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 December 27, 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, FL 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 February 10, 2004
there were 66,917,252 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

                                                                          Page

PART I--FINANCIAL INFORMATION

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.                                               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

<PAGE>
PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                  BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
                                      INDEX
                                December 27, 2003
<TABLE>
<CAPTION>
                                                                           Page Number

CONSOLIDATED FINANCIAL STATEMENTS
<S>                                              <C> <C>                      <C>    <C>
         Condensed Consolidated Balance Sheets at December 27, 2003            F-2
            (unaudited)

         Condensed Consolidated Statement of Operations and Comprehensive Loss
         for the three and nine months ended December 27, 2003
         (unaudited) and December 28, 2002 (unaudited)                         F-3

         Condensed Consolidated Statement of Cash Flows for the nine months
         ended December 27, 2003 (unaudited) and December 28, 2002
         (unaudited)                                                        F-4 to F-5

         Notes to Condensed Consolidated Financial Statements               F-6 to F-22

</TABLE>
<PAGE>
                 BEVsystems International, Inc. & Subsidiary
                        CONDENSED CONSOLIDATED BALANCE SHEET
                        At December 27, 2003 (Unaudited)


                                     ASSETS

Current assets
  Cash                                                               $   9,070
  Accounts receivable                                                   32,120
  Marketable securites                                                   8,500
                                                                     ----------
  Total current assets                                                  49,690
                                                                     ----------
Property, plant and equipment, net                                     945,588
                                                                     ----------
     Total assets                                                    $ 995,278
                                                                     ==========

          LIABILITIES AND SHAREHOLDERS' DEFICIENCY

Current liabilities
  Accounts payable                                                 $   742,426
  Accrued expenses                                                   3,025,997
  Deposits and deferred fees                                            63,670
  Convertible debentures and advances - stockholders                   639,590
  Notes Payable secured by assets                                      746,433
                                                                   ------------
     Total current liabilities                                       5,218,116
                                                                   ------------
Commitments and contigencies

Shareholders' deficiency
  Preferred stock; no par value; 5,000,000 shares authorized;
    100 shares issued and outstanding; nonvoting and
    convertible into 174,825 shares of common stock                     74,601
  Common stock; $.0001par value ; 650,000,000 shares authorized;
    61,011,392 shares issued and outstanding                             6,101
  Additional Paid-In Capital                                        36,331,838
  Unearned Services                                                 (2,203,368)
  Accumulated comprehensive income                                       3,000
  Accumulated deficit                                              (38,435,010)
                                                                   ------------

      Total shareholders' deficiency                                (4,222,838)
                                                                   ------------
      Total liabilities and shareholders' deficiency               $   995,278
                                                                   ============

  The accompanying notes are an integral part of these financial statements

<PAGE>
                   BEVsystems International, Inc. & Subsidiary
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
                                                               For the Three Months Ended       For the Nine Months Ended
                                                                  December 27,   December 28,  December 27,     December 28,
                                                                     2003           2002           2003             2002
<S>                                                                 <C>              <C>            <C>             <C>
Net revenues                                                     $    65,625      $    122,824   $    100,272    $    566,444
Cost of Goods Sold
  Cost of revenues                                                    10,531           141,870         39,106         440,636
                                                                 ------------     -------------  -------------   -------------
Gross Profit (loss)                                                   55,094           (19,046)        61,166         125,808
                                                                 ------------     -------------  -------------   -------------

Selling, general and administrative expenses
  Selling and marketing                                               31,619                 -         42,428               -
  General and administrative                                       1,318,588         1,563,793      3,726,509       6,633,342
  Asset impairment charges                                                 -                 -          6,041      11,946,032
  Loss on Settlement of Debt                                          18,636                           18,636
                                                                 ------------     -------------  -------------   -------------
Total selling, general and administrative expenses                 1,368,843         1,563,793      3,793,614      18,579,374
                                                                 ------------     -------------  -------------   -------------
Loss from operations before interest expense                      (1,313,749)       (1,582,839)    (3,732,448)    (18,453,566)
  Interest expense, net                                              104,414           104,561        557,157         513,815
                                                                 ------------     -------------  -------------   -------------
Net loss                                                         $(1,418,163)     $ (1,687,400)  $ (4,289,604)   $(18,967,381)
                                                                 ============     =============  =============   =============
Basic and diluted net loss per common share                      $     (0.02)     $      (4.19)  $      (0.12)   $     (62.32)
                                                                 ------------     -------------  -------------   -------------

Weighted average number of common shares outstanding              57,016,449           402,636     35,524,839         304,364
                                                                 ------------     -------------  -------------   -------------
</TABLE>

   The accompanying notes are an integral part of these financial statements

<PAGE>

                   BEVsystems International, Inc. & Subsidiary
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
                                                                 Nine Months Ended December 27,
                                                            December 27, 2003  December 28, 2002
<S>                                                             <C>              <C>
Operating activities
  Net loss                                                      $ (4,289,604)    $ (18,967,381)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
      Depreciation                                                    18,151                 -
      Amortization of unearned services                            1,966,297           449,175
      Asset impairment charges                                         6,041        11,946,032
      Issuance of Common stock for services and financing            919,035         4,519,700
      Issuance of warrants in connection with finanicng              267,229           140,153
      Grant of employee stock options                                487,498
      Changes in assets and liabilities:
        Accounts receivable                                          (31,664)           (4,413)
        Inventory                                                          -            35,546
        Prepaid expenses and other assets                            (11,155)          139,193
       Decrease in Deferred Revenue                                  (30,500)
        Accounts payable and accrued expenses                        206,957          (560,320)
                                                                -------------    --------------
           Net cash used in operating activities                    (491,716)       (2,302,315)

Investing activities
                                                                           -                 -
                                                                           -                 -
                                                                -------------    --------------


Financing activities
  Proceeds from notes payable and shareholder advances               514,147           416,387
  Repayments of notes payable                                        (13,497)         (330,524)
  Proceeds from issuance of convertible debentures                         -           728,000
  Proceeds from issuance of common stock                                   -           125,000
  Proceeds from exercise of stock options                                  -             5,500
  Net proceeds from exercise of warrants                                   -         1,349,656
                                                                -------------    --------------

           Net cash provided by financing activities                 500,650         2,294,019
                                                                -------------    --------------

Net increase(decrease) in cash                                         8,934            (8,296)

Cash, beginning of period                                                136             8,296
                                                                -------------    --------------

Cash (overdraft), end of period                                      $ 9,070     $ -         0
                                                                -------------    --------------
</TABLE>
The accompanying notes are an integral part of these financial statements

<PAGE>
                   BEVsystems International, Inc. & Subsidiary
     CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)(continued)



<TABLE>
<CAPTION>
                                                                   2003             2002
                                                               --------------    -------------
<S>                                                           <C>                <C>
Supplemental disclosure of non-cash information:

Cash paid during the year for:
   Interest                                                              $ -                 -
                                                               ==============

  Income Taxes                                                           $ -                 -
                                                               ==============

Schedule of non-cash investing and financing activities:

Stock issued in connection with the settlement of trade payables
   and accrued expenses                                            $ 868,914
                                                               ==============

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

Stock issued in connection with prepaid expenses                         $ -
                                                               ==============

Stock issued in connection with conversion of convertible
  noted payable                                                    $ 625,000
                                                               ==============

Cashless exercise of warrants in lieu of accounts payable                $ -
                                                               ==============

Cashless exercise of stock options in lieu of accounts payable           $ -
                                                               ==============

Issuance of warrants in connection with convertible debebtures           $ -
                                                               ==============

Issuance of warrants in connection with financing                        $ -
                                                               ==============

Issuance of common stock in connection with consulting
 agreement                                                       $ 2,400,000
                                                               ==============

The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
                  BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 27, 2003
                                   (UNAUDITED)


NOTE 1 -  ORGANIZATION, HISTORY AND NATURE OF BUSINESS

          BEVsystems International, Inc. and Subsidiary (collectively the
          "Company") is a provider of oxygenated water. The Company bottles its
          product through co-packing agreements and 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. On February 25, 2002, the Company consummated
          a merger with Aqua Clara Bottling and Distribution, Inc. and
          Subsidiary.

NOTE 2 -  BASIS OF PRESENTATION

          The accompanying unaudited condensed consolidated financial statements
          include the accounts of Bevsystems International, Inc. and its wholly
          owned subsidiary. All significant intercompany accounts and
          transactions have been eliminated in consolidation.

          The accompanying unaudited condensed consolidated financial statements
          have been prepared in accordance with U.S. generally accepted
          accounting principles for interim financial information and with
          instructions to Form 10-QSB. Accordingly, they do not include all of
          the information and footnotes required by U.S. generally accepted
          accounting principles for complete financial statements. In the
          opinion of management, all adjustments (consisting of normal recurring
          adjustments) considered necessary for a fair presentation have been
          included. The results of operations for the nine months ended December
          27, 2003 are not necessarily indicative of the results to be expected
          for the full year. For further information, refer to the company's
          annual report filed on Form 10-KSB for the year ended March 29,2003.

NOTE 3 -  GOING CONCERN

          The accompanying unaudited condensed 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
          shareholders' deficit. At December 27, 2003 the Company's accumulated
          deficit was $38,435,010 and its working capital deficiency was
          $5,168,426. For the nine months ended December 27, 2003 the Company
          had a net loss of $4,289,604. In addition, the Company is in default
          of its debt agreements for nonpayment and certain debtors have filed
          actions against the Company, including foreclosing property. These
          conditions, among others, 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.

                                      F-6
<PAGE>
NOTE 4 -  ACCRUED EXPENSES

          Accrued expenses consisted of the following at December 27, 2003:


 Payroll and related costs                               $   1,225,002
 Settlements                                                   450,000
 Other                                                         918,602
 Interest                                                      190,066
 Professional fees                                             182,327
 Directors fees                                                 60,000
                                                         -------------
                                                         $   3,025,997
                                                         =============
NOTE 5 -  CONVERTIBLE NOTES PAYABLE

          On October 22, 2001, the Company entered into a series of three
          convertible promissory notes with Financial Partners Network
          Corporation (an affiliate of the company's CEO) 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 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 $0.01 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. In September 2003, Financial Partners Network
          exercised their right to purchase 2,574 shares of the Company's common
          stock via a cashless exercise, resulting in the issuance of 2,504
          shares of the Company's common stock.


          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 $0.01 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. In September 2003, the CEO exercised his right to purchase
          1,961 shares of the Company's common stock via a cashless exercise,
          resulting in the issuance of 1,908 shares of the Company's common
          stock.

                                      F-7
<PAGE>
NOTE 5 -  CONVERTIBLE NOTES PAYABLE (cont'd)

          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 $4,200 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.

          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 originally 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 $8,400 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
          were 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 $50,000 note into 1,755 shares of the
          Company's common stock. In August 2003, another investor converted his
          $50,000 note, including accrued interest of $8,000, into 773,333
          shares of the Company's common stock. On September 22, 2003, another
          investor converted his $50,000 note, including accrued interest of
          $8,515, into 329,662 shares of the Company's common stock. The Company
          also granted these note holders 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. On September 22, 2003, one note holder exercised his
          warrants and purchased 750 shares of the Company's common stock for
          $133, the proceeds are currently due from the note holder. On

                                      F-8
<PAGE>
NOTE 5 -  CONVERTIBLE NOTES PAYABLE (cont'd)

          September 30, 2003, a note holder converted his $50,000 note,
          including accrued interest of $8,433, into 417,378 shares of the
          company's common stock.

          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 $0.01 per share expiring May 15, 2005. On January 21, 2003,
          this note, as well as a $363,000 secured note with the director,
          including accrued interest was converted into 4,440,044 shares of the
          Company's common stock. 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 the aforementioned secured note with this director the Company
          granted warrants to purchase 3,845 shares of the Company's common
          stock at an exercise price of $0.01 per share expiring May 15, 2005.
          On September 22, 2003, the director exercised his right to purchase
          4,629 shares of the Company's common stock via a cashless exercise,
          resulting in the issuance of 4,504 shares of the Company's common
          stock.

          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. 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
          September 30, 2003, the investor converted his note, including accrued
          interest of $15,879, into 2,000,000 shares of the Company's common
          stock.

          On June 27, 2002, the Company entered into a $50,000 convertible
          promissory note with an investor. The note was 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

                                       F-9
<PAGE>
NOTE 5 -  CONVERTIBLE NOTES PAYABLE (cont'd)

          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. 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. On October
          14, 2003 the note holder converted the principal amount of the note
          and accrued interest of $7,693.16 into 412,094 common shares of the
          company's stock.

          On July 5, 2002, the Company entered into a $250,000 convertible
          promissory note with an investor. The note was 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. 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
          September 30, 2003, the remaining balance of the note, including the
          default interest of $128,404, were converted into 2,500,000 shares of
          the Company's common stock.

          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 In June 2003, a related
          party-shareholder purchased the note from the investor. In
          consideration for extending the maturity date of the note

                                      F-10
<PAGE>
NOTE 5 -  CONVERTIBLE NOTES PAYABLE (cont'd)

          to September 30, 2003, the related party-shareholder was granted
          warrants to purchase 250,000 shares of the Company's common stock at
          an exercise price of $0.01 per share. The fair value of the warrants
          using the Black-Scholes Option Pricing Model was $52,825 and is being
          amortized to interest and financing expense over the term of the
          expense. On September 22, 2003, the related party-shareholder
          exercised his warrants via a cashless exercise, resulting in the
          issuance of 249,306 shares of the Company's common stock. On December
          10, 2003 the remaining balance of the note including accrued interest
          of $12,255.00 was converted into 1,662,000 shares of the company's
          common stock.

          The proceeds from the issuance of each 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 issued prior to March 29,
          2003 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.

          On September 30, 2003 the Company issued two Series A Convertible
          Promissory Notes, to a Director of the Company and a consultant for
          the Company. The notes were issued as a conversion of amounts advanced
          to the Company by the parties. The notes aggregated $338,199, and bear
          interest at a rate of 8.0% per annum. The notes mature on October 30,
          2003. Interest is due and payable at the end of each calendar quarter.
          At the option of the Holders, the interest may be paid in cash or
          converted into common stock. The principal amount of the note may be
          converted, in whole or in part, into common stock at the option of the
          Holder. The initial conversion price per share shall be equal to the
          lesser of (i) the average of the 5-day closing prices during the 5
          days immediately prior to the conversion date discounted by 25%, or
          (ii) $0.25. On December 10, 2003 the related party-shareholder was
          granted warrants to purchase 867,177 shares of the company's common
          stock at an exercise price of $0.01 per share. These warrants were
          exercised concurrently. The fair value of the warrants using the
          Black-Scholes Option Pricing Model was $95,460 and has been amortized
          to interest and financing expense in the period ending December 27,
          2003.

          On December 27, 2003 the Company issued a Series A Convertible
          Promissory Note, to a consultant for the Company. The note was issued
          as a conversion of amounts advanced to the Company by the party. The
          note aggregated $152,893, and bear interest at a rate of 8.0% per
          annum. The notes mature on January 30, 2003. Interest is due and
          payable at the end of each calendar quarter. At the option of the
          Holders, the interest may be paid in cash or converted into common
          stock. The principal amount of the note may be converted, in whole or
          in part, into common stock at the option of the Holder. The initial
          conversion price per share shall be equal to the lesser of (i) the
          average of the 5-day closing prices during the 5 days immediately
          prior to the conversion date discounted by 25%, or (ii) $0.25.

NOTE 6 -  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 December 27, 2003, the interest rate was 12%. Due to the
          default, the mortgage is now

                                      F-11
<PAGE>
NOTE 6 -  NOTES PAYABLE - SECURED BY ASSETS (cont'd)

          currently due and has been reclassified as a current liability. At
          December 27, 2003, the outstanding principal balance was $419,806.
          Accrued interest of $88,200 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-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.  Accrued  interest  of $39,375 is  included in
          accrued  expenses in the  accompanying  consolidated  balance sheet at
          December 27, 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.

          At December 27, 2003, the Company has a note payable currently in
          default. Certain vehicles of the Company secured the note. During the
          quarter ended September 27, 2003, the note holder sold three of the
          vehicles securing the note thereby reducing the amount due to $30,829.
          One secured vehicle remains under the note. The Company recorded an
          impairment loss of $6,040 as a result of the write-down of the
          vehicles sold. On November 10, 2003 the company paid the bank $13,000
          against the note, thereby releasing it from the security of the note.
          The bank has filed suit to recover the remaining balance of $17,829
          plus accrued interest.

NOTE 7 -  STOCKHOLDERS' DEFICIENCY

          Issuance of Warrants for Financing

          On July 28, 2003, the Company issued warrants to purchase 1,823,796
          shares of the Company's common stock at an exercise price of $0.01 per
          share. The warrants were issued to the Chief Executive Officer (for
          390,305 shares) a director (for 921,305 shares) and to Financial
          Partners Network Corporation (for 512,295 shares). The warrants expire
          on May 15, 2006. The warrants were issued in consideration for
          previous and continued funding via the payment of expenses and
          liabilities of the Company by the parties. The Company has valued the
          warrants at $145,356 using the Black-Scholes Pricing Model. The value
          of the warrants was recorded as a financing expense during the six
          months ended September 27, 2003. On September 22, 2003, the
          above-mentioned parties exercised their warrants via a cashless
          exercise, resulting in the issuance of 1,774,504 shares of the
          Company's common stock.

          Issuance of Common Stock for Settlement of Debt

          In August 2003, the Company issued 50,000 shares of its common stock,
          valued at $5,000, in partial settlement of debt. The Company also
          agreed to pay the Creditor at the rate of $2.00 for

                                      F-12
<PAGE>
NOTE 7 -  STOCKHOLDERS' DEFICIENCY (cont'd)

          every case of the Company's bottled water product sold through the
          direct efforts of the Creditor which will be applied towards the
          remaining debt due to the Creditor. The Creditor will also receive in
          cash a sales commission for every case of the Company's bottled water
          product sold through the direct efforts of the Creditor. No limit has
          been placed on the amount of commissions earned or cases sold.

          In August 2003, the Company issued 275,000 shares of its common stock,
          valued at $50,325, in settlement of debt with a consultant.

          In September 2003, the Company issued 100,000 shares of its common
          stock, valued at $18,300, in partial settlement of debt with a
          consultant. An additional 150,000 shares, valued at $27,450, is due to
          this consultant in accordance with the agreement.

          In October 2003, the Company issued 471,481 shares of its common
          stock, valued at $90,615, in settlement of debt with consultants and
          former employees. The company recorded a loss of $15,282 in connection
          with these issuances.

          In November 2003, the Company issued 883,999 shares of its common
          stock, valued at $118,622 in settlement of debt with consultants and
          former employees.

          In December 2003, the Company issued 350,000 shares of its common
          stock, valued at $36,500 for services with a consultant and employee.

          Issuance of Common Stock and Warrants for Consulting Services

          In March 2002, the Company entered into an 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 was 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 remaining warrants expired unexercised. The Company
          has valued the warrants at $214 using the Black-Scholes Pricing Model.

                                      F-13
<PAGE>
NOTE 7 -  STOCKHOLDERS' DEFICIENCY (cont'd)

          The value of the warrants was expensed during fiscal 2003. In
          September 2003, the Company and the consultant mutually agreed to
          terminate the agreement and acknowledged no further obligations due
          between the parties.

          In March 2002, the Company entered into an agreement with a consulting
          firm for services to be provided. 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
          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
          was 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 remaining warrants
          expired unexercised. 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. On June 30, 2003, the
          Company and the consulting firm mutually agreed to terminate the
          agreement. The Company also agreed to issue the consulting firm
          150,000 shares of its common stock valued at $10,500, in full
          settlement of the amounts due. The Company accrued and expensed
          $10,500 relating to this settlement.

          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. In
          connection with the agreement, the Company issued 8,440 shares of its
          common stock, valued at $354,456, 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 $322,708 using the Black-Scholes Pricing Model.
          The value of the warrants was expensed during the year ended March 29,
          2003. On June 30, 2003, the Company and the consulting firm mutually
          agreed to terminate the agreement. Terms of the agreement are the
          Company agreeing to issue the consulting firm 50,000 shares of its
          common stock valued at $3,500 in full settlement of the amounts due.
          The Company accrued and expensed $3,500 relating to this settlement.

          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. In September
          2003, the Company and the consultant mutually agreed to terminate the
          agreement and acknowledged no further obligations due between the
          parties.

          In September 2002, the Company entered into a new consulting agreement
          with a current shareholder of the Company, 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-8 shares 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 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 Company on the day of notice of execution.
          The option expires six months from the date of the

                                      F-14
<PAGE>
NOTE 7 -  STOCKHOLDERS' DEFICIENCY (cont'd)

          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 remaining warrants expired unexercised.
          The Company valued the warrants at $802 using the Black-Scholes
          Pricing Model and expensed them during the year ended March 29, 2003.
          In April 2003, the Company entered into a new consulting agreement
          with this consultant for services to be provided. The initial term of
          the engagement was for six months and would automatically renew on a
          month-to-month basis. In consideration for services to be provided,
          the consultant was to receive 1,500,000 shares of the Company's
          unrestricted common stock. No shares relating to this agreement were
          issued to the consultant. On September 30, 2003, the Company and the
          consultant mutually agreed to terminate the agreement and acknowledged
          no further obligations due between the parties.

          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
          commencing  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 issued the consulting firm 150,000 shares
          of its common stock valued at $15,000. The shares have a one-year hold
          from the date of  issuance.  All other terms and  conditions  from the
          prior contract remain unchanged.

          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 lawyer 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
          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 1,500,000 shares of the Company's
          unrestricted common stock valued at $105,000. The Company has expensed
          $105,000 related to this agreement. On September 30, 2003, the Company
          and the consulting firm mutually agreed to terminate the agreement and
          acknowledged no further obligations due between the parties.

          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

                                      F-15
<PAGE>
NOTE 7 -  STOCKHOLDERS' DEFICIENCY (cont'd)

          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.

          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 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 $240,000. These shares were
          issued during the quarter ended September 27, 2003. The Company has
          expensed $118,875 related to these agreements. In July 2003, the
          Company entered into a new consulting agreement with this 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 receive 15%
          of the total shares outstanding, exclusive of options or warrants. At
          September 27, 2003, in accordance with the agreement there are
          6,160,719 shares due the consultant, which have been valued at
          $369,643. The Company has accrued the value of this obligation and
          expensed $30,804 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. Effective June 23, 2003, the Company amended its consulting
          agreement with the consultant, whereby the consultant was to be issued
          an additional 1,000,000 shares of the Company's common stock, valued
          at $80,000 for services provided through the quarter ended September
          27, 2003. The shares were issued during the quarter ended September
          27, 2003. The Company has expensed $117,500 related to these
          agreements.

          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.

                                      F-16
<PAGE>
NOTE 7 -  STOCKHOLDERS' DEFICIENCY (cont'd)

          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 issued 250,000 shares of unrestricted S-8 common stock
          valued at $27,500. The Company has expensed $27,500 related to this
          agreement.

          In May 2003, the Company entered into a consulting agreement with a
          consultant for services to be provided over a one-year term. In July
          2003, the Company issued the consultant 250,000 shares of its common
          stock valued at $35,000 related to this agreement. An additional
          150,000 shares valued at $21,000, has been accrued and are due to the
          consultant at September 27, 2003. In addition, the Company is required
          to issue the consultant 500,000 shares of its common stock when the
          Company signs an Exclusive License Agreement with a certain company.
          The term of the consulting agreement is twelve months. The Company has
          expensed $21,000 relating to this agreement.

          In May 2003, the Company entered into a consulting agreement with a
          former director for services to be provided. The Company issued the
          consultant 250,000 shares of its common stock valued at $25,000. The
          Company has expensed $25,000 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 $13,000 related to this agreement.

          In August 2003, the Company issued 100,000 shares of its common stock
          valued at $9,500 to a consultant for services to be provided over
          thirty days. The Company has expensed $9,500 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 $8,500 and $5,500 at December
          27, 2003 and March 29, 2003, respectively. The stock is classified as
          available for sale and is included in marketable securities in the
          accompanying consolidated balance sheet. During the nine months ended
          December 27, 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.

          In August 2003, the Company entered into a marketing agreement with
          Benchmark Career Fund ("BCF"), whereby BCF agreed to provide athletic
          and other professional endorsement services for the Company's bottled
          water product through initiating contact with athletes and other
          selected professionals. BCF will receive $0.50 for every case of the
          Company's product sold within the continental United States, Hawaii,
          and Alaska, through the expiration of the

                                      F-17
<PAGE>
NOTE 7 -  STOCKHOLDERS' DEFICIENCY (cont'd)

          agreement. In addition, BCF will receive 10,000,000 shares of the
          Company's common stock to be used to attract and manage athletes as an
          initial payment. The agreement is for a period of two years,
          commencing on the date the 10,000,000 shares are issued to BCF. On
          September 30, 2003, the Company issued BCF 10,000,000 shares, valued
          at $2,400,000. The value of these shares have been recorded as
          unearned services and are being amortized over the life of the
          agreement.

NOTE 8 -  RELATED PARTY TRANSACTIONS

          Employment Agreements:

          On July 15, 2003, the Company entered into an employment agreement
          with its Senior Vice President of Sales and Marketing ("SVP"). The
          SVP's base compensation is $75,000 per year. In addition, the SVP is
          entitled to receive 1,000,000 shares of the Company's common stock
          over a one-year term. As of September 27, 2003, the SVP has been
          issued 750,000 shares valued at $52,500. The remaining 250,000 shares
          will be issued on the SVP's first employment anniversary. The Company
          has expensed $35,000 relating to this agreement. Subsequent to the
          quarter ended September 27, 2003, on September 30, 2003, the Company
          issued 100,000 shares of its common stock to the SVP valued at $24,000
          for accrued salary and advances against out-of-pocket expenses.

          Other Transactions

          At September 27, 2003, the Company had accrued expenses of $89,332 for
          disbursements paid by a director on behalf of the Company for
          operating expenses and payroll. In addition, at September 27, 2003,
          the Company accrued $15,000 for directors' fees due the director.
          During the quarter ended September 27, 2003, the Company issued the
          director 1,256,783 shares of its common stock, valued at $100,543, for
          directors fees owed and disbursements paid by the director on behalf
          of the Company.

          At December 27, 2003, the Company accrued $30,000 for directors' fees
          due another director. During the quarter ended September 27, 2003, the
          Company issued the director 750,000 shares of its common stock, valued
          at $60,000, for directors' fees owed.

          At September 27, 2003, the Company owed the CEO $15,641 for
          disbursements paid by the CEO on behalf of the Company for operational
          expenses. During the quarter ended September 27, 2003, the Company
          issued the CEO 1,382,467 shares of its common stock, valued at
          $110,597, in settlement of accrued salary and disbursements paid by
          the CEO on behalf of the Company.

          On October 30, 2003, the company issued 167,782 shares of its common
          stock, valued at $31,878 in settlement of the debt the company owed
          the daughter of the CEO. In connection with this transaction the
          company recorded a loss on settlement of $3,355.

NOTE 9 -  STOCK OPTION PLANS

          2003 Equity Incentive Plan:

          The shareholders approved the 2003 Equity Incentive Plan (the "
          Incentive 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.

                                      F-18
<PAGE>
NOTE 9 -  STOCK OPTION PLANS (cont'd)

          The Incentive Plan provides for the awards of 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 Incentive 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 employees and directors options to
          purchase 3,250,000 and 6,000,000 shares, respectively, 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. Accordingly,
          under APB No. 25, compensation expense of $487,500 has been recognized
          during the six months ended

          September 27, 2003 in connection with employee stock option grants. On
          August 7, 2003, 6,250,000 options were exercised.

          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 issuable 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 September 27, 2003.

NOTE 10 - RECENT ACCOUNTING PRONOUNCEMENTS

          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 11 - 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

                                      F-19
<PAGE>
          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.

          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 and judgments based on the
          Company's and counsel's assessments. During the six months ended
          September 27, 2003, the Company issued 1,369,884 shares of its common
          stock valued at approximately $82,000 in settlement of claims.

          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 year ended March 29, 2003, the Company entered into
          settlement agreements with certain professionals, consultants, vendors
          and former employees. In connection with certain of these settlement
          agreements, the Company is required to issue 1,375,000 shares of its
          common stock. As of September 27, 2003, the Company has issued
          1,225,000 shares related to these settlements, valued at $97,950. At
          September 27, 2003, approximately $330,000 is due under these
          settlements and are included in accrued expenses. An additional
          150,000 shares of common stock remain to be issued under these
          agreements. Certain plaintiffs are required to sell these shares and,
          once sold, if there is any remaining balance, the Company is required
          to pay the plaintiffs an aggregate of $15,000 per month, beginning
          November 1, 2003, until the obligation is satisfied.

          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

                                      F-20
<PAGE>
NOTE 11 - COMMITMENTS AND CONTINGENCIES (cont'd)

          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.

          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.

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

          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 purchased 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.

                                      F-21
<PAGE>
NOTE 11 - COMMITMENTS AND CONTINGENCIES (cont'd)

          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 December 27, 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.

NOTE 12 - SUBSEQUENT EVENT


          On February 4, 2004, the Company issued the CEO 2,550,175 shares of
          its common stock, valued at $90,276, in settlement of accrued salary
          and disbursements paid by the CEO on behalf of the Company.

          On February 4, 2004, the Company issued an employee 2,390,687 shares
          of its common stock, valued at $85,108, in settlement of accrued
          salary and disbursements paid by the employee on behalf of the
          Company.

          On February 4, 2004, the Company issued a consultant 1,000,000 shares
          of its common stock, valued at $35,600, in settlement of fees and
          disbursements paid by the consultant on behalf of the Company.

                                      F-22
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

Introduction

     The  following  discussion  of our  financial  condition and results of our
operations should be read in conjunction with the Financial Statements and Notes
thereto.  This document contains certain  forward-looking  statements including,
among  others,  anticipated  trends in our  financial  condition  and results of
operations and our business strategy. These forward-looking statements are based
largely on our  current  expectations  and are  subject to a number of risks and
uncertainties. Actual results could differ materially from these forward-looking
statements.  Important  factors to consider in evaluating  such  forward-looking
statements  include  (i)  changes in  external  factors  or in the our  internal
budgeting  process which might impact trends in our results of operations;  (ii)
unanticipated  working capital or other cash requirements;  (iii) changes in our
business  strategy or an inability to execute its strategy due to  unanticipated
changes in the  industries  in which it operates;  and (iv) various  competitive
market  factors  that  may  prevent  us  from  competing   successfully  in  the
marketplace.

Overview

BEVsystems International,  Inc. and Subsidiary (collectively the "Company") is a
provider of oxygenated water. The Company bottles its product through co-packing
agreements  and  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 assets of the beverage  division of
Life  International,  a  provider  of  oxygenated  water.  The  assets  included
oxygenation equipment,  bottles,  proprietary seals, marketing materials, office
equipment,  trademarks,  patent rights and other intangible  assets. On February
25,  2002,  the  Company  consummated  a merger  with Aqua  Clara  Bottling  and
Distribution, Inc. and its subsidiary.

Results of Operations

Results of  Operations - Three Months  Ended  December 27, 2003  Compared to the
Three Months Ended December 28, 2002.

Revenues

     Revenues  generated  during  the three  months  ended  December  27,  2003,
aggregated  $65,625, as compared to $122,824 for the three months ended December
28, 2002. The decrease in revenues of $57,199 from the prior period is primarily
due to the closing of the  manufacturing  plant in  Clearwater,  Florida and the
transitioning  from a direct sales organization to an organization that provides
licensees of its products on a national and international basis.

Costs of Goods Sold

     Cost of Goods Sold for the three months ended December 27, 2003, aggregated
$10,531, or 16% of revenue, as compared to $141,870, or 116% of revenue, for the
three  months ended  December 28, 2002.  The decrease for the three months ended
December  27,  2003  of  $131,339,  was  primarily  due  to the  closing  of the
manufacturing  plant in Clearwater,  Florida and the transitioning from a direct
sales organization to an organization that provides licensees of its products on
a national and international basis.

                                      F-23
<PAGE>
Selling, general and administrative expenses

     Selling,  general  administrative  expenses  incurred  for the three months
ended December 27, 2003, aggregated  $1,368,843,  as compared to $18,579,374 for
the three months ended  December 28, 2002.  The decrease of $194,950 is directly
attributable to the closing of the  manufacturing  plant in Clearwater,  Florida
and the transitioning  from a direct sales  organization to an organization that
provides licensees of its products on a national and international basis.

Net Loss and Loss Per Share

         The net loss and the basic net loss per  weighted  average  share  were
$1,418,163  and $(.02),  respectively,  for the three months ended  December 27,
2003, as compared to $1,687,400 and $(4.19),  respectively, for the three months
ended December 28, 2002. The net loss decreased from  operations  decreased from
the previous  period  primarily as a result of the  transitioning  from a direct
sales organization to an organization that provides licensees of its products on
a national and  international  basis. The basic loss per share also was affected
by a 200:1 reverse stock split on January 2, 2003.

Results of Operations - Nine Months Ended December 27, 2003 Compared to the Nine
Months Ended December 28, 2002.

Revenues

     Revenues  generated  during  the  nine  months  ended  December  27,  2003,
aggregated  $100,272 as compared to $566,444 for the nine months ended  December
28,  2002.  The  decrease  in  revenues  of  $466,172  from the prior  period is
primarily  due to the  transitioning  from a  direct  sales  organization  to an
organization  that  provides  licensees  of  its  products  on  a  national  and
international basis.

Costs of Goods Sold

     Cost of Goods Sold for the nine months ended December 27, 2003,  aggregated
$39,106 or 39% of  revenue,  as  compared  to $440,636 or 78% of revenue for the
nine months  ended  December  28,  2002.  The decrease for the nine months ended
December  27,  2003 of  $401,530,  was  primarily  due to a  decrease  in  sales
resulting  from  the  transition   from  a  direct  sales   organization  to  an
organization  that  provides  licensees  of  its  products  on  a  national  and
international basis.

Selling, general, and administrative  expenses

         Selling, general and administrative expenses incurred for the nine
months ended December 27, 2003, aggregated $3,793,613, as compared to
$18,579,374 for the nine months ended December 28, 2002.The decrease of
$14,785,760 for the nine months ended December 27, 2003, was primarily due to a
one time impairment charge and the continued implementation by management of a
plan to reduce various costs, including but not limited to the closing of the
manufacturing plant in Clearwater, Florida and the transitioning from a direct
sales organization to an organization that provides licensees of its products on
a national and international basis.

Net Loss and Loss Per Share

         The net loss and the  basic  net loss per  weighted  average  share was
$4,289,604  and $(.12),  respectively,  for the nine months  ended  December 27,
2003, as compared to net loss of $18,967,381 and $(63.32), respectively, for the
nine months ended December 28, 2002. The net loss from operations decreased from
the previous  period  primarily as a result of the  transitioning  from a direct
sales organization to an organization

                                      F-24
<PAGE>
that provides  licensees of its products on a national and international  basis.
The net basic loss per share also was affected by a 200:1 reverse stock split on
January 2, 2003.

Liquidity and Capital Resources

At December 27, 2003, we had working capital deficit of $5,168,425. Our primary
source of liquidity has historically consisted of sales of equity securities and
debt instruments. The Company is currently engaged in discussions with numerous
parties with respect to raising additional capital, provided, however, the
Company cannot provide any assurance as to whether the Company will be able to
raise funding in connection with these negotiations. 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.

     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.  On August 29, 2002,  in  consideration  for  extending 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 $0.01 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.  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.  In  September  2003,
Financial Partners Network exercised their right to purchase 2,574 shares of the
Company's  common  stock via a cashless  exercise,  resulting in the issuance of
2,504 shares of the Company's common stock.

     On November  15,  2001,  the Company  entered  into a $200,000  convertible
promissory  note with the Chief Executive  Officer  ("CEO") of the Company.  The
note was due May 15, 2002 and had an interest  rate of 10.5% per year. 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 $0.01 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.  In September  2003, the CEO exercised his right to purchase 1,961 shares
of the Company's common stock via a cashless exercise, resulting in the issuance
of 1,908 shares of the Company's common stock.

     In April 2002,  the Company  issued an aggregate of $200,000 of convertible
promissory  notes to several  investors.  The notes were 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.

     On May 15, 2002, the Company entered into an $80,000 convertible promissory
note with a director of the Company. 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 $0.01 per share
expiring May 15, 2005. On January 21, 2003,

                                      F-25
<PAGE>
this  note,  as well as a $363,000  secured  note with the  director,  including
accrued  interest,  was converted into 4,440,044  shares of the Company's common
stock.  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 the  aforementioned  secured
note with this director,  the Company granted  warrants to purchase 3,845 shares
of the Company's  common stock at an exercise  price of $0.01 per share expiring
May 15,  2005.  On  September  22, 2003,  the  director  exercised  his right to
purchase  4,629 shares of the  Company's  common stock via a cashless  exercise,
resulting in the issuance of 4,504 shares of the Company's common stock.

     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 $15,867 is  included  in accrued  expenses  in the
Company's  consolidated  balance sheet as of December 27, 2003. 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 if 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.  Subsequent  to the
quarter ended September 27, 2003, on September 30, 2003, the investor  converted
his note,  including  accrued interest of $15,879,  into 2,000,000 shares of the
Company's common stock.

     On July 5, 2002, the Company entered into a $250,000 convertible promissory
note with an investor. The note was 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. In August 2003,  $30,000 of the note was converted into 500,000
shares of the Company's common stock. Accrued interest due to the default of the
Company  of  $128,404  is  included  in  accrued   expenses  in  the   Company's
consolidated  balance  sheet as of December 27,  2003.  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.
Subsequent to the quarter ended  September 27, 2003, on September 30, 2003,  the
remaining balance of the note, including the default interest of $128,404,  were
converted into 2,500,000 shares of the Company's common stock.

                                      F-26
<PAGE>
     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 $7,500 is included  in accrued  expenses in the  Company's
consolidated  balance  sheet as of December  27,  2003.  In June 2003, a related
party-shareholder  purchased the note from the investor.  In  consideration  for
extending the maturity date of the note to when,  the related  party-shareholder
was granted warrants to purchase 250,000 shares of the Company's common stock at
an exercise  price of $0.01 per share.  The fair value of the warrants using the
Black-Scholes  Option  Pricing  Model  was  $52,825  and is being  amortized  to
interest and  financing  expense over the term of the expense.  On September 22,
2003,  the  related  party-shareholder  exercised  his  warrants  via a cashless
exercise,  resulting in the issuance of 249,306  shares of the Company's  common
stock.

     In August 2003, an investor  converted his $50,000 note,  including accrued
interest of $8,000,  into  773,333  shares of the  Company's  common  stock.  On
September 22, 2003, an investor  converted his $50,000 note,  including  accrued
interest of $8,515,  into 329,662  shares of the  Company's  common  stock.  The
balance of these notes was $50,000 at September  27, 2003.  Accrued  interest of
$8,567 is included in accrued  expenses in the  Company's  consolidated  balance
sheet  relating to the  outstanding  notes as of December 27, 2003.  The Company
also granted these note holders  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.
On September 22, 2003, one note holder  exercised his warrants and purchased 750
shares of the  Company's  common stock for $133,  the proceeds are currently due
from the note holder.  Subsequent  to the quarter  ended  September 27, 2003, on
September 30, 2003, a note holder converted his $50,000 note,  including accrued
interest of $8,433, into 417,378 shares of the Company's common stock.

     If we need to obtain  capital,  no  assurance  can be given that we will be
able to obtain this capital on  acceptable  terms,  if at all. In such an event,
this may have a materially adverse effect on our business, operating results and
financial  condition.  If the need  arises,  we may  attempt  to obtain  funding
through the use of various types of short term funding, loans or working capital
financing arrangements from banks or financial institutions.

Settlement of Debt

     In January  2003,  the Company  entered  into an  agreement  with the Chief
Executive  Officer  and his spouse,  a director  of the  Company  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  securities owed to
these parties, which aggregated approximately $1,050,000.

     In August  2003,  the Company  issued  50,000  shares of its common  stock,
valued at $5,000, in partial  settlement of debt. The Company also agreed to pay
the creditor at the rate of $2.00 for every case of the Company's  bottled water
product sold through the direct  efforts of the creditor,  which will be applied
towards the remaining debt due to the creditor.  The creditor will also receive,
in cash,  a sales  commission  for every  case of the  Company's  bottled  water
product  sold  through  the direct  efforts of the  creditor.  No limit has been
placed on the amount of commissions earned or cases sold.

                                      F-27
<PAGE>
     In August 2003,  the Company  issued  275,000  shares of its common  stock,
valued at $50,325, in settlement of debt with a consultant.

     In September  2003,  the Company issued 100,000 shares of its common stock,
valued  at  $18,300,  in  partial  settlement  of  debt  with a  consultant.  An
additional  150,000  shares,  valued at $27,450,  is due to this  consultant  in
accordance with the agreement.

     At  September  27,  2003,  the Company had accrued  expenses of $89,332 for
disbursements paid by a director on behalf of the Company for operating expenses
and payroll. In addition, at September 27, 2003, the Company accrued $15,000 for
directors'  fees due to the  director.  During the quarter  ended  September 27,
2003,  the Company  issued the director  1,256,783  shares of its common  stock,
valued  at  $100,543,  for  directors  fees owed and  disbursements  paid by the
director on behalf of the Company.

     At September 27, 2003,  the Company owed the CEO $28,641 for  disbursements
paid by the CEO on behalf of the Company for  operational  expenses.  During the
quarter ended September 27, 2003, the Company issued the CEO 1,382,467 shares of
its common  stock,  valued at  $110,597,  in  settlement  of accrued  salary and
disbursements paid by the CEO on behalf of the Company.

     At September 27, 2003, the Company  accrued $15,000 for directors' fees due
to a director.  During the quarter ended  September 27, 2003, the Company issued
the  director  750,000  shares  of its  common  stock,  valued at  $60,000,  for
directors' fees owed.

     A  former  officer  of  Aqua  Clara  filed  suit  against  Aqua  Clara  for
approximately  $227,000 of accrued wages, loans and other damages. In connection
with this lawsuit,  a lien was filed against the  Company's  assets.  The former
officer also sought  1,350,000 shares of the Company's common stock. As of March
30, 2002,  the Company  accrued  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.  In  September  2003,  the
Company settled this suit for $450,000. The terms include 16 monthly installment
payments and  3,000,000  shares of 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.

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 December 27, 2003,  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.

                                      F-28
<PAGE>
PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There were no material developments in any litigation or governmental proceeding
or new  proceedings  involving the Company during the quarter ended December 27,
2003 except for the following:

     o    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 the appellate upheld the judgment.  The Company has filed a
          request for a rehearing and has filed a multicount  complaint  against
          the claimant. In addition,  the judgment was dismissed with respect to
          its subsidiaries.

Item 2. Changes in Securities

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 $.01
of which 6,250,000 were exercised within the quarter

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 December 27, 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 December 27, 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  that is secured by  certain  vehicles  of the
Company and the note holder is seeking repossession of the vehicles.  During the
quarter ended  September 27, 2003 the note holder sold three  vehicles under the
note.  The company paid the bank $13,000  towards the note,  which  subsequently
released the lien on the last vehicle.  The remaining  balance under the note of
$17,829. is being pursued by the lender.

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

None.

Item 5. Other Information

None.

                                      F-29
<PAGE>
Item 6. Exhibits and Reports on Form 8-K

(a)      Exhibits

Exhibit                   Description of Exhibits
  No.

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

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

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

32.2 Certification  by the  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)

(b)      Reports on Form 8-K

On August 29, 2003,  the Company  filed a Form 8-K  reporting  under Item 5 with
respect to the filing of its Form  10-KSB for the year ended  March 31, 2003 and
the Form 10-QSB for the quarter ended March 31, 2003.

                                   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: February 10, 2004                          BEVSYSTEMS INTERNATIONAL, INC.


                                                  By:  /s/ G. Robert Tatum
                                                           ---------------
                                                           G. Robert Tatum
                                                           CEO & 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.

         Signature                         Capacity                     Date

 /s/ G. Robert Tatum                     CEO & Chairman        February 10, 2004
     ---------------
     G. Robert Tatum


 /s/ Darren J Cioffi                     CFO                   February 10, 2004
     ---------------
     Darren J. Cioffi

                                      F-30