any reason, the
Company may not be able to repay the Amcon Loans when due, in which event the
Company will likely not be able to continue as a going concern.
SEASONALITY
The Company believes that its business is subject to seasonal variations.
For obvious reasons, demand for bottled water in any given market tends to be
higher during the summer months than during the winter. However, the Company
expects these seasonal effects to be moderated by concurrent sales into a
variety of different markets worldwide, all of which may not have the same
summer season. Moreover, several of the Company's target markets, such as
California and the Middle East, have hot or mild temperatures throughout the
year.
CURRENCY FLUCTUATIONS
The Company is not directly affected by currency fluctuations in overseas
markets, since all of the Company's sales are quoted in U.S. dollars. However,
currency fluctuations can adversely affect the demand for the Company's product
in foreign markets by increasing the price of the product in local currency.
PART II: OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) In the third quarter of 2000, the Company raised an aggregate of
$66,000 through the exercise of outstanding warrants. The Company also issued
(i) 30,000 shares of common stock to certain key executives as incentive
compensation. (ii) 16,750 shares of common stock to marketing consultants for
services rendered, and (iii) 4,000 shares of common stock to the landlord of
the Company's U.S. Mainland office in lieu of rent payments. The Company also
issued 700,000 shares of common stock to the principals of the bottler of its
herbal beverage line pursuant to a co-packing agreement, and an additional
4,483 shares to the principals as incentive compensation. During the third
quarter of 2000, the Company also granted non-qualified stock options to
purchase an aggregate of 1,800 shares of Common Stock to its non-employee
directors. All of the foregoing transactions were exempt from registration
under the Securities Act of 1933 as amended, by virtue of Section 4(2)
hereunder.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HAWAIIAN NATURAL WATER COMPANY, INC.
(Registrant)
November 13, 2000 By: /s/ MARCUS BENDER
----------------------
Marcus Bender
President & Chief Executive Officer
November 13, 2000 By: /s/ WILLARD D. IRWIN
-----------------------
Willard D. Irwin
Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
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