UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

                    [X] QUARTERLY REPORT PURSUANT TO SECTION
                     13 OR 15(d) OF THE SECURITIES EXCHANGE
                      ACT OF 1934 For the quarterly period
                               ended June 29, 2003

            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


                         BEVSYSTEMS INTERNATIONAL, INC.
        (Exact name of small business issuer as specified in its charter)

        Florida                                            84-1352529
    (State or other jurisdiction of            (IRS Employer Identification No.)
     incorporation or organization)



                              1315 Cleveland Street
                            Clearwater, Florida 33755
                    (Address of principal executive offices)

                                 (786) 425-0811
                           (Issuer's telephone number)

                                 Not Applicable
              (Former name, former address and former fiscal year,
                         if changed since last report)


     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 Yes [X] No [ ]

     State the number of shares  outstanding of each of the issuer's  classes of
common equity, as of the latest  practicable date: As of September 8, 2003 there
were  38,283,323  shares of common stock,  par value  $0.0001 per share,  of the
issuer outstanding.

     Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]
<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                 Page

PART I--FINANCIAL INFORMATION
<S>          <C>                                                                                 <C>
Item 1. Financial Statements.                                                                    F-1

Item 2. Management's Discussion and Analysis or Plan of Operation.                               1
Item 3. Controls and Procedures.                                                                 6

PART II--OTHER INFORMATION

Item 1. Legal Proceedings.                                                                       6

Item 2. Changes in Securities and Use of Proceeds.                                               7

Item 3. Defaults Upon Senior Securities.                                                         9

Item 4. Submission of Matters to a Vote of Security Holders.                                     9

Item 5. Other Information.                                                                       9

Item 6. Exhibits and Reports on Form 8-K.                                                        9

SIGNATURES                                                                                       10
</TABLE>
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                                      INDEX
                                  JUNE 28, 2003
<TABLE>
<CAPTION>

                                                                                            Page Number

CONSOLIDATED FINANCIAL STATEMENTS

<S>                                          <C>                                               <C>
         Consolidated Balance Sheets at June 28, 2003                                       F-2 to F-3
            (unaudited) and March 29, 2003

         Consolidated Statement of Operations for the three months
               ended June 30, 2003 (unaudited) and June 30, 2002                                  F-4

         Consolidated Statement of Changes in Shareholders' Deficiency
           for the three months ended June 28, 2003 (unaudited)                                   F-5

         Consolidated Statement of Cash Flows for the three months
           ended June 28, 2003 and June 30, 2002 (unaudited)                                F-6 to F-7

         Notes to Consolidated Financial Statements                                         F-9 to F-32
</TABLE>
<PAGE>

                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 28, 2003
<PAGE>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                                      INDEX
                                  JUNE 28, 2003
<TABLE>
<CAPTION>

                                                                                            Page Number

CONSOLIDATED FINANCIAL STATEMENTS

                  <S>                                                                          <C>
         Consolidated Balance Sheets at June 28, 2003                                       F-2 to F-3
            (unaudited) and March 29, 2003

         Consolidated Statement of Operations for the three months
               ended June 30, 2003 and June 30, 2002 (unaudited)                               F-4

         Consolidated Statement of Changes in Shareholders' Deficiency
           for the three months ended June 28, 2003 (unaudited)                                F-5

         Consolidated Statement of Cash Flows for the three months
           ended June 28, 2003 and June 30, 2002 (unaudited)                                F-6 to F-7

         Notes to Consolidated Financial Statements                                         F-8 to F-32
</TABLE>
<PAGE>


                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                  JUNE 28, 2003



                                                      ASSETS
<TABLE>
<CAPTION>

                                                                                   June 28, 2003
                                                                                    (unaudited)          March 29, 2003
                                                                                    ------------         ------------
Current assets:
<S>                                                                                 <C>                  <C>
     Cash and cash equivalents                                                      $       443          $       136
     Accounts receivable, net
     Marketable securities                                                                    -                    -
                                                                                         14,500                5,500
                                                                                    ------------         ------------

          Total current assets
                                                                                         14,943                5,636
                                                                                     -----------         ------------

Property and equipment, net                                                             997,819            1,003,363
                                                                                     -----------         ------------

          Total assets                                                              $ 1,012,762          $ 1,008,999
                                                                                    ============         ============
</TABLE>

   See accompanying notes to the consolidated financial statements (unaudited)

                                       F-2
<PAGE>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                  JUNE 28, 2003



                    LIABILITIES AND SHAREHOLDERS' DEFICIENCY

<TABLE>
<CAPTION>

                                                                                    June 28, 2003
                                                                                     (unaudited)        March 29, 2003
                                                                                   ---------------      ---------------
Current liabilities:
<S>                                                                                 <C>                  <C>
     Accounts payable                                                               $   1,662,836        $   1,665,132
     Accrued expenses                                                                   2,451,075            2,320,371
     Convertible notes payable                                                            785,000              785,000
     Notes payable secured by assets                                                      778,873              778,873
     Deferred revenue                                                                      80,670               94,170
                                                                                   ---------------      ---------------


          Total current liabilities                                                     5,758,454            5,643,546
                                                                                   ---------------      ---------------


Commitments and contingencies

Shareholders' deficiency:
     Preferred stock; no par value, 5,000,000 shares authorized; 100 shares
      issued and outstanding nonvoting and convertible
       into 874 shares of common stock                                                     74,601               74,601
     Common stock; $.0001 par value, 650,000,000 shares
       authorized;21,170,742 and, 11,311,272 issued and outstanding                         2,117                1,132
     Additional paid-in capital                                                        30,994,770           30,064,193
     Unearned services                                                                  (325,874)             (629,067)
     Accumulated comprehensive income                                                       9,000                    -
     Accumulated deficit                                                             (35,500,306)          (34,145,406)
                                                                                   ---------------      ---------------

          Total shareholders' deficiency                                              (4,745,692)           (4,634,547)
                                                                                   ---------------      ---------------

Total liabilities and shareholders' deficiency                                      $   1,012,762        $   1,008,999
                                                                                   ===============      ===============
</TABLE>


   See accompanying notes to the consolidated financial statements (unaudited)

                                       F-3
<PAGE>


                 BEVSYSTEMS INTERNATIONAL INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
           FOR THE THREE MONTHS ENDED JUNE 28, 2003 AND JUNE 30, 2002
<TABLE>
<CAPTION>
                                                                                  2003                        2002
                                                                            ---------------            ---------------

<S>                                                                          <C>                       <C>
Net revenues                                                                 $      15,967             $      213,322

Cost of  revenues                                                                      315                    165,700
                                                                            ---------------            ---------------

Gross profit (loss)                                                                 15,652                     47,622
                                                                            ---------------            ---------------
Operating expenses:
    Selling and marketing                                                                -                    597,506

    General and administrative                                                   1,357,300                  2,185,543
                                                                            ---------------            ---------------

             Total operating expenses                                            1,357,300                  2,783,049
                                                                            ---------------            ---------------

Loss before other income (expense)                                              (1,341,648)                (2,735,427)
                                                                            ---------------            ---------------

Other income (expense):
     Interest and financing expense                                                (41,175)                  (183,416)

     Other income                                                                   27,923                          -
                                                                            ---------------            ---------------
            Total other income (expense)                                           (13,252)                  (183,416)
                                                                            ---------------            ---------------

Net loss                                                                        (1,354,900)                (2,918,843)

Other comprehensive income (loss):

      Net unrealized gain on securities                                              9,000                          -
                                                                            ---------------            ---------------
Comprehensive loss                                                           $  (1,345,900)            $   (2,918,843)
                                                                            ===============            ===============

Basic loss per common share                                                  $       (0.07)            $       (13.65)
                                                                            ===============            ===============


Weighted average common shares outstanding                                      18,575,340                    213,856
                                                                            ===============            ===============
</TABLE>

   See accompanying notes to the consolidated financial statements (unaudited)

                                       F-4
<PAGE>

                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
          CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIENCY
                    FOR THE THREE MONTHS ENDED JUNE 28, 2003


<TABLE>
<CAPTION>
                           Common Stock, $.0001 par
                                  value
                                                    Additional                           Accumulated
                           Number of                Paid-in       Preferred    Unearned  Comprehensive Accumulated
                           Shares       Amount      Capital       Stock        Services  Income        Deficit       Total
                         ------------ ------------ ------------ ------------ ----------- ------------ ------------ ------------
<S>                                          <C>              <C>          <C>              <C>             <C>               <C>

Balance at March 29,
2003                      11,311,272  $     1,132  $30,064,193  $    74,601  $ (629,067)   $       -  $(34,145,406)$(4,634,547)

Common stock issued for
services and financing     7,714,586          771      763,849            -    (356,000)           -             -     408,620

Common stock issued for
settlement of payables     2,144,884          214      166,728            -     (33,000)           -             -     133,942

Amortization of unearned
services                           -            -            -            -     692,193            -             -     692,193

Change in unrealized gain
on marketable Securities           -            -            -            -           -        9,000             -       9,000

Net loss for the three
months ended June 28,
2003                               -            -            -            -           -            -    (1,354,900) (1,354,900)
                         ------------ ------------ ------------ ------------ ----------- ------------ ------------ ------------
Balance at June 28, 2003  21,170,742 $      2,117  $30,994,770  $    74,601  $ (325,874)   $   9,000  $(35,500,306)$(4,745,692)
                         ============ ============ ============ ============ =========== ============ ============ ============
</TABLE>
   See accompanying notes to the consolidated financial statements (unaudited)

                                       F-5
<PAGE>

                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
           FOR THE THREE MONTHS ENDED JUNE 28, 2003 AND JUNE 30, 2002
<TABLE>
<CAPTION>
                                                                                        2003                2002
                                                                                 -----------------   -----------------
<S>                                                                                        <C>              <C>
Cash flows from operating activities:
  Net loss                                                                      $      (1,354,900)  $      (2,918,843)
  Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:
      Depreciation                                                                          5,544              48,628
      Amortization of unearned services                                                   692,193                   -
      Amortization of debt discount                                                             -              81,290
      Issuance of common stock for services and financing                                 418,369           2,237,407
   Changes in operating assets and liabilities, net of acquisitions:
      Decrease (increase) in accounts receivable                                                -             (20,721)
      Decrease (increase) in inventory                                                          -             (28,113)
      Decrease (increase) in prepaid expenses and other current assets                          -              12,256
      Increase in accounts payable and accrued expenses                                   252,601             (69,127)
      Decrease in deferred revenue                                                        (13,500)                  -
                                                                                 -----------------   -----------------

        Net cash provided by (used in) operating activities                                   307            (657,223)
                                                                                 -----------------   -----------------

Cash flows from investing activities:
     Purchase of property and equipment                                                         -             (31,138)
                                                                                 -----------------   -----------------
           Net cash used in investing activities                                                -             (31,138)
                                                                                 -----------------   -----------------

Cash flows from financing activities:
     Proceeds from notes payable and shareholder advances                                       -             131,000
     Repayments of notes payable                                                                -            (326,114)
     Proceeds from issuance of convertible notes payable                                        -             490,000
     Proceeds from exercise of stock options                                                    -              14,500
     Net proceeds from exercise of warrants                                                     -             467,887
                                                                                 -----------------   -----------------

        Net cash provided by financing activities                                               -             777,273
                                                                                 -----------------   -----------------

Net increase in cash and cash equivalents                                                     307              88,912

Cash and cash equivalents, beginning period                                                   136               8,296
                                                                                 -----------------   -----------------

Cash and cash equivalents, end of year period                                    $            443   $          97,208
                                                                                 =================   =================
</TABLE>

   See accompanying notes to the consolidated financial statements (unaudited)

                                                        F-6
<PAGE>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
       FOR THE THREE MONTHS ENDED JUNE 28, 12003 AND JUNE 30, 2002(cont'd)
<TABLE>
<CAPTION>

Supplemental disclosure of non-cash information:                                      2003                2002
                                                                                -----------------   ---------------
<S>                                                                                    <C>              <C>
     Cash paid during the year for:
           Interest                                                             $              -    $       34,948
                                                                                =================   ===============
           Income taxes                                                         $              -    $            -
                                                                                =================   ===============

Schedule of non-cash investing and financing activities:

     Issuance of common stock for services                                      $        389,000    $            -
                                                                                =================   ===============

     Stock issued in connection with the settlement of trade payables           $        124,193    $      419,194
                                                                                =================   ===============

     Stock issued in connection with conversion of notes payable                $              -    $       68,912
                                                                                =================   ===============


     Stock issued in connection with prepaid expenses                           $              -    $      123,188
                                                                                =================   ===============
</TABLE>

   See accompanying notes to the consolidated financial statements (unaudited)


                                       F-7
<PAGE>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE THREE MONTHS ENDED JUNE 28, 2003
                                   (UNAUDITED)


NOTE 1 - ORGANIZATION, HISTORY AND NATURE OF BUSINESS

         BEVsystems International, Inc. and Subsidiaries (collectively the
         "Company") is a provider of oxygenated water. The Company distributes
         its products primarily through an international distribution network.
         The Company's fiscal year ends on the Saturday nearest to March 31.

         On July 12, 2001, the Company acquired the net assets of the beverage
         division of Life International, a provider of oxygenated water. The net
         assets included oxygenation equipment, bottles, proprietary seals,
         marketing materials, office equipment, trademarks, patent rights and
         other intangible assets (see Note 4). On February 25, 2002, the Company
         consummated a merger with Aqua Clara Bottling and Distribution, Inc.
         and Subsidiary (see Note 4).

NOTE 2 - BASIS OF PRESENTATION

         The accompanying unaudited financial statements have been prepared in
         accordance with generally accepted accounting principles in the United
         States of America for interim financial information, the instructions
         to Form 10-QSB and Items 303 and 310(B) of Regulation S-B. In the
         opinion of management, the unaudited financial statements have been
         prepared on the same basis as the annual financial statements and
         reflect all adjustments, which include only normal recurring
         adjustments, necessary to present fairly the financial position as of
         June 28, 2003 and the results of the operations and cash flows for the
         three months ended June 28, 2003 and June 30, 2002. The results for the
         three months ended June 30, 2003, are not necessarily indicative of the
         results to be expected for any subsequent quarter or the entire fiscal
         year ending March 29, 2004. The balance sheet at March 29, 2003 has
         been derived from the audited financial statements at that date.

         Certain information and footnote disclosures normally included in
         financial statements prepared in accordance with generally accepted
         accounting principles in the United States of America have been
         condensed or omitted pursuant to the Securities and Exchange
         Commission's ("SEC") rules and regulations.

         These unaudited financial statements should be read in conjunction with
         the Company's audited financial statements and notes thereto for the
         year ended March 29, 2003 as included in the Company's report on Form
         10-KSB filed on September 15, 2003.

         Loss per common share is computed pursuant to Financial Accounting
         Standards Board, Statement of Financial Accounting Standards ("SFAS")
         No. 128, "Earnings Per Share" ("EPS"). Basic income (loss) per share is
         computed as net income (loss) available to common shareholders divided
         by the weighted average number of common shares outstanding for the
         period. Diluted EPS reflects the potential dilution that could occur
         from common stock issuable through stock based compensation including
         stock options, restrictive stock awards, warrants and other convertible
         securities. Diluted EPS is not presented since the effect would be
         anti-dilutive.


                                      F-8
<PAGE>
NOTE 3 - GOING CONCERN

         The accompanying consolidated financial statements have been prepared
         assuming that the Company will continue as a going concern. The Company
         has incurred operating losses, negative cash flows from operating
         activities, negative working capital and has a shareholder's deficit.
         At June 28, 2003 and March 29, 2003, the Company's accumulated deficit
         was $35,500,306 and $34,145,406, respectively and its working capital
         deficiency was $5,743,511 and $5,637,910, respectively. For the years
         ended March 29, 2003 and March 30, 2002, the Company had a net loss
         from operations of $29,560,198 and $4,585,208, respectively. In
         addition, the Company is in default of its debt agreement for
         nonpayment and certain debtors have filed actions against the Company,
         including foreclosing property. These conditions raise substantial
         doubt about the Company's ability to continue as a going concern.

         The Company has initiated several actions to generate working capital
         and improve operating performances, including equity and debt
         financing, cost reduction measures, renegotiating and settling certain
         liabilities and redefining its business and marketing strategy.
         However, there can be no assurance that it will be able to increase
         revenues or to raise additional capital.

         The financial statements do not include adjustments relating to the
         recoverability and realization of assets and classification of
         liabilities that might be necessary should the Company be unable to
         continue in operation.

NOTE 4 - ACQUISITIONS

         LIFE INTERNATIONAL

         Effective July 12, 2001, the Company consummated a merger with Life
         International, an oxygenated beverage company. Pursuant to the merger,
         the Company issued 57,894 shares of common stock to Life International
         and 16,664 warrants for additional shares. The warrants were exercised
         prior to March 30, 2002 and provided Life International with a 49%
         ownership in the Company. There was no cost to exercise the warrants
         and they had no expiration date. The stocks and warrants were assigned
         a value of $4,899,871, based on the sales price of common stock sold by
         the Company in two separate identically priced private placements which
         occurred before and after the acquisition.

         The merger was accounted for using the purchase method of accounting.
         The Company determined the purchase price to be $5,913,490, which
         consisted of a cash payment of $1,020,000, the value of the shares and
         warrants of $4,899,871, less the net assets of $6,381, which consisted
         of $96,381 of fixed assets, less liabilities assumed of $90,000. The
         purchase price in excess of net assets was allocated as follows:

                           DESCRIPTION                      AMOUNT
                           -----------                  -------------
                           Customer relations           $    400,000
                           Process technology              3,887,000
                           Trademarks                        830,000
                           Goodwill                          796,490
                                                        -------------

                                                         $ 5,913,490
                                                        =============

                                      F-9
<PAGE>
NOTE 4 - ACQUISITIONS (cont'd)

         The Company obtained an independent valuation of the assets of Life
         International in order to determine the fair value of the assets
         purchased at July 12, 2001. Subsequent to the purchase, the Company
         obtained additional independent valuations of the assets and determined
         that the above assets were impaired. Based upon the independent
         valuations, the Company has recorded a one-time non-cash charge of
         $5,913,490 to write off the carrying value of its intangible assets at
         March 29, 2003. In calculating the impairment charge for goodwill of
         $796,490 recorded during the second quarter of fiscal 2003, the fair
         value was estimated using quoted market prices. The amount of the
         impairment primarily reflects the decline in the Company's stock price
         since the acquisition of the goodwill. In calculating the impairment
         charge for the remaining intangible assets of $5,117,000 recorded
         during the fourth quarter of fiscal 2003, the fair value was estimated
         using the discounted cash flow method. The amount of the impairment
         primarily reflects the Company's insolvency, the cessation of
         production, and the fact that the Company is not currently producing
         significant revenues to cover its cost of operations and continue as a
         going concern.

         AQUA CLARA BOTTLING & DISTRIBUTION, INC.

         Effective February 25, 2002, the Company consummated a merger with Aqua
         Clara Bottling & Distribution, Inc. and Subsidiary (Aqua Clara), an
         oxygenated beverage company. The merger was accounted for as a reverse
         merger using the purchase method of accounting. Accordingly, the
         acquisition has been treated as an acquisition of Aqua Clara by
         BEVsystems International, Inc. ("BEVsystems") and as a recapitalization
         of BEVsystems. As a result, the assets and liabilities of BEVsystems
         are recorded at historical values and the assets and liabilities of
         Aqua Clara are recorded at their estimated fair value at the date of
         the merger. As a result, the Company recorded an additional 39,996
         shares of common stock, 100 shares of preferred stock (valued as if
         converted to 874 shares of common stock) and options to purchase 25,884
         shares of common stock.

         The Company determined the purchase price to be $13,831,661, which
         consisted of the value assigned to the stocks and options of
         $14,685,806, based on the closing price of the stock of $1.10 per share
         on February 25, 2002, the closing date of the transaction, less the
         estimated proceeds from the exercise of the options of $2,573,561, plus
         the net liabilities assumed of $1,719,416. The net liabilities assumed
         consisted of cash of $6,559, accounts receivable of $22,581, inventory
         of $37,139, other assets of $5,891 less liabilities assumed of
         $1,791,586. The purchase was allocated as follows:

                           DESCRIPTION                         AMOUNT
                           ---------------                  ---------------
                           Land                             $       90,000
                           Building                                784,454
                           Equipment                               757,665
                           Goodwill                             11,149,542
                           Trademarks                              910,000
                           Customer relations                      140,000
                                                            ---------------
                                                            $   13,831,661
                                                            ===============
                                      F-10
<PAGE>
NOTE 4 - ACQUISITIONS (cont'd)

         The Company obtained an independent valuation of the assets of Aqua
         Clara in order to determine the fair value of the assets purchased at
         February 25, 2002. Subsequent to the purchase, the Company obtained
         additional independent valuations of the assets and determined that the
         above assets were impaired. Based upon the valuations, the Company
         recorded a one-time non-cash charge of $12,199,542 to write off the
         carrying value of its intangible assets during the year ended March 29,
         2003. In calculating the impairment charge for goodwill of $11,149,542
         recorded during the second quarter of fiscal 2003, the fair value was
         estimated using quoted market prices. The amount of the impairment
         primarily reflects the decline in the Company's stock price since the
         acquisition of the goodwill. In calculating the impairment charge for
         the remaining intangible assets of $1,050,000 recorded during the
         fourth quarter of fiscal 2003, the fair value was estimated using the
         discounted cash flow method. The amount of the impairment primarily
         reflects the Company's insolvency, the cessation of production, and the
         fact that the Company is not currently producing significant revenues
         to cover its cost of operations and continue as a going concern.

NOTE 5 - MARKETABLE SECURITIES

         Marketable securities, which consist of equity securities, have been
         categorized as available for sale and, as a result, are stated at fair
         value based generally on quoted market prices. Marketable securities
         available for current operations are classified as current assets.
         Unrealized holding gains and losses, net of applicable deferred taxes,
         are included as a component of shareholders' deficiency until realized.
         For the period ended June 28, 2003, the unrealized gain on marketable
         securities was $9,000. For purposes of determining gross realized gains
         and losses, the cost of investment securities sold is based upon
         specific identification.

NOTE 6 - ACCRUED EXPENSES

         Accrued expenses consisted of the following at June 28, 2003 and March
         29, 2003:
<TABLE>
<CAPTION>
                                                                     June 28, 2003                  March 29, 2003
                                                                     --------------                 --------------
<S>                                                                   <C>                              <C>
              Payroll and related costs                               $     804,302                    $   767,554
              Settlements                                                   641,366                        765,559
              Other                                                         562,110                        455,136
              Interest                                                      179,165                        137,990
              Professional fees                                             194,132                        154,132
              Directors fees                                                 70,000                         40,000
                                                                     --------------                 --------------
                                                                     $    2,451,075                    $ 2,320,371
                                                                     ==============                 ==============
</TABLE>
NOTE 7 - CONVERTIBLE NOTES PAYABLE

         On October 22, 2001, the Company entered into a series of three
         convertible promissory notes with Financial Partners Network
         Corporation in the amount of $100,000, $100,000 and $62,584. The notes
         were due April 22, 2002 and had an interest rate of 10.5% per year. The
         notes were convertible, at the option of the holder, into shares of the
         Company's common stock at an initial conversion price of $65.99 per
         share. The conversion price was subject to adjustment if the Company
         issued additional shares of its common stock without consideration or
         for a consideration per share less than the conversion price in effect
         immediately prior to the issuance of such additional shares of common
         stock. On August 29, 2002, in consideration for extending

                                      F-11
<PAGE>
NOTE 7 - CONVERTIBLE NOTES PAYABLE (cont'd)

         the maturity dates on the notes, the Company granted warrants to
         purchase 2,574 shares of the Company's common stock at an exercise
         price of $2.00 per share expiring May 15, 2005. On January 21, 2003,
         all three notes, inclusive of accrued interest of $34,464, were
         converted into 1,710,753 shares of the Company's common stock at a rate
         of $0.108 per share. The Company also granted warrants to Financial
         Partners Network Corporation to purchase 2,198 shares of the Company's
         common stock at an exercise price of $65.99 per share expiring November
         10, 2006. In lieu of exercising the warrant by paying the per share
         warrant price, the holder may execute a cashless exercise in accordance
         with the formula set forth in the warrant agreement.

         On November 5, 2001, the Company entered into a $100,000 convertible
         promissory note with an investor. The note is currently in default and
         was due November 5, 2002 and has an interest rate of 10.5% per year.
         The note is convertible, at the option of the holder, into shares of
         the Company's common stock at an initial conversion price of $65.99 per
         share. The conversion price is subject to adjustment if the Company
         issued additional shares of its common stock without consideration or
         for a consideration per share less than the conversion price in effect
         immediately prior to the issuance of such additional shares of common
         stock. Accrued interest of $16,457 is included in accrued expenses in
         the accompanying consolidated balance sheet. The Company also granted
         warrants to purchase 609 shares of the Company's common stock at an
         exercise price of $65.99 per share expiring November 5, 2004. The
         warrants were exercised on January 24, 2003 for a total of $40,000.

         On November 15, 2001, the Company entered into a $200,000 convertible
         promissory note with the Chief Executive Officer ("CEO"). The note was
         due May 15, 2002 and had an interest rate of 10.5% per year. The note
         was convertible, at the option of the holder, into shares of the
         Company's common stock at an initial conversion price of $65.99 per
         share. The conversion price was subject to adjustment if the Company
         issued additional shares of its common stock without consideration or
         for a consideration per share less than the conversion price in effect
         immediately prior to the issuance of such additional shares of common
         stock. On August 29, 2002, in consideration for extending the maturity
         date on the note, the Company granted warrants to purchase 1,961 shares
         of the Company's common stock to the CEO at an exercise price of $2.00
         per share expiring May 15, 2005. On January 21, 2003, the note,
         including accrued interest of $24,500, was converted into 3,571,424
         shares of the Company's common stock at a rate of $0.108 per share.

         On December 21, 2001, the Company entered into a $20,000 convertible
         promissory note with an investor. The note is currently in default and
         was due June 21, 2002 and has an interest rate of 10.5% per year. The
         note is convertible, at the option of the holder, into shares of the
         Company's common stock at an initial conversion price of $65.99 per
         share. The conversion price is subject to adjustment if the Company
         issues additional shares of its common stock without consideration or
         for a consideration per share less than the conversion price in effect
         immediately prior to the issuance of such additional shares of common
         stock. Accrued interest of $3,150 is included in accrued expenses in
         the accompanying consolidated balance sheet. The Company also granted
         warrants to the investor to purchase 122 shares of the Company's common
         stock at an exercise price of $65.99 per share expiring November 5,
         2004.

                                      F-12
<PAGE>
NOTE 7 - CONVERTIBLE NOTES PAYABLE (cont'd)

         On December 21, 2001, the Company entered into a $40,000 convertible
         promissory note with an investor. The note is currently in default and
         was due June 21, 2002 and has an interest rate of 10.5% per year. The
         note is convertible, at the option of the holder, into shares of the
         Company's common stock at an initial conversion price of $65.99 per
         share. The conversion price is subject to adjustment if the Company
         issues additional shares of its common stock without consideration or
         for a consideration per share less than the conversion price in effect
         immediately prior to the issuance of such additional shares of common
         stock. Accrued interest of $6,300 is included in accrued expenses in
         the accompanying consolidated balance sheet. The Company also granted
         warrants to purchase 243 shares of the Company's common stock at an
         exercise price of $65.99 per share expiring November 5, 2004. On July
         30, 2002, in consideration for extending the maturity date on the note
         to June 21, 2003, the Company granted warrants to the investor to
         purchase 100 shares of the Company's common stock at an exercise price
         of $48.00 per share expiring May 15, 2005.

         In April 2002, the Company entered into several convertible promissory
         notes with several investors for a total value of $200,000. The notes
         are due April 30, 2003 and have an interest rate of 12%. The notes are
         convertible, at the option of the holders, into shares of the Company's
         common stock at an initial conversion price per share equal to the
         lesser of (i) the average of the lowest three-day trading prices during
         the five trading days immediately prior to the conversion date
         discounted by 25%, or (ii) the average of the lowest three-day trading
         prices during the five trading days immediately prior to the funding.
         The conversion price is subject to adjustment if the Company issues
         additional shares of its common stock without consideration or for a
         consideration per share less than the conversion price in effect
         immediately prior to the issuance of such additional shares of common
         stock. During the year ended March 29, 2003, one investor converted his
         note into 1,755 shares of the Company's common stock. The balance of
         the notes were $150,000 at June 28, 2003. Accrued interest of $21,467
         is included in accrued expenses in the accompanying consolidated
         balance sheet. The Company also granted these investors warrants to
         purchase a total of 3,000 shares of the Company's common stock at an
         exercise price equal to the lesser of (i) the average of the lowest
         three day trading prices during the five trading days immediately prior
         to the conversion date discounted by 25%, or (ii) the average of the
         lowest three day trading prices during the five trading days
         immediately prior to the funding date. The warrants are callable by the
         Company when the five-day average closing stock price exceeds 120% of
         the five-day average closing price prior to the funding date. The
         warrants expire on April 30, 2005. In August 2003, another investor
         converted his note into 773,333 shares of the Company's common stock at
         a rate of $0.108 per share.

         On May 15, 2002, the Company entered into an $80,000 convertible
         promissory note with a director. The note was due August 15, 2002 and
         had an interest rate of 12.0% per year. The note was convertible, at
         the option of the holder, into shares of the Company's common stock at
         an initial conversion price per share equal to the lesser of (i) the
         average of the lowest 3 day trading prices during the 5 trading days
         immediately prior to the conversion date discounted by 25%, or (ii) the
         average of the lowest 3 day trading prices during the 5 trading days
         immediately prior to the funding date. The conversion price was subject
         to adjustment. On August 29, 2002, in consideration for extending the
         maturity date on the note, the Company granted warrants to purchase 784
         shares of the Company's common stock at an exercise price of $2.00 per
         share

                                      F-13
<PAGE>
NOTE 7 - CONVERTIBLE NOTES PAYABLE (cont'd)

         expiring May 15, 2005. On January 21, 2003, these notes, including
         accrued interest of $6,180, were converted into 4,440,044 shares of the
         Company's common stock at a rate of $0.108 per share. The Company also
         granted to the director warrants to purchase 1,200 shares of the
         Company's common stock at an exercise price equal to the lesser of (i)
         the average of the lowest three day trading prices during the five
         trading days immediately prior to the conversion date discounted by
         25%, or (ii) the average of the lowest three day trading prices during
         the five trading day immediately prior to the funding date. The
         warrants to purchase 1,200 shares of the Company's common stock were
         exercised on August 7, 2002. On August 29, 2002, in consideration for
         extending the maturity date of a secured note with this director, as
         mentioned above, the Company granted warrants to purchase 3,845 shares
         of the Company's common stock at an exercise price of $2.00 per share
         expiring May 15, 2005.

         On June 4, 2002, the Company entered into a $100,000 convertible
         promissory note with an investor. The note was due June 4, 2003 and has
         an interest rate of 12%. The note is convertible, at the option of the
         holder, into shares of the Company's common stock at an initial
         conversion price per share equal to the lesser of (i) the average of
         the lowest three-day trading prices during the five trading days
         immediately prior to the conversion date discounted by 25%, or (ii) the
         average of the lowest three-day trading prices during the five trading
         days immediately prior to the funding. The conversion price is subject
         to adjustment if the Company issues additional shares of its common
         stock without consideration or for a consideration per share less than
         the conversion price in effect immediately prior to the issuance of
         such additional shares of common stock. Accrued interest of $12,867 is
         included in accrued expenses in the accompanying consolidated balance
         sheet. The Company also granted warrants to this investor to purchase
         1,500 shares of the Company's common stock at an exercise price equal
         to the lesser of (i) the average of the lowest three day trading prices
         during the five trading days immediately prior to the conversion date
         discounted by 25%, or (ii) the average of the lowest three day trading
         prices during the five trading day immediately prior to the funding
         date. The warrant is callable by the Company when the five-day average
         closing stock price exceeds 120% of the five-day average closing price
         prior to the funding date. The warrant expires on April 30, 2005.

         On June 27, 2002, the Company entered into a $50,000 convertible
         promissory note with an investor. The note is due April 30, 2003 and
         has an interest rate of 12%. The note is convertible, at the option of
         the holder, into shares of the Company's common stock at an initial
         conversion price per share equal to the lesser of (i) the average of
         the lowest three-day trading prices during the five trading days
         immediately prior to the conversion date discounted by 25%, or (ii) the
         average of the lowest three-day trading prices during the five trading
         days immediately prior to the funding. The conversion price is subject
         to adjustment if the Company issues additional shares of its common
         stock without consideration or for a consideration per share less than
         the conversion price in effect immediately prior to the issuance of
         such additional shares of common stock. Accrued interest of $6,050 is
         included in accrued expenses in the accompanying consolidated balance
         sheet. The Company also granted warrants to this investor to purchase
         750 shares of the Company's common stock at an exercise price equal to
         the lesser of (i) the average of the lowest three day trading prices
         during the five trading days immediately prior to the conversion date
         discounted by 25%, or (ii) the average of the lowest three day trading
         prices during the five trading day immediately prior to the funding
         date. The warrant is callable by the Company when the five-day average
         closing stock price exceeds 120% of the five-day average closing price
         prior to the funding date. The warrant expires on April 30, 2005.

                                      F-14
<PAGE>
NOTE 7 - CONVERTIBLE NOTES PAYABLE (cont'd)

         On July 5, 2002, the Company entered into a $250,000 convertible
         promissory note with an investor. The note is due July 5, 2003 and does
         not bear interest, except in the case of default. The note is
         convertible, at the option of the holder, into shares of the Company's
         common stock at an initial conversion price per share equal to the
         lesser of (i) the average of the 5-day closing bid prices during the 5
         trading days immediately prior to the conversion date discounted by
         25%, or (ii) $60. The conversion price is subject to adjustment if the
         Company issues additional shares of its common stock without
         consideration or for a consideration per share less than the conversion
         price in effect immediately prior to the issuance of such additional
         shares of common stock. The conversion price is also subject to
         adjustment so that the number of shares into which the note is
         converted does not exceed the number of shares such that, when
         aggregated with all other shares of common stock then beneficially or
         deemed beneficially owned by the holder, would result in the holder
         owning more than 9.999% of all such shares of common stock as would be
         outstanding on the conversion date. The balance of the note at June 28,
         2003 was $250,000. Accrued interest of $20,000 is included in accrued
         expenses in the accompanying consolidated balance sheet. In August
         2003, $30,000 of the note was converted into 500,000 shares of the
         Company's common stock. The Company also granted warrants to the
         investor to purchase 1,667 shares of the Company's common stock at an
         exercise price of $72.00 per share. The warrant is callable at the
         Company's option, provided that the closing bid prices for the five
         days preceding the date the Company exercises such option exceeds 140%
         of the warrant exercise price and that an effective registration
         statement is in place.

         On August 4, 2002, the Company entered into a $75,000 convertible
         promissory note with an investor bearing interest at 10% per annum with
         principal and all accrued interest payable in full on March 4, 2003.
         The note is secured by 50,000 shares of the Company's common stock. The
         holder of the note is entitled, at its option, to convert at any time,
         the principal amount of the note and accrued interest at a conversion
         price equal to the latest five-day average of the closing bid price of
         the Company's common stock into such shares of the Company's common
         stock. The shares to be issued pursuant to this note shall contain
         unlimited piggyback registration rights. Any overdue payment of
         principal on the note shall bear interest at 15% per annum until paid.
         On February 5, 2003, the Company issued 50,000 shares of its common
         stock, valued at $85,000, in consideration for extending the maturity
         date of the note. Accrued interest of $5,625 is included in accrued
         expenses in the accompanying consolidated balance sheet. In June 2003,
         a related party-shareholder purchased the note from the investor.

         The proceeds from the issuance of the convertible notes payable with
         the warrants were allocated between the warrants and the notes payable,
         based on their relative fair values at the time of issuance. The fair
         value of the warrants of $459,792 was calculated using the
         Black-Scholes Option Pricing Model and was accounted for as additional
         paid-in capital and interest and financing expense during the year
         ended March 29, 2003.


                                      F-15
<PAGE>
NOTE 8 - NOTES PAYABLE  - SECURED BY ASSETS

         On July 31, 2002, the Company refinanced their manufacturing plant
         located in Clearwater, Florida. The amount of the mortgage note totaled
         $420,000. The mortgage note is secured by the underlying building and
         land. The note was due in monthly installments of principal and
         interest through 2032 and has an initial interest rate of 12.99%. The
         interest rate will be adjusted annually to a rate equal to 6.00% above
         the prime rate and shall never be less than 12.00% per year. At June
         28, 2003, the interest rate was 12%. Due to the default, the mortgage
         is now currently due and has been reclassified as a current liability.
         At June 30, 2003, the outstanding principal balance was $419,806.
         Accrued interest of $63,000 is included in accrued expenses in the
         accompanying consolidated balance sheet.

         In May 2002, the Company entered into an agreement with Brickell Bay
         Capital Fund, LLC ("Brickell Bay") to extend the maturity date of its
         $300,000 convertible promissory note to October 4, 2002. As part of the
         agreement, the Company was required to pay past due interest totaling
         $23,625 and issue warrants to purchase 2,511 shares of the Company's
         common stock at an exercise price of $65.99 per share. The fair value
         of the warrants of $290,531 was calculated using the Black-Schole
         Option Pricing Model and was accounted for as additional paid in
         capital and interest and financing expense during the year ended March
         29, 2003. Accrued interest of $23,625 is included in accrued expenses
         in the accompanying consolidated balance sheet at June 28, 2003. On May
         30, 2002, Brickell Bay exercised warrants relating to a previous
         agreement to purchase 2,511 shares of the Company's common stock for a
         total consideration of $165,706. In addition, on April 4, 2002, the
         Company entered into a Collateral Assignment of Rents, Leases and
         Profits ("Collateral Assignment") with Brickell Bay whereby the
         Company's manufacturing plant in Clearwater, Florida and land was
         assigned to Brickell Bay as collateral for the $300,000 note. In June
         2003, Brickell Bay filed a foreclosure action against the Company for
         nonpayment (See Note 14).

         At March 29, 2003, the Company has a note payable and capital leases
         currently in default aggregating $59,067. Certain vehicles of the
         Company secure the note and subsequent to year end the note holder is
         seeking repossession of the vehicles.

NOTE 9 - STOCKHOLDERS' DEFICIENCY

         Reverse Stock Split

         On January 2, 2003, the Board of Directors authorized a 200:1 reverse
         stock split. All references in the accompanying consolidated financial
         statements to the number of common shares and per share amounts have
         been restated to reflect the reverse stock split.

         Change in Domestication and Common Stock

         On October 21, 2002, at a special meeting of the shareholders, the
         holders of a majority of the shares entitled to vote adopted the Board
         of Directors' recommendation that the Company change its domicile from
         Colorado to Florida. The Company subsequently filed a Certificate of
         Domestication with the state of Florida, and a withdrawal of its
         authority in Colorado, resulting in the Company becoming a Florida
         corporation. As a result of the shareholder's adoption of the

                                      F-16
<PAGE>
NOTE 9 - STOCKHOLDERS' DEFICIENCY (cont'd)

         recommendation of the Board of Directors at the October 21, 2002
         meeting, the number of authorized common shares were increased from
         100,000,000 to 650,000,000, with a par value of $.0001 per share.

         In connection with the acquisition of Aqua Clara, all shares of common
         stock outstanding prior to the acquisition date were exchanged at the
         ratio of 1.6738 per share. All shares of common stock and prices have
         been restated in the accompanying consolidated financial statements and
         notes.

         Private Placement

         In July 2001, the Company completed a private placement of $1,787,500,
         consisting of 27,199 shares of the Company's common stock at $66 per
         share and 27,199 warrants, exercisable at $132 and expiring on May 1,
         2003. The options had no value using the Black-Scholes Option Pricing
         Model. In December 2001, the Company raised an additional $247,500
         through a private placement of 3,766 shares of common stock at $66 per
         share. In February 2002, the Company raised an additional $965,000
         through a private placement of 10,768 shares of common stock at $90 per
         share. The issuance costs associated with these private placements were
         $515,000 and is reflected in the net proceeds.

         Issuance of Warrants

         In May 2002, the Company granted warrants to purchase 1,500 shares of
         the Company's common stock at an exercise price equal to the average of
         the lowest closing 3 day trading prices during the 5 trading days
         immediately prior to the exercise date, discounted by 25%. The warrant
         is callable by the Company when the five-day average closing stock
         price exceeds 120% of the 5-day average closing price prior to the
         warrant issue date. The warrants have a term of three years. The
         Company has valued the warrants at $147 using the Black-Scholes pricing
         model. The value of the warrants was recorded as interest and financing
         expense during the year ended March 29, 2003.

         Issuance of Warrants for Settlement of Debt

         The Company was indebted to a consulting firm for financial consulting
         and advisory services in the amount of $50,000. The Company entered
         into an agreement to settle the amount owed for these services and on
         October 28, 2002, the Company issued warrants to the consulting firm to
         purchase 12,500 shares of the Company's common stock at an exercise
         price of $8 per share. The warrants have a term of five years. The
         Company has valued the warrants at $89,691 using the Black-Scholes
         pricing model. The value of the warrants was recorded as consulting
         expense during the year ended March 29, 2003.

                                      F-17
<PAGE>
NOTE 9 - STOCKHOLDERS' DEFICIENCY

         Issuance of Common Stock for Settlement of Debt

         In April 2002, the Company issued 125 shares of its common stock in
         settlement of debt.

         In January 2003, the Company entered into an agreement with the Chief
         Executive Officer and his spouse, a director and Financial Partners
         Network Corporation whereby the Company issued a total of 9,722,221
         shares of its restricted common stock to such shareholders in
         satisfaction of all debt, convertible notes, security interest and
         other equity owed to the shareholders by the Company, which aggregated
         approximately $1,050,000.

         Issuance of Common Stock and Warrants for Consulting Services

         In January 2002, the Company issued 110 shares of common stock for
         services rendered. The Company recorded $7,200 of expense during the
         year ended March 29, 2002.

         In March 2002, the Company entered into a one-year agreement with a
         consultant for services to be provided. The Company agreed to issue the
         consultant 500 shares of its common stock each month. In addition, the
         Company agreed to pay the consultant up to $600,000 of its common stock
         over the term of the agreement. The consultant is also entitled to
         receive additional compensation for other services provided, as defined
         in the agreement. The agreement was amended on June 6, 2002, whereby
         the Company agreed to grant the consultant the right to purchase 3,000
         shares of the Company's common stock at a 40% discount to the average
         of the three highest closing bid prices of the Company's common stock
         as of the date of notice. In April 2002, the consultant exercised her
         right to purchase 500 shares of the Company's common stock. The Company
         has valued the warrants at $214 using the Black-Scholes Pricing Model.
         The value of the warrants was expensed during fiscal 2003.

         In March 2002, the Company entered into a one-year agreement with a
         consulting firm for services to be provided. The Company agreed to
         issue the firm 500 shares of its common stock each month. In addition,
         the Company agreed to pay the firm up to $600,000 of its common stock
         over the term of the agreement. The firm is also entitled to receive
         additional compensation upon the occurrence of certain events, as
         defined in the agreement. The agreement was amended on June 6, 2002,
         whereby the Company agreed to grant the firm the right to purchase
         3,000 shares of the Company's common stock at a 40% discount to the
         average of the three highest closing bid prices of the Company's common
         stock as of the date of notice. On January 15, 2003, the Company
         entered into another agreement with the same consulting firm for a
         period of six months. The Company agreed to pay the firm an amount of
         common stock in an amount not less than 7.00% of the fully diluted post
         recapitalization shares of the Company. The firm was issued 718,553
         common shares valued at $1,221,540 under this agreement, which is being
         expensed over the term of the agreement. During the year ended March
         29, 2003, the consulting firm exercised its right to purchase 1,125
         shares of the Company's common stock. The Company has valued the
         warrants at $160 using the Black-Scholes Pricing Model. The value of
         the warrants was expensed during the year ended March 29, 2003.

                                      F-18
<PAGE>
NOTE 9 - STOCKHOLDERS' DEFICIENCY (cont'd)

         In March 2002, the Company entered into a six-month consulting
         agreement with another consulting firm for services to be provided. The
         agreement automatically renewed on a month-to-month basis. During the
         year ended March 29, 2003, this contract was terminated. The Company
         was required to pay a monthly retainer of $3,750. In addition, the
         Company agreed to pay the consulting firm an amount not less than 2.9%
         of the Company's fully diluted shares of common stock. The Company also
         agreed to issue the consulting firm a warrant to purchase an additional
         2.9% of the Company's fully diluted shares of common stock, exercisable
         for five years, at an exercise price of $1.00. Should the agreement be
         terminated prior to the end of its term, the compensation vests
         pro-rata. In addition to any amounts payable to the consulting firm
         noted above, the consulting firm shall also be paid additional
         compensation in connection with certain transactions and events as
         defined in the agreement. The Company issued 8,440 shares of its common
         stock, valued at $354,456, in connection with the agreement during the
         year ended March 29, 2003. In addition, on August 29, 2002, the Company
         granted warrants to purchase 9,564 shares of the Company's common stock
         at an exercise price of $200 per share expiring August 29, 2007. The
         Company has valued the warrants at $322,508 using the Black-Scholes
         Pricing Model. The value of the warrants was expense during the year
         ended March 29, 2003. In addition, on August 29, 2002, the company
         granted warrants to purchase 9,564 shares of the Company's common stock
         at an exercise price of $2.00 per share expiring August 29, 2007. The
         Company has valued the warrants at $322,508 using the Black-Scholes
         Pricing Model. The value of the warrants was expensed during fiscal
         2003.

         In April 2002, the Company entered into a consulting agreement with a
         current shareholder of the Company, whereby the consultant agreed to
         serve as a member of the Board of Directors of the Company and assist
         the Company in increasing shareholders equity. The consultant is to
         provide services to the Company for as long as he is a duly elected
         member of the Board of Directors. Compensation was $5,000 per month and
         the consultant was eligible to earn a bonus equal to one percent of net
         increases in shareholder equity, measured by market capitalization, as
         defined in the agreement. The bonus was payable 10% in cash and 90% in
         the Company's common stock. In September 2002, a new agreement was
         entered into, whereby the consultant agreed to continue to serve as a
         member of the Board of Directors of the Company and assist the Company
         in increasing shareholders equity. The consultant is to provide
         services to the Company for as long as he is a duly elected member of
         the Board of Directors. Compensation is $5,000 per month in the form of
         cash or free-trading S-8shares of the Company's common stock. If common
         stock is to be issued, they are to have a 25% discount to the closing
         price on the date of issue.

         In April 2002, the Company issued 148 shares of its common stock to a
         consultant for services to be provided, valued at $23,680.

         In April 2002, the Company issued 109 shares of its common stock to a
         consultant for services to be provided, valued at $17,440.

         In April 2002, the Company issued 150 shares of its common stock to a
         consultant for services to be provided, valued at $21,600. In addition,
         on April 10, 2002, the Company also agreed to pay the consultant $6,000
         per month, beginning April 1, 2002, as a consulting fee on an annual
         basis,

                                      F-19
<PAGE>
NOTE 9 - STOCKHOLDERS' DEFICIENCY (cont'd)

         which will be applied against media expenditures. Should no media be
         placed, the $6,000 monthly consulting fee will be paid to the
         consultant. On April 29, 2002, the Company also agreed to set up a
         production account with the consultant to cover various media-related
         expenses to be incurred on behalf of the Company. The Company will
         issue approximately $100,000 worth of restricted common stock to the
         consultant to fund this account. The consultant is to liquidate the
         stock as needed to pay for various media purchases made on behalf of
         the Company. The consultants handling of the production account is
         currently being reviewed by the Company.

         In June 2002, the Company entered into a three month consulting
         agreement with a consultant for services to be provided. The Company
         agreed to pay the consultant 4,500 shares of its unrestricted common
         stock, which vest pro-rata over the life of the agreement. On August
         30, 2002, the agreement was amended such that the Company agreed to
         issue the consultant 7,500 shares of unrestricted common stock, which
         vest pro-rata over the life of the agreement. The agreement was further
         modified to extend the term to eight months. As of June 28, 2003, 375
         shares valued at $19,500 are owed to the consultant.

         In July 2002, the Company entered into an amended consulting agreement
         with a consultant for services to be provided. In consideration for
         these services, the Company issued warrants to purchase up to $300,000
         of the Company's common stock at a 40% discount to the average of the
         three highest closing bid prices of the Company's common stock as of
         the date of notice. The warrants expire one year from the date of the
         agreement. During fiscal 2003, the consultant exercised his right to
         purchase 1,470,000 shares of the Company's common stock.

         In August 2002, the Company entered into a six-month agreement with a
         consultant whereby the consultant would provide the Company services in
         connection with marketing, public relations, strategic planning and
         business opportunities for the Company. The Company is required to pay
         the consultant a fee of 2,500 shares of the Company's common stock and
         a warrant to purchase 1,250 shares of the Company's stock at a purchase
         price equal to 120% of the closing market price of the Company's common
         stock on the date of the agreement. The Company has valued the warrants
         at $18,657 using the Black-Scholes Pricing Model. The value of the
         warrants was expensed during fiscal 2003.

         In August 2002, the Company issued warrants to a consultant for
         services to be provided to purchase 25,000 shares of the Company's
         common stock at an exercise price of $20 per share. The warrants have a
         term of one year. The warrants were exercised during the year ended
         March 29, 2003. In November 2002, the Company issued additional
         warrants to the same consultant for services to be provided to purchase
         25,000 shares of the Company's common stock at an exercise price equal
         to a forty percent discount to the closing bid price on the day of
         notice. As of June 28, 2003, 3,792 warrants were exercised. The
         warrants have a term of six months.

         In September 2002, the Company issued warrants to a consultant for
         services to be provided to purchase 30,000 shares of the Company's
         common stock at an exercise price of a 40% discount to the closing bid
         price of the Company on the day of notice of execution. The warrants
         expire six months from the date of issuance. At the same time, the
         Company entered into a Stock Option Purchase Agreement with this
         consultant whereby the consultant has the option to purchase up to
         30,000 shares of the Company's common stock at a 40% discount to the
         closing bid price of the

                                      F-20
<PAGE>
NOTE 9 - STOCKHOLDERS' DEFICIENCY (cont'd)

         Company on the day of notice of execution. The option expires six
         months from the date of the agreement. In November 2002, the Company
         issued additional warrants to the consultant for services to be
         provided to purchase 62,500 shares of the Company's common stock at an
         exercise price of a 40% discount to the closing bid price of the
         Company on the day of notice of execution. The warrants expire six
         months from the date of issuance. The consultant has exercised a total
         of 81,500 warrants during the year ended March 29, 2003. The Company
         has valued the warrants at $802 using the Black-Scholes Pricing Model.
         The value of the warrants was expensed.

         In September 2002, the Company issued 158 shares of its common stock to
         a consultant for services to be provided valued at $1,300.

         In September 2002, the Company entered into a consulting agreement with
         a consultant for services to be provided. Under the agreement, the
         Company issued 125 shares of its common stock and November 1, 2002
         valued at $1,025.

         In September 2002, the Company entered into a consulting agreement with
         a consultant for services to be provided. Under the agreement, the
         Company issued 163 shares of its common stock valued at $1,333.

         In September 2002, the Company issued 145 shares of its common stock to
         a consultant for services to be provided valued at $1,193.

         In March 2003, the Company entered into a three-month consulting
         agreement with a consulting firm for services to be provided commencing
         March 15, 2003. The Company irrevocably paid the consultant 50,000
         shares of its restricted common stock valued at $22,000. The Company
         has three options to extend the agreement for three months each. For
         each additional three-month period, the Company shall pay the
         consultant $1,500 and $15,000 worth of the Company's common stock. The
         shares issued to the consultant will have a one-year hold from the date
         of issuance, March 15, 2003. In the event that the consultant is unable
         to sell the shares after the one-year hold, resulting from the
         Company's neglect, as defined in the agreement, the Company is required
         to issue "penalty shares" as defined in the agreement. On June 17,
         2003, the Company entered into an extension agreement whereby both
         parties agreed to extend the contract to September 17, 2003. For this
         extension, the Company agreed to issue to the consultant 150,000 shares
         of its common stock valued at $13,500. The shares have a one-year hold
         from the date of issuance. All other terms and conditions from the
         prior contract remain unchanged.

                                      F-21
<PAGE>
NOTE 9 - STOCKHOLDERS' DEFICIENCY (cont'd)

         In April 2003, the Company entered into an agreement with a lawyer for
         services rendered and services to be rendered. In exchange for
         providing legal services to the Company and as payment for services
         already provided amounting to $45,000, the lawyer received 750,000
         shares of the Company's S-8 common stock valued at $120,000. The lawyer
         is required to sell the shares and the net proceeds to be applied as a
         credit against the balance due. In the event there is an excess of
         proceeds, the consultant is required to credit the Company for future
         legal services. The Company has expensed $120,000 related to this
         agreement.

         In April 2003, the Company entered into a consulting agreement with a
         consultant for services to be provided. The initial term of the
         engagement is for six months and will automatically renew on a
         month-to-month basis. In consideration for services to be provided, the
         consultant will receive 1,500,000 shares of the Company's unrestricted
         common stock. The Company has expensed $35,000 related to this
         agreement valued at $105,000.

         In April 2003, the Company entered into a consulting agreement with a
         consulting firm for services to be provided. The initial term of the
         engagement is for six months and will automatically renew on a
         month-to-month basis. In consideration for services to be provided, the
         consulting firm received 500,000 shares of the Company's unrestricted
         common stock valued at $105,000. The Company has expensed $35,000
         related to this agreement valued at $105,000.

         In April 2003, the Company issued 300,000 shares of its common stock
         valued at $36,000 to a consultant for legal services provided and to be
         provided. Following the issuance of the shares, the consultant will
         sell the shares on the open market. The net proceeds shall be applied
         as a credit against any outstanding legal fees and the excess, if any,
         shall be applied as a credit against future legal fees. The Company has
         expensed $36,000 related to this agreement.

         In April 2003, the Company entered into a consulting agreement with a
         consultant for services provided and to be provided. In exchange for
         providing consulting services to the Company and as payment for
         services already provided amounting to $27,000, the consultant received
         500,000 shares of the Company's S-8 common stock valued at $60,000.
         200,000 shares are to be issued directly to the consultant. An
         additional 300,000 shares shall be issued and held by the Company until
         the consultant complies with the provisions of the agreement and it is
         determined that the balance owed is not satisfied. If the balance owed
         is not deficient, the Company shall return the 300,000 shares to its
         treasury. The consultant is required to sell the shares on the open
         market and apply the net proceeds as a credit against the balance due.
         In the event that the balance due is not paid in full from the net
         proceeds, then the Company will undertake to issue additional shares of
         its common stock, and to register such shares pursuant to an S-8
         registration, so that additional installments of shares can be issued
         to the consultant to satisfy the remaining balance. In the event there
         is an excess of proceeds, the consultant is required to credit the
         Company for future consulting services.

                                      F-22
<PAGE>
NOTE 9 - STOCKHOLDERS' DEFICIENCY (cont'd)

         In May 2003, the Company issued 1,250,000 shares of its common stock
         valued at $125,000 to a consultant for services to be provided over one
         year. Effective June 23, 2003, the Company amended its consulting
         agreement with the consultant, whereby the consultant agreed to provide
         additional services to the Company in exchange for 3,000,000 shares of
         the Company's common stock valued at $300,000. The Company has expensed
         $15,625 related to this agreement.

         In May 2003, the Company issued 1,000,000 shares of its common stock
         valued at $100,000 to a consultant for services to be provided over one
         year. The Company has expensed $12,500 related to this agreement.

         In May 2003, the Company issued 500,000 shares of its common stock
         valued at $50,000 to a consultant for services to be provided.
         Following the issuance of the shares, the consultant will sell the
         shares on the open market. The net proceeds shall be applied as a
         credit against the fees incurred for services rendered. In the event
         that the balance has not been paid in full from the net sale proceeds
         of the shares, the Company will issue additional shares of its common
         stock to the consultant. In the event that there is excess, it shall be
         applied as a credit for future consulting services. The Company has
         expensed $50,000 related to this agreement.

         In May 2003, the Company entered into a six-month Attorney/Client
         Agreement with an attorney for certain legal services to be provided.
         The Company agreed to issue 250,000 shares of unrestricted S-8 common
         stock valued at $30,000 upon execution of the agreement. The Company
         has expensed $7,500 related to this agreement.

         In June 2003, the Company issued 325,000 shares of its common stock
         valued at $26,000 to a consultant for services to be provided over one
         year. The Company has expensed $0 related to this agreement.

         Marketing Agreement:

         On January 20, 2003, the Company entered into a six-month Strategic
         Marketing Agreement with ChampionLyte Holdings, Inc. ("ChampionLyte")
         whereby the Company agreed to issue shares equal to $125,000 per month
         of its common stock to ChampionLyte. The shares were to be fully paid
         and non-assessable and bear no restrictive legend. ChampionLyte was to
         issue the Company 50,000 shares of its restricted stock per month under
         the agreement. These shares were to carry piggyback registration
         rights. ChampionLyte was also to pay the Company up to $100,000 per
         month for services to be rendered by the Company relating to the use of
         their beverage knowledge and distributing the other firm's beverage
         product, as well as for any and all expenses incurred on its behalf. In
         connection with the agreement, the Company received 50,000 shares of
         ChampionLyte common stock, valued at $14,500 and $5,500 at June 29,
         2003 and March 29, 2003, respectably. The stock is classified as
         available for sale and is included in marketable securities in the
         accompanying consolidated balance sheet. During the three months ended
         June 28, 2003, the Company issued 1,715,000 shares of its common stock
         valued at $157,900 to ChampionLyte. On May 20, 2003, the Company and
         ChampionLyte mutually agreed to terminate this agreement.

                                      F-23
<PAGE>
NOTE 10- INCOME TAXES

         Total income tax benefit consists of the following:

                Current:
                    Federal                                     $             -
                    State and local                                           -
                                                                ----------------
                                                                $             -
                                                                ----------------
                Deferred:
                    Federal                                                   -
                    State and local                                           -
                                                                ----------------
                                                                              -
                                                                ----------------
                       Total income tax benefit                 $             -
                                                                ================

           A reconciliation of income tax benefit resulting from applying U.S.
           federal statutory rates to pretax loss and the reported amount of
           income tax benefit is as follows:

                Tax benefit at federal statutory rate
                       applied to pretax loss                   $     4,242,750
                State and income taxes, net of
                       federal income tax benefit, applied
                       to pretax loss                                 1,442,500
                Permanent differences                                (4,832,800)
                Valuation allowance                                    (852,450)
                                                                ----------------
                       Total income tax benefit                 $             -
                                                                ================

           Income taxes are provided for the tax effects of transactions
           reported in the financial statements and consist of taxes currently
           due plus deferred taxes related to the difference between the
           financial statement and income tax bases of assets and liabilities
           for financial statement and income tax reporting purposes. Deferred
           tax assets and liabilities represent the future tax return
           consequences of these temporary differences, which will either be
           taxable or deductible in the year when the assets or liabilities are
           recovered or settled. Accordingly, measurement of the deferred tax
           assets and liabilities attributable to the book-tax bases
           differential are computed at a rate of 15% federal and 6% state and
           local pursuant to Statement of Financial Accounting Standards
           ("SFAS") No. 109, Accounting for Income Taxes.

           The tax effect of significant items comprising the Company's net
           non-current deferred tax assets and liabilities are as follows:



                                      F-24
<PAGE>
NOTE 10 -  INCOME TAXES (cont'd)
<TABLE>
<CAPTION>

                       March 29, 2003

                                <S>                                                                            <C>
                              Net operating loss carryfowards                           $                 2,100,000
                              Stock compensation                                                          1,030,600
                                Asset impairment                                                          3,801,500
                                Valuation allowance                                                      (6,932,100)
                                                                                        ----------------------------
                              Deferred non-current tax asset                                                      -
                                                                                        ----------------------------

                              Depreciable assets                                                                  -
                                                                                        ----------------------------
                              Deferred non-current tax liability                                                  -
                                                                                        ----------------------------
                              Net non-current deferred tax asset                        $                         -
                                                                                        ============================
</TABLE>
           Based on management's present assessment, the Company has not yet
           determined it to be more likely than not that a deferred tax asset
           attributable to the future utilization of the net operating loss
           carry forwards will be realized. Accordingly, the Company has
           provided a 100% valuation allowance against the deferred tax asset in
           the consolidated balance sheet at March 29, 2003.

           The Company files separate tax returns for federal and state
           purposes. As such, income tax is based on the separate taxable
           income or loss of each entity. The Company has not filed its income
           tax returns for the years ended March 29, 2003 or March 30, 2002.
           Since the Company has not filed its tax returns for several years,
           management has estimated the Company's net operating loss carry
           forwards available to offset future taxable income to be
           approximately $9,000,000, of which some of the loss will be subject
           to Internal Revenue Code Section 382 limitations.

NOTE 11-   RELATED PARTY TRANSACTIONS

           Employment Agreements:

           On March 30, 2001, the Company entered into an employment
           agreement with its Chief Executive Officer ("CEO") for an initial
           term of five years beginning February 1, 2001 and automatically
           renewing for additional one-year periods unless notified by
           either the CEO or the Company's Board of Directors that such
           renewal will not take place. The Company is required to pay the
           CEO an annual base salary of $125,000 and the CEO is eligible to
           receive annual bonuses established by the Board of Directors.

           Transactions

         Financial Partners Network Corporation ("FPN"), a corporation owned by
         the Company's Chairman and Chief Executive Officer, advanced funds and
         provided services to the Company. A fee of $250,000 was paid for
         services rendered in connection with the private placement stock
         offering during the year ended March 30, 2002. There were no balances
         due FPN at June 28, 2003 and March 29, 2003.

                                      F-25
<PAGE>

NOTE 11 - RELATED PARTY TRANSACTIONS (cont'd)

          The Company bought $0 and $35,913 worth of oxygenated water from a
          corporate shareholder during the years ended March 29, 2003 and March
          30, 2002, respectively. The amounts are included in accounts payable
          and accrued expenses for the period ended June 28, 2003 and the year
          ended March 29, 2003.

          On June 28, 2003, the Company accrued expenses of $187,723 for
          disbursements paid by a director on behave of the Company for
          operating expenses and payroll. In addition, the Company accrued
          $20,000 for directors fees due the director.

          On June 28, 2003, the Company accrued $45,000 for directors fees due
          another director.

          As of June 28, 2003 the Company owed the CEO $54,296 for disbursements
          made by the CEO on behalf of the Company for operational expenses.

          As of June 28, 2003, the Company owed the daughter of the CEO $28,682
          for services rendered.

NOTE 12   -       STOCK OPTION PLAN

         In April 2001, the Company adopted a Stock Option Plan intended to
         provide officers, directors, key employees and consultants of the
         Company an opportunity to acquire stock in the Company. As of March 30,
         2002, 1,732,383 options to purchase shares at $0.33 per share had been
         issued and 900,000 options to purchase shares at $0.01 per share had
         been issued. During the year ended March 29, 2003, the 900,000 options
         were exercised and the 1,732,383 options were canceled due to
         terminations. The fair value of the options on the grant date was
         calculated using the Black-Scholes Option Pricing Model. There were no
         options granted or exercised during the quarter ending June 28, 2003.

         The Company applies Accounting Principles Board Opinion No. 25,
         "Accounting for Stock Issued to Employees," in accounting for stock
         based employee compensation arrangements whereby no compensation cost
         related to stock options is deducted in determining net loss. Had the
         compensation cost for stock option grants to the Company's employees
         been determined by SFAS No. 123, "Accounting for Stock Based
         Compensation," the Company's net loss would have increased for the year
         ended and March 30, 2002 as presented in the table below. Using the
         Black-Scholes Option Pricing Model, the Company's pro forma net loss is
         as follows:

                                                                2002
                                                          --------------
                  Pro Forma Net Loss                      $ (4,653,620)
                  Pro Forma Net Loss Per Share            $      (0.20)
                  Risk Free Interest Rate                         5.71%
                  Expected Lives                                2 Years
                  Expected Volatility                              None

         For purposes of these pro forma disclosures, the estimated fair value
         of the options granted is amortized to expense over the options'
         vesting period.


                                      F-26
<PAGE>
NOTE 12- STOCK OPTION PLAN (cont'd)

         2003 Equity Incentive Plan:

         The shareholders approved the 2003 Equity Incentive Plan (the "Plan")
         in April 2003. The Incentive Plan is effective April 1, 2003. Officers,
         directors, key employees and consultants, who in the judgment of the
         Company render significant service to the Company, are eligible to
         participate.

         The Incentive Plan provides for the award stock-based compensation
         alternatives such as non-statutory stock options and incentive stock
         options. The Incentive Plan provides for 10,000,000 shares of common
         stock to be offered form either authorized and unissued shares or
         issued shares, which have been reacquired by the Company. Options
         granted under the plan vest at a rate of 20% per year with the first
         20% becoming exercisable on the first anniversary of the date the
         options were granted.

         In April 2003, the Company granted options to purchase 9,250,000 shares
         of the Company's common stock under the plan. The options are fully
         vested as of the grant date and have an exercise price of $0.01.

         2003 Stock Incentive Plan:

         In April 2003, the Company's Board of Directors approved the 2003 Stock
         Incentive Plan ("2003 Plan"). The purpose of the 2003 Plan is to
         provide long-term incentives and rewards to employees, directors,
         independent contractors or agents; assist the Company in attracting and
         retaining such persons; and associate the interests of such persons
         with those of the Company's stockholders. The 2003 Plan is to be
         administered by the Board of Directors and the maximum number of shares
         issueable under the 2003 Plan may not exceed 3,500,000 shares of the
         Company's common stock. No shares have been issued under the 2003 plan
         as of June 28, 2003.

         In July 2003, the Board of Directors approved a resolution for the
         creation of the Company's 2003 Stock Incentive Plan #1 which includes
         the issuance of a total of 2,710,750 shares of the Company's common
         stock pursuant thereto and the filing of an S-8 Registration Statement
         to register the Plan. No shares have been issued under the 2003 plan as
         of June 28, 2003.

NOTE 13 - RECENT ACCOUNTING PRONOUNCEMENTS

          In April 2002, the Financial Accounting Standards Board ("FASB")
          issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
          Amendment of FASB Statement No. 13, and Technical Corrections" ("SFAS
          No. 145"). This statement eliminates the requirement to report gains
          and losses from extinguishment of debt as extraordinary unless they
          meet the criteria of APB Opinion 30. SFAS No. 145 also requires
          sale-leaseback accounting for certain lease modifications that have
          economic effects that are similar to sale-leaseback transactions. The
          changes related to lease accounting are effective for transactions
          occurring after May 15, 2002


                                      F-27
<PAGE>
NOTE 13- RECENT ACCOUNTING PRONOUNCEMENTS (cont'd)

         and the changes related to debt extinguishment are effective for fiscal
         years beginning after May 15, 2002. The adoption of SFAS No. 145 did
         not have a material impact on the Company's financial position or
         results of operations.

         In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
         Associated with Exit or Disposal Activities" ("SFAS No. 146"). SFAS No.
         146 nullifies Emerging Issues Task Force Issue No. 94-3 and requires
         that a liability for a cost associated with an exit or disposal
         activity be recognized when the liability is incurred. This statement
         also establishes that fair value is the objective for initial
         measurement of the liability. SFAS No. 146 did not have a material
         impact on the Company's financial position or results of operations.

         In December 2002, the FASB issued SFAS No. 148, "Accounting for
         Stock-Based Compensation - Transition and Disclosure, an amendment of
         FASB Statement No. 123" ("SFAS No. 148"). SFAS No. 148 amends SFAS No.
         123, "Accounting for Stock-Based Compensation," to provide alternative
         methods of transition for an entity that voluntarily changes to the
         fair value based method of accounting for stock-based employee
         compensation. It also amends the disclosure provisions of that
         Statement to require prominent disclosure about the effects on reported
         net income of an entity's accounting policy decisions with respect to
         stock-based employee compensation. During the quarter ended June 30,
         2003, the Company adopted a fair value method of accounting for
         stock-based compensation. The adoption of SFAS No. 148 did not have a
         material impact on the Company's financial position or results of
         operations.

         In November 2002, the FASB issued FASB Interpretation No. 45,
         "Guarantor's Accounting and Disclosure Requirements for Guarantees,
         Including Indirect Guarantees of Indebtedness of Others" ("FIN 45").
         FIN 45 requires that upon issuance of a guarantee, a guarantor must
         recognize a liability for the fair value of an obligation assumed under
         a guarantee. FIN 45 also requires additional disclosures by a guarantor
         in its interim and annual financial statements about the obligations
         associated with guarantees issued. The recognition provisions of FIN 45
         are effective for any guarantees issued or modified after December 31,
         2002. The disclosure requirements are effective for financial
         statements of interim or annual periods ending after December 15, 2002.
         The adoption of the disclosure requirements of FIN 45 did not have a
         material impact on the Company's financial position or results of
         operations. The Company is currently evaluating the effects of the
         recognition provision of FIN 45, but does not expect the adoption to
         have a material impact on the Company's financial position or results
         of operations.

         In January 2003, the FASB issued FASB Interpretation No. 46
         "Consolidation of Variable Interest Entities" ("FIN 46"). In general, a
         variable interest entity is a corporation, partnership, trust, or any
         other legal structure used for business purposes that either (a) does
         not have equity investors with voting rights or (b) has equity
         investors that do not provide sufficient financial resources for the
         entity to support its activities. A variable interest entity often
         holds financial assets, including loans or receivables, real estate or
         other property. A variable interest entity may be essentially passive
         or it may engage in activities on behalf of another company. Until now,
         a company generally has included another entity in its consolidated
         financial statements only if it controlled the entity through voting
         interests. FIN 46 changes that by requiring a variable interest entity
         to be consolidated by a company if that company is subject to a
         majority of the risk of loss from the variable interest entity's
         activities or entitled to receive a majority of the entity's

                                      F28
<PAGE>
NOTE 13- RECENT ACCOUNTING PRONOUNCEMENTS (cont'd)

         residual returns or both. FIN 46's consolidation requirements apply
         immediately to variable interest entities created or acquired after
         January 31, 2003. The consolidation requirements apply to older
         entities in the first fiscal year or interim period beginning after
         June 15, 2003. Certain of the disclosure requirements apply in all
         financial statements issued after January 31, 2003, regardless of when
         the variable interest entity was established. The Company adopted FIN
         46 effective January 31, 2003. The adoption of FIN 46 will not have a
         material impact on the Company's consolidated financial condition or
         results of operations taken as a whole.

         In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
         Financial Instruments with Characteristics of both Liabilities and
         Equity" ("SFAS No. 150"). SFAS No. 150 is effective for financial
         instruments entered into or modified after May 31, 2003, and otherwise
         is effective at the beginning of the first interim period beginning
         after June 15, 2003, except for mandatory redeemable financial
         instruments of nonpublic entities. The adoption of SFAS No. 150 is not
         expected to have a material impact on the Company's financial position
         or results of operations.

NOTE 14    -      COMMITMENTS AND CONTINGENCIES

         Litigation:

         A former officer of Aqua Clara filed suit against Aqua Clara for
         approximately $227,000 of accrued wages, loans that took the form of a
         mortgage on the property, and other damages. This claim also sought
         1,350,000 shares of the Company's common stock. At March 30 2002 the
         Company had provided approximately $180,000 related to the accrued
         wages, loans and other damages in the accompanying financial
         statements, which was accrued by Aqua Clara prior to the acquisition.
         However, the Company asserts that all or a majority of the number of
         common shares due was a frivolous claim and did not include any amount
         related to these shares in the related financial statements. In
         September 2003 the Company settled this suit for $450,000. The terms
         include 16 monthly installment payments and 3,000,000 shares of S-8
         common stock of the Company to be escrowed as collateral, to be
         released upon satisfaction of the settlement amount. The $450,000
         settlement amount is included in accrued expenses at March 29, 2003 and
         $270,000 is included in settlements in other income and expense in the
         accompanying consolidated statements of operations.

         During the fiscal year ended March 29, 2003 and subsequent to such,
         various vendors, consultants and professionals have filed actions
         against the Company, including some having received default judgments.
         The unsettled claims aggregate approximately $180,000. The Company has
         included in accrued expenses at March 29, 2003 approximately $154,000
         of these settlements based on this assessment, certain of the balances
         were previously included as accounts payable. During the fiscal year
         ended March 29, 2003 and subsequent to such, various former employees
         of the Company and certain related Company's have filed actions against
         the Company to recover severance pay, back wages, personal property and
         interest. One such group of claims has obtained a judgment against the
         Company's bottling equipment and is forcing a disposition of the
         equipment through an auction. The unsettled claims aggregate
         approximately $985,000. The Company has included in accrued expenses at
         March 29, 2003 approximately $792,000 as a contingency related to these
         unsettled claims, actions

                                      F-29
<PAGE>
NOTE 14- COMMITMENTS AND CONTINGENCIES (cont'd)

         and judgments based on the Company's and counsel's assessments. During
         the quarter ended June 28, 2003, $82,000 of these claims were settled.

         An action was filed on June 26, 2003. The suit is a foreclosure action
         against the Company by a secured mortgage holder for non-payment. The
         Plaintiff seeks to recover possession of the collateral, consisting of
         real property and machinery. The principal amount of the note is
         approximately $300,000. In addition to this amount, back interest,
         attorneys' fees and costs are being sought in the amount of
         approximately $50,000. The complaint in this action has been received
         by the Company, the Company's answer has been filed and the Company is
         awaiting discovery.

         Subsequent to the quarter ended June 28, 2003, the Company entered into
         settlement agreements with certain professionals, consultants, vendors
         and former employees. These settlements aggregate approximately
         $386,000 and are included in accrued expenses at June 28, 2003.

         The Company is a defendant in an action commenced by an individual and
         a related company, which action was filed on June 6, 2003. The
         Plaintiff in this action served a 13-count complaint, which includes
         claims of breach of contract, ejectment and foreclosure of a security
         agreement. Further, the Plaintiff is claiming that he is entitled to
         receive shares of Preferred Stock of the Company, which are convertible
         into 15% of the issued and outstanding shares of the Company. The
         Plaintiff has not specified an amount of damages. The satisfaction of
         the conditions upon which the Company agreed to issue such shares and
         the consideration for the issuance of such shares are in dispute.
         Accordingly, the Company believes the individual is no longer entitled
         to receive such shares. The Company and counsel handling the action
         believe that the Company will prevail in the defense of these
         transactions due to the Plaintiff's failure to satisfy its
         consideration obligations. Although the Company believes that such
         action is without merit, and it is vigorously defending such action,
         there can be no assurance that such action will not be successful.

         The Company is party to various legal proceedings generally incidental
         to its business as is the case with other companies in the same
         industry.

              Operating Leases

         The Company has an operating lease for office space. The lease is
         subject to escalation for the Company's proportionate share of
         increases in real estate taxes and certain other operating expenses.

         The approximate future minimum rentals under the operating lease in
         effect on March 29, 2003 is as follows:

                      2004            $             69,142
                      2005                          69,132
                      2006                          69,132
                                      ---------------------
                                      $            207,406
                                      =====================

                                      F-30
<PAGE>
NOTE 14- COMMITMENTS AND CONTINGENCIES (cont'd)

         License and Trademark Agreement:

         On May 7, 2003, the Company entered into a new exclusive license and
         trademark agreement with StonePoint Group, Limited ("StonePoint")
         whereby the Company granted StonePoint the exclusive, unlimited
         royalty-free right and license to all the intellectual property,
         know-how and technology for use in the production, licensing,
         marketing, distribution, use, sublicense, subcontract, sale and
         transfer of the products (as defined in the agreement) within the
         established territory. The territory includes the countries of Japan,
         Taiwan, the Philippines, China, North Korea, South Korea, Singapore,
         Vietnam, Thailand, Malaysia, Indonesia, Cambodia and Laos. No royalties
         or fees of any kind shall ever be due to the Company and the term of
         the agreement is perpetual.

         The Company was paid $1,742,000 in the following form:

                  Cash of $400,000 pursuant to a prior license and trademark
                  agreement dated January 8, 2002;

                  Cash of $342,000 spent by StonePoint during 2002 for costs
                  incurred by StonePoint for remedial actions taken by
                  StonePoint to regain and recapture StonePoint's business
                  relationship with its Distributor and to protect and preserve
                  the Distributor and StonePoint Supply and Purchase Agreement
                  as a result of contaminated product purchased by the Company;
                  and

                  The assumption by StonePoint of the Company's debt obligation
                  to Distributor in the amount of $1 million in future product
                  rebates, in settlement of the $3 million loss suffered by
                  Distributor as a result of the recall caused by the
                  contaminated product produced by the Company.

         As a result of the above, the Company recognized $1,342,000 in
         settlement expense, of which $1,092,000 was recognized during the year
         ended March 29, 2003 and $250,000 was recognized during the year ended
         March 30, 2002. The Company recognized $1,342,000 in exclusive license
         agreement revenue, related to the new agreement. Such amounts are
         included in settlements in other income and expense in the accompanying
         consolidated statements of operations.

         The Company also recognized under the prior agreement $371,999 in net
         revenues during the year ended March 29, 2003 and $39,001, was
         recognized during the year ended March 30, 2002.

         Lack of Insurance:

         The Company, at June 28, 2003, did not maintain any liability insurance
         or any other form of general insurance. The Company is also lacking
         insurance coverage for Directors and Officers Liability, workman's
         compensation, disability, and business discontinuance. Although the
         Company is not aware of any claims resulting from non-coverage, there
         is no assurance that none exist. Management plans to obtain coverage as
         soon as possible.

                                      F-31
<PAGE>
NOTE 15- SUBSEQUENT EVENTS

         Release Agreement:

         In July 2003, the Company and one of its directors entered into a
         Mutual Release Agreement, whereby the Company and the director mutually
         agreed to terminate and release each other from their current
         relationship for a consideration of $5,000.

         Consulting Agreement:

         In July 2003, the Company entered into a consulting agreement with a
         consultant for services to be provided. The agreement expires July 18,
         2005. As consideration for the services to be provided, upon filing of
         Form SB-2 registration statement with the Securities and Exchange
         Commission, the Company will issue the consultant sufficient shares of
         the Company's common stock such that the consultant will own 15% equity
         in the Company. Such equity shall be calculated based upon all
         currently outstanding shares exclusive of options or warrants.


                                      F-32
<PAGE>
Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto as filed in the Quarterly Report on Form
10-QSB of BEVsystems International, Inc. and Subsidiaries (the "Company") for
the quarter ended June 29, 2003.
Forward-looking statements in this report are made pursuant to the "safe-harbor"
provisions of the Private Securities Litigation Reform Act of 1995. The Company
wishes to advise readers that actual results may differ substantially from such
forward-looking statements. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially from those
expressed in or implied by the statements, including, but not limited to, the
following: Changing economic conditions, interest rate trends, continued
acceptance of the Company's products in the marketplace, competitive factors,
and other risks detailed in the Company's periodic report filings with the
Securities and Exchange Commission.

Results of Operation

For the three months ended June 30, 2003 (First Quarter):

Net Revenues for the first quarter of fiscal year 2003 were $15,967 compared
$213,322, for the same period of fiscal year 2002. General, selling and
marketing expenses for the first quarter of fiscal year 2003 was $1,357,300
compared to $2,783,049, for the same period of fiscal year 2002. The net loss
for the first quarter of fiscal year 2003 was $1,345,900 compared to $2,918,843,
for the same period of fiscal year 2002.

Liquidity and Capital Resources

Our primary source of liquidity has historically consisted of sales of equity
securities and debt instruments. In the fiscal year ending March 30, 2003, the
Company raised $ 1,681,529 through the issuance of common stock. The company
also received proceeds from debt instruments of $1,171,387. These proceeds were
used to finance our continued operations.

The company is currently engaged in discussions with numerous parties with
respect to raising additional capital. Independent Auditors have determined
under Generally Accepted Accounting Principles that the company has a "Going
Concern" related to the liquidity for the next twelve months.

However, the Company has no definitive plans or arrangements in place with
respect to additional capital sources at this time. The Company has no lines of
credit available to it at this time. There is no assurance that additional
capital will be available to the Company when or if required.

Financing Strategy

The Company has reached settlement agreements with numerous creditors that have
judgments and/or claims against the Company. The Company has reached agreement
to satisfy several additional creditors with a combination of cash and/or stock.
The consolidated financial statements and notes thereto appearing elsewhere in
this Form 10-Q reflect settlements that have been paid off in full. Some
creditors have converted from debt to equity and many of these agreements call
for payouts in restricted shares at significant discounts or payouts over time.
The Company used its best efforts to not create significant pressure on its
stock by the methodology it employed in these negotiated settlements that have
resulted in either the issuance of restricted stock or the issuance of shares on
a monthly basis. Some of these issues were covered under a recent S-8
registration statement. This registration statement also included amongst other
expenses, future professional fees to the Company's attorneys, out-sourced
professional services and other consultants.

2003 / 2004 Brand Development and Marketing:

BEVsystems is utilizing endorsements from respected well-known athletes to gain
public awareness of the Life O2 SuperOxygenated bottled water product. Our
initial product launch with these celebrities coincides with the beginning of
the fall 2003 NFL football season. We have reached definitive agreement with two
football players that are household names with the San Francisco `49ers, and
Buffalo Bills. They are Tarrell Owens and Takeo Spikes. These athletes have
agreed to endorse the product, provide memorable quotes, allow their photo with
the product to be used in advertising, wear our logos on apparel,

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<PAGE>
visit retail outlets promoting the product, and introduce Life O2 to their
teammates.

For each of these teams, BEVsystems will produce Life O2 with the label and
sports closure (cap) in the team colors. Each player that endorses the product
will have their own private label product with their picture on the inside of
the see-thru label. Each private label product will have its own bar-code (UPC)
identifying the product so that we can track royalties earned by the athlete.

BEVsystems is setting up a separate fund containing BEVsystems' common stock for
the athletes. BCF, LLP. and RBC Professional Sports Division, have agreed to
manage this fund for the athletes.

During the first week in August Life O2 bottled water was delivered to
individual players at the NFL football training camps for the San Francisco
`49ers, Buffalo Bills, Miami Dolphins, and Washington Redskins and Atlanta
Falcons.

We have a well thought-out plan for announcing each step of our 2003 / 2004
Brand Development and Marketing Plan.

BEVsystems is developing a promotional marketing program. In September we will
begin negotiations with major retail chains to carry our product in the regions
supporting our initial four football teams. The meetings will take place with
the active participation of the professional athletes. The marketing program
will include a fully developed promotional program for the retail outlet with
endorsements from the athletes and in-store Point-of-Purchase .

With the endorsement of the athletes creating demand for Life O2, the
advertising and marketing campaign in place, and the retail outlets lined up, we
will then begin negotiations for our regional distributors.

Risk Factors and Cautionary Statements

We may not be able to raise capital as needed to maintain our operations.

We will need to raise additional funds to promote our brand and support all of
our strategies for growth. Additional financing may not be available on
favorable terms, if at all. We may also require additional capital to acquire or
invest in complementary businesses or products or obtain the right to use
complementary technologies. If we cannot raise needed funds on acceptable terms,
we may not be able to develop or enhance our brands or our products, take
advantage of future opportunities or respond to competitive pressures or
unanticipated requirements, which could seriously harm our business, financial
condition and results of operations. If we issue additional equity securities to
raise funds, the ownership percentage of our existing stockholders would be
reduced. New investors may demand rights, preferences or privileges senior to
those of existing holders of our common stock.

If we lose key personnel, we may not be able to successfully operate our
business.

Our future success depends, in large part, on our ability to attract and retain
highly skilled personnel. The loss of the services of any of our key personnel,
the inability to attract or retain qualified personnel in the future or delays
in hiring required personnel, particularly sales, marketing and financial
personnel, may seriously harm our business, financial condition and results of
operations. We will need to expand our sales operations and marketing operations
in order to increase market awareness of our products, generate increased
revenue and support the existing and future distributors. New sales personnel
and marketing personnel will require training and take time to achieve full
productivity. Competition for such personnel is intense. We cannot be certain
that we will successfully attract and retain additional qualified personnel.

Our failure to manage our rapid growth effectively could negatively affect our
results of operations.

We expect to experience a period of increasing demand for support from these
distributors that would significantly strain all of our resources. We expect
that adding the personnel required to support the demands of the new
distributors will place strain on our management, operational and financial
resources. An inability to manage these increased demands effectively could
seriously harm our business, financial condition and results of operations.
Historically, Life International outsourced its financial and accounting
function and we plan to make similar arrangements initially. We may not generate
timely management information or maintain control of this function on this
basis. We may not be able to install adequate control systems in an efficient
and timely manner, and our current or planned operational systems, procedures
and controls may not be adequate to support our future operations. Delays in the
implementation of new systems or operational disruptions when we

                                       2
<PAGE>
transition to new systems would impair our ability to accurately forecast sales
demand, manage our product inventory and record and report financial and
management information on a timely and accurate basis.

Our markets are highly competitive, and we cannot assure we will be able to
compete effectively.

We compete in a new, rapidly evolving and highly competitive and fragmented
market. We expect competition to intensify in the future. We cannot assure you
that we will be able to compete effectively. We believe that the main
competitive factors in the bottled water market are brand recognition, product
quality, product placement and availability and cost. We compete in the
oxygenated bottled water market with Talking Rain (Airwater), O to Go and a
variety of start- ups, and in general with other bottled waters and sports
drinks. Many of our large competitors have strong relationships with mass
merchandisers and entrenched shelf space commitments. They may be able to
leverage their existing relationships to carry alternative oxygenated water
offerings. We also expect that other companies may enter our market with better
products, greater financial resources or greater brand recognition. We expect
our competitors to continue to improve the dissolved oxygen content and shelf
life of their current products and introduce new products. To be competitive, we
must continue to invest significant resources in research and development,
advertising and marketing. We cannot be sure that we will have sufficient
resources to make these investments or that we will be able to make the
technological advances necessary to be competitive. Increased competition is
likely to result in price reductions, reduced gross margin and loss of market
share. Our failure to compete successfully against current or future competitors
could seriously harm our business, financial condition and results of
operations.

The oxygenated water category may not achieve widespread acceptance, which could
cause our business to fail.

The oxygenated water category is relatively new. Less than 1% of all bottled
water sold worldwide has enriched oxygen content. Our ability to increase
revenue in the future depends on consumers becoming aware of and selecting
oxygenated bottled water instead of mineral waters and sports drinks. In order
to achieve acceptance, we will have to convince consumers to prefer
oxygen-enriched water. If these efforts fail or if oxygen enriched water does
not achieve commercial acceptance, our business, financial condition and results
of operations could be seriously harmed. As competition increases, our inability
to introduce enhanced bottling equipment and packaging could prevent us from
competing effectively with others. We expect that the oxygenated water market
will be characterized by rapid technological change. We also expect that
increased competition in the oxygenated water category will require us to
rapidly evolve and adapt our products to remain competitive. The successful
operation of our business depends on our ability to develop new bottling
technology and packaging enhancements that respond to evolving industry
standards on a timely and cost-effective basis. We cannot be certain that we
will successfully develop these technologies or capabilities. Our failure to
produce technologically competitive products in a cost-effective manner and on a
timely basis will seriously harm our business, financial condition and results
of operations.

Our reliance on co-packers may adversely affect our revenues and margins.

Our business sells bottled water that is produced by co-packers. While this
arrangement will permit us to avoid significant capital expenditures to
establish bottling plants of our own, it will expose us to various risks. Our
current arrangements do not provide for any capacity reservations or committed
delivery times from these co- packers. Since the volumes of Life International's
orders have been low to date, Life International has not been adversely affected
by the lack of dedicated capacity. If demand for our products increases, we will
need committed capacities and pricing. In order to secure committed capacity, we
will be required to enter into "take-or-pay" arrangements that commit us to
fixed purchase commitments whether or not warranted by our sales. If any of our
co-packers were to terminate or fail to renew our arrangements, or should they
have difficulties in timely producing oxygenated water for us, our ability to
fulfill our commitments to distributors would be adversely affected until we
were able to make alternative arrangements, and our business reputation would be
adversely affected if any of the co-packers were to produce inferior quality
products. To the extent that the co- packers increase their prices, we would in
most cases not be able to pass along the increase and our revenues, gross profit
and operating income would be adversely affected. In addition, in order to
reduce logistics costs, we must establish numerous co-packing relationships with
strategically located co-packers. We will need to achieve very large volumes in
order to support a geographically diverse co-packer network. Accordingly, our
logistics costs are likely to be very high for the foreseeable future.

We depend on entrepreneurial, local distributors to generate most of our revenue
and our operating results may be harmed if these companies are not commercially
viable.

We expect to generate most of our revenue from small, private distributors.
Failure to generate revenue from these distributors would have a negative impact
on our business. Many of these distributors are still building their
infrastructures and introducing

                                       3
<PAGE>
their products. We cannot guarantee that any of these companies will achieve
commercial viability. Given that these distributors may be small or start-up
operations with uncertain financial resources, we cannot be sure that these
distributors will be able to properly market and sell the products in their
territories, produce oxygenated water that meets applicable quality standards,
or pay their obligations to us. Life International recently terminated a
distributor that had been delinquent for over one year in the payment of a
minimum royalty for the use of the Life O2 technology. The failure of our
distributors to achieve commercial viability or to pay their obligations to us
would, in turn, seriously harm our business, financial condition and results of
operations.

A loss of one or more of our key distributors could cause a significant decrease
in our sales.

We expect to derive a majority of our revenue from a small number of
distributors. While many of the agreements with distributors provide minimum
annual payments, failure to make such payments in most cases would result in a
reevaluation of the relationship rather than the collection of the amount.
Accordingly, we cannot be certain that present or future distributors will not
terminate their purchasing arrangements with us or significantly reduce or delay
their orders. A substantial number of the distributors of Life International
have been recently established and we will need to provide substantial
assistance in order for them to succeed. Many of the distributors of Life
International have not yet reached volumes that are adequate to achieve
commercial success. The continued inability of distributors to increase volumes
could cause the distributors to discontinue their efforts to bottle and sell our
products. Any termination, reduction or delay in orders could seriously harm our
business, financial condition and results of operations.

We may not be able to expand our distribution channels, which would harm our
ability to generate revenue.

We believe that our future success is dependent upon our ability to establish
and maintain successful relationships with a variety of international
distributors. To date, Life International has entered into agreements with
distributors covering only a portion of the territory that we plan to cover, and
most of the relationships developed to date are new. The distributor typically
may terminate these distribution agreements without cause upon short notice. We
cannot be certain that we will be able to reach agreement with additional
distributors on a timely basis or at all, or that these distributors will devote
adequate resources to marketing, selling and supporting our products. We must
successfully manage our distributor relationships. Our inability to generate
revenue from distributors may harm our business, financial condition and results
of operations.

Revenues from distributors based outside the United States have historically
accounted for most of the revenue of the business, which exposes us to risks
inherent in international operations.

Our international operations will be subject to a variety of risks associated
with conducting business internationally, any of which could seriously harm our
business, financial condition and results of operations. These risks include:

* greater difficulty in collecting accounts receivable;

* satisfying import or export licensing and product certification requirements;

* tariffs, duties, price controls or other restrictions on foreign currencies or
trade barriers imposed by foreign countries;

* potential adverse tax consequences, including restrictions on repatriation of
earnings;

* fluctuations in currency exchange rates;

* easonal reductions in business activity in some parts of the world;

* unexpected changes in regulatory requirements;

* burdens of complying with a wide variety of foreign laws, particularly with
respect to intellectual property and license requirements;

* difficulties and costs of staffing and managing foreign operations;

* political instability;

                                       4
<PAGE>
* the impact of economic recessions outside of the United States; and

* limited ability to enforce agreements, intellectual property and other rights
in some foreign countries.

Defects in our products may seriously harm our credibility and harm our
business.

While we have established quality standards, our distributors may not comply
with these standards and may ship bottled water products that have lower oxygen
content or shorter shelf life than as advertised.

These problems would seriously harm our credibility, market acceptance of our
products and the value of our brand. We believe that there are inherent
limitations in the shelf life of oxygen-enriched water packaged in PET bottles.
While we are investigating alternative packaging systems, we cannot assure you
that we will be able to discover a commercially viable solution. The failure to
utilize packaging that provides a consumer with high oxygen content following
extended periods of shipping, handling and stocking of our products may result
in consumer dissatisfaction with our products and harm our brand. We also
believe that additional education and monitoring of our distributors and
co-packers will be required to assure compliance with our quality standards. We
will need to hire and train regional field managers to improve the performance
of the distributors. The occurrence of some of these types of problems may
seriously harm our business, financial condition and results of operations.

Government regulation could restrict our business or increase our cost of doing
business.

The bottled water industry is highly regulated in the United States by the Food
and Drug Administration, state agencies and self-regulatory organizations, such
as the International Bottled Water Association. There are equivalent
governmental and self-regulatory agencies in other countries. These agencies
impose strict production, quality, labeling and packaging requirements on
producers of bottled water. New and more stringent government regulations may be
adopted in the future that may adversely impact on our business.

We may be liable for product liability damages.

Our distributors and we will be selling ingested consumer products into the
stream of commerce. We may, therefore, be subject to claims by consumers if the
bottled water that our appointed bottlers or we or distributors sell injures
them. Life International in the past has maintained product liability insurance
in amounts it deemed sufficient and we plan to obtain product liability
insurance. We cannot assure you that we will obtain and maintain adequate or
affordable product liability insurance. If we incur uninsured product liability
claims our business, financial condition and results of operations could be
materially and adversely affected.

Pending Claim by Third Party

The Company is a defendant in an action commenced by an individual and a related
company, which action was filed on June 6, 2003. The Plaintiff in this action
served a 13-count complaint, which includes claims of breach of contract,
ejectment and foreclosure of a security agreement. Further, the Plaintiff is
claiming that he is entitled to receive shares of Preferred Stock of the
Company, which are convertible into 15% of the issued and outstanding shares of
the Company. The Plaintiff has not specified an amount of damages. The
satisfaction of the conditions upon which the Company agreed to issue such
shares and the consideration for the issuance of such shares are in dispute.
Accordingly, the Company believes the individual is no longer entitled to
receive such shares. The Company and counsel handling the action believe that
the Company will prevail in the defense of these transactions due to the
Plaintiff's failure to satisfy its consideration obligations. Although the
Company believes that such action is without merit, and it is vigorously
defending such action, there can be no assurance that such action will not be
successful.

Holders of Company stock may be subject to foreign personal holding company,
passive foreign investment company, controlled foreign corporation and personal
holding company rules.

To the extent that we earn a majority of our income from the payment of
royalties, together with other "passive" income (for United States federal
income tax purposes), we may be treated as a foreign personal holding company or
a passive foreign investment company. In that event, holders of our common stock
that are United States persons would be required to pay tax

                                       5
<PAGE>
on their pro rata share of the Company's or its relevant non-United States
subsidiary's undistributed foreign personal holding company income. If the
Company were a passive foreign investment company, then any holder of our common
stock that is a United States person could be liable to pay tax at the then
prevailing rates on ordinary income plus an interest charge upon some
distributions by the Company or when that shareholder sold our common stock at a
gain.

Furthermore, additional tax considerations would apply if the Company or any of
its affiliates were a controlled foreign corporation or a personal holding
company.

Item 3.  Controls and Procedures

        (a)   Evaluation of Disclosure Controls and Procedures.

BEVsystems maintains disclosure controls and procedures (as defined in Rule
13a-14(c) and Rule 15d-14(c) of the Exchange Act) designed to ensure that
information required to be disclosed in the reports of BEVsystems filed under
the Exchange Act is recorded, processed, summarized, and reported within the
required time periods. BEVsystems' Chief Executive Officer and Chief Financial
Officer has concluded, based upon his evaluation of these disclosure controls
and procedures as of a date within 90 days of the filing date of this report,
that, as of the date of his evaluation, these disclosure controls and procedures
were effective at ensuring that the required information will be disclosed on a
timely basis in the reports of BEVsystems filed under the Exchange Act.

        (b)   Changes in Internal Controls.

BEVsystems maintains a system of internal controls that is designed to provide
reasonable assurance that the books and records of BEVsystems accurately reflect
BEVsystems' transactions and that the established policies and procedures of
BEVsystems are followed. There were no significant changes to the internal
controls of BEVsystesm or in other factors that could significantly affect such
internal controls subsequent to the date of the evaluation of such internal
controls by the Chief Executive Officer and Chief Financial Officer, including
any corrective actions with regard to significant deficiencies and material
weaknesses.

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

BEVsystems announced July 11, 2003 that it reached settlement agreements with
six creditors that have judgments against the Company. The Company has reached
agreement to satisfy several additional creditors with a combination of cash
and/or stock. The Company has made continued progress towards restructuring its
business and Balance Sheet. The Company is party to legal proceedings as set
forth below.

Thorp & Company v. BEVsystems Int'l, Inc., et al., Case No. 02-27983-CA-13. This
action was filed in the Eleventh Judicial Circuit for Miami-Dade County on
November 8, 2002. The Plaintiff is asserting a claim to recover $35,000 of
accounts payable. The Plaintiff in this case has filed a motion for default
judgment. The Company requires time to file a response to the motion.

Freeman Decorating Co. v. BEVsystems Int'l, Inc., et al., Case No. 02-22432-CA
(09). This action was filed in the Seventh Judicial Circuit for Dade County on
September 10, 2002. The Plaintiff in the action seeks payment for advertising
services rendered. The action was inadvertently mishandled by management and
subsequently not defended, resulting in a default judgment for approximately
$18,995. The Company has served a temporary standstill on collection activities.

Young & Rubicam, L.P. v. BEVsystems Int'l, Inc., et al., Case No.
02-31444-CA-08. This action was filed in the Eleventh Judicial District for
Miami-Dade County. The Plaintiff in the action seeks to recover approximately
$57,410 for non-payment of office rent. The Company has received the complaint
and the answer is due.

Zinno v. BEVsystems Int'l, Inc., et al., Case No. 03-4199-CO-41. This action was
filed in the Sixth Judicial Circuit for Pinellas County, Florida on July 7,
2003. The Plaintiff, a former employee of the Company, filed suit against both
the Company and Wasser Merger, Inc. for approximately $6,475 of back wages,
personal property, expenses and interest. The Company has filed

                                       6
<PAGE>
a cross-claim against Wasser Merger, Inc., pursuant to an indemnification
agreement Wasser executed with the Company to assume all payroll as of February
2003. Defenses have been filed. The Company has a reasonable likelihood of
prevailing on the merits of the case.

Brickell Bay Capital Fund, LLC v. BEVsystems Int'l, Inc., et al., Case No.
03-4936-CI-015. This action was filed in the Sixth Judicial Circuit for Pinellas
County, Florida on June 26, 2003. The suit is a foreclosure action against the
Company by a secured mortgage holder for non-payment. The Plaintiff seeks to
recover possession of the collateral, consisting of real property and machinery.
The principal amount of the note is approximately $300,000. In addition to this
amount, back interest, attorneys' fees and costs are being sought in the amount
of approximately $50,000. The complaint in this action has been received by the
Company, the Company's answer has been filed and the Company is awaiting
discovery.

Burkhardt, et al. v. BEVsystems Int'l, Inc., et al., Case No. 03-13379-CA-08.
This action was filed in the Eleventh Judicial Circuit for Miami-Dade County,
Florida on June 6, 2003. The Plaintiff served a 13-count complaint which
includes claims of breach of contract, ejectment and foreclosure of a security
agreement. Further, the Plaintiff is claiming that he is entitled to receive
shares of Preferred Stock of the Company, which are convertible into 15% of the
issued and outstanding shares of the Company. The Plaintiff has not specified an
amount of damages. The satisfaction of the conditions upon which the Company
agreed to issue such shares and the consideration for the issuance of such
shares are in dispute. Accordingly, the Company believes the individual is no
longer entitled to receive such shares. The Company filed a motion to transfer
venue and the motion is pending. The Company and counsel handling the action
believe that the Company will prevail in the defense of these transactions due
to the Plaintiff's failure to satisfy its consideration obligations. Although
the Company believes that such action is without merit, and it is vigorously
defending such action, there can be no assurance that such action will not be
successful.

Bell Industries, Inc. v. BEVsystems Int'l, Inc., et al., Case No. 03-362-CC-26
(04). This action was filed in the Sixth Judicial Circuit for Pinellas County,
Florida on January 16, 2003. The Plaintiff commenced the action to recover
approximately $17,683 for advertising services rendered. The Plaintiff obtained
a default judgment on April 9, 2003. The Company has served a temporary
standstill on collection activities.

GBS v. BEVsystems Int'l, Inc., Case No. 02-5341-A-21. This action was filed in
Pinellas County, Florida. The Plaintiff seeks recovery of approximately $28,084
allegedly owed to it for accounts payable by the Company. The extent of
potential liability on the claim is being determined by way of discovery and due
diligence.

R.R. Donnelly, Inc. v. BEVsystems Int'l, Inc., Case No. 02-4360-CO-41. This
action was filed in Pinellas County, Florida. The Plaintiff seeks recovery of
approximately $12,019 allegedly owed to it for accounts payable by the Company.
Liability is expected and the amount is in dispute.

Bowne of NYC, LLC v. Aqua Clara. This action was filed in New York City, New
York. The Plaintiff seeks recovery of approximately $5,481 allegedly owed to it
for accounts payable by the Company. Management of the Company has chosen not to
defend this action. Since the initial complaint, no notice of any other adverse
action has been received by the Company.

Plunkett v. BEVsystems Int'l, Inc, et al. This action was filed in the Sixth
Judicial Circuit for Pinellas County on February 11, 2003. Former employees of
the company filed the action to recover severance pay as a result of their
termination and/or for salary accruals. The Plaintiffs in this case obtained a
judgment in the amount of approximately $438,620, have attached the Company's
bottling equipment in Clearwater, Florida and is forcing a sherrif's auction to
dispose of the equipment. The proceeds will go to the Lien Holder, Brickell Bay
Fund. The Company has filed an appeal with the courts to hear the matter and
still expects to prevail.

The real estate in Clearwater, Florida is in foreclosure with the first and
second mortgage holder, Yale Mortgage and Brickell Bay Fund. Mortgages amount to
approximately $740,000.

Item 2.  Changes in Securities

BEVsystems issued the following securities during the period covered by this
report without registering the securities under the Securities Act. All of the
bellow issuances, offerings and sales were either registered or were deemed to
be exempt under Rule 506 of Regulation D and/or Section 4(2) of the Securities
Act of 1933, as amended (the "1933 Act"). With respect to the issuances which
were deemed to be exempt, no advertising or general solicitation was employed in
offering the securities. The

                                       7
<PAGE>
offerings and sales of exempt issuances were made to a limited number of
persons, all of whom were accredited investors, business associates of the
Company or executive officers of the Company, and transfer was restricted by the
Company in accordance with the requirements of the 1933 Act. The
below-referenced persons represented that they were accredited or sophisticated
investors, and that they were capable of analyzing the merits and risks of their
investment, and that they understood the speculative nature of their investment.

Issuance of Common Stock and Warrants for Consulting Services

In April 2003, the Company entered into an agreement with a lawyer for services
rendered and services to be rendered. In exchange for providing legal services
to the Company and as payment for services already provided amounting to
$45,000, the lawyer received 750,000 shares of the Company's common stock valued
at $120,000, which shares were registered on a Form S-8 registration statement.
The lawyer is required to sell the shares and the net proceeds to be applied as
a credit against the balance due. In the event there is an excess of proceeds,
the consultant is required to credit the Company for future legal services.

In April 2003, the Company entered into a consulting agreement with a consultant
for services to be provided. The initial term of the engagement is for six
months and will automatically renew on a month-to-month basis. In consideration
for services to be provided, the consultant will receive 1,500,000 shares of the
Company's common stock, which shares were registered on a Form S-8 registration
statement.

In April 2003, the Company entered into a consulting agreement with a consulting
firm for services to be provided. The initial term of the engagement is for six
months and will automatically renew on a month-to-month basis. In consideration
for services to be provided, the consulting firm received 500,000 shares of the
Company's common stock valued at $105,000. Such shares were registered on a Form
S-8 registration statement.

In April 2003, the Company issued 300,000 shares of its common stock valued at
$36,000 to a consultant for legal services provided and to be provided.
Following the issuance of the shares, the consultant will sell the shares on the
open market. The net proceeds shall be applied as a credit against any
outstanding legal fees and the excess, if any, shall be applied as a credit
against future legal fees.

In April 2003, the Company entered into a consulting agreement with a consultant
for services provided and to be provided. In exchange for providing consulting
services to the Company and as payment for services already provided amounting
to $27,000, the consultant received 500,000 shares of the Company's common stock
valued at $600,000, which shares were registered on a Form S-8 registration
statement. 200,000 shares are to be issued directly to the consultant. An
additional 300,000 shares shall be issued and held by the Company until the
consultant complies with the provisions of the agreement and it is determined
that the balance owed is not satisfied. If the balance owed is not deficient,
the Company shall return the 300,000 shares to its treasury. The consultant is
required to sell the shares on the open market and apply the net proceeds as a
credit against the balance due. In the event that the balance due is not paid in
full from the net proceeds, then the Company will undertake to issue additional
shares of its common stock, and to register such shares pursuant to a Form S-8
registration, so that additional installments of shares can be issued to the
consultant to satisfy the remaining balance. In the event there is an excess of
proceeds, the consultant is required to credit the Company for future consulting
services.

In May 2003, the Company issued 1,250,000 shares of its common stock valued at
$125,000 to a consultant for services to be provided over one year. Effective
June 23, 2003, the Company amended its consulting agreement with the consultant,
whereby the consultant agreed to provide additional services to the Company in
exchange for 3,000,000 shares of the Company's common stock valued at $30,000.

In May 2003, the Company issued 1,000,000 shares of its common stock valued at
$100,000 to a consultant for services to be provided over one year.

In May 2003, the Company issued 500,000 shares of its common stock valued at
$50,000 to a consultant for services to be provided. Following the issuance of
the shares, the consultant will sell the shares on the open market. The net
proceeds shall be applied as a credit against the fees incurred for services
rendered. In the event that the balance has not been paid in full from the net
sale proceeds of the shares, the Company will issue additional shares of its
common stock to the consultant. In the event that there is excess, it shall be
applied as a credit for future consulting services.

                                       8
<PAGE>
In May 2003, the Company entered into a six-month Attorney/Client Agreement with
an attorney for certain legal services to be provided. The Company agreed to
issue 250,000 shares of common stock valued at $30,000 upon execution of the
agreement, which shares are required to be registered pursuant to a Form S-8
registration statement.

In June 2003, the Company issued 325,000 shares of its common stock valued at
$26,000 to a consultant for services to be provided over one year.

2003 Equity Incentive Plan:

In April 2003, the Company granted options to purchase 9,250,000 shares of the
Company's common stock under the Company's 2003 Equity Incentive Plan. The
options are fully vested as of the grant date and have an exercise price of
$0.01.

Item 3.  Defaults Upon Senior Securities

On July 31, 2002, the Company refinanced their manufacturing plant located in
Clearwater, Florida. The amount of the mortgage note totaled $420,000. The
mortgage note is secured by the underlying building and land. The note was due
in monthly installments of principal and interest through 2032 and has an
initial interest rate of 12.99%. The interest rate will be adjusted annually to
a rate equal to 6.00% above the prime rate and shall never be less than 12.00%
per year. At June 28, 2003, the interest rate was 12%. Due to the Company's
failure to make the required payments under the note, the mortgage is now in
default and is currently due and has been reclassified as a current liability.
At June 30, 2003, the outstanding principal balance was $419,806.

In May 2002, the Company entered into an agreement with Brickell Bay Capital
Fund, LLC ("Brickell Bay") to extend the maturity date of its $300,000
convertible promissory note to October 4, 2002. As part of the agreement, the
Company was required to pay past due interest totaling $23,625 and issue
warrants to purchase 2,511 shares of the Company's common stock at an exercise
price of $65.99 per share. On May 30, 2002, Brickell Bay exercised warrants
relating to a previous agreement to purchase 2,511 shares of the Company's
common stock for a total consideration of $165,706. In addition, on April 4,
2002, the Company entered into a Collateral Assignment of Rents, Leases and
Profits ("Collateral Assignment") with Brickell Bay whereby the Company's
manufacturing plant in Clearwater, Florida and land was assigned to Brickell Bay
as collateral for the $300,000 note. In June 2003, Brickell Bay filed a
foreclosure action against the Company for nonpayment.

The Company has a note payable and capital leases currently in default
aggregating $59,067. Certain vehicles of the Company secure the note and the
note holder is seeking repossession of the vehicles.

Item 4.  Submission of Matters to a Vote of Security Holders

None.

Item 5.  Other Information

None.

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

Exhibit                   Description of Exhibit
  No.

31.1 Certification by the Chief Executive Officer and Chief Financial Officer
     pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)

32.1 Certification by the Chief Executive Officer and Chief Financial Officer,
     Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
     the Sarbanes-Oxley Act of 2002 (filed herewith)

                                       9
<PAGE>
     (b) Reports on Form 8-K

On June 6, 2003, the Company filed a Form 8-K reporting under Item 5 the
approval of Board of Directors resolution relocating our principal corporate
office from 501 Brickell Key Drive, Suite 407, Miami Florida 33151 to 1315
Cleveland Street, Clearwater, Florida 33755.

On June 17, 2003, the Company filed a Form 8-K reporting under Item 4 the
termination of its independent auditor, Rosenberg Rich Baker Berman & Co. and
the engagement of Massella Rounbus LLP as its principal independent auditor.

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on behalf of the undersigned
thereunto duly authorized.

         Date: September 15, 2003           BEVSYSTEMS INTERNATIONAL, INC.


                                            By:  /s/ G. Robert Tatum
                                                -------------------------------
                                            G. Robert Tatum
                                            CEO, CFO & Chairman


Pursuant to the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
         Signature                          Capacity                            Date

<S>                                             <C>                                 <C>
 /s/ G. Robert Tatum                        CEO, CFO & Chairman                 September 15, 2003
---------------------------
G. Robert Tatum

 /s/ James Dale Davidson                    Director                            September 15, 2003
---------------------------
James Dale Davidson

 /s/ E. Douglas Cifers                      Director                            September 15, 2003
---------------------------
E. Douglas Cifers
</TABLE>