SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 3
To
FORM 10-SB
General Form for Registration of Securities of
Small Business Issuers
Under Section 12 (b) or (g) of the Securities exchange Act of 1934
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(Exact 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, NY 11791
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (516) 921-7288
Securities to be registered pursuant to Section 12 (b) of the Act:
Common Stock, $.01, par value
Securities to be registered pursuant to Section 12 (g) of the Act:
None
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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 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. See "Properties."
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. 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. Alternatively, we will private label product for customers who seek
to sell bottled water under an established brand name of their own.
Additionally, we have developed our own proprietary brand of water, AVIVA
SPRINGS. Adirondack intends to market AVIVA SPRINGS through its established
relationships with those distributors and end users that are
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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. There can be
no assurance such bond offering will be completed.
Industry Overview
According to the 1997 Beverage world Market Index, the multiple beverage
market, which consists of soft drinks, fruit beverages, bottled teas, sports
drinks and bottled water, beer, wine, and spirits, accounted for retail revenue
of $173.7 billion in 1996, representing an increase of 1.2% from 1995. Soft
drinks are the largest segment of the Multiple Beverage Market, with retail
sales of $$52.6 billion and 14.2 billion gallons in 1996. Sales of bottled water
in the United States have increased since 1987 form 1.56 billions gallons to
3.12 billion gallons in 1996, representing $4.3 billion in sale sin 1996.
The growth of the still water segment of the bottled water market is most
important to Adirondack. The bottled still water business experienced growth of
20% in 1994, 27% in 1995 and 30% in 1996. Still water comprises over 92% of all
of the bottled water gallonage sold in the United States.
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
non-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.
Sparkling water includes domestic and imported sparkling water, club
soda and seltzer, and is typically sold through normal food and
beverage retail channels.
* Imported water, which includes both sparkling and non-sparkling water
produced and bottled outside the U.S., is targeted to "image-conscious
consumers." Imported water is sold through normal food and beverage
retail channels, typically at significantly higher prices than other
bottled water alternatives.
Adirondack believes that a significant constraint on the entry of new brands
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,
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have realized the profit potential of private labeling water in conjunction with
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.
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.
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
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.
Products
Bottled Water
Through our production relationship with an established bottler, Adirondack
currently produces bottled natural mountain and spring water, which is one of
several recognized categories of bottled water products, in containers of
between 8 ounces and 1.5 liters, the "Premium" polyethylene plastic ("PET")
market. Pursuant to federal regulation, our natural mountain and spring water
bottled products will be labeled in the following categories:
Natural Water: Bottled spring, mineral, artesian or well water which is
derived from an underground formation or water from surface water that only
requires minimal processing, is not derived from a municipal system or public
water supply, and is unmodified except for limited treatment (e.g., filtration,
ozonation or equivalent disinfection process).
Spring Water: Water derived from an underground formation from which water
flows naturally to the surface of the earth. Spring water may be collected only
at the spring or through a bore hole tapping the underground formation feeding
the spring. There must be a natural force causing water to flow to the surface
through a natural orifice. The location of the spring must be identified and
such identification maintained in the company's
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records. Spring water collected with the use of an external force must be from
the same underground striation as the spring, as shown by a measurable hydraulic
connection using a hydro-geologically valid method between the bore hole and the
natural spring, and it should have all the physical properties, before
treatment, and be of the same composition and quality, as the water that flows
naturally to the surface of the earth.
Natural mountain and spring waters are not always free from contamination
problems. Springs can be contaminated with coliform (bacteria in the water).
Natural mountain springs need to be monitored and tested on a regular basis to
make sure they are without contamination. We have installed ozonation and micro
filtration equipment to remove organic contaminants and reduce mineral content.
We have had no known contamination problems with our primary spring or three
spring sources. Our water has not been determined to be better or less
contaminated than municipal water. Adirondack believes, however, that natural
mountain and spring water has advantages over municipal water because, unlike
municipal water, natural mountain and spring water is not treated with chlorine
and other chemicals. However, there can be no assurance that our source will not
experience contaminated water related problems.
We will have the ability to provide natural mountain and spring water for the
following:
8 ounce PET bottles (standard twist cap)
12 ounce PET bottles (standard twist cap)
16.9 ounce PET bottles (standard twist cap)
16.9 ounce PET bottles (sports cap)
20 ounce PET bottles (sports cap)
1 liter PET bottles (standard twist cap)
1 liter PET bottles (sports cap)
1.5 liter PET bottles (standard twist cap)
1 gallon PET bottles
5 gallon PET bottles
Tanker trucks for bulk water
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 Distributers 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. Adirondack expects to enter into a formal agreement with
Jetro/Restaurant Depot by the end of 1999.
Since August 1999, Adirondack has been producing water for its own proprietary
brand, AVIVA SPRINGS. Adirondack sells AVIVA SPRINGS to wholesalers,
distributers 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.
In July 1999, Adirondack entered into an agreement with Creative Beverages of
Canada, pursuant to which Adirondack will acquire 51% of Creative Beverages of
Canada, which includes its trademark of MAX O2 brand oxygenated water and its
client list of private label clients, including Tree of Life/Gourmet Award
Natural Food and Beverage Distribution Company.
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Water Source
Adirondack's primary water source creates an average minimum flow of
approximately 550,000 gallons per day, or an estimated minimum of 200,000,000
gallons of natural mountain and spring water per year. In addition, in
accordance with our exclusive long term lease with the Incorporated Village of
Lake George, we have secured exclusive rights to three other similar sources in
the Lake George, New York area that are within one (1) mile of the proposed
bottling plant site. These three alternate sources each flow at a rate of more
than 50% of the primary sources flow rate, with a product of similar high
quality. We believe this will allow Adirondack to market itself as a premium
quality American natural mountain and spring water bottled at the source. Many
bottled waters are not bottled at the source, and have secondary sources for the
same brand that are equally distant or further from the bottling plant than the
primary source. Adirondack's source is 2700 feet from the proposed plant site.
Adirondack believes that its water is clean, refreshing and lightly
mineralized. When tested directly from its source, prior to micro filtration,
ozonation, or any other treatment whatsoever our natural mountain and spring
water exceeds the requirements of the state and federal regulations in quality
and definition. After basic micro filtration and ozonation as required by New
York State law, our water will become cleaner and with less mineral presence, so
as to ensure its high quality.
Production
Adirondack commenced production operations in May 1999 with the Siena brand.
In August, 1999 it commenced production of the Ciro brand, and in August 1999,
it commenced production of its own proprietary brand, AVIVA SPRINGS. All three
(3) brands are bottled in Saratoga, New York, pursuant to separate bottling
agreements. We currently have one on site employee, working as demand requires,
to capture natural mountain and spring water through the pumping station and
fill transportation trucks.
For water extraction, Adirondack has built over 2700 linear feet of 4" piping
from the natural spring reservoir down the mountain reserve to the pumping
station/building site. We do not need to install a pump to extract the natural
mountain and spring water as water flow and gravity provide more than enough
force to bring water to the pumping station/building site. This line will
accommodate both bulk water and the eventual plant water flow. Adirondack has
the right to add additional piping lines.
Additionally, Adirondack has installed an HMBI OREC Ozone Generator/Ozonator
and a filtration unit as required by the New York State Health Department for
the specific intent of eliminating any microbial organisms inherent in fresh
water. We will only ozonate and micro-filter for this purpose. At the base of
the pipeline, Adirondack has erected a 16' x 24' structure to house the
ozonator, micro-filtration unit and the metered pumping station that will
accommodate tanker trucks for its initial operation as well as initial and
future bulk water sale. However, natural occurrences beyond the control, such as
contamination of the springs or failure of the water supply to comply with all
applicable governmental requirements for mineral and chemical concentration,
could have a material adverse effect on our business.
After extraction, the water is transported to our contract bottler. Utilizing
a contract bottler allows Adirondack to bottle water for the products for which
we are currently providing water. Contract bottling has enabled us to commence
operations prior to building our own bottling facility. Bottlers used by
Adirondack all have plants that have been inspected and received high quality
assurance ratings by both the National Sanitary Foundation, and the
International Bottled Water Association. The water is bottled, labeled, and
packaged by the contract bottlers and then trucked by independent trucking
companies to its final destination.
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Bottling Plant
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.
During the initial stages of the contemplated bottling plant's operation,
Adirondack anticipates that all PET bottles will be purchased from outside
sources. Adirondack anticipates that within several years after completion of
the bottling plant, it will develop the capability to produce PET bottles at the
facility. By initially purchasing and storing bulk quantities of PET bottles,
Adirondack will be able to take advantage of the economies of purchasing greater
quantities of product and be more resistant to market fluctuations in the cost
and availability of PET bottles. Until and unless Adirondack produces bottles
for its own use, Adirondack expects to purchase and warehouse various sizes of
PET bottles at the plant, as well as contract purchases as the need arises.
Marketing and Distribution
Still Water
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 by either direct contact or through brokers
or wholesale/distributors: off-premises retail (supermarkets, convenience store,
and drug store); on-premises retail (restaurants); vending machines;
institutions (hospitals, schools); and bulk sales.
Private label bottling enables Adirondack to sell its products without the
expenses of the advertising budget that is normally required to establish brand
recognition and market identity.
Many retail chains and distributors are starting to sell their own house brand
products together with or in lieu of national brands. According, we expect that
more North American chains of on and off-premise retailers, including those in
the northeast region, will begin to offer their house brands.
In March 1997, Adirondack initially approached the northeast market through
distributors of bottled water who did not have their own private labels. Since
that time, we have begun to pursue other distributors in the northeast, as well
as in other U.S. markets and abroad. Our bulk sales will be conducted through
direct contacts and our international bulk water representative. Currently,
Adirondack has no bulk sales. We have also begun to pursue other non-distributor
revenue sources including hotels, theaters and restaurant chains.
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In addition to direct contact by employees and sales representatives engaged
by Adirondack, we expect to work with consultants and food brokers to coordinate
sales as necessary, as well as contacting other potential sources of sales.
Adirondack intends to sell its products through sales representatives.
Adirondack has a sales representative that is engaged by Adirondack as an
independent contractor on a non-exclusive basis for the broadline food service
industry. The representative's compensation will consist solely of commissions
based on a percentage of net sales. Additionally, we have developed our own
proprietary brand, AVIVA SPRINGS which is being sold and distributed in the
Northeast to non-traditional sales sources including recreational,
entertainment, and fitness and health facilities.
In March 1999, Adirondack developed the "Siena" trademark for private labels
for the Jetro/Restaurant Depot Corp. Delivery commenced on May 1999.
Jetro/Restaurant Depot Corp. is based in New York and has been operating for
approximately 20 years with locations in New York, New Jersey, Massachusetts,
Illinois, Florida, and California. In March 1999, Adirondack developed the
"Ciro" label for Conca D'Oro Importers of Woodside, New York, as their
proprietary brand.
Competition
The bottled water market is highly competitive. Adirondack competes in the
non-sparkling segment of the bottled water market directly with office delivery
water companies and indirectly with companies that provide vending machines and
with off-the-shelf marketers. Our water products compete not only with other
bottled water products but also with other types of beverages, including soft
drinks, coffee, beer, wine and fruit juices. We compete with vended water and
off-the-shelf marketers on the basis of (1) quality, (2) taste, (3) the
convenience of on-site delivery, and (4) the features offered by the water
dispenser (i.e. the ability to have heated, chilled or room temperature water,
depending on the dispenser rented). Such competition includes bottles and
distributors of water products, several of which are more experienced and have
greater financial and management resources that Adirondack and have established
proprietary trademarks, distribution facilities and bottling facilities.
The bottled water segment of the beverage industry is less concentrated than
other important segments of the beverage industry, but remains concentrated.
According to the 1997 Beverage Market Index, the bottled water segment does not
have a dominant market force in the same manner as soft drinks and beer, but in
1996 the four largest companies, each of whom market several brands, accounted
for 50% of the revenues of bottled water.
Government Regulation
Prior to 1996, bottled water was regulated in the same fashion as municipal
water. Municipal water is regulated not as food by the FDA, but as a commodity
by the Environmental Protection Agency pursuant to the Safe Drinking Water Act
which only provided for certain mineral/chemical content requirements so as to
ensure water safety, not product definition.
In 1996, the United States enacted statutes and regulations to regulate
bottled water as a food. Accordingly, Adirondack's bottled water must meet FDA
standards for manufacturing practices and chemical and biological purity,
Furthermore, these standards undergo a continuous process of revision. The
labels affixed to bottles and other packaging of the water are subject to FDA
restrictions on health and nutritional claims for foods.
As of 1996, bottled water is fully regulated as a food by the FDA under the
Federal Food, Drug, and Cosmetic Act ("FFDCA"). The FFDCA defines food as
"articles used for food or drink for man or other animal." This includes
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packaged (bottled) water sold in containers at retail outlets as well as
containers distributed to the home and office market. This legislation was
designed to ensure that bottled water companies clearly and accurately define
the type of water that was being bottled and sold to the public. The FDA adopted
the basic mineral/chemical guidelines employed by the EPA, while making some
aspects more stringent.
In addition, all drinking water must meet EPA standards established under the
Safe drinking Water Act ("SDWA") for mineral and chemical concentration. The
1986 amendments to the SDWA mandated the establishment of new drinking water
quality and treatment regulations. Most municipalities meet or exceed EPA
drinking water regulations, many of which reflect recent public awareness of the
issue of contaminated water. For example, EPA standards for leading drinking
water did not exist prior to 1986, when 50 ppb (parts per billion) was
established. This standard was lowered to 15 ppb in 199, because after five
years the government still found 130 million people exposed to unacceptable lead
levels.
This United States government also enacted Safe Drinking Water Reauthorization
Act of 1996. This law requires all local water utilities to issue reports to
their consumers disclosing all, chemicals and bacteria in their water.
Bottled water is also subject to state and local regulation. Bottled water
must originate from an "approved source" in accordance with standards prescribed
by the state health department in each of the states in which Adirondack's
products will be sold. The source must be inspected and the water sampled,
analyzed and found to be of safe and wholesome quality. There are annual
"compliance monitoring tests" of both the source and the bottled water. The
health department of the individual states also govern water purity and safety,
labeling of bottled water products and manufacturing practices of producers.
Adirondack's water supply is located in State of New York, and has received
the required certification as a bulk water facility by the New York State
Department of Health. In the event Adirondack constructs its own bottling
facility in the future it will require a state certificate as a manufacturer
approving Adirondack to operate the bottling facility. The application, report
and proposed labels and caps are reviewed by the Department of Health. In
addition, samples of the water are tested. After this review and testing,
arrangements are made for the local county public health unit to inspect the
water bottling facilities.
Adirondack currently has all required approvals and believes that its
contemplated bottling facilities, once constructed, will be in substantial
compliance with all applicable governmental regulations.
Seasonality
Adirondack currently conducts its business exclusively in the northeastern
United States. In the beverage industry, sales typically increase in the second
and third calendar quarters. This seasonality can be attributed to the weather
and annual seasons, in that, as the weather gets warmer and people are outside
and more active, beverage demand and sales, including bottled water demand and
sales, increase.
In order to reduce the expected seasonality of its business in the
northeastern United States, Adirondack intends to pursue institutional
clientele, who are less seasonal in their purchases, and clientele in other
United States markets, specifically the western and southeast markets, and
international markets as costs of shipping and availability allow.
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Suppliers
Adirondack purchases production material, including various labels from
Wisconsin Label Group, Inc., PET bottles from Plastipak Packaging, Inc. and Wine
Bottle & Packaging, Inc., and production of product from the Saratoga Beverage
Group. All material and work is done on a purchase/production order basis.
Adirondack has entered into no formal agreements with any of these companies.
Properties
Adirondack has a ground and water lease with the Incorporated Village of Lake
George, which provides for exclusive rights to four (4) pure water sources, as
well as five (5) acres of property to build up to 50,000 square foot bottling
plant. The initial term of the lease for the water source expires in May 2002,
with two separate options to renew for additional five year terms through 2012.
If Adirondack erects a bottling plant, Adirondack will have the right to
purchase water from the water source until 2029. Provided Adirondack pays the
minimum base rent under the lease, it maintains its exclusive right to use the
water source for wholesale or retail sales of the water. The initial base rent
is $.001 per gallon, with a minimum payment of $30,000 commencing in the second
year lease. The rent increases to $.01 per gallon commencing in the second
renewal period, with a minimum base rent of $75,000 per year. Adirondack is
obligated under the lease to construct all necessary improvements, including,
but not limited to, a pipeline, filling station and two separately-metered
outlets. The terms of the lease with respect to the land for the bottling plant
expires in May 2029. The base rent for the five acres for the bottling plant is
$75,000 commencing in the second year of the lease with an addition payment of
$.0025 per gallon for each gallon bottled at the plant in excess of 50,000,000
gallons. The base rent increases to $200,000 per year in the year 2023 with an
additional payment of $.025 per gallon bottled at the plant in excess of
50,000,000. There is no assurance that Adirondack will be able to meet its
financial obligations and therefore, no assurance can be made that it will
retain these property rights.
Our principal offices are located in Syosset, New York where we leases 3,750
square feet of office space for which we pay a monthly rent of $4,712.
Adirondack has a sublease with an unrelated party for $2,000 per month expiring
in August 2001. Adirondack believes that current facilities are adequate for its
current needs.
Employees
As of August 1, 1999, Adirondack employed 4 people, 1 in production and 3 in
management and administration. None of our employees are subject to a collective
bargaining agreement and we believe that our relations with our employees are
satisfactory.
Plan of Operation
Adirondack was incorporated in March 1997 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. Since May 1999, Adirondack
has been bottling water taken from its source near the Village of Lake George,
New York. Adirondack 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 on which Adirondack intends to build a
50,000 square foot bottling plant. The lease term for the water source is five
(5) years expiring 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 property of the Village. Initial base rent for water is
$.001 per gallon with a minimum of $30,000 commencing in the second year of the
lease. Adirondack's primary water source at a minimum rate of 560,000 gallons
per day of high quality, natural and mountain spring water. The reservoir is
located 2,700 feet up a mountain from the proposed bottling site.
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In July 1997, Adirondack was approved for a $4,625,000 bond issue loan by the
(New York) counties of Warren and Washington Industrial Development Agency for
the plant. Adirondack has until July 31, 2000 to commence the bond offering.
There can be no assurance such bond offering will be completed.
In May 1999 Adirondack commenced operations, producing, through our
relationship with an established bottler, bottled water under the Siena Springs
label for Jetro/Restaurant Depot pursuant to purchase orders we received.
Adirondack expects to enter into an agreement with Jetro/Restaurant Depot by the
end of 1999, but can not so guarantee. In August 1999, Adirondack began to
produce Ciro brand water, a trade name owned by Conca D'Oro Importers of
Woodside, New York. Pursuant to a contract entered into June 4, 1999 by
Adirondack and Conca D'Oro Importers of Woodside, New York, Adirondack is the
exclusive provider for CDI for all its private label water products. Adirondack
outsources the bottling and distribution for any water it produces.
In August 1999, Adirondack began producing its own private label brand water,
AVIVA SPRINGS. The bottling and distribution are outsourced for AVIVA SPRINGS.
Adirondack currently market its AVIVA SPRINGS water in health and fitness
facilities throughout the Northeast, through existing contacts and
relationships.
For the 4 month period ended October 31, 1999, Adirondack had sales revenues
of $3,197, with a loss of $80,170.
Adirondack has agreed to acquire 51% of Creative Beverages of Canada, a
Canadian corporation. The negotiations include an option to acquire the
remaining 49% within three (3) years. Creative Beverages has current private
label clients and is a marketing company that holds certain trademarks and
licence for the brand name MAX O2. The cost of this acquisition is estimated at
$35,000, minus operational and production expenses accumulated by Adirondack
prior to final closing which is anticipated to occur on or before October 1999.
Adirondack is also negotiating with several marketing companies for the rights
to license trade and brand names for bottled water products. Adirondack is
negotiating with Leisure Concepts Inc. for the right to bottle water under
licensed brands World Championship Wrestling and Pokemon, and with Met-Rx USA
for the rights to bottle water under its Source/One Brand of nutrition
supplements. Adirondack is also negotiating with Goebel Marketing and Sales with
regard to Goebel providing the marketing and sales of Adirondack's products,
including the AVIVA SPRINGS brand of water, to certain retail clients.
On June 4, 1999, Adirondack entered into a distribution agreement with GPR
Trucking, Inc. pursuant to which GPR will distribute Adirondack's AVIVA SPRINGS
and Adirondack products, and will not distribute water products other than
Adirondack brands.
Adirondack intends to engage in a private and/or public offering of its
securities within the next few months to raise approximately $5,000,000.
Further, Adirondack intends to engage in an offering of industrial development
bonds to raise up to $4,625,00. Unless at least $4,000,000 is raised, Adirondack
will be unable to build its proposed bottling plant which will keep it dependant
on outside bottlers. Failure to raise a minimum of $ $2,000,000 over the next
twelve months will prevent Adirondack from adequately marketing its product and
services, and will have a materially adverse effect on Adirondack.
ITEM 3. Description of Property
Adirondack 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 up to a 50,000 square
foot bottling plant. The lease term for the water source if for five
<PAGE>
(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.
Adirondack has entered into five-year lease for office space. The lease term
is from October 1, 1998 through September 30, 2003.
Minimum annual rentals for both leases for the year ending:
July 31, 2000 $88,260
July 31, 2001 90,592
July 31, 2002 84,680
July 31, 2003 46,448
July 31, 2004 11,612
ITEM 3 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 62.1%
125 Michael Drive
Sysosett, NY 11791
Eugene Stricker 1,291,842 8.1%
42 Barret Road
Lawrence, NY 11559
Mark Schindler(2) 891,842 5.6%
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
Jeff Rashkow -0- 0%
51 Anderson Ave.
Scarsdale, NY 10583
Nick Namit -0- 0%
3728 East End
Seaford, NY 11783
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 62.1%
<PAGE>
(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.
ITEM 5 Directors, Executive Officers, Promoters and Control Persons
Name Age Period served as director Other Capacities in which
currently serving
David Sackler 32 Since 1997 President, Chief
Executive Officer,
Chairman of the Board
David Miller 51 Vice President-
Marketing
Jeff Rashkow 48 Since 1999 National Sales
Manager/Health and
Fitness
Doug Auer 52 Since 1997 Project Manger
Ronald Berk 50 Since 1997
Nick Namit 45 Since 1997
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. 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. From 1998 through the present, Mr. Sackler
has been an independent commercial and residential real estate manager and
broker/agent.
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.)
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.
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.
<PAGE>
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.
ITEM 6 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 $100,00.
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and Principal Position Year Salary Bonus Other Annual Compensation Long
term Compensation Awards options/ Shares All other Compensation
David Sackler, President 1998 1999 $100,000 - -
David Miller, Vice President-Marketing 1998 1999
DougAuer, Project Manager 1998 1999
Adirondack intends to enter into an 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. 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 an
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.
Stock Option Plan
Adirondack has adopted the Adirondack 1998 Stock Incentive Plan. The Plan
enables Adirondack to grant incentive stock options, nonqualified options and
stock appreciation rights for up to 1,500,000 shares of the Adirondack's common
stock. Incentive stock options granted under the plan must conform to applicable
Federal income tax regulations. All options must have an exercise price not less
that the fair market value of shares at the date of grant (110% of fair market
value for ten percent or more stockholders). Adirondack had issued incentive
stock options to purchase 100,000 shares of common stock at an exercise price of
$.20 per share as of August 1, 1999.
ITEM 7 Certain Relationships and Related Transactions
On May 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 shall convert
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.
Adirondack intends to issue such shares of preferred stock to CES.
<PAGE>
In addition, Adirondack has agreed to enter into a business consulting
agreement with Madison Venture Capital II, Inc., of which two shareholders of
the Company, Eugene Stricker and Mark Schindler, are principals. The
agreement was to begin September 1, 1998 for a period of 5 years.
ITEM 8 Description of Securities
Adirondack's certificate of incorporation originally provided authorized
capital stock of 200 shares of common stock, with no par value. On August 5,
1998, Adirondack's board of directors resolved to amend its certificate of
incorporation to authorize 40,000,000 shares of common stock, par value $.01 per
share, and 1,000,000 shares of Preferred Stock, par value $.01 per share. After
giving effect to such amendment, Adirondack instituted a 133,590 for one stock
split for the common stock and the issuance of 20,000 shares of Series A
Preferred stock to an affiliate in exchange for certain indebtedness. The
certificate of amendment was filed in December 1998. As of August 1, 1999,
Adirondack has 15,859,000 shares of common stock and 20,000 shares of Series A
preferred stock issued and outstanding.
Common Stock
The holders of common stock are entitled to one vote per share held of record
on all matters to be voted on by shareholders. There is no cumulative voting
with respect to the election of directors, with the result that holders of more
than 50% of the shares voting for the election of directors can elect all of the
directors. The holders of common stock are entitled to receive dividends when,
as and if declared by the Board of Directors from sources available therefor. In
the event of liquidation, dissolution, or winding up of the company, whether
voluntary or involuntary, the holders of common stock are entitled to share
ratably in the assets of the company available for distribution to stockholders
after payment of liabilities and after provisions for each class of stock, if
any, having preference over the common stock. All outstanding shares are fully
paid and non-assessable and legally issued. The Board of Directors is authorized
to issue additional shares of common stock within the limits authorized by
Adirondack's charter and without stockholder action.
Preferred Stock
Adirondack has authorized the issuance of 1,000,000 shares of undesignated
preferred stock with such designations, rights and preferences as may be
determined from time to time by the board of directors. Accordingly, the board
of directors is empowered, without obtaining stockholder approval, to issue such
preferred stock with dividend, liquidation, conversation, voting or other rights
that could adversely affect the voting power or other rights of the holders of
the common stock. In the event of issuance, the preferred stock could be
utilized, under certain circumstances, as a method of discouraging, delaying or
preventing a change in the control of the company.
Adirondack has issued 20,000 shares of Series A Redeemable Preferred Stock,
par value $.01 per share. The shares were issued to an affiliated entity as
satisfaction of a debt owed to the affiliated entity by Adirondack in the amount
of $200,233. The Series A Redeemable Preferred Stock contains preferential
liquidation rights in the amount of $200,233. The Series A Redeemable Preferred
Stock is not be entitled to any dividends and shall not be entitled to any
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. The series
A Redeemable Preferred Stock provides that the preferred stock may be redeemed
commencing January 1, 2001 by Adirondack, at its option, through payments of up
to 20% of Adirondack's pre-tax profits (as determined in accordance with
generally accepted accounting principals) of each year commencing with fiscal
year ended December 31, 2000 until payment of an aggregate of $200,233 for all
20,000 shares.
<PAGE>
PART II
ITEM 1 Market for Common equity and Related Stockholder Matters.
All of Adirondack's currently issued and outstanding shares were issued in
private transactions. There is currently no public trading market for
Adirondack's securities.
There are approximately 36 shareholders of Adirondacks common stock, including
management and controlling shareholders. Adirondack has declared no dividends on
its securities.
ITEM 2 Legal Proceedings
Adirondack is not a party to any legal proceedings, either actual or pending.
ITEM 3 Charges in and Disagreements with Accountants
Not Applicable
ITEM 4 Recent Sales of Unregistered Securities
Between August 4, 1998 and December 31, 1998, Adirondack engaged in a private
offering of its securities pursuant to Rule 504 of Regulation D of the
Securities Act of 1933. In such offering, Adirondack offered for sale a minimum
of 500,000 shares and a maximum of 2,000,000 shares of common stock at $.50 per
share. The offering closed on October 16, 1998, with 522,000 shares sold to 29
shareholders.
In 1997, Adirondack issued 100 shares to 8 people for work, labor and services
performed. This offering was conducted pursuant to Section 4(2) of the
Securities Act. On August 5, 1998, Adirondack instituted a stock split
(133,590:1).
ITEM 5 Indemnification of Directors and Officers
Indemnification. Adirondack shall indemnify to the fullest extent permitted
by, and in the manner permissible under the laws of the State of New York, any
person made, or threatened to be made, a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he is or was a director or officers of Adirondack, or served any other
enterprise as director, officer or employee at the request of Adirondack. The
Board of Directors, in its discretion, shall have then power on behalf of
Adirondack to indemnify any person, other than a director or officer, made a
party to any action, suit or proceeding by reason of the fact that he/she is or
was an employee of Adirondack.
Insofar as indemnification for liabilities arising under the Act may be
permitted to director, officers and controlling person of Adirondack, Adirondack
has been advised that in the opinion of the Securities and exchange Commission,
such indemnification is against public policy as expressed in the Act, and is
therefor, unenforceable. In the event that claim for indemnification against
such liabilities (other than the payment by Adirondack of expenses incurred or
paid by a director, officer or controlling person of Adirondack in the
successful defense of any action, suit or proceedings) is asserted by such
director, officer or controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by its is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issues.
INDEMNIFICATION OF OFFICERS OR PERSONS CONTROLLING THE CORPORATION FOR
LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IS HELD TO BE
AGAINST PUBLIC POLICY NY THE SECURITIES AND EXCHANGE COMMISSION, AND IS THEREFOR
UNENFORCEABLE.
<PAGE>
PART F/S
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
Financial Statements
February 28, 1999
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
Table of Contents
Independent Auditors' Report
Financial Statements
Balance Sheets
Statements of Operations and Retained Earnings (Deficit)
Statement of Changes in Stockholders' Equity
Statements of Cash Flows
Notes to Financial Statements
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 28, 1999 and 1998 and the related
statements of operations and retained earnings, changes in stockholders' equity
and cash flows for the year ended February 28, 1999 and March 7, 1997
(inception) to February 28, 1998. 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 28, 1999 and 1998 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.
Simon Krowitz Bolin & Associates
July 17, 1999
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
<PAGE>
BALANCE SHEETS
February 28,
1999 1998
ASSETS
Current Asset
Cash $ 9,557 $ 542
Property and Equipment
Site Development 77,466 60,170
Office Equipment 7,824 0
Accumulated Depreciation,
Amortization 0 0
Total Property and Equipment 85,290 60,170
Other Assets
Security Deposits 24,712 20,000
Deferred Offering Costs 0 7,500
Total Other Assets 24,712 27,500
TOTAL ASSETS $ 119,559 $ 88,212
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities
Payroll Taxes Payable $ 5,947 $ 0
Accounts Payable 0 35,000
Loan Payable 342 184,125
Total Liabilities 6,289 219,125
Stockholders' Equity
Common Stock - Authorized 40,000,000
Shares $.01 Par Value; 13,881,000
Issued and Outstanding 15,220 10,000
Preferred Stock - Series A,
Authorized, 1,000,000 at $.01
Par Value; 20,000 Shares
Issued 200 0
Paid-in Capital - Common 255,780 0
Paid-in Capital - Preferred 200,033 0
Deficit Accumulated During
Development Stage (357,963) (140,913)
Total Stockholders' Equity 113,270 (130,913)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 119,559 $ 88,212
See Auditors' Report and Notes to Financial Statements.
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
<PAGE>
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
For the Year Ended March 7, 1997 Cumulative
February 28, 1999 (inception) to Total
February 28, 1999
REVENUES
Sales $ 0 $ 0 $ 0
EXPENSES
Bottling Costs 2,970 2,465 5,435
Officers Salaries 40,000 0 40,000
Salaries 0 45,675 45,675
Consulting Fees 23,525 35,300 58,825
Professional Fees 5,700 17,020 22,720
Rent 48,562 0 48,562
Office Expenses 7,361 4,034 11,395
Taxes 4,260 0 4,260
Insurance 1,333 5,820 7,153
Utilities 2,334 3,499 5,833
Travel 0 8,600 8,600
Equipment Rental 0 8,399 8,399
Auto Expense 0 3,605 3,605
Supplies 0 6,496 6,496
TOTAL EXPENSES 136,045 140,913 276,958
OTHER INCOME (EXPENSE)
Rent Income 5,125 0 5,125
Stock Placement
Expenses (86,130) 0 (86,130)
TOTAL OTHER INCOME (EXPENSE) (81,005) 0 (81,005)
NET INCOME (LOSS) (217,050) (140,913) (357,963)
ADIRONDACK PURE SPRINGS MT. WATER CO., INC
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
<TABLE>
<CAPTION>
For the Year Ended March 7, 1997 Cumulative
February 28, 1999 (inception) to Total
February 28, 1999
<S> <C> <C> <C>
DEFICIT ACCUMULATED DURING
DEVELOPMENT STAGE - Begin
$ (140,913) $ 0 $ 0
DEFICIT ACCUMULATED DURING
DEVELOPMENT STAGE - End
$ (357,963) $ (140,913) $ (357,963)
(LOSS) PER SHARE - Basic
$ (.02) $ (1,409) $ (.02)
(LOSS) PER SHARE - Diluted
$ (.02) $ (1,409) $ (.02)
SHARES USED IN PER SHARE CALCULATION
- - Basic 13,547,000 100
SHARES USED IN PER SHARE CALCULATION
- Diluted 13,547,000 100
</TABLE>
See Auditors' Report and Notes to Financial Statements.
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended February 28, 1999 and 1998
Preferred Stock Common Stock Paid-in Accumulated
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
Loss for Period (140,913)
Balance -
February 28, 1998 0 0 100 10,000 0 (140,913)
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 0 0 522,000 5,220 255,780 0
Loss for Year (217,050)
Balance -
February 28, 1999 20,000 $ 200 13,881,000 $ 15,220 $ 455,813 $ (357,963)
</TABLE>
See Auditors' Report and Notes to Financial Statements
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
For the Year Ended March 7, 1997 Cumulative
February 28, 1999 (inception) to Total
February 28, 1999
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Loss $(217,050) $(140,913) $(357,963)
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Increase in Loan
Payable 16,450 184,125 200,575
(Decrease) Increase in
Accounts Payable (35,000) 35,000
Increase in Payroll
Taxes Payable 5,947 5,947
Increase (Decrease)
in Deferred Offering
Costs 7,500 (7,500)
NET CASH (USED) PROVIDED BY
OPERATING ACTIVITIES (222,153) 70,712 (151,441)
CASH FLOWS FROM INVESTING
ACTIVITIES
Site Development (17,296) (60,170) (77,466)
Purchase of Office
Equipment (7,824) (7,824)
Increase in Security
Deposits (4,712) (20,000) (24,712)
NET CASH (USED) BY INVESTING
ACTIVITIES (29,832) (80,170) (110,002)
CASH FLOWS FROM BY FINANCING
ACTIVITIES
Sale of Common
Stock 261,000 10,000 271,000
NET INCREASE IN CASH 9,015 542 9,557
CASH - Beginning 542 0 0
CASH - Ending $ 9,557 $ 542 $ 9,557
Supplemental Disclosures:
Conversion of Loan
Payable to Preferred
Stock $ 200,233 $ 0 $ 200,233
</TABLE>
See Auditors' Report and Notes to Financial Statements.
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
<PAGE>
NOTES TO FINANCIAL STATEMENTS
February 28, 1999
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.
<PAGE>
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.
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 28, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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. Basis 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.
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).
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.
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
<PAGE>
NOTES TO FINANCIAL STATEMENTS
February 28, 1999
NOTE 5 - COMMON STOCK (Continued)
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.
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 authorized the issue of 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 options,
could start January 1, 2000 through payments of up to 20% of the Company's
pre-tax profit.
NOTE 7 - COMMITMENTS, CONTINGENCIES
The Company has been approved for a four million six hundred and twenty-five
thousand dollars ($4,625,000) by the Counties of Warren and Washington
Industrial Development Agency bond issue loan for the purpose of constructing up
to 50,000 square foot bottling plant. The Company has until July 31, 2000 to
begin the bond offering.
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 28, 1999
NOTE 7 - COMMITMENTS, CONTINGENCIES (Continued)
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 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.
<PAGE>
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 29, 2000 $87,490
February 28, 2001 89,790
February 28, 2002 92,182
February 28, 2003 69,669
February 28, 2004 0
The Company intends to enter into an 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 intends to enter into an employment
agreement with Douglas Aver, its Project Manager, for a term of three years at
a salary of $32,500 per year.
NOTE 8 - RENTAL INCOME
The Company entered into a sublease agreement for a portion of its office
space. The sublease term is October 1, 1998 to September 30, 2003 at a
minimum annual rental of $28,500. As of February 28, 1999, the subtenant is
in default of the terms of the lease and has not made the required lease
payments. Consequently, no income accrual has been made pending resolution of
this matter.
The Company has negotiated with a new subtenant for a two-year lease 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.
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 28, 1999
NOTE 9 - RELATED PARTY TRANSACTION
The Company has entered into a consulting agreement with CES Consulting Co.,
Inc. (CES). The agreement is for five (5) years beginning September 1, 1998
at an annual cost of $100,000 per year.
NOTE 10 - SUBSEQUENT EVENTS
Acquisition - The Company is currently in negotiations to acquire 51% of
Creative Beverages of Canada, a Canadian corporation. The negotiations
include 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. The cost of this acquisition is estimated at
$35,000.
Marketing - The Company is negotiating with Titan Sports for supplying the
World Wrestling Federation with water and other licensed products. The fee to
the Company is up to 12% of gross sales.
The Company is negotiating a five (5) year licensing agreement with Met-Rx
USA-Source\One for the sale of its water, for a fee of 5% of gross sales.
The Company is awaiting completion of negotiations with Goebel Marketing and
Sales (Goebel) for a marketing and sales agreement. Goebel will provide the
marketing and sales of the Company's Aviva brand of water. Goebel will
receive a commission of 5% of gross sales of private labels, including Met-Rx.
<PAGE>
Sales - The Company has negotiated an exclusive agreement with Conca D'Oro
Importers of Woodside, New York whereas the Company will act as the exclusive
provider for CDI for its private label water products. The agreement's term
is June 4, 1999 to December 3, 2000.
Distribution - The Company entered into a distribution agreement on June 4,
1999. The agreement extends until December 31, 2009. Under the terms of the
agreement, the Company will pay the distributor $1.25 per case of the products
delivered to the retailer. The distributor agrees that during the term hereof
it will not carry or distribute bottled water other than the products.
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 28, 1999
NOTE 10 - SUBSEQUENT EVENTS (Continued)
Other - The Company has agreed to enter into a business consulting agreement
with Madison Venture Capital II, Inc., of which two shareholders of the
Company are principals. The agreement is to begin on September 1, 1998 or
upon the achievement of certain conditions. The agreement is for a period of
5 years at the rate of $2,000 per month. As of February 28, 1999, these
conditions have not been achieved.
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 that is to
raise $725,000. 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 120% of the Offering price
for a period of five (5) years commencing one year from the date of the
prospectus.
The Company has an agreement (dated June 2, 1999) for the services of MRK
Enterprises, Inc. for the preparation of the offering memorandum, printing
costs, filing of 15c211 and Form 10 with the SEC for 2,000,000 common shares.
<PAGE>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
NOVEMBER 30, 1999
===============================================================================
ASSETS
CURRENT ASSETS
Cash $ 4,384
Accounts Receivable - Trade 31,132
Deferred Offering Costs 2,450
Inventory 24,034
- -------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 62,000
- -------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Site Development 77,466
Office Equipment 7,824
Accumulated Depreciation, Amortization (3,925)
- -------------------------------------------------------------------------------
TOTAL PROPERTY AND EQUIPMENT 81,365
- -------------------------------------------------------------------------------
OTHER ASSETS
Deposits - Future Acquisition 13,507
Security Deposits 24,712
Startup Costs 75,000
- -------------------------------------------------------------------------------
TOTAL OTHER ASSETS 113,219
- -------------------------------------------------------------------------------
TOTAL ASSETS $ 256,584
===============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts Payable $ 147,694
Payroll Taxes Payable 32,376
Loan Payable 81,467
- -------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 261,537
- -------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common Stock - Authorized 40,000,000 Shares $.01 Par Value;
15,859,000 Issued and Outstanding 35,000
Preferred Stock - Series A, Authorized, 1,000,000 at $.01 Par
Value; 20,000 Shares Issued 200
Paid-in Capital - Common 311,000
Paid-in Capital - Preferred 200,033
Deficit Accumulated During Development Stage (551,186)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (4,953)
- -------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 256,584
===============================================================================
Page 1 of 11
<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 NOVEMBER 30, 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 (140,913)
- --------------------------------------------------------------------------------------------------------------------
Balance - February 28, 1998 0 0 100 10,000 0 (140,913)
Amendment to Certificate of
Incorporation - Stock Split 13,358,900 10,000 0 0
Loss for Five Months Ended July
31, 1998 (10,766)
- --------------------------------------------------------------------------------------------------------------------
Balance - July 31, 1998 0 0 13,359,000 10,000 0 (151,679)
Conversion of Loan to
Preferred Stock 20,000 200 200,033 0
Sale of Stock 500,000 5,000 256,000 0
Loss for Seven Months Ended
February 28, 1998 (206,284)
- --------------------------------------------------------------------------------------------------------------------
Balance - February 28, 1999 20,000 200 13,859,000 15,000 456,033 (357,963)
Stock Issued for Professional
Fees 2,000,000 20,000 55,000 0
Loss for Five Months Ended
July 31, 1999 (110,063)
- --------------------------------------------------------------------------------------------------------------------
Balance - July 31, 1999 20,000 200 15,859,000 35,000 511,033 (468,026)
Loss for One Month Ended
August 31, 1999 (21,330)
- --------------------------------------------------------------------------------------------------------------------
Balance - August 31, 1999 20,000 200 15,859,000 35,000 511,033 (489,356)
Loss for Three Months Ended
November 30, 1999 (61,830)
- --------------------------------------------------------------------------------------------------------------------
Balance - November 30, 1999 20,000 $200 15,859,000 $35,000 $511,033 $(551,186)
====================================================================================================================
</TABLE>
Page 2 of 11
<PAGE>
<TABLE>
<CAPTION>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
====================================================================================================================
September 1, September 1, March 7, 1997
1998 to 1999 to (inception) to
November 30, November 30, November 30,
1998 1999 1999
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Sales $ 0 $ 10,197 $ 49,025
- --------------------------------------------------------------------------------------------------------------------
COST OF SALES
Beginning Inventory 0 0 0
Bottling Units 0 31,598 56,956
Site Expense 0 616 10,497
Rent - Site 7,500 7,500 20,000
Salaries 0 0 45,675
Less: Ending Inventory 0 (24,034) (24,034)
- --------------------------------------------------------------------------------------------------------------------
TOTAL COST OF SALES 7,500 15,680 109,094
- --------------------------------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) (7,500) (5,483) (60,069)
- --------------------------------------------------------------------------------------------------------------------
EXPENSES
Officer's Salary 14,000 24,000 114,000
Consulting, Professional Fees 54,075 24,000 160,095
Commissions 0 900 900
Office Rent, Expenses 12,762 15,769 101,581
Taxes 0 1,836 6,555
Insurance 250 0 7,153
Travel, Auto Expense 0 1,532 17,784
Equipment Rental 0 0 8,399
Supplies, Miscellaneous 0 0 7,271
Depreciation 0 560 3,924
- --------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 81,087 68,597 427,662
- --------------------------------------------------------------------------------------------------------------------
OTHER INCOME EXPENSES
Rent Income 2,825 12,250 22,675
Stock Placement Expenses (51,065) 0 (86,130)
- --------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSES) (48,240) 12,250 (63,455)
- --------------------------------------------------------------------------------------------------------------------
NET (LOSS) (136,827) (61,830) (551,186)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3 of 11
<PAGE>
<TABLE>
<CAPTION>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
(CONTINUED)
====================================================================================================================
September 1, September 1, March 7, 1997
1998 to 1999 to (inception) to
November 30, November 30, November 30,
1998 1999 1999
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DEFICIT ACCUMULATED DURING
DEVELOPMENT STAGE - BEGIN $ $ (489,356) $ 0
DEFICIT ACCUMULATED DURING
DEVELOPMENT STAGE - END $ $ (551,186) $ (551,186)
- --------------------------------------------------------------------------------------------------------------------
(LOSS) PER SHARE - BASIC $ $ (.04) $ (.04)
(LOSS) PER SHARE - DILUTED $ $ (.04) $ (.04)
- --------------------------------------------------------------------------------------------------------------------
SHARES USED IN PER SHARE CALCULATION
- Basic 14,192,333 14,192,333
SHARES USED IN PER SHARE CALCULATION
- Diluted 14,192,333 14,192,333
====================================================================================================================
</TABLE>
Page 4 of 11
<PAGE>
<TABLE>
<CAPTION>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
===================================================================================================================
September 1, March 7, 1997
1999 to (inception) to
November 30, November 30,
1999 1999
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Loss $ (61,830) $ (551,186)
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation 561 3,925
Increase in Accounts Receivable 0 (31,132)
Increase in Inventory (24,034) (24,031)
Increase in Loan Payable 1,500 281,700
Increase in Deferred Offering Costs (2,450) (2,450)
(Decrease) Increase in Accounts Payable 62,030 147,694
Increase in Payroll Taxes Payable 9,670 32,376
- --------------------------------------------------------------------------------------------------------------------
NET CASH (USED) PROVIDED BY
OPERATING ACTIVITIES (14,553) (143,107)
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Site Development 0 (77,466)
Purchase of Office Equipment 0 (7,824)
Increase in Security Deposits 0 (24,712)
Deposits for Acquisition 0 (13,507)
- --------------------------------------------------------------------------------------------------------------------
NET CASH (USED) BY INVESTING
ACTIVITIES 0 (123,509)
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM BY FINANCING
ACTIVITIES
Sale of Common Stock 0 271,000
- --------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (14,553) 4,384
CASH - BEGINNING 18,937 0
- --------------------------------------------------------------------------------------------------------------------
CASH - ENDING $ 4,384 $ 4,384
===================================================================================================================
SUPPLEMENTAL DISCLOSURES:
Conversion of Loan Payable to Preferred Stock $ 200,233
Stock Issued for Professional Fees $ 75,000
===================================================================================================================
</TABLE>
Page 5 of 11
<PAGE>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999
================================================================================
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.
Page 6 of 11
<PAGE>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999
================================================================================
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.
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.
Page 7 of 11
<PAGE>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999
================================================================================
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 500,000 shares were issued.
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 authorized the issuance of 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.
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.
Page 8 of 11
<PAGE>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999
================================================================================
NOTE 7 - COMMITMENTS, CONTINGENCIES (CONTINUED)
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:
November 30, 2000 $88,842
November 30, 2001 89,132
November 30, 2002 75,126
November 30, 2003 37,743
November 30, 2004 8,712
The Company has entered into an 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 to entered into
an employment agreement with Douglas Aver, its Project Manager, for a
term of three years at a salary of $32,500 per year.
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 9 of 11
<PAGE>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999
================================================================================
NOTE 9 - RELATED PARTY TRANSACTION
The Company has entered into a consulting agreement with CES Consulting
Co., Inc. (CES). The agreement is for five (5) years beginning
September 1, 1998 at an annual cost of $100,000 per year.
NOTE 10 - SUBSEQUENT EVENTS
ACQUISITION - The Company has agreed in principal to acquire 51% of
Creative Beverages of Canada, a Canadian corporation. The negotiations
include 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. The cost of this acquisition is
estimated at $35,000. The Company has expended $13,507 on this project.
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%.
The Company is negotiating a five (5) year licensing agreement with
Met-Rx USA-Source\One for the sale of its water, for a fee of 5% of
gross sales. The Company is also negotiating a joint marketing
agreement with the Met-RX for the Company's Aviva Springs labeled
water.
The Company is awaiting completion of negotiations with Goebel
Marketing and Sales (Goebel) for a marketing and sales agreement.
Goebel will provide the marketing and sales of the Company's Aviva
brand of water. Goebel will receive a commission of 5% of gross sales
of private labels, including Met-Rx.
SALES - The Company has negotiated an exclusive agreement with Conca
D'Oro Importers of Woodside, New York whereas the Company will act as
the exclusive provider for CDI for its private label water products.
The agreement's term is June 4, 1999 to December 3, 2000.
The Company has negotiated a sales agreement with Nutrition Club Stores
(NCS) for the national distribution of its water to local gyms.
Page 10 of 11
<PAGE>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999
================================================================================
NOTE 10 - SUBSEQUENT EVENTS (CONTINUED)
DISTRIBUTION - The Company entered into a distribution agreement on
June 4, 1999. The agreement extends until December 31, 2009. Under the
terms of the agreement, the Company will pay the distributor $1.25 per
case of the products delivered to the retailer. The distributor agrees
that during the term hereof it will not carry or distribute bottled
water other than the products.
OTHER - The Company has agreed to enter into a business consulting
agreement with Madison Venture Capital II, Inc., of which two
shareholders of the Company are principals. The agreement is to begin
on September 1, 1998 or upon the achievement of certain conditions. The
agreement is for a period of 5 years at the rate of $2,000 per month.
As of February 28, 1999, these conditions have not been achieved.
The Company's labeled water has been named the official water for 1999
for the Mr. Olympia and Fitness Olympia contest by the International
Federation of Body Builders.
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 that is 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 120% of the
Offering price for a period of five (5) years commencing one year from
the date of the prospectus.
The Company has an agreement (dated June 2, 1999) for the services of
MRK Enterprises, Inc. for the preparation of the offering memorandum,
printing costs, filing of 15(c)2-11 and Form 10 with the SEC for
2,000,000 common shares.
Page 11 of 11
<PAGE>
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
125 MICHAEL DRIVE, SUITE 101
SYOSSET, NEW YORK 11791
In accordance with Item 310(b) of Regulation S-B, it is the opinion of
management that all adjustments necessary in order to make the financial
statements not misleading have been made.
<PAGE>
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, thereto duly authorized.
ADIRONDACK PURE SPRINGS MT. WATER CO., INC.
(Registrant)
Date:August 27, 1999 By: David Sackler
David Sackler, President
