U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended February 29, 2000.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _____ to _____
Commission file number 0-30276
Adirondack Pure Springs Mt. Water Co., Inc.
(Name of small business issuer in its charter)
New York 11-3377469
(State or other jurisdiction (I.R.S. Employer
incorporated or organization) Identification No.)
125 Michael Drive, Suite 101
Syosset, New York 11791
(Address of principal executive offices)
Registrant's telephone number, including area code: (516) 921-7288
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
The Registrant's revenues for fiscal year ended February 29, 2000 were
$36,645. The aggregate market value of the voting stock held by non-affiliated
of the Registrant as of July 20, 2000 was approximately $1,286,000 based upon
the last reported sale, which occurred in February, 2000. For purposes of this
disclosure, Common Stock held by persons who hold more than 5% of the
outstanding voting shares and Common Stock held by officers and directors of the
Registrant have been excluded in that such persons may be deemed to be
"affiliates" as that term is defined under the rules and regulations promulgated
under the Securities Act of 1933. This determination is not necessarily
conclusive.
The number of shares of the Registrant's Common Stock outstanding as of July
20, 2000 was 15,931,000.
Page 1
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Introduction
Adirondack Pure Springs Mt. Water Co., Inc. a New York corporation ("Adirondack"
"we" or "us") was organized on March 6, 1997. Adirondack was founded to extract,
distribute and bottle its natural mountain and spring water from a stream and
spring fed natural reservoir in the northeastern United States. Once we raise
sufficient funds to construct a bottling facility, we plan to bottle our
drinking water at the source in the Incorporated Village of Lake George, New
York. However, there can be no assurance such facility will be completed.
Adirondack's business to date has focused on the still water segments of the
bottled water market because of its quality natural mountain and spring water,
the quantity of its available water and contributing market factors, including
its central location in the northeastern United States market, increased
government regulation of water quality and increased public awareness and demand
for bottled water.
We have targeted and will continue to target the market for private labeled
bottled water, which allows us to sell our products without the expense of an
advertising budget that is required to establish brand recognition and market
identity. Private label bottled water, is water bottled by Adirondack under
another company's brand name (i.e., Ciro for Conca D'Oro) or a brand name
created and designed exclusively for use by an Adirondack client (i.e., Siena
Springs for Jetro/Restaurant Depot). We are seeking to develop separate brand
names for customers who desire a brand name and who would not otherwise
distribute a private label bottled water. Adirondack intends to retain ownership
of the trademark for each brand that it develops, although some exclusivity
regarding use may be granted to the customers. Currently, Adirondack does not
own the trademarks for any brand names used on an exclusive basis by its private
label clients. Alternatively, we will bottle private label products for
customers who seek to sell bottled water under their established brand name.
Additionally, we have developed our own proprietary brand of water, AVIVA
SPRINGS, for which we have filed for a Trademark. Additionally, we have filed
for a Trademark for an additional proprietary branded product called Adam's Ale,
which is a bottled water product that is to be produced and sold at the end of
2000 or early 2001. Adirondack intends to market AVIVA SPRINGS through its
established relationships with those distributors and end users that are
interested in purchasing Adirondack's premium quality product, but do not have
the interest or ability to properly market a private label of their own.
AVIVA SPRINGS sales will initially focus on the health and fitness field to
offset the seasonality of sales generally attributed to the beverage and water
industry in the northeast. The revenue/sales high point of the health and
fitness season is the same time of year as the low revenue/sales point of the
beverage season.
Until construction of our bottling facility, Adirondack will continue to utilize
independent bottlers to produce its products. Adirondack has a preliminary
agreement for the authorization of tax-exempt industrial development bonds in
the principal amount of up to $4,650,000 with the Counties of Warren and
Washington Industrial Development Agency, which offering is subject to several
conditions. The proceeds of such bond offering will be utilized to construct a
facility on land the company has leased from the Village of Lake George and will
have a capacity for up to three production lines. As per the terms of this
agreement, Adirondack is obligated to retain an underwriter for the bond
offering and to build its planned facility with the offering proceeds.
Adirondack is permitted to build a facility up to 50,000 square feet. In return,
the counties of Warren and Washington's Industrial Development Agency will loan
Adirondack $4,650,000. Adirondack intends to issue the bonds once it has
retained an underwriter for such offering. There can be no assurance such bond
offering will be completed.
Industry Overview and Factors That May Affect Future Results
Page 2
<PAGE>
According to the 1999 Beverage World Magazine Beverage Market Index, the Bottled
Water market has grown in Wholesale Sales ($3.95 billion in 1997 to $4.33
billion in 1988), Retail Sales ($4.74 billion in 1997 to $5.2 billion in 1998)
and Gallonage Volume or Consumption (3.43 billion in 1997 to 3.77 billion in
1998). Additionally, Bottled Water Gallonage or Consumption, in the convenient
or PET size category grew by 27.8% over 1997 and increased its share of the New
Age beverage market (i.e., Ready to Drink Teas, Sports Drinks, Fruit Beverages,
etc.) to 34.5% of the entire New Age Market Segment. In the entire Beverage
Market, Bottled Water gallonage grew by 10.1% over 1997 and as a category now
comprises 12.2% of the entire Beverage Market Gallonage, behind only Soft Drinks
(49%), Beer (19.4%) and Fruit Beverages (13.2%). Only 42.1% of the Bottled Water
market is sold by the Top 10 Brands in the United States, leaving 57.9% of the
market available to smaller companies and private label brands.
The bottled water market comprises three major segments: non-sparkling,
sparkling and imported water.
* Non-sparkling or still water contains no carbonation and is consumed as an
"alternative to tap water." Non-sparkling water is generally distributed
directly to homes and offices, through retail outlets and through vending
machines. Distinctions are often made among brands of on-sparkling water based
on their source, level of mineral content and the method of purification
(ozonation, distillation, deionization or reverse osmosis).
* Sparkling water contains either natural or artificial carbonation and is
positioned to compete in the broad "refreshment beverage" field.
* Imported water, which includes both sparkling and non-sparkling water produced
and bottled outside the U.S., is targeted to "image-conscious consumers."
Adirondack currently participates, only in the non-sparkling or still water,
market. Non-sparkling bottled water is distributed through commercial and home
delivery, retail stores for on and off premises usage, on premises usage,
institutional usage and vending machines. Within the non-sparkling segment,
retail pricing generally reflects the costs associated with the maintenance of
each distribution channel. As a result, on-premise retail has the highest per
gallon price, with off-the-shelf bottled water for off-premise use sold through
retail channels, home delivery and, bulk water, having the next highest per
gallon prices, respectively.
Adirondack believes that a significant constraint on the entry of newbrands is
limited retail shelf space. Retailers have limited ability to display a variety
of brands, despite the many different bottled water brands available. Most
waters displayed are either regional brands, national brands and private labeled
or store brands. Because of competition for available shelf space, food and
beverage distributors, as well as retailers themselves, have realized the profit
potential of private labeled water in addition to selling regional and national
brand water. Subsequently, according to Beverage Aisle magazine, supermarket
private label bottled waters outsell regional and national brands by 3 to 1
margin.
Water is sold through various channels, including:
1. Home delivery (1 to 5 gallons bottles)
2. Commercial and Office delivery (1 to 5 gallon bottles)
3. Off-Premises Retail (supermarkets, convenience stores and drug stores)
4. On-Premises Retail (restaurants)
5. Vending machines
6. Institutional Usage (hospitals, schools)
7. Bulk sales (domestic and international sales of potable water)
Off-Premises Retail (supermarkets, convenience store, drug store and similar
outlets) comprises over 40% of bottled water sales.
The northeastern region is the second largest bottled water market (total
gallonage) in the United States. The largest market is the western United
States. Adirondack believes it will benefit from its location within a five hour
Page 3
<PAGE>
drive of all of the major markets of the northeastern United States. Our water
source is located approximately 40 miles from the Port of Albany, which
facilitates transportation for any bulk and other sales abroad to be sent via
ship. The filling station/bottling plant site is 100 yards from Route 9N, a
local, paved major roadway, which connects, seven tenths (.7) of a mile away, to
Interstate 87, a major northeast road artery. The proximity of the proposed
plant to I-87 will facilitate access for all transport vehicles coming to and
from the site. As of the date hereof, Adirondack has not yet begun construction
of its plant, nor is there any guarantee that it will complete construction,
once begun.
ITEM 2. DESCRIPTION OF PROPERTY
Adirondack has an exclusive ground and water lease with the Incorporated Village
of Lake George, which provides for exclusive rights to four water sources, as
well as five acres of property to build up to a 50,000 square foot bottling
plant from the proceeds of a proposed bond offering, which has been authorized
by the (New York) Counties of Warren and Washington Industrial Development
Agency ("IDA"). Adirondack's primary water source is located 2700 feet up a
mountain from the proposed bottling plant site and flows into a protected,
natural mountain and spring reservoir at an approximate minimum rate of 550,000
gallons per day of natural mountain and spring water. At this rate, our primary
source is capable of producing an estimated minimum 200,000,000 gallons of
natural mountain and spring water per year. Our three other sources flow at more
that 50% of the primary source's flow rate, with a product of similar high
quality. The three other sources are within one mile of our proposed bottling
plant site. The lease term for the water source is for five (5) years expiring
May, 2002 with two five (5) year renewal options. If the bottling plant (see
below) is constructed, the lease term extends to 2029.
Adirondack's principal executive, administrative and marketing operations are
currently located in 3750 sq. ft. of leased office space in Syosset, New York.
Portions of this space are subleased until such time Adirondack needs the space.
This lease expires September 30, 2003.
Adirondack has an agreement for the authorization of tax-exempt industrial
development bonds in the principal amount of $4,650,000 with the New York
Counties of Warren and Washington Industrial Development Agency for the purpose
of constructing a bottling plant of up to 50,000 square feet and purchasing
equipment. Within 12-18 months after completion of the contemplated bond
offering, Adirondack expects to have an operational, automated, water bottling
plant, consisting of up to 50,000 square feet of office, warehouse, water
analyzes laboratory and production space.
The production space will initially consist of one bottling and packaging line
that will allow for product line and size flexibility, with an expansion
capacity. The bulk water filling station will remain at its current location
outside of the main facility.
The proposed offering of the bonds is contingent upon several conditions,
including agreement by Adirondack and the purchasers of the bonds upon mutually
acceptable terms for the bonds, the sale of the bonds, obtaining an underwriter,
obtaining all necessary government approvals and compliance with New York State
Department of Taxation. Adirondack anticipates that the tax free nature of the
bonds will lower Adirondack's borrowing costs. This bond offering, if it occurs
at all, must be commenced by July 2000, although Adirondack has the right to
file a request for an annual extension with the Warren and Washington County
Industrial Development Authority. There can be no assurance the extension will
be granted.
ITEM 3. LEGAL PROCEEDINGS
To the knowledge of Company's management, there are no legal proceedings to
which the Company is a party or to which the Company's property is subject.
Page 4
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
The Company did not submit any matters to a vote of security holders during the
fourth quarter of the fiscal year ended February 29, 2000.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
a) There is not an active market for the Company's stock and is not traded on
any of the markets or bulleting board. Due to the lack of trading, the
Company is unable to provide historic price information.
b) As of February 29, 2000, there were approximately 52 holders of record of
the Company's Common Stock.
c) The Company has never paid cash dividends on its Common Stock. The Company
presently intends to retain any future earnings to finance operations and
the further development of the Company's business and does not presently
intend to disperse any cash dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERTIONS
Results of Operations
Fiscal 1999 vs. Fiscal 1998
The Company is still in the development stage and has not commenced full
operations. The Company had sales of $30,645 in fiscal 1999 as opposed to $0 in
fiscal 1998. Gross profit decreased in fiscal 1999 due to a full year of the
ground lease for the water site. The loss for fiscal 1999 was $387,629 as
opposed to $191,265 for fiscal 1998. The increased loss was due in part to a
one-time charge of $75,000 of start-up costs and the full year's accrual of a
consulting contract.
General and administrative expenses increased from $180,920 in fiscal 1998 to
$309,939 in fiscal 1999 due in large part to the start of the consulting
contract as mentioned above.
Rental income increased to $27,246 in fiscal 1999 from $0 in fiscal 1998.
Management expects this level of rental income to continue over the next two
years.
Marketing and Distribution
Adirondack's goal is to provide private labeled bottled water for distribution
in the northeastern United States. We seek to sell our still water products
through five methods of distribution: off-premises retail (supermarkets,
convenience store and drug store); on-premises retail (restaurants); vending
machines; institutions (hospitals, schools); and bulk sales by either direct
contact, through brokers and wholesale/distributors.
Adirondack currently produces water for the following private label brands:
Siena Springs and Ciro. These brands are sold throughout the Northeast in
grocery and convenience stores, as sold by the clients, Jetro/Restaurant Depot
and Conca D'Oro Importers and Distributors, respectively. Adirondack utilizes a
contract bottler for the bottling of Siena Spring and Ciro Water. Adirondack
intends to file for the Siena trademark. In June 1999, Adirondack entered into a
contract with Conca D'Oro Importers and Distributors which owns the Ciro brand.
Production of Ciro water commenced in August 1999. In May 1999, Adirondack
commenced production of Siena Springs water as per purchase orders issued by
Jetro/Restaurant Depot.
Since August 1999, Adirondack has been producing water for its own proprietary
brand, AVIVA SPRINGS. Adirondack sells AVIVA SPRINGS to wholesalers,
Page 5
<PAGE>
distributors and end users throughout the Northeast. AVIVA is also sold in
several health club chains in the Northeast. AVIVA SPRINGS is sold primarily in
16.9 ounce size bottles.
Adirondack is currently negotiating with and expects to enter into a joint
marketing agreement with MET-Rx, U.S.A., Inc., a manufacturer of meal
replacement bars and shakes and body building supplements. As of the date
hereof, no agreement has been executed between the two parties.
Liquidity and Capital Resources
The Company's working capital at February 29, 2000 was $(376,150) as opposed to
$(140,065) for the preceding year. The decrease in working capital was in part
due to accrued salary to the president and additional funds loaned to the
Company by the president.
Inventory increased as the Company prepares to start its operations.
The Company has no long term liabilities and no bank borrowings as of February
29, 2000.
At February 29, 2000, the Company's balance sheet reflects cash of $11,663;
accounts receivable of $10,198 and inventory of $41,432 as opposed to only a
cash balance of $9,557 for the prior year.
The Company also raised funds through the sale of common stock. Management
believes that its present resources, including additional sale of stock are
sufficient to fund its anticipated level of operations through December 31,
2000.
Recent Accounting Pronouncements
There are no recent accounting pronouncements that would affect the financial
information in this filing.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the financial statements set forth in this Form 10-KSB
report as included in Part IV, Item 13 and by such reference is incorporated
herein.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(c2) OF THE EXCHANGE ACT
The following table sets forth certain information with respect to the directors
and executive officers of the Company as of February 29, 2000.
Name Age Period served as director Other Capacities
in which
currently serving
David Sackler 33 Since 1997 President, Chief
Executive Officer,
Chairman of the
Board
David Miller 51 Vice President-
Marketing
Page 6
<PAGE>
Jeff Rashkow 48 Since 1999 National Sales
Manager/Health and
Fitness
Doug Auer 52 Since 1997 Project Manger
Ronald Berk 50 Since 1997 Director
Nick Namit 45 Since 1997 Director
Directors and Officers
David Sackler, Mr. Sackler founded Adirondack in 1997. Mr. Sackler has overall
responsibility for operations of the company, but will focus on marketing, sales
and operations. Since 1997, he has been President, CEO and Chairman of the Board
of Directors of Adirondack. From 1989 to date, Mr. Sackler has worked as an
independent real estate broker and sales agent. From October 10, 1996 through
May 1, 1997, he was President of Adirondack Mountain Spring Water Inc., which
was created to develop spring water facilities at another location but ceased
being an operating entity before the establishment of Adirondack because it
could not locate a commercially viable source of water. During such period, he
researched market trends and water company operations. Mr. Sackler currently
devotes approximately 40 hours per week to work at Adirondack.
David Miller, Mr. Miller has been the Vice President - Marketing and a Director
of the company since its inception. Since 1988, he has been a marketing and
sales consultant for Surgical Instrument Corp. From 1988 through 1996, he
represented Assistance Services in the selling of their administrative services.
Since January 1997, he has served as sales and marketing agent for Barrie House
Coffee, Inc. and Omni Services Group, Inc. From 1985 through August 1997, he
represented Atlantic Marketing, a food/beverage brokerage firm that distributed
Ocean Spray and Lipton products. He has 28 years of experience as a former
Marketing Director and then President of two Aerospace companies (General
Aerospace Corp. and Ragen Nuclear Corp.) Mr. Miller currently devotes
approximately 10 hours per month to work at Adirondack.
Jeff Rashkow, Mr. Rashkow joined Adirondack in August, 1999. For 21 years prior
to March, 1999, Mr. Rashkow worked at Bally Total Fitness, Inc., where his last
title prior to leaving the company was Director of Added Revenue. In that
capacity he sought and procured ancillary revenue from areas other than the
fitness industries traditional revenue source, membership fees, essentially
creating new income for the company. Mr. Rashkow currently devotes approximately
five hours per month to work at Adirondack.
Douglas Auer, Mr. Auer has been the project manager of Adirondack since its
inception. Mr. Auer has overseen the installation and construction of the
pipelines and filling station and operates and maintains the filling station. He
served as a consultant to Adirondack Mountain Springs Inc. from 1995 through May
1997. From 1987 through 1995 he was self employed as a construction/ engineering
consultant. From 1972 through 1987 he worked for Pitney Bowes as a mechanical
engineer specializing in mechanical diagnostics and repair for automated
equipment, product evaluation controller.
Ronald Berk, Esq. Mr. Berk has been a Director of Adirondack since November
1997. He has been a corporate and real estate attorney in private practice since
1977.
Nick Namit, Mr. Namit has been a Director of Adirondack since November 1997.
From 1992 to the present, he has been President of Intelligent Monitoring
Technologies, which provides navigational systems for the aircraft industry.
From 1993 to the present, he has been a partner in Electro Mechanical
Industries, which supplies replacement parts to metropolitan transit
authorities. From 1994 to present he has been Chief Executive Officer of Four
Winds Tour & Travel, which provides tour packages for students. He is the holder
of three patents related to beverages bottling.
No Director receives any compensation for his services as a director.
Page 7
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table provides certain summary information concerning the
compensation paid or accrued by Adirondack during the fiscal years ended 1998
and 1999 to or on behalf of Adirondack's president and the executive officers of
Adirondack for services rendered an all capacities to Adirondack whose total
aggregate salary and bonus exceed $100,000.
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and Principal Position Year Salary
David Sackler, President 1999 $100,000 (1)
1998 $100,000 (2)
1997 $ 83,333 (2)
(1) $36,000 was paid to Mr. Sackler with the balance deferred.
(2) 100% of this salary was deferred.
The table above reflects the verbal employment agreement with David Sackler,
Adirondack's President and Chief executive Officer, for a term of five years at
a salary of $100,000 per year. Mr. Sackler has been accruing salary at the rate
of $100,000 per year since May 1997. Adirondack will repay such accrued salary
from operating revenues and not from the proceeds of any offering. Upon
commencement of construction of the bottling facility, Adirondack intends to
enter into a written employment agreement with Douglas Auer, its Project
Manager, for a term of three years at a salary of $32,500 per year. As
Vice-President- Marketing, David Miller will be paid a commission based on the
sales for which he is responsible. As National Sales Manager/Health and Fitness,
Mr. Rashkow will be compensated on the sales for which he is responsible.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to officers, directors
and persons who are known by Adirondack to be beneficial owners of more than 5%
of Adirondack's common stock.
Percent of Class
Shareholders Number of shares Beneficially Owned
CES Holding Corp. (1) 9,843,474 61.5%
125 Michael Drive
Syosset, NY 11791
David Sackler
125 Michael Drive
Syosset, NY 11791 0 0%
Eugene Stricker 1,291,842 8.1%
42 Barret Road
Lawrence, NY 11559
Mark Schindler(2) 891,842 5.0%
330 East 75th Street #11C
New York, NY 10021
Doug Auer -0- 0%
16 Oakwood Dr.
Queensbury, NY 12804
David Miller -0- 0%
19A Chestnut Street
Greenvale, NY 11548
Page 8
<PAGE>
Jeff Rashkow -0- 0%
51 Anderson Ave.
Scarsdale, NY 10583
Nick Namit -0- 0%
3728 East End
Seaford, NY 11783
MRK Enterprises, Inc. 2,000,000 12.5%
150 East 59th Street
24th Floor
New York, NY 10022
Ronald Berk -0- 0%
211 East 70 St.
New York, NY 10021
SBS Limited Partnership(2) 235,271 1.5%
c/o Mark Schindler
330 East 75th Street #11C
New York, NY 10021
Directors and Officers
as a Group (1) 9,843,474 61.5%
(1) David Sackler, the president of Adirondack, is the President and sole
shareholder of CES Holding Corp.
(2) Mark Schindler, a shareholder of
Adirondack, is a principal shareholder of SBS Limited Partnership. 235,271
shares are held in the name of SBS Limited Partnership and 891,842 shares are
held in the name of Mark Schindler.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 31, 1998, Adirondack entered into an agreement with CES Consulting
Corp., of which Harry Sackler, father of David Sackler, president of Adirondack,
is president and sole shareholder. Pursuant to this agreement CES converted debt
owed by Adirondack to CES in the amount of $200,233 into Series A preferred
stock. This agreement also provides that commencing January 1, 2001 Adirondack,
at its option, may redeem any portion of the preferred stock by paying up to 20%
of Adirondack's pre-tax profits of the fiscal year ended December 31, 2000 and
each year thereafter until payment of an aggregate of $200,233 to the holders of
the Series A Preferred, subject to approval of the Board of Directors.
On December 31, 1997, Adirondack entered into a consulting agreement with CES
Consulting Co., Inc., pursuant to which, CES Consulting Co., Inc. is to provide
consulting services to Adirondack for a five year period commencing December 31,
1997 and ending December 30, 2002, for an annual fee of $100,000. Harry Sackler,
the father of Adirondack's president, David Sackler is the President of CES
Consulting Co., Inc.
In addition, Adirondack entered into a business consulting agreement with
Madison Venture Capital II, Inc., (Madison), of which two shareholders of the
Company, Eugene Stricker and Mark Schindler, are principals. The agreement began
October 1, 1998 for a period of 5 years, including payments of $2,000 per month.
Services specified in the agreement have not been performed; therefore, the
parties have agreed that no fees are due to Madison until such time as the
parties agree that services will commence and payments will accrue. No payments
have accrued or been paid to date.
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedule. The following documents are filed as part
of this report:
Independent Auditor's Report.
Financial Statements and Schedules:
Balance Sheets at February 29, 2000 and February 28, 1999.
Page 9
<PAGE>
Statements of Operations for the years ended February 29, 2000 and
February 28, 1999 and 1998.
Statements of Shareholders' Equity for the years ended February 29, 2000
and February 28, 1999 and 1998.
Statements of Cash Flows for the years ended February 29, 2000 and
February 28, 1999 and 1998.
Notes to Financial Statements.
All schedules omitted are not applicable, not required or the required
information is included in the financial statements or notes thereto.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the fourth
quarter ended February 29, 2000.
(c) Exhibits.
Exhibit Number Description
-------------- -----------
3 Certificate of Incorporation of the Registrant. (Incorporated by
reference to Exhibit 2.1 of Registrant's Form 10.
3.1 Certificate of Amendment of Certificate of Incorporation (Incorporated
by reference to Exhibit 2.2 of Registrant's Form 10)
3.2 Bylaws of Registrant. (Incorporated by reference to the Registrant's
Form 10.
10.1 1998 Stock Option Plan of Registrant. (Incorporated by reference to
Exhibit 3.1 of the Form 10)
10.2 Agreement for conversion of debt to C.E.S. Consultants, Inc. to Series A
Redeemable Preferred Stock
10.3 Employment Agreement between the Registrant and David Sackler
10.4 Employment Agreement between the Registrant and Douglas Auer
10.5 Amended Consulting Agreement between the Registrant and Madison Venture
Capital II, Inc.
10.6 Consulting Agreement between the Registrant and CES Consulting Co., Inc.
dated December 31, 1997.
10.7 Consulting Agreement between Registrant and MRK Enterprises, Inc. dated
June 2, 1999.
23.1 Consent of Independent Auditors
27 Financial Data Schedule
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
Date: August 4, 2000
David Sackler By: /s/ David Sackler
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Page 10
<PAGE>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
===========================================
Financial Statements
February 29, 2000 and February 28, 1999
Page 11
<PAGE>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
Table of Contents
================================================================================
Independent Auditors' Report 1
Financial Statements
Balance Sheets 2
Statements of Changes in Stockholders' Equity 3
Statement of Operations and Retained Earnings (Deficit) 4 - 5
Statements of Cash Flows 6
Notes to Financial Statements 7 - 13
Page 12
<PAGE>
Independent Auditors' Report
To the Board of Directors of
Adirondack Pure Springs Mt. Water Co., Inc.
Syosset, New York
We have audited the accompanying balance sheets of Adirondack Pure Springs Mt.
Water Co., Inc. (a corporation) as of February 29, 2000 and February 28, 1999
and the related statements of operations and retained earnings, changes in
stockholders' equity and cash flows for the years ended February 29, 2000 and
February 28, 1999 and March 7, 1997 (inception) to February 29, 2000. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Adirondack Pure Springs Mt.
Water Co., Inc. as of February 29, 2000 and February 28, 1999 and the results of
its operations, changes in stockholders' equity and its cash flows for the
periods indicated above in conformity with generally accepted accounting
principles.
/s/ Simon Krowitz Bolin & Associates, P.A.
July 20, 2000
Page 13
<PAGE>
<TABLE>
<CAPTION>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
BALANCE SHEETS
======================================================================================================================
February 29, February 28,
2000 1999
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 11,663 $ 9,557
Accounts Receivable - Trade 10,198 0
Deferred Offering Costs 2,450 0
Inventory 41,432 0
----------------------------------------------------------------------------------------------------------------------
Total Current Assets 65,743 9,557
----------------------------------------------------------------------------------------------------------------------
Property and Equipment
Site Development 85,027 77,466
Show Displays 7,500 0
Office Equipment 7,824 7,824
Accumulated Depreciation, Amortization (8,517) (345)
----------------------------------------------------------------------------------------------------------------------
Total Property and Equipment 91,834 84,945
----------------------------------------------------------------------------------------------------------------------
Other Assets
Investment 17,107 0
Security Deposits 24,712 24,712
----------------------------------------------------------------------------------------------------------------------
Total Other Assets $ 41,819 $ 24,712
----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 199,396 $ 119,214
======================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts Payable $ 131,350 $ 0
Accrued Salary 219,128 143,333
Payroll Taxes Payable 16,479 5,947
Loan Payable 74,936 342
----------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 441,893 149,622
----------------------------------------------------------------------------------------------------------------------
Stockholders' Equity
Common Stock - Authorized 40,000,000 Shares $.01 Par Value;
15,931,000 and 13,881,000 Issued and Outstanding 35,720 15,220
Preferred Stock - Series A, Authorized, 1,000,000 at $.01 Par
Value; 20,000 Shares Issued 200 200
Paid-in Capital - Common 324,690 169,650
Paid-in Capital - Preferred 200,033 200,033
Deficit Accumulated During Development Stage (803,140) (415,511)
----------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity (Deficit) (243,497) (30,408)
----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 199,396 $ 119,214
======================================================================================================================
</TABLE>
Page 14
<PAGE>
<TABLE>
<CAPTION>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period March 7, 1997 (inception) to February 29, 1999
======================================================================================================================
Accum-
Preferred Stock Common Stock Paid-in ulated
Shares Amount Shares Amount Capital Deficit
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance - March 7, 1997
(inception) 0 $ 0 0 $ 0 $ 0 $ 0
Sale of Stock 100 10,000 0
Loss for Period (224,246)
----------------------------------------------------------------------------------------------------------------------
Balance - February 28, 1998 0 0 100 10,000 0 (224,246)
Amendment to Certificate of
Incorporation - Stock Split 13,358,900 10,000 0 0
Conversion of Loan to
Preferred Stock 20,000 200 200,033 0
Sale of Stock 522,000 5,220 169,650 0
Loss for the Year Ended
February 28, 1999 (191,265)
----------------------------------------------------------------------------------------------------------------------
Balance - February 28, 1999 20,000 200 13,881,000 15,220 369,683 (415,511)
Stock Issued for Professional
Fees 2,000,000 20,000 55,000 0
Sale of Stock 50,000 500 100,040
Loss for the Year Ended
February 29, 2000 (387,629)
----------------------------------------------------------------------------------------------------------------------
Balance - February 29, 2000 20,000 $200 15,931,000 $35,720 $524,723 $(803,140)
======================================================================================================================
</TABLE>
Page 15
<PAGE>
<TABLE>
<CAPTION>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
======================================================================================================================
March 7, 1997 March 7, 1997
March 1, 1999 March 1, 1998 (inception) (inception) to
to February to February to February February 29,
29, 2000 28, 1999 28, 1998 2000
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Sales $ 36,645 $ 0 $ 0 $ 36,645
----------------------------------------------------------------------------------------------------------------------
COST OF SALES
Beginning Inventory 0 0 0 0
Bottling Units 54,029 2,970 2,465 59,464
Site Expense 9,354 2,500 0 11,854
Rent - Site 30,000 10,000 0 40,000
Salaries 0 0 45,675 45,675
Commissions 4,650 0 0 4,650
Other Selling Expenses 3,641 0 0 3,641
Amortization 6,339 0 0 6,339
Less: Ending Inventory (41,432) 0 0 (41,432)
----------------------------------------------------------------------------------------------------------------------
TOTAL COST OF SALES 66,581 15,470 48,140 130,191
----------------------------------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) (29,936) (15,470) (48,140) (93,546)
----------------------------------------------------------------------------------------------------------------------
EXPENSES
Officer's Salary 100,000 100,000 83,333 283,333
Consulting, Professional Fees 113,490 29,225 52,320 195,035
Utilities, Telephone 9,658 2,334 3,499 15,491
Office Rent, Expenses 56,198 43,423 4,034 103,655
Taxes 6,544 4,260 0 10,804
Insurance 951 1,333 5,820 8,104
Travel, Auto Expense 11,436 0 12,205 23,641
Equipment Rental 0 0 8,399 8,399
Supplies, Miscellaneous 9,829 0 6,496 16,325
Depreciation 1,833 345 0 2,178
----------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 309,939 180,920 176,106 666,965
----------------------------------------------------------------------------------------------------------------------
OTHER INCOME EXPENSES
Rent Income 27,246 5,125 0 32,371
Startup Costs (75,000) 0 0 (75,000)
----------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSES) (47,754) 5,125 0 (42,629)
----------------------------------------------------------------------------------------------------------------------
NET (LOSS) (387,629) (191,265) (224,246) (803,140)
----------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 16
<PAGE>
<TABLE>
<CAPTION>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
(Continued)
======================================================================================================================
March 7, 1997 March 7, 1997
March 1, 1999 March 1, 1998 (inception) (inception) to
to February to February to February February 29,
29, 2000 28, 1999 28, 1998 2000
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DEFICIT ACCUMULATED DURING
DEVELOPMENT STAGE - Begin $ (415,511) $ (224,246) $ 0 $ 0
----------------------------------------------------------------------------------------------------------------------
DEFICIT ACCUMULATED DURING
DEVELOPMENT STAGE - End (803,140) $ (415,511) $ $ (692,367)
----------------------------------------------------------------------------------------------------------------------
(LOSS) PER SHARE - Basic $ (.02) $ (.03) $ (.02) $ (.05)
(LOSS) PER SHARE - Diluted $ (.02) $ (.03) $ (.02) $ (.05)
----------------------------------------------------------------------------------------------------------------------
SHARES USED IN PER SHARE
CALCULATION - Basic 15,931,000 13,547,000 13,359,000 14,192,333
SHARES USED IN PER SHARE
CALCULATION - Diluted 15,981,000 13,647,000 13,380,000 14,292,333
======================================================================================================================
</TABLE>
Page 17
<PAGE>
<TABLE>
<CAPTION>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
======================================================================================================================
March 7, 1997 March 7, 1997
March 1, 1999 March 1, 1998 (inception) (inception) to
to February to February to February February 29,
29, 2000 28, 1999 28, 1998 2000
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Loss $ (387,629) $ (191,265) $ (224,246) $ (803,140)
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation and Amortization 8,172 345 0 8,517
Increase in Accounts Receivable (10,198) 0 0 (10,198)
Increase in Inventory (4,432) 0 0 (41,432)
Increase in Accrued Expense 75,795 60,000 83,333 219,128
Increase in Deferred Offering Costs (2,450) (7,500) (7,500) (2,450)
(Decrease) Increase in Accounts
Payable 131,350 (35,000) 35,000 131,350
Increase in Payroll Taxes Payable 10,532 5,947 0 16,479
----------------------------------------------------------------------------------------------------------------------
NET CASH (USED) PROVIDED BY
OPERATING ACTIVITIES (215,860) (152,473) (113,413) (481,746)
----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Site Development (7,561) (17,296) (60,170) (85,027)
Purchase of Equipment (7,500) (7,824) 0 (15,324)
Increase in Security Deposits 0 (4,712) (20,000) (24,712)
Deposits for Acquisition (17,107) 0 0 (17,107)
----------------------------------------------------------------------------------------------------------------------
NET CASH (USED) BY INVESTING
ACTIVITIES (32,168) (29,832) (80,170) (142,170)
----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM BY FINANCING
ACTIVITIES
Issuance of Preferred Stock 0 0 0 200,233
Increase in Loan Payable 74,594 16,450 184,125 74,936
Sale of Common Stock 175,540 174,870 10,000 360,410
----------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES
----------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH 2,106 9,015 542 11,663
CASH - Beginning 9,557 542 0 0
----------------------------------------------------------------------------------------------------------------------
CASH - Ending $ 11,663 $ 9,557 $ 542 $ 11,663
======================================================================================================================
Supplemental Disclosures:
Conversion of Loan Payable to
Preferred Stock $ 0 $ 200,233 $ 0 $ 200,233
Stock Issued for Professional Fees $ 75,000 $ $ 0 $ 75,000
======================================================================================================================
</TABLE>
Page 18
<PAGE>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 29, 2000
================================================================================
NOTE 1 - ORGANIZATION
Adirondack Pure Springs Mt. Water Co., Inc. (the Company) is a New York
corporation established March, 1997. It was formed to extract,
distribute and contract private label mountain water from a stream and
spring fed reservoir in both bulk and bottled forms in the northeastern
United States. The Company plans to bottle its drinking water at the
source near the Village of Lake George, New York. The Company has an
exclusive ground and water lease with the Incorporated Village of Lake
George, which provides exclusive rights to four water sources, as well
as five acres of property to build a 50,000 square foot bottling plant.
The Company's primary water source flows into a protected, natural
mountain and spring reservoir at a minimum rate of 560,000 gallons per
day of high quality, natural and mountain spring water. This reservoir
is located 2,700 feet up a mountain from the proposed bottling plant
site.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Property and Equipment - Property and equipment are recorded at cost
when acquired. Improvements that significantly add to the productive
capacity or extend the useful life of the related asset are
capitalized. Site development costs will be amortized over the lesser
of the life of the lease or asset. Office equipment will be depreciated
over the estimated useful lives of the assets ranging from 3 to 7
years. When property or equipment is sold or otherwise disposed of, the
related cost and accumulated depreciation or amortization are removed
from the accounts and any gain or loss is included in income.
Maintenance and repairs are charged to expense in the period incurred.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Income Taxes - The Company accounts for income taxes according to the
liability method. Under this method, deferred tax assets and
liabilities are determined based on differences between financial
reporting and income tax bases of assets and liabilities and are
measured using enacted tax rates and laws that are in effect.
Method of Accounting - The Company prepares its financial statements on
the accrual method of accounting, recognizing income when earned and
expenses when incurred. Income is considered earned when products are
shipped, at which time customers are billed and revenue is recognized.
Page 19
<PAGE>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 29, 2000
================================================================================
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts Receivable - Management considers all accounts receivable to
be collectible. Therefore, no allowance for bad debts has been included
in the statements.
Impairment of Long-Lived Assets - Long-lived assets (i.e., property ,
plant and equipment) held and used by the Company are reviewed for
impairment whenever events or changes in circumstances indicate that
the net book value of the asset may not be recoverable. An impairment
loss will be recognized if the sum of the expected future cash flows
(undiscounted and before interest) from the use of the asset is less
than the net book value of the asset. Generally, the amount of the
impairment loss is measured as the difference between the net book
value of the assets and the estimated fair value of the related asset.
Earnings per Share - Effective for the year ended February 28, 1998,
the Company adopted Statement of Financial Standards No. 128, Earnings
Per Share ("FAS 128"). FAS 128 replaces prior earnings per share
("EPS") reporting requirements and requires the dual presentation of
basic and diluted EPS. Basic EPS excludes dilution and is computed by
dividing net income by the weighted average number of shares
outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock.
Inventory - The Company reports inventory at the lower of cost or
market value using the first-in, first-out method. Inventory consists
of bottles and packaging materials. Inventory is decreased based on the
number of units bottled per customer orders.
Incentive Stock Options - The Company adopted its stock incentive plan
on July 1, 1998. The Plan enables the company to grant incentive stock
options, nonqualified options and stock appreciation rights for up to
1.5 million shares of the Company's common stock. All options must
conform to federal income tax regulations and have an exercise price of
not less than the fair value of shares at the date of the grant (110%
of fair value for ten percent or more shareholders). Fair value is
determined on the option issue date using the market value of the stock
on an established exchange or the Black-Scholes model if the stock is
not listed on an exchange at the time options are issued. Options are
issued by a committee established by the board of directors based on
eligibility and must be exercised within terms specified on the grant
date.
For financial statement purposes, compensation expense would be
recorded only if the options were issued below fair value. As of the
date of these financial statements, no options had been issued under
the stock incentive plan. Outside of the stock incentive plan, in
conjunction with the offering of the Company's stock referenced in Note
5, the Company issued options as compensation to legal counsel for
100,000 shares of common stock at $0.20 per share. This value was
agreed upon between counsel and management. See also Note 11.
Page 20
<PAGE>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 29, 2000
================================================================================
NOTE 3 - LOAN PAYABLE
At February 28, 1998, the Company had been advanced funds from a
related party. These amounts were non-interest bearing. During the
subsequent fiscal year $200,233 of such loans were converted into
preferred stock (see also Note 6). The balance represents additional
advances during the current three-month period and are non-interest
bearing.
NOTE 4 - INCOME TAXES
No provision for income taxes is required as the Company has incurred
losses during its development stage. These losses are available to
offset taxable years in the future. The losses will be available until
2017 and 2018, respectively.
NOTE 5 - COMMON STOCK
The Company's Certificate of Incorporation provided for 200 shares of
common stock, no par value. On August 5, 1998, the shareholders amended
the Certificate of Incorporation. The Company is now authorized for
40,000,000 shares of common stock, $.01 par value. Consequently, the
initial shareholders were given a 133,590 for one stock split.
Also, during 1998, the Company entered into an offering of 2,000,000
shares of common stock at an offering price of $.50 per share. Under
this offering 522,000 shares were issued.
During February 2000, the Company sold 50,000 shares of stock with
50,000 warrants at $2.00 per share. The warrants allow the holder to
obtain additional shares at $2.00 per share.
NOTE 6 - PREFERRED STOCK
In August, 1998, the Company amended its Certificate of Incorporation
to authorize the issuance of 1,000,000 shares of undesignated preferred
stock with a $.01 par value. The Board of Directors is authorized to
issue preferred stock in one or more series with varying designations,
preferences or other special rights.
The Board has issued 20,000 shares of Series A redeemable preferred
stock, par value $.01 per share. Series A redeemable preferred stock
shall contain preferential liquidation rights in the amount of $200,233
but is not entitled to dividends or voting rights, except as to matters
which may adversely affect the rights of the Series A redeemable
preferred stock or as otherwise required by law. Redemption of this
stock, at the Company's option, could start January 1, 2001 through
payments of up to 20% of the Company's pre-tax profit.
Page 21
<PAGE>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 29, 2000
================================================================================
NOTE 7 - COMMITMENTS, CONTINGENCIES
The Company has been approved for a bond offering loan of four million
six hundred and twenty-five thousand dollars ($4,625,000) by the
Counties of Warren and Washington Industrial Development Agency for the
purpose of constructing an up to 50,000 square foot bottling plant. The
Company has until July 31, 2000 to begin the bond offering.
Properties - The Company has an exclusive ground and water lease with
the Incorporated Village of Lake George, which provides rights to four
(4) pure water sources, as well as five (5) acres of property for
construction of an up to a 50,000 square foot bottling plant. The lease
term for the water source is for five (5) years expiring May 2002 with
two five (5) year renewal options. If the plant is constructed, the
lease term extends to 2029. At the termination of the lease, all
improvements become the property of the Village. Initial base rent for
water $.001 per gallon with a minimum $30,000 commencing in the second
year of the lease.
The Company has entered into a five-year lease for office space. The
lease term is from October 1, 1998 through September 30, 2003.
Minimum annual rentals for the year ending:
February 28, 2001 $ 81,729
February 28, 2002 82,553
February 28, 2003 37,743
February 29, 2004 8,712
---------
$210,737
=========
The Company has entered into a verbal employment agreement with David
Sackler, its President and Chief Executive Officer, for a term of five
years at a salary of $100,000 per year. The Company has entered into a
verbal employment agreement with Douglas Auer, its Project Manager, for
a term of three years at a salary of $32,500 per year. Mr. Auer's
contract will take effect upon construction of the bottling plant
referenced above; therefore, no compensation to Mr. Auer has been
recorded in these financial statements.
Page 22
<PAGE>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 29, 2000
================================================================================
NOTE 7 - COMMITMENTS, CONTINGENCIES (Continued)
The amount of compensation to Mr. Sackler recorded in these financial
statements is as follows:
<TABLE>
<CAPTION>
March 1, March 7,
1999 to March 1, March 7, 1997
February 29, 1998 to 1997 to (inception)
2000 February 28, February to February
1999 28, 1998 29, 2000
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Compensation recorded $100,000 $100,000 $83,333 $283,333
Compensation paid 35,000 29,205 0 64,205
Compensation deferred 65,000 70,795 83,333 219,128
</TABLE>
Mr. Sackler's deferred salary will be paid from operating revenues and
not from the proceeds of any offering. Future commitments to Mr. Sackler
under his employment agreement referenced above are as follows:
March 1, 2000 - February 28, 2001 $100,000
March 1, 2001 - February 28, 2002 100,000
March 1, 2002 - April 30, 2002 16,667
--------
$216,667
========
NOTE 8 - RENTAL INCOME
The Company has negotiated with a subtenant for a two-year sublease
beginning August 1, 1999 with rent at $24,000 for Year 1 and $25,200 for
Year 2. There is a two-year renewal option.
Page 23
<PAGE>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 29, 2000
================================================================================
NOTE 9 - RELATED PARTY TRANSACTIONS
The Company has entered into a consulting agreement with CES Consulting
Co., Inc. (CES). The agreement is for five (5) years beginning December
31, 1997 at an annual cost of $100,000 per year.
The Company has entered into a business consulting agreement with
Madison Venture Capital II, Inc. (Madison), of which two shareholders of
the Company are principals. The agreement began on October 1, 1998. The
agreement is for a period of 5 years at the rate of $2,000 per month.
Services specified in the agreement have not been performed; therefore,
the parties have agreed that no fees are due to Madison until such time
as the parties agree that services will commence and payments will
accrue.
NOTE 10 - SUBSEQUENT EVENTS
Acquisition - In July, 1999, the Company entered into an agreement with
Creative Beverages of Canada, pursuant to which Adirondack will acquire
51% of Creative Beverages of Canada, a Canadian corporation. The
agreement includes an option to acquire the remaining 49% within three
(3) years. Creative Beverages has current clients and is a marketing
company that holds certain trademarks and licenses. This acquisition was
completed April 15, 2000 at a cost of $21,165. As of February 29, 2000,
the Company had expensed $17,107 on the acquisition.
Marketing - The Company is negotiating with Leisure Concepts, Inc. for
two license agreements for supplying bottled water for World
Championship Wrestling and Pokemon. The fee arrangement has not been
completed, but management feels that the fee will be 12%.
Private Placement - The Company has signed a letter of intent concerning
an underwriting agreement with First Madison Securities to effectuate a
public offering of its securities (the "Offering") and a private
placement. Management originally intended to raise $1,500,000 pursuant
to this placement, but currently expects to raise $1,305,000. This
private placement is currently in process. It is anticipated that the
Offering will consist of the sale by the Company of a $4,625,000
Industrial Development bond, and/or a "best efforts" equity offering of
up to five million dollars ($5,000,000). Provided all units being
offered are sold within the Offering period, the Company shall issue and
sell at the closing of the proposed underwriting, to the Underwriter
warrants to purchase from the Company one (1) unit for every ten (10)
units sold (the "Underwriter's Warrants") in the offering at a price of
$.001 per warrant. The Underwriter's Warrants will be exercisable at
150% of the Offering price for a period of two (2) years commencing one
year from the date of the prospectus.
Page 24
<PAGE>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 29, 2000
================================================================================
NOTE 11 - STOCK OPTIONS
Stock options issued by the Company as described in Note 2 were issued
on November 15, 1997 and expire on November 15, 2002. For the years
ended February 29 and February 28, the status of these options was as
follows:
<TABLE>
<CAPTION>
2000 1999
---- ----
Number of Option Price per Number of Option Price per
Shares Share Shares Share
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at
beginning of period 100,000 $0.20 100,000 $0.20
Options granted during the
period 0 0
Options outstanding and
exercisable at end of period 100,000 $0.20 100,000 $0.20
None of the options granted by the company were exercised, forfeited or
expired during the years ended February 29, 2000 and February 28, 1999.
</TABLE>
Page 25
<PAGE>
Exhibit Index
Exhibit No. Exhibit Description
----------- -------------------
23.1 Consent of Independent Auditors
27 Financial Data Schedule
