SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                  FORM 10 QSBA
                                   -----------

(Mark One)

[X]     QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
        ACT OF 1934

                         For the quarterly period ended
                                October 31, 2001

[ ]     TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15 (d) OF  THE  SECURITIES
        EXCHANGE ACT OF 1934 For the transition period from to


                         Commission File Number 0-24801

               Delaware 82-0506425 (State or other Jurisdiction of
incorporation) (IRS Employer Identification No.)

AQUA VIE BEVERAGE CORPORATION
(Exact Name of Registrant as Specified in its Charter)

P.O. Box 6759  333 South Main Street Ketchum, Idaho 83340
(Address of principal executive offices)

208/622-7792
(Registrant's telephone number)

Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the last 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.

YES [ ] NO [X] As of the quarter ending October 31, 2001 the Registrant has been
subject to the filing  requirements  of the Securities Act of 1934 for less than
90 days.

Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.

Class                                        Outstanding at October 31, 2001

Common Stock, Par value $0.001                       63,699,784


                                        1
<PAGE>

Item 1. Financial Statements:

<TABLE>
<CAPTION>
                          AQUA VIE BEVERAGE CORPORATION
                                 Balance Sheets
                                 --------------
                                                                        October 31,     July 31,
                                                                           2001          2001
                                                                       (Unaudited)
                                                                        (Restated)     (Restated)
                                                                       -----------    -----------

ASSETS

    CURRENT ASSETS
<S>                                                                    <C>            <C>
      Cash                                                             $     4,765    $     3,608
      Accounts receivable                                                   55,832         82,776
      Inventory                                                             89,634        155,372
      Prepaid and other assets                                              22,786         24,434
                                                                       -----------    -----------
        Total Current Assets                                               173,017        266,190
                                                                       -----------    -----------

    PROPERTY AND EQUIPMENT
      Equipment                                                            201,608        201,608
      Less accumulated depreciation                                       (101,767)       (85,615)
                                                                       -----------    -----------
        Total Property and Equipment                                        99,841        115,993
                                                                       -----------    -----------

    OTHER ASSETS
      Intangibles                                                          313,336        305,040
      Less accumulated amortization                                        (74,284)       (58,159)
                                                                       -----------    -----------
        Total Other Assets                                                 239,052        246,881
                                                                       -----------    -----------

    TOTAL ASSETS                                                       $   511,910    $   629,064
                                                                       ===========    ===========

                      LIABILITIES AND STOCKHOLDERS' DEFICIT
                     -------------------------------------

    CURRENT LIABILITIES
      Accounts payable                                                 $   297,134    $   362,312
      Bank overdraft                                                        49,857         52,412
      Settlements payable                                                   10,000         10,000
      Notes payable - current                                              455,990        455,135
      Accrued expenses                                                      84,401         64,101
      Loan from related party                                               86,558        128,520
                                                                       -----------    -----------
        Total Current Liabilities                                          983,940      1,072,480
                                                                       -----------    -----------

    LONG-TERM DEBT
      Notes payable - net of current portion                                13,777         14,632
                                                                       -----------    -----------

    COMMITMENTS AND CONTINGENCIES                                             --             --
                                                                       -----------    -----------

    STOCKHOLDERS' DEFICIT
      Preferred stock,  Series A, B, C, D, E
        and F, $0.001 par value,  1,000,000
        shares authorized,15,074 and 15,074
        shares issued and outstanding, respectively                             15             15
      Common stock, $0.001 par value, 120,000,000 shares
        authorized, 65,313,173and 58,253,173 shares
        issued and outstanding, respectively                                65,313         58,253
      Additional paid-in capital                                         5,933,607      5,562,162
      Subscriptions receivable                                            (176,977)      (176,977)
      Accumulated deficit                                               (6,307,765)    (5,901,501)
                                                                       -----------    -----------
        Total Stockholders' Deficit                                       (485,807)      (458,048)
                                                                       -----------    -----------

    TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                        $   511,910    $   629,064
                                                                       ===========    ===========
</TABLE>

                   See notes to interim financial statements.

                                        2
<PAGE>

<TABLE>
<CAPTION>
                          AQUA VIE BEVERAGE CORPORATION
                            Statements of Operations
                                   (Unaudited)
                                                                      Three Months Ended
                                                                          October 31,
                                                                  -----------------------------
                                                                     2001          2000
                                                                   (Restated)
                                                                  ------------    ------------

<S>                                                               <C>             <C>
NET REVENUES                                                      $     46,858    $    192,256

COST OF GOODS SOLD                                                      81,700         137,399
                                                                  ------------    ------------

GROSS PROFIT (LOSS)                                                    (34,842)         54,857
                                                                  ------------    ------------

GENERAL AND ADMINISTRATIVE EXPENSES
       Promotion and advertising                                        68,156         457,687
       Legal and accounting                                             46,597          11,953
       Other general and administrative expenses                       246,013         361,691
                                                                  ------------    ------------
            Total expenses                                             360,766         831,331
                                                                  ------------    ------------

LOSS FROM OPERATIONS                                                  (395,608)       (776,474)

OTHER EXPENSES
       Interest expense                                                 10,656          17,595
                                                                  ------------    ------------

LOSS BEFORE TAXES                                                     (406,264)       (794,069)

INCOME TAXES                                                              --              --
                                                                  ------------    ------------


NET LOSS                                                          $   (406,264)   $   (794,069)
                                                                  ============    ============

NET LOSS PER COMMON SHARE
       BASIC AND DILUTED                                          $     (0.01)   $      (0.02)
                                                                  ============    ============

WEIGHTED AVERAGE NUMBER OF COMMON
       SHARES OUTSTANDING, BASIC AND DILUTED                        63,699,784      40,774,176
                                                                  ============    ============

</TABLE>


                   See notes to interim financial statements.
                                        3
<PAGE>

<TABLE>
<CAPTION>

                          AQUA VIE BEVERAGE CORPORATION
                       Statement of Stockholder's Deficit
                                  (Split Table)

                                        Preferred, Series A, B,
                                        C, D, E and F                  Common Stock
                                    ------------------------    ------------------------
                                       Number                     Number
                                     of Shares      Amount      of Shares      Amount
                                    ----------    ----------    ----------   ----------
<S>                                       <C>          <C>            <C>           <C>
Balance, July 31, 2000                   7,410    $        7    30,811,408   $   30,811

Issuance of common stock
 for services at prices
 ranging from $0.02
  to $0.42                                --            --       5,335,000        5,335

Issuance of common stock
 for debt conversion at
 $0.40 per share                          --            --         850,000          850

Conversion of preferred
 Series A to common
 stock                                  (1,368)           (2)    4,489,123        4,489

Conversion of preferred
 Series B to common
 stock                                  (4,608)           (4)   16,567,642       16,568

Conversion of preferred
 Series C to common
 stock                                    (200)         --         200,000          200

Issuance of preferred Series
 D for cash and receivable
 at $100 per share                      12,000            12          --           --

Issuance of preferred Series
 E for cash at $100
 per share                                 600             1          --           --

Issuance of preferred Series
  F for cash at $100
  per share                              1,240             1          --           --

Forgiveness of debt and accrued
  payroll by officer and majority
  stockholder                             --            --            --           --

Net loss for the year ended
 July 31, 2001 (restated)                 --            --            --           --
                                    ----------    ----------    ----------   ----------

Balance, July 31, 2001
  (Restated)                            15,074            15    58,253,173       58,253

Stock converted per
 subscription                             --            --       6,250,000        6,250

Stock issued for services                 --            --         810,000          810

Forgiveness of payroll by officer
  and majority stockholder                --            --            --           --

Net loss for the quarter
 ended October 31, 2001
 (restated)                               --            --            --           --
                                    ----------    ----------    ----------   ----------

Balance, October 31, 2001
 (Unaudited) (restated)                 15,074    $       15    65,313,173   $   65,313
                                    ==========    ==========    ==========   ==========
</TABLE>
                   See Notes to interim financial statements.
                                        4
<PAGE>

<TABLE>
<CAPTION>

                          AQUA VIE BEVERAGE CORPORATION
                       Statement of Stockholder's Deficit
                          (Second Part of Split Table)

                                         Additional
                                          Paid-in     Subscriptions   Accumulated
                                          Capital      Receivable       Deficit        Total
                                        -----------    -----------    -----------    -----------
<S>                                      <C>           <C>            <C>           <C>
Balance, July 31, 2000                   $2,422,236    $      --      $(3,654,081)  $ (1,201,027)

Issuance of common stock
 for services at prices
 ranging from $0.02
  to $0.42                                  640,783           --             --          646,118

Issuance of common stock
 for debt conversion at
 $0.40 per share                            340,000           --             --          340,850

Conversion of preferred
 Series A to common
 stock                                       (4,487)          --             --             --

Conversion of preferred
 Series B to common
 stock                                      (16,564)          --             --             --

Conversion of preferred
 Series C to common
 stock                                         (200)          --             --             --

Issuance of preferred Series
 D for cash and receivable
 at $100 per share                        1,199,988       (176,952)          --        1,023,048

Issuance of preferred Series
 E for cash at $100
 per share                                   59,999            (25)          --           59,975

Issuance of preferred Series
  F for cash at $100
  per share                                 123,999           --             --          124,000

Forgiveness of debt and accrued
  payroll by officer and majority
  stockholder                              796,408            --             --          796,408

Net loss for the year ended
 July 31, 2001 (restated)                       --            --       (2,247,420)    (2,247,420)
                                        -----------    -----------    -----------    -----------

Balance, July 31, 2001                   5,562,162       (176,977)     (5,901,501)      (458,048)

Stock converted per
 subscription                               247,645           --             --          253,895

Stock issued for services                    63,800           --             --           64,610

Forgiveness of payroll by
  officer and majority
  stockholder                                60,000          --              --           60,000

Net loss for the quarter
 ended October 31, 2001
 (restated)                                    --             --         (406,264)      (406,264)
                                        -----------    -----------    -----------    -----------

Balance, October 31, 2001
 (Unaudited) (restated)                 $ 5,933,607    $  (176,977)   $(6,307,765)   $  (485,807)
                                        ===========    ===========    ===========    ===========
</TABLE>

                   See notes to interim financial statements.
                                        5
<PAGE>

<TABLE>
<CAPTION>

                          AQUA VIE BEVERAGE CORPORATION
                            Statements of Cash Flows
                                   (Unaudited)
                                                                               Three Months
                                                                                October 31,
                                                                    -------------------------------------
                                                                      2001                       2000
                                                                    (Restated)
                                                                    ---------                   ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                 <C>                        <C>
      Net loss                                                      $(406,264)                 $(794,069)
      Adjustments to reconcile net loss to net cash
          used by operating activities:
               Depreciation and amortization                           32,277                     40,696
               Stock issued for services                               64,610                       --
               Services charged to additional
                  paid-in capital                                      60,000                       --
      Changes in assets and liabilities:
               Accounts receivable                                     26,944                   (125,634)
               Inventory                                               65,738                    151,937
               Prepaid expenses                                         1,648                    (69,618)
               Accounts payable                                       (65,178)                   209,887
               Accrued expenses                                        20,300                     18,221
               Accured compensation                                      --                       60,000
                                                                    ---------                   ---------
          Net cash used by operating activities                      (199,925)                  (508,580)
                                                                    ---------                   ---------

CASH USED BY INVESTING ACTIVITIES:
      Increase in Intangible Asset for slotting                        (8,296)                      --
                                                                    ---------                   ---------
          Net cash used by investing activities                        (8,296)                      --
                                                                    ---------                   ---------

CASH PROVIDED BY FINANCING ACTIVITIES
      Sale of common stock                                               --                      188,468
      Stock conversion subscriptions                                  253,895                       --
      Bank overdraft                                                   (2,555)                   115,137
      Payments on debt                                                   --                      (18,362)
      Advances from affiliate                                         223,961                       --
      Payments to affiliate                                          (265,923)                      --
      Proceeds from notes payable                                        --                      202,500
      Advances from stockholders                                         --                      105,610
                                                                    ---------                   ---------
          Net cash provided by financing activities                   209,378                    593,353
                                                                    ---------                   ---------

INCREASE (DECREASE) IN CASH                                             1,157                     84,773

BEGINNING BALANCE                                                       3,608                     11,127
                                                                    ---------                   ---------



ENDING BALANCE                                                      $   4,765                  $  95,900
                                                                    =========                  =========

SUPPLEMENTAL CASH FLOW DISCLOSURES:
      Income taxes paid                                             $    --                    $    --
      Interest paid                                                 $    --                    $    --

NON-CASH INVESTING AND FINANCING ACTIVITIES:
      Issuance of common stock for services                         $  64,610                  $    --
      Forgiveness of payroll by officer and
          majority stockholder                                      $  60,000                  $  60,000

</TABLE>

                   See notes to interim financial statements.
                                        6
<PAGE>


CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

                          AQUA VIE BEVERAGE CORPORATION
                      NOTES TO INTERIM FINANCIAL STATEMENTS
                                   (Restated)
                                October 31, 2001


NOTE 1 - BASIS OF PRESENTATION

The  foregoing  unaudited  interim  financial  statements  have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim  financial  information  and with the  instructions  to Form
10-QSB  and  Regulation  S-B as  promulgated  by  the  Securities  and  Exchange
Commission.  Accordingly,  these financial  statements do not include all of the
disclosures  required by accounting  principles generally accepted in the United
States of America for complete  financial  statements.  These unaudited  interim
financial  statements  should be read in conjunction with the audited  financial
statements for the period ended July 31, 2001. In the opinion of management, the
unaudited interim financial statements furnished herein include all adjustments,
all of which are of a normal recurring nature, necessary for a fair statement of
the results for the interim period presented.

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires the use of estimates
and  assumptions  that affect the  reported  amounts of assets and  liabilities,
disclosure of contingent  assets and  liabilities  known to exist as of the date
the financial statements are published, and the reported amounts of revenues and
expenses  during  the  reporting  period.  Uncertainties  with  respect  to such
estimates  and  assumptions  are inherent in the  preparation  of the  Company's
financial statements;  accordingly, it is possible that the actual results could
differ from these estimates and assumptions that could have a material effect on
the  reported  amounts  of the  Company's  financial  position  and  results  of
operations.

Operating  results for the  three-month  period  ended  October 31, 2001 are not
necessarily  indicative  of the results that may be expected for the year ending
July 31, 2002.

NOTE 2 - RESTATEMENT AND CORRECTION OF AN ERROR

The Company's  financial  statements  for the year ended July 31, 2001 have been
restated to reflect the correction of errors as follows.

1.        Settlements   payable   have  been  accrued  to  reflect  an  expected
          settlement on a breach of contract claim for $10,000.

2.        Forgiveness of advances and payroll by the Company's  chief  executive
          officer is shown as a capital  contribution which increased additional
          paid-in  capital by $796,408  and  expenses by $120,000 for salary not
          recognized in the last six months of the Company's fiscal year.

                                       7
<PAGE>
                          AQUA VIE BEVERAGE CORPORATION
                      NOTES TO INTERIM FINANCIAL STATEMENTS
                                   (Restated)
                                October 31, 2001

NOTE 2 - RESTATEMENT AND CORRECTION OF AN ERROR

The effect of these corrections was restated financial statements, which thereby
increased  net loss for the year ended July 31, 2001 by $806,408,  and increased
liabilities by $10,000.

The Company's  financial  statements  for the period ended October 31, 2001 have
been  restated  to  reflect  $60,000  payroll as a capital  contribution  by the
Company's chief executive officer.

The effect of these corrections was restated financial statements, which thereby
increased net loss the three months ended October 31, 2001 by $60,000.

NOTE 3 - ADDITIONAL COMMENTS

During March 2001,  the Company  entered into a shipping and security  agreement
with a central California  contract  manufacturer.  The agreements  provided the
Company  with  production  financing  and  inventory  expansion  of its beverage
products,  interest-free  and  without a factoring  fee.  Under the terms of the
agreement,  the Company granted to the contract manufacturer a security interest
in the Company's inventory and receivables. Based on that agreement, the Company
began  an  aggressive   campaign  to  place  its  products  in  California-based
supermarket chains by paying and/or incurring slotting fees, supporting sampling
programs, and other marketing activities.

In April 2001, the contract manufacturer commenced production under the terms of
the shipping and security  agreement and began shipping product to major grocery
chain  accounts in  California,  Arizona and Nevada.  Subsequently,  the Company
increased its sales and marketing efforts, and slotting fee commitments intended
to support an expanded sales program. The packer, which was experiencing quality
assurance  problems,  failed to sustain  production  levels adequate to meet the
sales levels  projected by the Company  notwithstanding  the marketing  expenses
incurred by the Company, and the packer continued in its failure to resolve past
account  issues  arising over  defective  products.  This led to a demand by the
Company for an  accounting  resulting  in a refusal by the packer of any further
production or shipment of inventory  already produced until the Company executed
an indemnity in the packer's favor. Management held steadfast in its belief that
its product quality and purity are critical and not subject to compromise.  This
dispute had a negative impact on the Company by creating uncertainty relative to
the Company's  ability to deliver product to fill pending and projected  orders,
for  which  the  slotting  payments  and  marketing  efforts  had  already  been
undertaken.  In an effort to resolve the dispute, the Company entered into a new
production  agreement,  which  provided for payments to be made  directly to the
Company  in  settlement  of the claims and also  effected a  termination  of the
factoring agreement.

                                       8
<PAGE>
                          AQUA VIE BEVERAGE CORPORATION
                      NOTES TO INTERIM FINANCIAL STATEMENTS
                                   (Restated)
                                October 31, 2001

NOTE 3 - ADDITIONAL COMMENTS (Continued)

Subject to  third-party  quality  assurance  testing,  shipping  and  production
resumed in July  under the new  agreement.  Management  is  confident  that with
certain  modifications  having  been  made  to  the  manufacturing  process  and
production  line,  and with  strict  adherence  to the  quality  assurance,  the
aforementioned   issues  have  been  resolved  and  the  packer  is  capable  of
maintaining production levels and consistent quality.

Notwithstanding  the impact on the Company's sales and marketing  efforts by the
packer's  failure  to perform as agreed,  and the  consequent  loss of  saleable
inventory  under the  shipping  and  security  agreement  to satisfy  orders and
proposed  orders  during the  period  from June to August  2001 of the  dispute,
through  additional  slotting fee commitments and other arrangements made by the
Company,  the  Company  was able to place its  products on the shelves of retail
grocery chains, and to obtain additional approvals.

Management believes that these placements and approvals provide a major foothold
and a foundation  for  regional  expansion  into 2002 as the Company  expects to
begin a rapid expansion of its inventory  production and its sales and marketing
programs during the current fiscal year.
                                       9

<PAGE>



Item 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

During its first three years of existence (from inception to July 31, 2001), the
Company  accumulated a deficit of  $5,901,501.  In the  subsequent  three months
ended October 31, 2001, the Company's  accumulated deficit grew to $6,307,765 as
the Company's marketing and executive expenses  increased,  creating a quarterly
operating loss of $406,264.

At October 31, 2001, the Company's  total assets of $511,910 were lower than the
$629,064 reported at its July 31, 2001 year-end.  The decrease was due primarily
to a decrease in inventory to approximately $90,000 from approximately $155,000,
decreases in accounts receivable,  and increases in accumulated depreciation and
amortization.  The Company's  current  liabilities  decreased from $1,072,480 at
July 31, 2001 to $983,940 at October 31, 2001.

The Company entered into an aggressive marketing campaign in the Spring of 2001,
which substantially  increased its General and Administrative expenses for sales
personnel  and  marketing  expenses for slotting fees and related items based on
the  production  financing  agreement  made  with its  contract  packer  in late
February 2001 (see Note 3 to the  Financials).  These  expenses were incurred in
the  anticipation  of a rapid  increase  in sales and  revenues  to support  the
expenditures. The dispute which arose with the packer, although resolved in late
July, 2001, did not provide  compensation for the loss of revenues  projected by
management  for  that  period,  and  also  reduced  the  sales  activity  due to
uncertainties over supply.  Management had proposed to address these problems in
early  September 2001 but was unable to adequately  redress the issue due to the
September 11th event and it impact on retail sales.

Aqua Vie continues to offer  information  about its products and a  subscription
service on its Internet  site.  Aqua Vie's revenue from Internet  sales, a small
portion of current  revenue,  is  projected  to be an  important  part of future
revenue.  Management  intends  to  expand  and  develop  marketing  of Aqua  Vie
beverages through the Internet,  and redesign of the Company's  Internet site to
support the Company's marketing plan is currently underway.

Given  Aqua Vie's  market  distribution  presence  and order  interest  by major
customers,   the  funded  slotting  fee  arrangements  with  major  grocery  and
convenience store chains, its present  relationship with its co-packer,  and the
present  production  and  overhead  cost  structure,  profitability  is believed
achievable in 2002, given adequate bridge financing.  The immediate  solution to
profitability in this early growth scenario rests with the Company's  ability to
obtain bridge financing  adequate to meet the increased product demand available
within the account base with which the Company has already  secured shelf space.
At the same time,  the company will  continue to build brand  awareness  through
immediate  execution  of consumer  marketing  programs  postponed  during  2001,
including radio and newspaper  advertising in select markets,  which is expected
to commence in January 2002.
                                       10
<PAGE>

The Company  began a program to seek  production  financing  shortly  before the
September  11th event but was unable to  finalize  commitments  with  interested
investors at that time due to the market  uncertainties which arose. In the last
few  days  the  Company  has  secured  additional  debt  financing  from a major
shareholder  that it believes  should  provide for proposed  January  sales.  In
addition,  discussions  are expected to continue with several  other  interested
investors unrelated to the Company, to support an expanded inventory  production
and sales program for the first Quarter of 2002.

In the future Aqua Vie expects to improve margins through economies of scale and
by introducing new products that  management  believes will support higher gross
margins  even  in  today's  competitive  market  environment.  The  first  to be
introduced  will  be a line  of  Hydrators  especially  designed  for  children.
Subsequently,   the  Company  plans  to  follow  with  a  multi-flavor  line  of
nonalcoholic  wines made from spring water.  These  nonalcoholic wines have been
designed to provide all of the sensual  qualities of fine wines and  champagnes,
without the presence of alcohol or preservatives.

Aqua Vie's product line contains no directly patented or patentable  features or
components.  Copyrighting,  trade marking and the use of trade secret techniques
and     formulations    are    employed     extensively.     Aqua    Vie    uses
non-disclosure/non-compete  agreements with  employees,  suppliers and co-packer
bottlers.  At present  the  Company  has not issued  any  licenses,  franchises,
concessions,  royalty  agreements or labor contracts,  though future development
may include such actions being incorporated into the corporate strategy.

FINANCIAL  CONDITION,  LIQUIDITY AND CAPITAL RESOURCES The Company's revenues of
approximately  $46,000  for the quarter  ended  October 31, 2001 were a decrease
from  approximately  $192,000 of revenues in the corresponding  first quarter of
the prior fiscal year, due to the time lost in the resolution of the processor's
quality assurance problem,  the resultant  temporary lack of inventory available
for sale, the  consequent  delay of advertising  and marketing  programs,  and a
postponement of final arrangements for additional funding in September,  delayed
because of events of September 11th. Discussions are ongoing with the same third
parties concerning this additional funding.

Because it has sustained  recurring losses from  operations,  the Company cannot
assure  that it will be able to fully  carry out its plans as  budgeted  without
additional  operating  capital.  At October 31,  2001,  the Company had negative
working  capital of  $810,923,  although  this amount  represents  a decrease in
liquidity and capital  resources from its negative  working capital  position of
$806,290  at July 31,  2001.  The  decrease  is  principally  attributable  to a
decrease in current Assets.

In the three months ended October 31, 2001,  the Company funded a portion of its
operations from the sale of its common stock,  which raised $253,895 in cash. In
addition, Aqua Vie financed its operations by issuing shares for services valued
at $64,610.  This recent mix of diversified  funding sources  contrasts with the
corresponding  three  months of the prior year when the primary  source of funds
was $202,500 in loans and $788,468 from the Company's sale of stock.
                                       11
<PAGE>

The Company anticipates a substantial use of cash for the foreseeable future. In
particular,  management  of the  Company  intends  substantial  expenditures  in
connection with production of additional  inventory for the planned  increase in
sales,  expansion of the Company's marketing  organization,  payment of slotting
fees to obtain  shelf  space  with new  retailers,  and  quality  assurance  and
distribution  management.  The availability of sufficient  future funds for Aqua
Vie will depend to a  significant  extent on the growth in market  acceptance of
the Company's primary product line by retail chains. The Company does not expect
to incur any major capital  expenditures in the next year. Aqua Vie's management
expects that  additional  funding for operating  expenditures  will be available
from the issuance of debt and/or equity securities,  as needed.  There can be no
assurance whether or not such financing will be available on satisfactory terms.

RESULTS OF OPERATIONS  Aqua Vie  commenced  operations in 1998 and has a limited
history of operations,  which to date have not been  profitable.  Its operations
are  subject to the risks and  competition  inherent in the  establishment  of a
relatively new business  enterprise.  Aqua Vie is currently operating at a loss.
The  Company's  three  month  revenues  of  $46,858  were less than  three-month
revenues of the prior fiscal  year,  sales to date have not been  sufficient  to
cover the costs of operations.  Though sales to date have not been sufficient to
cover the costs of operations,  profitability  is believed  achievable  assuming
inventory  levels are  adequate to meet  demand  within the  Company's  existing
customer base.

For the three months ended October 31, 2001, the Company's  sales produced gross
profit (loss) of ($34,842),  which compares with the gross profit of $54,857 for
the comparable  three months of the prior fiscal year.  Operating  expenses were
$360,766 for the three months ended  October 31, 2001 and were  $831,331 for the
comparable  period  of the  prior  year.  The  year-to-year  change  principally
reflects  a decrease  in  marketing  expenses  during  the most  recent  quarter
resulting from the Company's decision to postpone its advertising, marketing and
promotional  activities  pending the  development  of higher  inventory  levels.
During this same  year-to-year  time frame,  the decrease in operating  expenses
during the quarter ended October 31, 2001 also reflects reduction in general and
administrative expenses.

While Aqua Vie  continued  to operate at a loss during the most recent  quarter,
given  inventories  adequate to support its  marketing  efforts,  the  Company's
ability to generate  higher  revenue  and  realize a net profit from  operations
remains  primarily  dependent upon the effectiveness of its marketing efforts in
generating sales of its line of flavored spring water products.

In the quarter ending October 31, 2001, the Company's net loss of ($406,264) for
the three  months  ended  October 31,  2001  resulted in a net loss per share of
($0.006) for the quarter.  This  contrasts with a net loss of ($794,069) for the
three  months  ended  October  31,  2000,  which also posted a per share loss of
($0.02).
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<PAGE>


PART II - - OTHER INFORMATION

ITEM  1. LEGAL PROCEEDINGS

There are no substantial legal  proceedings  against the Company and the Company
is unaware  of any such  meaningful  proceedings  contemplated  against  it. The
Company anticipates that in the future it will have conflicts as regards certain
Accounts Payable for services invoiced but not adequately  performed and for the
use of selected names for products and product lines in selected market places.

ITEM 2. CHANGES IN SECURITIES

Recent Sales of unregistered securities.

Sales  of   unregistered   securities   were  pursuant  to  the  exemption  from
registration  under the  Securities  Act of 1933  contained  in Section 4(2) and
Regulations  promulgated  thereunder.  During the three months ended October 31,
2001, the Company  issued 695,000 shares of common stock for services  valued at
$64,610.

ITEM 3.

DEFAULTS ON SENIOR SECURITIES

Not applicable.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 5.

OTHER INFORMATION

Not applicable.

CAUTIONARY  STATEMENT FOR PURPOSES OF THE SAFE HARBOR  PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

Statements in this discussion  which are not historical  facts may be considered
forward-looking  statements  within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. The words "believe",  "expect",  "anticipate",
"estimate" and similar  expressions  identify  forward looking  statements.  Any
forward  looking  statements  involve risks and  uncertainties  that could cause
actual  events or  results  to differ,  perhaps  materially,  from the events or
results  described in forward looking  statements.  Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
their dates.  The Company  undertakes no obligation to publicly update or revise
any forward looking statements,  whether as a result of new information,  future
events  or  otherwise.  Risks  associated  with the  Company's  forward  looking
statements include,  but are not limited to, risks associated with the Company's
history of losses and uncertain profitability, need for market acceptance of the
HYDRATROR(TM)  product  line,  the  Company's  reliance at this time on a single

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product line,  reliance on the market  distribution  and retail system and risks
associated with the Company's international  operations,  currency fluctuations,
the risk of new and different  legal and regulatory  requirements,  governmental
approvals,  tariffs and trade barriers,  risks  associated with  competition and
technological and product  innovation by competitors,  dependence on proprietary
formulas,  general economic  conditions and conditions in the beverage industry,
reliance  on key  management,  limited  manufacturing  production  history  with
respect to the aseptic  bottling  system,  maintenance of quality control by the
contract  bottler,  dependence  on  key  suppliers,  future  capital  needs  and
uncertainty of additional  financing,  potential recalls and product  liability,
dilution,  effects of outstanding  convertible  debentures and preferred  stock,
limited public market,  liquidity,  possible volatility of stock price, recently
adopted new listing standards for NASDAQ securities and environmental matters.

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                                   SIGNATURE

                          AQUA VIE BEVERAGE CORPORATION
                                  (Registrant)


Date  April 26, 2002               By: /s/  Thomas J. Gillespie
                                    ---------------------------
                                            Thomas J. Gillespie
                                            Chief Executive Officer
                                            & President

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