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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-KSB

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|/x/ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

|/ / | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------

COMMISSION FILE NUMBER: 0-29280

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HAWAIIAN NATURAL WATER COMPANY, INC.(Name of small business issuer in its charter)

HAWAII(State or jurisdiction of
incorporation or organization)

99-0314848(I.R.S. Employer
Identification No.)


98-746 KUAHAO PLACE
PEARL CITY, HAWAII 96814(Address of principal executive offices)

(808) 483-0520Issuer's telephone number

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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF EXCHANGE THE ACT:
COMMON STOCK, NO PAR VALUE
REDEEMABLE COMMON STOCK PURCHASE WARRANTS ("WARRANTS")
(Title of Class)

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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 days. YES /x/  NO / /

Check
if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. / /

State
issuer's revenues for its most recent fiscal year: $3,681,026

State
the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold or the
average bid and asked price of such common equity, as of a specified date within the past 60 days: $1,904,636 as of April 6, 2001, based upon the closing sales price of the Common Stock on such
date.

State
the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 7,935,982 shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Registrant's definitive proxy statement to be filed with the Commission in connection with the 2001 Annual Meeting of Stockholders and
Registrant's Registration Statement on Form SB-2 (File No. 333-18289) are incorporated by reference into Part III of this Report.

Transitional
Small Business Disclosure Format (check one): YES / /  NO /x/

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PART I

Item 1. Description of Business

General.Hawaiian Natural Water Company, Inc. (the "Company") produces and sells bottled water under the "Hawaiian
Springs," and "Ali'i" names and a line of herbal beverages under the "East Meets West XEN" name.

The
Company's Hawaiian Springs brand is the only bottled "natural" water available from Hawaii. All other bottled waters produced in Hawaii contain "purified" water, from
which chemicals and minerals have been removed by means of reverse osmosis filtration.

The
Company draws its Hawaiian Springs water from a well located at the base of the Mauna Loa mountain in Kea'au (near Hilo) on the Big Island of Hawaii. The water is
"bottled at the source" in polyethylene terepthalate ("PET") plastic bottles, which are manufactured at the Company's bottling facility. PET products under the Ali'i name are bottled at the same
facility, using purified water.

The
Company was incorporated in Hawaii in September 1994, and began commercial operations in February 1995. From inception until mid-1999, the Company was involved exclusively in the
sale of retail premium PET products under the Hawaiian Spings name (bottles of two liters or less are considered premium). In June 1999, the Company entered the home and office delivery
market through the acquisition of Ali'i Water Bottling Co., Inc. ("Ali'i"), a bottler of purified water under the Ali'i name. The operations of Ali'i consisted of a home and office delivery business
on the Big Island of Hawaii and a line of PET products sold through retail channels in the Hawaiian Islands. Upon completion of the acquisition, the Company consolidated Ali'i's PET bottling
operations into the Company's bottling facility in Kea'au. In March 2000, the Company expanded its home and office delivery business through the acquisition of Aloha Water Company, Inc. ("Aloha"), a
major distributor of purified water under the Aloha name to the home and office market in the greater Honolulu area. This acquisition was rescinded in December 2000. See Note 4 to the financial
statements.

In
January 2000, the Company expanded its product line beyond the water category through the introduction of a line of herbal beverages under the East Meets West XEN
name. This beverage line consists of six natural juice flavors containing concentrated herbal extracts. The beverages are packaged in both glass and PET bottles, featuring unique oriental style
graphics. The product is manufactured for the Company pursuant to a co-packing agreement with a Los Angeles area bottler. Initial sales efforts have concentrated on Southern California, Hawaii and the
Vancouver, Canada areas. The brand's further expansion will hinge upon the success achieved in these areas.

Approximately
76% of the Company's revenues for 2000 were attributable to the sale of PET products; the remaining revenues were derived from the sale of home and office delivery
products (16%) and the sale of East Meets West XEN products (8%). Approximately 91% of the Company's PET sales were generated in Hawaii, approximately 6% on the U.S. Mainland, and approximately 3% in
international markets (principally Guam, Saipan and Japan).

In
November 2000, the Company entered into a merger agreement with Amcon Distributing Company ("Amcon"), pursuant to which the Company has agreed to merge with and into, and thereby
become, a wholly-owned subsidiary of Amcon (the "Merger"). The Merger consideration values the entire common equity interest in the Company at $2,865,348, payable in common stock of Amcon, which will
be priced at not less than $6.00 or more than $8.00 per share, based on a 20 trading day measuring period ending three trading days before the date of the Company's stockholder vote on the Merger. As
a result, Amcon will issue an aggregate of not less than 358,168 or more than 477,558 shares. Holders of outstanding options and warrants of the Company would receive comparable options and warrants
of Amcon with the exercise price and number of shares covered adjusted based upon the exchange ratio. Completion of the Merger is subject to various conditions, including approval by the Company's
stockholders, and registration under the Securities Act of 1993, as amended, of the Amcon

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shares to be issued in the merger. The Comppany anticipates that the Merger will be completed by June 30, 2001. See Note 5 to the financial statements.

The Bottled Water Market.Since the mid-1970's the bottled water market has experienced substantial growth in the
United States and most of the industrialized world. Concerns about municipal water quality combined with increased health awareness and the availability of light weight convenient packaging, such as
plastic bottles, have fueled bottled water consumption in the United States and other industrialized nations. The bottled water market in the United States has grown from approximately 317 million
gallons in 1976 to approximately 4.25 billion gallons in 1999. Currently, bottled water is one of the fastest growing segments of the beverage industry worldwide.

The
bottled water market is generally divided into two principal segments: (i) retail and (ii) home and office delivery. In the retail segment, water is bottled at the manufacturer's
bottling plant, packed into cases and sold through a distribution network to retail outlets for resale to consumers. Retail product is often distinguished by type of water (e.g., sparkling versus
non-sparkling) and by type of bottle (e.g., PET versus glass). For several years, the fastest growing market within the retail segment has been the non-sparkling premium PET market (bottles of two
liters or less are considered premium). This category has grown from approximately 230 million gallons nationwide in 1992 to approximately 1.3 billion gallons in 1999, with a compound annual growth
rate of over 25%. The Company estimates the total retail market in Hawaii at approximately 5.8 million gallons (1,600,000 cases) per year and believes that sales of PET products continue to grow at a
rapid pace. The cost of the bottle is typically the largest cost component in the manufacture of retail product, since a new bottle must be used for each unit of production. Empty bottles are not
intended to be refilled and are not returned to the manufacturer. Competition in the retail market is regional, national and international in scope. Some of the best known brands, such as "Evian" and
"Crystal Geyser," are shipped from a local bottling source for sale throughout the world.

In
the home and office delivery segment, water is bottled at the manufacturer's bottling plant in large (typically five gallon) bottles and delivered to the customer. The manufacturer
services the customer on a periodic (typically weekly) basis by picking up empty bottles and replacing them with full ones. The empty bottles are returned to the bottling facility for refilling. The
bottles are typically made of a hard, durable plastic designed for reuse at least 20 times. As a result, the cost of the bottle is a relatively small component in the cost of the finished product.
Competition in the home and office market is inherently local, since the size and weight of the product and the need to service customers on a continuing basis require the manufacturer to be located
within reasonable proximity to customers. Office accounts often require servicing large numbers of employees at a single location, and therefore typically involve larger or more frequent deliveries
than home accounts.

The Nutraceutical Market.Nutraceutical beverages are typically juices or teas mixed with herbal extracts or other
additives thought to have nutritional benefit. The nutraceutical market has recently emerged as a significant beverage category, anticipated by industry sources to grow at an annual rate of 25%
through 2003. Expanding interest among consumers in health and well-being is fueling growth in this market. Nutraceutical beverages are currently experiencing growing consumer demand in most large
metropoplitan areas throughout the U.S. Mainland. The New York City and Los Angeles areas are currently the two largest markets. Consumer interest in these products has also emerged in Europe and the
more developed countries in Asia.

The Company's Natural Water Source.The Company draws its natural water from a well at the base of the Mauna Loa
mountain range in Kea'au (near Hilo) on the Big Island of Hawaii. The southeastern slopes of Mauna Loa, above Kea'au, are among the wettest places on earth, experiencing up to 225 inches of rainfall
annually. Rainfall filters through the porous lava rock of the mountainside forming large underground reservoirs and aquifers that flow back into the ocean. This constant

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movement maintains the purity of the source and also accounts for the low mineral content of the water, which gives it its distinctively light or "young" taste.

The
Company's well is drilled to a depth of approximately 250 feet. The source is continuously recharged from rainwater at this level. Water is pumped from the well at the rate of
approximately 250 gallons per minute. This water flow is more than adequate to satisfy the Company's maximum production capacity. The flow rate could be expanded, if desired, through the use of
stronger pumping equipment. In 1998, the Company replaced its pumping equipment and refurbished its well shaft through the installation of new stainless steel casing.

Bottling Operations.The Company currently has bottling facilities at two locations, one for retail PET production,
located adjacent to the Company's well at Kea'au, and one for home and office delivery, serving the Big Island. The Company's East Meets West XEN line is manufactured by an independant
Los Angeles area bottler pursuant to a co-packing agreement.

PET Operations.All of the Company's retail PET products are bottled at the Company's facility in
Kea'au. These products consist of the Hawaiian Springs natural water line, the Ali'i purified water line and various limited production co-labelled products.

The
Company's PET bottling operations consist of three processes: bottle manufacturing, filling and packing. The Company currently manufactures all of its own PET bottles, utilizing
blow molding equipment installed at the Company's bottling facility in Kea'au. This equipment has a normal annual capacity of approximately 18 million bottles. The Company purchased the equipment in
September 1997, for an aggregate of $1.2 million, payable in installments over five years. See Note 6 to financial statements. In March 1999, the Company purchased additional blow molding and bottling
equipment for the production of its 5 liter product (see below). This equipment is installed as a separate bottling line at the Kea'au bottling facility. The Company has recently ordered new blow
molding and related equipment which is expected to be fully operational by August 2001. This high speed equipment will add up to 2.5 million cases of annual bottling capacity. This equipment has been
acquired in Amcom's name. The Company expects to lease this equipment from Amcon on terms to be agreed upon.

Bottles
manufactured by the Company can either be fed directly onto the bottling line or stored for later use. The Company's bottling line is a fully automated conveyor system which
moves the bottles through continuous stages of production: rinsing, filling, labelling and capping. Finished bottles are date stamped and conveyed into the packing room, where they are packed by
machine into cardboard cases and placed onto pallets for immediate shipment or storage. The Company stores finished goods
inventory at its Kea'au facility and also maintains approximately one week's supply of finished goods in inventory at its headquarters facility in Pearl City. See "Item 2. Description of Property."

Most
of the Company's PET product is sold in standard sizes of 0.33, 0.5, 1.0 and 1.5 liters. All sizes come with tamper-proof caps. Sports caps are also available on 1.0 liter
bottles. Since the fall of 1999, the Company has also offered its Hawaiian Springs brand in a 5 liter PET bottle. The Company believes that it is the only bottler in the United States
offering water in this package. Sales of 5 liter product to date have been strong, and the Company foresees growing demand for this product in the future.

Home and Office Delivery.The Company has a home and office bottling facility in Kailua-Kona, serving
customers on the Big Island. This facility which produces water under the Ali'i name, was acquired in June 1999 in connection with the acquisition of the business and operating assets of Ali'i. The
Company draws its water for this facility from municipal water sources. The water is then "purified" through reverse osmosis filtration. The Company's automated bottling lines clean, fill and cap the
bottles. Most of daily production is placed onto delivery vehicles for immediate delivery. The Company usually keeps only a few days of finished goods in inventory, which are stored at the bottling
facility. Product is sold in both 3 and 5 gallon sizes. The most common size in the industry is 5 gallons.

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In addition to water, the Company also provides coolers or other dispensing equipment to its customers. This equipment may either be purchased or rented for a monthly fee. The Company owns
substantially all of the equipment and delivery vehicles used in its home and office operations. The facility is occupied pursuant to a lease. See "Item 2. Description of Property." All of the
Company's deliverymen are Company employees.

East Meets West Xen.The Company's East Meets West XEN beverage line is
currently offered in 20-ounce glass or PET bottles. Both types of packaging are being offered in order to capitalize on selling opportunities within retail and food service segments (golf courses,
sports stadiums, schools, etc.) where the sale of glass bottles may be impracticable. Product is manufactured for the Company by a Los Angeles area bottler pursuant to a co-packing agreement. Pursuant
to this agreement, the bottler manufactures product based upon the Company's formulations and stores the product in its warehouse pending shipment. In exchange, the bottler is entitled to receive cash
compensation in an amount equal to its actual production costs, plus a specified mark-up. The bottler is currently entitled to receive a specified premium per case, payable quarterly in common stock
of the Company, valued at its trading price (as defined) at the time of issuance. Upon completion of the Merger, the stock consideration will be eliminated.

Distribution.  PET Products.The Company distributes its PET products primarily in Hawaii and to a
limited extent on the U.S. Mainland and in certain international markets (principally Guam, Saipan and Japan). A majority of the Company's product is sold through retail channels such as convenience
stores and supermarkets, although the Company also sells through food service outlets such as restaurants, bars, airlines, hotels and country clubs. The Company's product is currently distributed on
Aloha Air (Continental flights and flights to Micronesia) and Continental Airlines/Air Micronesia (flights departing Hawaii and flights departing New York, Houston and Los Angeles for Hawaii). The
product is also sold at the Mauna Lani Golf Course and other prestigious golf courses on the Big Island of Hawaii, as well as military commissaries in Hawaii.

Paradise
Beverages ("Paradise"), one of Hawaii's largest beverage wholesalers, acts as the Company's retail distributor throughout Hawaii. The Company has also appointed several other
distributors to cover food service markets in Hawaii not normally covered by Paradise. In addition, the Company has entered into broker agreements in Hawaii to support the sales efforts of the
Company's distributors. Sales in Hawaii accounted for approximately 91% of the Company's PET revenue during 2000.

Sales
to the U.S. Mainland accounted for approximately 6% of the Company's PET revenue during 2000. The Company's primary marketing efforts on the U.S. Mainland are directed toward
niche markets, with special emphasis on the specialty and natural food markets. The Company believes that demand for its product is enhanced in these markets due to consumer focus on quality and
willingness to pay a premium for products perceived as superior. An additional niche market being cultivated by the Company is the health and fitness club market.

The
Company's largest international markets are currently Guam, Saipan, and Japan. In Guam and Saipan, the Company's bottled water is sold and marketed thru Pacific Gift Supply, an
established importer and distributor. In Japan, the Company's products are being distributed by CFC Japan Corporation. International sales accounted for approximately 3% of the Company's PET revenue
in 2000.

East Meets West Xen.Sales of the Company's East Meets West XEN line
commenced in January 2000. Sales efforts to date have concentrated on California, Hawaii, and Vancouver, British Columbia. The brand's further expansion will depend upon success achieved in these
territories. Distribution of the Company's product is being handled by a network of beverage distributors and to a lesser extent food service distributors. Depending upon the initial success in these
channels and

5

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available financing, the Company may seek to introduce the product into supermarket chains. Distribution in Hawaii is being handled by Paradise Beverages and Hansen Sales, a food service distributor.

Marketing.  PET Products.The Company's marketing program for its PET products concentrates on selling
efforts by its distributors and brokers as well as attendance at trade shows and events. In Hawaii, the Company has promoted its product through sales to airlines, hotels, country clubs and other such
customers which enhances the visibility of the Company's product.

On
the U.S. Mainland, substantial marketing and promotional expenditures are typically required in order to obtain widespread distribution through the largest retail outlets, such as
supermarkets. Supermarkets, especially in California, typically charge entry or "slotting fees" in exchange for introducing new and untested products. Even after a successful introduction, continuing
expenditures for in-store promotions and coupon programs are generally required in order to maintain shelf space for these products. Such promotional programs often need to be supported by widespread
marketing campaigns (e.g. television, radio or print advertising) which can be very costly. The Company has lacked the financial resources required to maintain such a mass marketing campaign.
Accordingly, the Company's marketing strategy for the U.S. Mainland has been directed toward niche markets, with special emphasis on the specialty and natural foods markets. The Company is the
"official water" of SPINNING, an indoor cycling exercise program featured in health clubs in 60 countries.

The
Company has also entered into marketing contracts with several celebrities to represent the Company's products in television and radio appearances.

East Meets West Xen.Marketing for the Company's East Meets West XEN line is
primarily based upon sales efforts by distributors. The Company also has one full time marketing consultant in California dedicated to the East Meets West Xen line, who may accompany
distributors on sales calls. New accounts are typically offered free merchandise or other allowances in connection with their first order. The Company also provides point of sale marketing materials,
in-store sampling and displays to enhance consumer interest. To date, the Company's marketing budget has been insufficient to support the distribution originally envisioned for this brand.

Home and Office Delivery.Marketing efforts in this segment rely primarily upon customer referrals,
display of Company logos on delivery vehicles and bottles, advertising in certain mass print media, such as the Yellow Pages and appearances at trade shows and events. The Company's home and office
delivery business is currently limited to the Kailua-Kona area of the Big Island.

Governmental Regulation; Quality Control.The bottled water industry is highly regulated both in the United States and
abroad. Various state and Federal regulations, designed to ensure the quality of the product and the truthfulness of its marketing claims, require the Company to monitor each aspect of its production
process, including its water source, bottling operations and packaging and labeling practices.
The Environmental Protection Agency requires a yearly analysis of the Company's water source by a certified laboratory with respect to a comprehensive list of contaminants (including herbicides,
pesticides, volatile chemicals and trace metals). In addition, the Hawaii Department of Health requires weekly microbiological testing of the Company's well water and finished product, as well as
monthly inspection of its production line.

The
Company's PET bottling facility has an on-site laboratory, where samples of its finished product are visually and chemically tested daily. The Company also utilizes an independent
state certified laboratory to test samples from each production run. In addition, the Company's production line is subject to constant visual inspection. The Company believes that it meets or exceeds
all applicable regulatory standards concerning the quality of its water.

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The Company is also subject to regulation by the Food and Drug Administration (the "FDA"), which regulates the Company's packaging and labeling practices. Separate regulations apply
to water and nutraceutical products. The Company has met all FDA requirements for the labeling of its water as "natural" and "bottled at the source." "Natural" signifies that the chemical composition
and mineral content of the bottled water are the same as those at the source. This contrasts with "purified" water from which chemicals and minerals have been removed by means of reverse osmosis
filtration. "Bottled at the source" signifies that the water is pumped directly from the source to the bottling facility, thereby eliminating handling and transportation procedures which might lead to
contamination. The Company's Hawaiian Springs products have also been certified as Kosher by the Union of Orthodox Jewish Congregations of America.

In
addition to U.S. regulations, the Company must meet the requirements of foreign regulatory agencies in order to import and sell its product into other countries. These requirements
are generally similar to, and in certain respects more stringent than, U.S. regulations. The Company believes that it is in compliance with applicable regulations in all foreign territories where it
currently markets its product.

Failure
to meet applicable regulations in U.S. or foreign markets could lead to costly recalls, loss of certification to market product or, even in the absence of governmental action,
to loss of revenue as a result of adverse market reaction to negative publicity.

Competition.  PET Products.The retail PET water market is highly competitive, with numerous
participants selling products often perceived as generic by consumers. The principal bases of competition in the industry are price, brand recognition, water source and packaging. Price competition
has become more pronounced as the industry has matured. The Company seeks to develop recognition for its Hawaiian Springs brand based upon its unique water source. The Company generally
prices this product at or slightly below the price for other premium brands. Competition in the market for the Company's Ali'i brand is largely based upon price.

The
Company sells most of its product in Hawaii but also seeks to compete on the U.S. Mainland and in certain foreign markets. See "Distribution." Competition in the PET market is
international in scope, even in Hawaii, where the Company competes primarily with large, established foreign and domestic companies, as well as local competitors. The most popular brands of natural
water sold in Hawaii include "Dasani," "Crystal Geyser," "Arrowhead," "Dannon," "Sparkletts," and "Alhambra" (all bottled on the U.S. Mainland) and "Evian" (bottled in France), as well as local
brands, such as "Menehune," "Hawaiian Isles" and "Hawaii." All local bottlers, except the Company, sell "purified" municipal water, not "natural" or "spring" water. The Company is the only producer of
natural water from Hawaii. The Company believes that it is likely to remain the only such producer, at least for some time, because of zoning, water use and other restrictions currently in effect
which make development of a competing natural water source difficult.

Home and Office Delivery.Competition in the home and office delivery market is inherently local. None
of the major national or international competitors in the PET products market offer home and office delivery in Hawaii. Competition in the market is generally limited by island. The largest market is
Oahu, where the bulk of Hawaii's population resides. "Menehune" is currently the largest competitor in this market. Significant markets also exist on the Big Island, Maui and Kauai. The Company is
currently one of two principal competitors on the Big Island.

East Meets West Xen.The nutraceutical beverage market is still a young and developing
market with a limited number of national or international competitors. Competition is primarily based upon brand recognition, packaging, taste and ingredients. The Company seeks to compete primarily
on the basis of taste and distinctive packaging. Currently, the best selling brand of herbal juices is the "SOBE" brand, which competes directly with the Company's product. "AriZona" is currently the
best

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selling brand of herbal tea. "Snapple" and "Hansen's Natural" have recently extended their product lines to include nutraceutical beverages. "Red Bull," an energy drink originated in Asia, is
currently popular in Europe as well as the United States.

Employees.The Company has four employees at its executive office in Pearl City, 32 employees at its PET bottling
facility in Kea'au, including three in the Company's accounting and administrative department which was relocated from Pearl City in December 2000, and seven employees at its home and office facility
in Kailua-Kona. See "Item 2. Description of Property." The Company also has one
marketing consultant located in Los Angeles, California dedicated to the East Meets West XENline. The Company's employees are not unionized, and the Company has not experienced any work
stoppages or strikes as a result of labor disputes. The Company considers its relations with its employees to be satisfactory.

Item 2. Description of Property

The Company currently operates three leased facilities: (i) a PET bottling facility in Kea'au on the Big Island of Hawaii, (ii) an office/warehouse facility in
Pearl City (outside Honolulu), and (iii) a home and office bottling facility in Kailua-Kona on the Big Island. The Company also stores limited amounts of finished goods inventory in temporary storage
facilities located in Los Angeles, Houston and New Jersey.

The
Company's PET bottling facility is located on approximately 14.5 acres in Kea'au (near Hilo) on the Big Island. The facility consists of an approximately 8,000 square foot
renovated concrete building which houses the Company's bottle manufacturing, filling and packing operations, and several adjacent warehouse structures. The property is located within an agricultural
zone, but has been granted a Special Use Permit by the County of Hawaii for water extraction and bottling operations. The Special Use Permit is of perpetual duration, so long as the conditions to its
effectiveness have been met. The Company is currently in compliance with all of these conditions and does not anticipate any material difficulties in compliance in the indefinite future. See "Item 1.
Description of BusinessBottling OperationsPET Operations."

The
bottling facility and surrounding property, including the water source and pumping equipment, are owned by Hawaii Brewery Development Co., Inc. ("HBDC"), a corporation owned by
two of the Company's officers and directors. The facility is leased from HBDC pursuant to a long-term lease agreement (the "HBDC Lease"). The HBDC Lease provides for an initial term of 50 years
commencing on October 1, 1994, which may be extended at the option of the Company for an additional 50 years. The HBDC Lease requires the Company to pay rent to HBDC on a monthly basis at a rate equal
to the greater of (i) a certain base rent (the "Base Rent"), or (ii) 2% of the Company's net revenues (as defined). The Base Rent is currently $5,335 per month. The HBDC Lease entitles the Company to
exclusive use of the water source; provided, however, that HBDC may draw up to 50% of the water flow for use in beer brewing or other beverage production, but may not draw water for the sale of
natural water. The Company believes that 50% of the water flow is adequate for the current and projected future needs of the Company's business. HBDC currently conducts no other activity on the leased
premises, and the Company is not aware of any current plans by HBDC to conduct any other activities in the foreseeable future.

In
November 1999, the Company relocated its headquarters facility from Honolulu to a much larger facility in Pearl City. The facility consists of approximately 15,000 square feet of
office and warehouse space. The Company incurred approximately $37,000 in leasehold improvement costs in 1999 to build out the office space at this facility. The Company leases this facility pursuant
to a lease agreement (the "Headquarters Lease") with an initial term of 45 months (commencing November 1999). Rent under the Headquarters Lease is payable monthly at the rate of $6,800 per month
through May 2001, $7,800 per month thereafter through May 2002 and $8,800 thereafter through May 2003.

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In January 2001, the Company entered into an agreement to sublease 11,770 square feet of this facility. The sublease is for a 29 month period, ending on May 31, 2003; the sublease
monthly rental rate is $7,062. The Company retains approximately 1,000 square feet of office space and 1,300 square feet of warehouse space at this facility. In December 2000, the Company relocated
its accounting and administrative operations from Pearl City to its bottling facility in Kea'au on the Big Island.

The
Company's Ali'i home and office bottling operations are conducted in approximately 5,043 square feet of office and warehouse space in Kailua-Kona on the Big Island of Hawaii. This
facility is leased on a month-to-month basis at a current rental rate of $2,747 per month.

The
Company's temporary storage facilities in Los Angeles, Houston and New Jersey are leased on a month-to-month basis.

In
the opinion of management, all of the Company's facilities are adequately covered by insurance.

Item 3. Legal Proceedings

None

Item 4. Submission of Matters to a Vote of Securityholders

None

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PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

(a)  The
Company's Common Stock was quoted on the National Association of Securities Dealers Automated Quotation System ("Nasdaq") SmallCap Market under the symbol HNWC
from May 1997, until October 5, 1999. The Company's Common Stock was delisted from the Nasdaq SmallCap Market, effective as of the close of business on October 5,1999. Since October 6, 1999,
the Company's Common Stock has been quoted on the OTC Bulletin Board. The following table sets forth the high and low closing bid prices for the Company's Common Stock during the periods indicated as
reported by Nasdaq, and the OTC Bulletin Board. These prices reflect inter-dealer prices, without retail mark-ups, mark-downs or commissions, and may not represent actual transactions:

High

Low2000:First Quarter

$
1
15/16

$

5/16Second Quarter


1
1/16



5/16Third Quarter



15/32



1/64Fourth Quarter



5/16



2/161999:First Quarter

$
4
1/8


2
1/2Second Quarter


2
11/16



9/16Third Quarter


1
5/16



1/2Fourth Quarter


1




9/32


The
last sales price for the Company's Common Stock, on the OTC Bulletin Board on April 6, 2001, was $.24.

The
Company had 45 stockholders of record as of April 6, 2001 (which number does not include the number of stockholders whose shares are held of record by a brokerage house or
clearing agency, but does include such brokerage house or clearing agency as one record holder).

The
Company has never paid any dividends on its Common Stock and does not anticipate paying any such dividends in the foreseeable future. The Company intends to retain any earnings it
may generate in the foreseeable future to finance the development and expansion of its business.

During
the year ended December 31, 2000, the Company granted to certain consultants stock options to purchase an aggregate of 12,500 shares of Common Stock at an exercise price of
$2.00 per share. No employee stock options were granted during the year ended December 31, 2000. Employee stock options to purchase an aggregate of 8,800 shares of Common Stock were forfeited during
the year ended December 31, 2000. In February 2000, the Company reduced the exercise price of all stock options held by then current employees and consultants from $4.00 per share to $2.00 per share.

During
2000, a warrantholder exercised warrants to purchase an aggregate of 230,600 shares of common stock at an exercise price of $1.00 per share. The Company also issued 100 shares
of Series B mandatorily redeemable convertible preferred stock ($100,000 liquidation preference amount) in 2000 (see Note 2c to financial statements). All of the foregoing transactions
were exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof and the rules and regulations thereunder.

10

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Item 6.  Management's Discussion and Analysis or Plan of Operation

The following discussion may be deemed to contain certain "Forward-Looking Statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, as indicated by the use of terms such as "may," "will," "expect," "believe," "estimate," anticipate," "intend" or other similar terms or the negative of such terms.
Forward-Looking Statements anticipated changes in revenue, cost of materials, expense items, income or loss, earnings or loss per share, capital expenditures, capital structure and other financial
items; plans or objectives of the Company with respect to the Company's growth strategy, introduction of new products, and proposed acquisition transactions; possible actions by customers, suppliers,
competitors or regulatory authorities; and assumptions underlying the foregoing. These Forward-Looking Statements are based upon the Company's current expectations and are subject to a number of risks
and uncertainties, including without limitation: the prospect for continuing losses and the Company's possible inability to continue as a going concern; the Company's need for additional capital and
the possible unwillingness of Amcon or other investors to provide such capital on acceptable terms; possible adverse conditions in the market for the Company's securities and the possible adverse
impact of such conditions on the Company's ability to raise additional capital as needed; possible termination of the Merger Agreement described below; possible adverse changes in the market for the
Company's products; possible adverse effects of changes in currency exchange rates; possible adverse changes in the Company's distributor network; possible adverse developments in the execution of the
Company's existing business strategy or in the implementation of changes thereto; possible adverse changes in the Company's cost of materials or sources of supply; possible adverse developments in the
Company's ability to attract and retain key personnel; possible adverse developments in governmental regulation in the U.S. or abroad; and possible adverse developments in the competitive environment
for the Company's products. Many of these risks and uncertainties are beyond the ability of the Company to predict or control. Should any unanticipated changes occur in the Company's business, or
should management's operating assumptions prove incorrect, the Company's actual results could differ materially from those contemplated by these Forward-Looking Statements.

Results of Operations



In November 2000, the Company entered into a merger agreement (the "Merger Agreement") with Amcon Distributing Company ("Amcon"), pursuant to which the Company
has agreed to merge with and into, and thereby become, a wholly-owned subsidiary of Amcon (the "Merger"). The Merger consideration values the entire common equity interest in the Company at
$2,865,348, payable in common stock of Amcon, which will be priced at not less than $6.00 or more than $8.00 per share, based on a 20 trading day measuring period ending three trading days before the
date of the Company's stockholder vote on the merger. As a result, Amcon will issue an aggregate of not less than 358,168 or more than 477,558 shares. Holders of outstanding options and warrants of
the Company would receive comparable options and warrants of Amcon with the exercise price and number of shares covered adjusted based upon the exchange ratio.

The
Merger is expected to qualify as a tax-free reorganization. It is subject to various conditions, including the effectiveness of a registration statement covering the Amcon shares
to be issued, the listing of such shares on the American Stock Exchange, and the approval of the Company's stockholders. All of the Company's officers and directors and any of their affiliated
entities that own shares of the Company's common stock have agreed to vote their shares in favor of the Merger.

The
Company anticipates completion of the Merger by June 30, 2001. However, the Merger Agreement is terminable under certain circumstances, and there can be no assurance that
the Merger

11

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will be completed. Pending completion of the Merger, Amcon has made certain interim financing available to the Company. If the Merger Agreement is terminated for any reason, it is likely that the
Company will not be able to continue as a going concern.



Net Sales.Net sales increased 21% to approximately $3,681,000 for the year ended December 31, 2000 ("2000") from
approximately $3,050,000 for the year ended December 31, 1999 ("1999"). $2,795,000 (76%) of net sales in 2000 were derived from sales of PET products; $598,000 (16%) were derived from home and office
delivery sales, and $288,000 (8%) were derived from sales of East Meets West XEN the ("XEN") products, which were introduced to the market in January 2000. The increase in net sales in 2000 was due
primarily to a $450,000 increase in sales of home and office delivery products and $288,000 in first year sales of XEN products, partially offset by a $108,000 reduction in net sales of PET products.
Home and office delivery sales for 2000 included $280,000 in sales by Aloha Water Company, Inc. ("Aloha"), a Honolulu based bottler acquired in March 2000. This acquisition was subsequently rescinded
in December 2000 (see Note 4 to financial statements). Aloha sales are therefore non-recurring. The $170,000 balance of the increase in home and office delivery sales is attributable to a full year of
operations of Ali'i Water Bottling Co., Inc. ("Ali'i"), a home and office delivery business on the Big Island, which was acquired in June 1999. PET net sales declined $108,000 in 2000, despite an 8%
increase in case sales to approximately 520,000 cases in 2000 from approximately 481,000 cases in 1999. Net sales revenue declined however, due to an increase in discounts and promotional allowances
per case, resulting in a decline in the average net sales price per case of 12% in 2000 compared to 1999. Case sales in 2000 were also adversely affected by intermittent manufacturing equipment
breakdowns, which periodically shut down production during the year. The Company hopes to avoid such breakdowns in the future through the installation of new manufacturing equipment. See
Note 15 to financial statements. Sales in the Hawaiian market accounted for approximately 91% of PET sales in 2000, compared to approximately 88% in 1999. Sales to the U.S. Mainland accounted
for approximately 6% of PET sales in 2000, compared to approximately 3% in 1999. International sales accounted for approximately 3% of PET sales in 2000, compared to approximately 9% in 1999. Upon
consummation of the Merger, the Company expects to enter into a distribution agreement with an affiliate of Amcon for the distribution of Hawaiian Springs products on the U.S. Mainland.
This distribution agreement is expected to increase the Company's PET sales to the U.S. Mainland. The Company believes that the outlook for PET sales in Asia is still promising but that the
development of these markets may take substantially longer than originally anticipated, given the Company's limited financial resources and economic conditions in Asia which are somewhat resistive to
the sale of an imported premium priced product. The Company's primary target markets for the launch of its XEN products in 2000 were California and Hawaii. The Company plans to continue to focus its
XEN sales and marketing efforts in these two markets. To date, the Company has allocated very limited resources to the marketing of this product line. As a result, first year orders were substantially
lower than originally anticipated. After giving effect to the rescission of the Aloha acquisition (see Note 4 to financial statements), the Company's home and office delivery business is
currently limited to the Kailua-Kona area of the Big Island of Hawaii. Given the limited size of this market, significant growth in home and office delivery sales is not anticipated. The Company has
no current plans to acquire or develop a home and office delivery business in the Honolulu area.

Cost of Sales.The Company's aggregate cost of sales increased 21% in 2000 compared to 1999, while aggregate net sales
also increased 21%. The primary component in PET cost of sales is the production cost of finished bottles. Indirect manufacturing expenses increased approximately $213,000 (10%) in 2000 compared to
1999, primarily attributable to increased labor, and manufacturing rejects, repairs, and supplies expenses associated with bottling equipment breakdowns in July 2000 which resulted in a shutdown of
production for one week. These increased expenses were partially offset by increased production during 2000 compared to 1999. For 2000, the Company's bottling facility operated

12

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at 65% of normal capacity compared to 60% in 1999. The Company has ordered new high speed blow molding equipment which will substantially increase the efficiency of its bottle making operations. This
equipment, which is expected to be fully operational by August 2001, will be leased from Amcon on terms to be agreed upon, but which are expected to result in significant improvements to the Company's
manufacturing costs. The lease of this equipment is expected to be accounted for as an operating lease.

Expenses.Selling and marketing expenses increased 36% to approximately $900,000 in 2000 from approximately $661,000 in
1999, primarily attributable to $234,000 of expenses associated with the launch of the XEN product line and a $158,000 increase in expenses associated with the home and office delivery operations,
offset by a $153,000 reduction in expenses associated with PET product sales. The Company currently has one full-time marketing consultant devoted to the sale of XEN products in California. The
increase in home and office delivery business expense is attributable to a full year of Ali'i operations compared to six months in 1999 ($75,000 of the increase), and the expenses of Aloha ($83,000),
which are not recurring in light of the rescission of the Aloha acquisition in December 2000. The decrease in expenses associated with PET sales is attributable to decreases in advertising and
promotional expenses, event activities, travel and consulting expenses.

General
and administrative expenses increased 11% to approximately $1,589,000 in 2000 from approximately $1,436,000 in 1999. The increase was primarily attributable to $58,000 of
expenses associated with the launch of the XEN product line and a $195,000 increase of expenses associated with the home and office delivery operations, offset by a $100,000 reduction in expenses
associated with PET product sales and corporate overhead. The increase in home and office delivery expenses is attributable to a full year of operations for Ali'i ($102,000, of which $83,000 was
related to a provision for uncollectible customer accounts balances or account balances deemed to be potentially uncollectible), and the expenses of Aloha ($93,000) which are not recurring in light of
the rescission of the Aloha acquisition. The decrease in expenses associated with PET sales and corporate overhead are primarily attributable to a reduction in legal and accounting fees, travel,
salaries, and SEC printing fees, partially offset by an executive bonus, increased corporate office rent, temporary employee services, and amortization expenses associated with the XEN co-packing
agreement (see Note 10d to financial statements). Legal and accounting fees decreased $168,000 in 2000 compared to 1999. Legal fees were unusually large in 1999 due to the large volume of financing
and acquisition transactions during 1999. The Company expects significant cost savings in the future as a result of the sub-lease of its headquarters in Pearl City. See Note 10b to financial
statements.

Other Income (Expense).Other(expense) increased to approximately $(1,146,000) in 2000 from approximately $(70,000) in
1999. This increase is primarily due to an approximately $1,026,000 impairment charge to purchase price in excess of the book value resulting from the rescission of the of Aloha acquisition (see Note
4 to financial statements). Additionally, interest expense (net of interest
income) increased approximately $50,000 due to interest on capitalized leases and interest on the Amcon notes (see Note 6 to financial statements).

Preferred Stock Dividend.Primarily as a result of the amortization of the beneficial conversion feature and redemption
of the Series A preferred shares, the Company recorded an aggregate preferred stock dividend of $416,379 during 1999. In 2000, the Company redeemed the remaining Series A preferred shares and
adjusted the previously accrued preferred stock dividend to the holder, resulting in an aggregate preferred stock dividend of $86,698 for the Series A preferred shares. The Series B
preferred shares became mandatorily redeemable subsequent to yearend at a redemption premium of $50,000. This premium is included in the preferred stock dividend for 2000. The Company classified the
original $100,000 purchase price as currently payable at December 31, 2000.

Net Loss and Net Loss Per Share.Due to the foregoing, the Company incurred a net loss of $(2,937,658), and a net loss
available to common shareholders of $3,074,356 or $(.45) per share, in 2000

13

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compared to a net loss of $(1,581,943), and net loss applicable to common shareholders of $(1,998,322), or $(.45) per share, in 1999. Weighted average shares outstanding increased to 6,844,744 in 2000
from 4,476,554 in 1999. The Company expects to continue to generate losses until such time, if any, as it achieves significantly higher sales levels.

Liquidity and Capital Resources

Cash and cash equivalents were approximately $14,600 at December 31, 2000, compared to approximately $9,000 at December 31, 1999. During 2000, the Company
raised an aggregate of approximately $431,600 in equity financing (net of offering costs), primarily as a result of the issuance of the Series B convertible preferred stock ($100,000), the
exercise of certain warrants by a private investor ($230,600) and the issuance of common stock and common stock warrants in a private offering ($100,000). See Note 2 to financial statements. As of
December 31, 2000, these proceeds had been substantially consumed as a result of (i) redemptions of Series A convertible preferred stock ($319,000), and (ii) losses from
operations. The remainder of the cash flow deficit for 2000 was funded from working capital and from certain interim loans from Amcon as described below. Overdue accounts payable increased from
$493,707 at December 31, 1999 to $943,672 at December 31, 2000.

There
are currently no shares of Series A convertible preferred stock outstanding. The Series B convertible preferred stock is currently subject to mandatory redemption
by the Company at an aggregate redemption price of $150,000.

In
September 2000, the Company received a $350,000 working capital loan from Amcon to fund its operations pending completion of the Merger. In October 2000, the Company received an
additional working capital loan from Amcon in the amount of $400,000. These loans, which are secured by all of the assets of the Company, bear interest at the annual rate of 10% and are currently due
on May 31, 2001. In February 2001, Amcon invested an additional $300,000 in the Company through the purchase of 750,000 shares of Common Stock at a purchase price of $.40 per share. These
shares will participate in the Merger consideration. The Company is currently negotiating additional equity investments by Amcon in amounts up to $500,000 for working capital pending completion of the
Merger.

The
Company had capital expenditures of approximately $101,000 in 2000, and approximately $488,000 in 1999. As of December 31, 2000, the Company owed an aggregate of $466,457 on its
existing blow moulding machine, payable in monthly installments ($81,043 in January 2001 (which has been paid), $27,124 in February 2001, $28,290 payable in March 2001, and $330,000 payable in annual
installments of $165,000 (plus accrued interest) commencing October 1, 2001. As of December 31, 2000, the Company owed approximately $20,000 on other equipment.

The
Company recently ordered a new blow molding machine and related equipment with an aggregate purchase price of approximately $1,500,000 for installation at the Company's bottling
facility. This equipment, which is expected to be operational by August 2001, should enable the Company to reduce its production costs of finished bottles in an amount sufficient to enable the Company
to reach break-even in its PET operations. This equipment has been acquired by Amcon in its own name. Upon installation, this equipment will be leased from Amcon on terms to be agreed upon. This lease
will be accounted for as an operating lease.

The
Company is currently substantially dependent upon funding from Amcon to sustain its operations. If Amcon fails to make additional financing available or if the Merger is not
completed for any reason, the Company will likely not be able to continue as a going concern.

Loss
carryforwards available to offset future taxable income were approximately $7.5 million as of December 31, 2000. The Company is subject to Internal Revenue Code Section
382, which limits the Company's ability to utilize net operating losses generated prior to the close of the IPO (approximately $2.3 million). The annual net operating loss limitation under Section 382
is approximately $361,000.

14

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Seasonality

The Company believes that its business is subject to seasonal variations. For obvious reasons, demand for bottled water in any given market tends to be higher
during the summer months than during the winter. However, the Company expects these seasonal effects to be moderated by concurrent sales into a variety of different markets worldwide, all of which may
not have the same summer season. Moreover, several of the Company's target markets, such as California and the Middle East, have hot or mild temperatures throughout the year.

Currency Fluctuations

The Company is not directly affected by currency fluctuations in overseas markets, since all of the Company's sales are quoted in U.S. dollars. However,
currency fluctuations can adversely affect the demand for the Company's product in foreign markets by increasing the price of the product in local currency.

Item 7.  Financial Statements

The Financial Statements required by this Item are attached hereto, commencing on page F-2.

Item 7A.  Quantitative and Qualitative Disclosure About Market Risk

Quantitative Disclosures.The Company is exposed to certain market risks associated with interest rate fluctuations on
its borrowing arrangements. All borrowing arrangements are entered into for purposes other than trading. The Company is not subject to risks from currency rate fluctuations, except as described above.
See "Item 6. Management's Discussion and Analysis or Plan of OperationCurrency Fluctuations". The Company does not utilize hedging contracts or similar instruments.

The
Company's exposure to interest rate risk arises from financial instruments entered into in the normal course of business. The Company's borrowings bear interest at fixed annual
rates. Changes in interest rates generally affect the fair value of such borrowings, but do not have an impact on earnings
or cash flows. Because of the uncertainty with respect to the Company's ability to continue as a going concern, the fair value of the Company's financial instruments may be significantly different
than their respective carrying values as of December 31, 2000.

Qualitative Disclosures.The Company's primary exposures relate to (1) interest rate risk on its borrowings, (2) the
Company's ability to pay or refinance its borrowings at maturity at market rates, and (3) the impact of interest rate movements on the Company's ability to obtain adequate financing to fund future
cash requirements. The Company manages interest rate risk on its outstanding borrowings by using fixed rate debt. While the Company can not predict or manage its ability to refinance existing
borrowings or the impact of interest rate movements will have on its existing borrowings, management evaluates the Company's financial position on an ongoing basis. The Company does not use
derivatives in its operations and therefore does not have any risk exposure to these instruments.

Item 8.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None

15

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PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act.

The information required by this Item is incorporated herein by reference to the Company's Definitive Proxy Statement (the "Proxy Statement"), to be filed with
the Securities and Exchange Commission (the "Commission") pursuant to Regulation 14A in connection with the Company's 2001 Annual Meeting of Stockholders.

Item 10.  Executive Compensation.

The information required by this Item is incorporated herein by reference to the Proxy Statement.

Item 11.  Security Ownership of Certain Beneficial Owners and Management.

The information required by this Item is incorporated herein by reference to the Proxy Statement.

Item 12.  Certain Relationships and Related Transactions.

The information required by this Item is incorporated herein by reference to the Proxy Statement.

Item 13.  Exhibits and Reports on Form 8-K

|Exhibit
Number |  | Description                                                                                                                                                                                                                                            
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            |  | Merger Agreement and Plan of Reorganization (relating to the acquisition of Aloha Water Company, Inc. ("Aloha")) (Incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8 K dated March 20,
 2000 (the "March 2000 8-K"))
|2.2            |  | Amended and Restated Agreement and Plan of Merger relating to the merger of the Registrant into a subsidiary of Amcon Distributing Company ("Amcon")                                                                                                   
|3.1            |  | Articles of Incorporation, as amended, of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1998 (the "1998 10 K"))                                            
|3.2            |  | By-Laws, as amended, of the Registrant (Incorporated by reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1997 (the "1997 10-K"))                                                              
|4.1            |  | Specimen Stock Certificate for the Registrant's Common Stock (Incorporated by reference to Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-QSB for the quarter ended June 30, 1997 (the "June 1997 10-Q"))                                 
|4.2            |  | Specimen Stock Certificate for the Registrant's Series A Convertible Preferred Stock (the "Series A Preferred")(Incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K dated March 12, 1999 (the "March 1999 8-K"))   
|4.3            |  | Resolutions setting forth the relative rights and preferences of the Series A Preferred (Incorporated by reference to Exhibit 4.1 to the March 1999 8-K)                                                                                               
|               |  |                                                                                                                                                                                                                                                        

16

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|4.4  |  | Specimen Stock Certificate for the Registrant's Series B Convertible Preferred Stock (the "Series B Preferred") (Incorporated by reference to Exhibit 4.4 to the Registrant's Annual Report on Form 10K-SB for the year ended December 31, 1999 (the
"1999 10-K"))                     
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.5  |  | Resolutions setting forth the relative rights and preferences of the Series B Preferred (Incorporated by reference to Exhibit 4.5 to the 1999 10-K)                                                                                                                                    
|4.6  |  | Warrant Agreement between the Registrant and Continental Stock Transfer & Trust Company, as Warrant Agent (Incorporated by reference to Exhibit 4.2 to the June 1997 10-Q)                                                                                                             
|4.7  |  | Specimen Warrant Certificate (Incorporated by reference to Exhibit 4.3 to the June 1997 10-Q)                                                                                                                                                                                          
|4.8  |  | Underwriter's Warrant Agreement between the Registrant and Joseph Stevens & Company, Inc. (Incorporated by reference to Exhibit 4.4 to the June 1997 10-Q)                                                                                                                             
|4.9  |  | Underwriter's Warrant Certificate (Incorporated by reference to Exhibit 4.5 to the June 1997 10-Q)                                                                                                                                                                                     
|4.10 |  | Warrant Agreement between the Registrant and Amro International, S.A. (Incorporated by reference to Exhibit 4.3 to the March 1999 8-K)                                                                                                                                                 
|4.11 |  | Form of Common Stock Purchase Warrant ($1.00 exercise price) issued to investors in September 1999 private offering (Incorporated by reference to Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-QSB for the quarter ended September 30, 1999
(the "September 1999 10-Q"))
|4.12 |  | Form of Common Stock Purchase Warrant ($1.50 exercise price) issued to investors in September 1999 private offering (Incorporated by reference to Exhibit 4.2 to the September 1999 10-Q)                                                                                              
|9.1  |  | Form of Stockholder Agreement among Amcon and certain affiliated stockholders of the Registrant                                                                                                                                                                                        
|10.1 |  | Lease Agreement dated October 3, 1994, as amended, between the Registrant as Lessee and Hawaii Brewery Development Co., Inc. as Lessor (Incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form SB-2 (File No.
333-18289)(the "Form SB-2")        
|10.2 |  | Master Lease Agreement No. A2500, dated December 8, 1994, between the Registrant and First Hawaiian Leasing and related agreements (Incorporated by reference to Exhibit 10.4 to the Form SB-2)                                                                                        
|10.3 |  | Employment Agreement, dated October 10, 1996, between the Registrant and Marcus Bender (Incorporated by reference to Exhibit 10.5 to the Form SB-2)                                                                                                                                    
|10.4 |  | Stock Option Agreement, dated October 10, 1996, between the Registrant and Marcus Bender (Incorporated by reference to Exhibit 10.6 to the Form SB-2)                                                                                                                                  
|10.5 |  | Employment Agreement between Aloha Water Company, Inc. and Daniel Gabriel (Incorporated by reference to Exhibit 10.1 to the March 2000 8-K)                                                                                                                                            
|10.6 |  | 1998 Stock Option Plan (Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-QSB for the quarter ended June 30, 1998 (the "June 1998 10-Q"))                                                                                                      
|     |  |                                                                                                                                                                                                                                                                                        

17

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|10.7  |  | Underwriting Agreement between the Registrant and Joseph Stevens & Company, Inc. (Incorporated by reference to Exhibit 10.1 to the June 1997 10-Q)                                                                                               
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.8  |  | Financial Advisory and Consulting Agreement between the Registrant and Joseph Stevens & Company, Inc. (Incorporated by reference to Exhibit 10.2 to the June 1997 10-Q)                                                                          
|10.9  |  | Asset Purchase Agreement between the Registrant and Bottles Packaging, Inc. ("BPI") (Incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated October 7, 1997 (the "October 1997 8-K"))                    
|10.10 |  | Bill of Sale between the Registrant and BPI (Incorporated by reference to Exhibit 10.2 to the October 1997 8-K)                                                                                                                                  
|10.11 |  | Promissory Note evidencing an aggregate of $825,000 in indebtedness of the Registrant to BPI (Incorporated by reference to Exhibit 10.3 to the October 1997 8-K)                                                                                 
|10.12 |  | Security Agreement between the registrant and BPI securing the obligations of the Registrant to BPI under the Promissory Note (Incorporated by reference to Exhibit 10.4 to the October 1997 8-K)                                                
|10.13 |  | Letter Agreement between the Registrant and 8607 Colonial Group, Inc. ("Colonial") (Incorporated by reference to Exhibit 99.1 to the June 1998 10-Q)                                                                                             
|10.14 |  | Option Agreement between the Registrant and Colonial (Incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form S-3 (File No. 333-63827))                                                                      
|10.15 |  | Asset Purchase Agreement by and among the Registrant, Ali'i Water Bottling, Inc. ("Ali'i") and Dennis Harris (Incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated June 30, 1999 (the "June 1999 8-K"))
|10.16 |  | Bill of Sale between the Registrant and Ali'i (Incorporated by reference to Exhibit 10.2 to the June 1999 8-K)                                                                                                                                   
|10.17 |  | Co-Packing Agreement between the Registrant and Langer Juice Company, Inc.* (Incorporated by reference to Exhibit 10.17 to the 1999 10-K)                                                                                                        
|10.18 |  | Secured Exchangeable Promissory Note (the "Aloha Note") issued to the stockholders of Aloha (Incorporated by reference to Exhibit 4.1 to the March 2000 8-K)                                                                                     
|10.19 |  | Pledge and Security Agreement securing the Aloha Note (Incorporated by reference to Exhibit 4.2 to the March 2000 8-K)                                                                                                                           
|10.20 |  | Rescission Agreement between the Registrant and the shareholders of Aloha                                                                                                                                                                        
|10.21 |  | Secured Convertible Promissory Note issued to Amcon in the principal amount of $350,000                                                                                                                                                          
|10.22 |  | Secured Convertible Promissory Note issued to Amcon in the principal amount of $400,000                                                                                                                                                          
|21    |  | Subsidiariesnone                                                                                                                                                                                                                                
|23.1  |  | Consent of Arthur Andersen LLP                                                                                                                                                                                                                   

---

None

18

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

| |  | HAWAIIAN NATURAL WATER COMPANY, INC.(REGISTRANT)
| |  | ------------------------------------------------
| |  | By:                                             

In
accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

|Name                                |  | Title                                |  | Date          
|----------------------------------- |  | ------------------------------------ |  | --------------
|                                    |  |                                      |  |               
|/s/MARCUS BENDERMarcus Bender       |  | Chief Executive Officer and Director |  | April 13, 2001
|/s/WILLARD IRWINWillard Irwin       |  | Chief Financial Officer              |  | April 13, 2001
|/s/BRIAN BARBATABrian Barbata       |  | Director                             |  | April 13, 2001
|/s/MICHAEL CHAGAMIMichael Chagami   |  | Director                             |  | April 13, 2001
|/s/WILHELM KUHLMANNWilhelm Kuhlmann |  | Director                             |  | April 13, 2001

19

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INDEX TO FINANCIAL STATEMENTS

|Report of Independent Public Accountants                                                    |  | F-1
|------------------------------------------------------------------------------------------- |  | ---
|Balance SheetDecember 31, 2000                                                             |  | F-2
|Statements of Operations For the Years Ended December 31, 2000 and 1999                     |  | F-3
|Statements of Stockholders' Equity (Deficit) for the Years Ended December 31, 2000 and 1999 |  | F-4
|Statements of Cash Flows for the Years Ended December 31, 2000 and 1999                     |  | F-7
|Notes to Financial StatementsDecember 31, 2000                                             |  | F-8

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To
the Stockholders and Board of Directors of
Hawaiian Natural Water Company, Inc.:

We
have audited the accompanying balance sheet of HAWAIIAN NATURAL WATER COMPANY, INC., (a Hawaii corporation) as of December 31, 2000 and the related statements of operations,
stockholders' equity (deficit) and cash flows for the two years in the period then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hawaiian Natural Water Company, Inc. as of December 31,
2000 and the results of its operations and its cash flows for the two years in the period then ended, in conformity with accounting principles generally accepted in the United States.

The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company
has suffered recurring losses and negative cash flows from operations. Additionally, the Company has past due accounts payable of approximately $944,000 and mandatorily redeemable preferred stock and
notes payable amounts due in the near term of approximately $1,211,000. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans with
respect to
these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/
ARTHUR ANDERSEN LLP

Honolulu,
Hawaii
April 13, 2001

F-1

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HAWAIIAN NATURAL WATER COMPANY, INC.        BALANCE SHEET        DECEMBER 31, 2000

|ASSETS                                                                               |                                                                                                 
|------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------
|Current Assets:                                                                      |                                                                                                 
|                                                                                     | Cash and cash equivalents                                                                       
|                                                                                     | Trade accounts receivable, net of allowance for doubtful accounts of $39,062                    
|                                                                                     | Inventories                                                                                     
|                                                                                     | Due from officers                                                                               
|                                                                                     | Other current assets                                                                            
|                                                                                     |                                                                                                 
|                                                                                     |                                                                                                 
|PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization of $989,490 |                                                                                                 
|                                                                                     |                                                                                                 
|CO-PACKING AGREEMENT, net of accumulated amortization of $37,500                     |                                                                                                 
|INTANGIBLE ASSET, net of accumulated amortization of $40,575                         |                                                                                                 
|                                                                                     |                                                                                                 
|                                                                                     |                                                                                                 
|                                                                                     |                                                                                                 
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                 |                                                                                                 
|Current Liabilities:                                                                 |                                                                                                 
|                                                                                     | Accounts payable                                                                                
|                                                                                     | Book overdraft                                                                                  
|                                                                                     | Accrued professional fees                                                                       
|                                                                                     | Accrued vacation                                                                                
|                                                                                     | Accrued commissions and billbacks                                                               
|                                                                                     | Accrued payroll and related taxes                                                               
|                                                                                     | Accrued other                                                                                   
|                                                                                     | Amount due for mandatorily-redeemable preferred stock                                           
|                                                                                     | Notes payable                                                                                   
|                                                                                     | Capital lease obligation                                                                        
|                                                                                     |                                                                                                 
|                                                                                     |                                                                                                 
|Non-current Liabilities:                                                             |                                                                                                 
|                                                                                     | Notes payablenet of current portion                                                            
|                                                                                     | Capital lease obligationnet of current portion                                                 
|                                                                                     | Other                                                                                           
|                                                                                     |                                                                                                 
|                                                                                     |                                                                                                 
|                                                                                     |                                                                                                 
|                                                                                     |                                                                                                 
|                                                                                     |                                                                                                 
|Stockholders' Equity:                                                                |                                                                                                 
|                                                                                     | Preferred stock, $1 par value:
Authorized5,000,000 shares
No shares outstanding                
|                                                                                     | Common Stock, no par value:
Authorized20,000,000 shares
Issued and outstanding7,185,966 shares
|                                                                                     | Common stock warrants and options:                                                              
|                                                                                     | Issued and outstanding5,595,558 shares                                                         
|                                                                                     | Accumulated deficit                                                                             
|                                                                                     |                                                                                                 
|                                                                                     |                                                                                                 
|                                                                                     |                                                                                                 
|                                                                                     |                                                                                                 
|                                                                                     |                                                                                                 

The
accompanying notes are an integral part of this financial statement

F-2

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HAWAIIAN NATURAL WATER COMPANY, INC.        STATEMENTS OF OPERATIONS        FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

|                                           |                            | 2000 |            | 1999       |  
|------------------------------------------ | -------------------------- | ---- | ---------- | ---------- | -
|NET SALES                                  |                            | $    | 3,681,026  |            | $
|COST OF SALES                              |                            |      | 2,983,160  |            |  
|                                           |                            |      |            |            |  
|                                           | Gross margin               |      |            | 697,866    |  
|EXPENSES:                                  |                            |      |            |            |  
|                                           | General and administrative |      |            | 1,589,275  |  
|                                           | Selling and marketing      |      |            | 900,285    |  
|                                           |                            |      |            |            |  
|                                           |                            |      | 2,489,560  |            |  
|                                           |                            |      |            |            |  
|                                           |                            |      | (1,791,694 | )          |  
|OTHER INCOME (EXPENSE):                    |                            |      |            |            |  
|                                           | Impairment charge          |      |            | (1,025,935 | )
|                                           | Interest income            |      |            |           |  
|                                           | Interest expense           |      |            | (120,029   | )
|                                           |                            |      |            |            |  
|NET LOSS                                   |                            |      | (2,937,658 | )          |  
|                                           | Preferred Stock Dividend   |      |            | (136,698   | )
|                                           |                            |      |            |            |  
|NET LOSS APPLICABLE TO COMMON SHAREHOLDERS |                            | $    | (3,074,356 | )          | $
|                                           |                            |      |            |            |  
|BASIC AND DILUTED NET LOSS PER SHARE       |                            | $    | (0.45      | )          | $
|                                           |                            |      |            |            |  

The
accompanying notes are an integral part of these financial statements.

F-3

---



HAWAIIAN NATURAL WATER COMPANY, INC.        STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)        FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

|                                                                                                       |                    | Common Stock |         | Common Stock Warrants and Options |           | Preferred Stock |           |           |   |           |        
|------------------------------------------------------------------------------------------------------ | ------------------ | ------------ | ------- | --------------------------------- | --------- | --------------- | --------- | --------- | - | --------- | -------
|
|BALANCE, December 31, 1998                                                                             |                    | 4,024,563    |         |                                   | 6,693,062 |                 | 3,757,959 |           |   | 2,841,329 |        
|Issuance of common stock and warrants in private offering                                              |                    |              |         |                                   |           |                 |           |           |   |           |        
|                                                                                                       | September 28, 1999 |              | 850,000 |                                   |           | 440,646         |           | 1,416,666 |   |           | 389,354
|                                                                                                       | December 6, 1999   |              | 100,000 |                                   |           | 53,097          |           | 166,667   |   |           | 46,903 
|                                                                                                       | December 10, 1999  |              | 100,000 |                                   |           | 53,098          |           | 166,666   |   |           | 46,902 
|Issuance of common stock for purchase of Net Assets of Alii Water Bottling, Inc.                       |                    |              |         |                                   |           |                 |           |           |   |           |        
|                                                                                                       | June 30, 1999      |              | 263,040 |                                   |           | 312,359         |           |          |   |           |       
|Issuance of common stock for Co-Packing agreement                                                      |                    |              |         |                                   |           |                 |           |           |   |           |        
|                                                                                                       | September 13, 1999 |              | 100,000 |                                   |           | 43,750          |           |          |   |           | 106,250
|Issuance of common stock and common stock options to professional advisor for services rendered        |                    |              |         |                                   |           |                 |           |           |   |           |        
|                                                                                                       | April 1, 1999      |              |        |                                   |           |                |           | 12,500    |   |           | 16,226 
|                                                                                                       | July 1, 1999       |              |        |                                   |           |                |           | 12,500    |   |           | 16,226 
|                                                                                                       | July 14, 1999      |              | 2,695   |                                   |           | 2,695           |           |          |   |           |       
|                                                                                                       | September 28, 1999 |              | 30,000  |                                   |           | 15,929          |           | 50,000    |   |           | 14,071 
|                                                                                                       | October 1, 1999    |              |        |                                   |           |                |           | 12,500    |   |           | 3,000  
|Issuance of common stock options to non-employee directors                                             |                    |             |         |                                   |          |                 | 9,000     |           |   | 8,395     |        
|Issuance of common stock options to marketing consultant                                               |                    |              |         |                                   |           |                 |           |           |   |           |        
|                                                                                                       | May 20, 1999       |              |        |                                   |           |                |           | 10,000    |   |           | 4,370  
|                                                                                                       | May 24, 1999       |              |        |                                   |           |                |           | 30,000    |   |           | 13,110 
|Exercise of common stock options by financial public relations advisor                                 |                    |              |         |                                   |           |                 |           |           |   |           |        
|                                                                                                       | January 11, 1999   |              | 50,000  |                                   |           | 125,000         |           | (50,000   | ) |           |       
|Issuance of preferred stock and common stock warrants to institutional investor, net of offering costs |                    |              |         |                                   |           |                 |           |           |   |           |        
|                                                                                                       | March 3, 1999      |              |        |                                   |           |                |           | 100,000   |   |           | 97,422 
|Issuance of common stock and Common stock warrants to Broker for services rendered                     |                    |              |         |                                   |           |                 |           |           |   |           |        
|                                                                                                       | March 3, 1999      |              | 5,000   |                                   |           | 18,750          |           | 15,000    |   |           | 41,670 
|Issuance of preferred stock to institutional investor                                                  |                    |              |         |                                   |           |                 |           |           |   |           |        
|                                                                                                       | August 10, 1999    |              |        |                                   |           | 312,500         |           |          |   |           |       
|Repricing of warrants associated with the outstanding preferred stock                                  |                    |              |         |                                   |           |                 |           |           |   |           |        
|                                                                                                       | August 10, 1999    |              |        |                                   |           |                |           |          |   |           | 27,003 
|                                                                                                       | September 23, 1999 |              |        |                                   |           |                |           |          |   |           | 19,069 
|                                                                                                       | November 5, 1999   |              |        |                                   |           |                |           |          |   |           | 14,229 
|Conversion of preferred stock to common stock                                                          |                    |              |         |                                   |           |                 |           |           |   |           |        
|                                                                                                       | August 24, 1999    |              | 11,429  |                                   |           | 6,000           |           |          |   |           |       
|Redemption of preferred stock                                                                          |                    |              |         |                                   |           |                 |           |           |   |           |        
|                                                                                                       | September 23, 1999 |              |        |                                   |           |                |           |          |   |           |       
|                                                                                                       | October 1, 1999    |              |        |                                   |           |                |           |          |   |           |       
|                                                                                                       | October 8, 1999    |              |        |                                   |           |                |           |          |   |           |       
|                                                                                                       | November 5, 1999   |              |        |                                   |           |                |           |          |   |           |       

F-4

---

|Accrued dividends to preferred Shareholder                                                       |                    |          |          |   |          |         |          |          |   |          |        |    |      |   |        |         |   | (26,545    | )       |   | (26,545    | )       
|------------------------------------------------------------------------------------------------ | ------------------ | --------- | -------- | - | --------- | ------- | --------- | -------- | - | --------- | ------ | --- | ---- | - | ------- | ------- | - | ---------- | ------- | - | ---------- | --------
|Net loss                                                                                         |                    |          |          |   |          |         |          |          |   |          |        |    |      |   |        |         |   | (1,581,943 | )       |   | (1,581,943 | )       
|                                                                                                 |                    |           |          |   |           |         |           |          |   |           |        |     |      |   |         |         |  
|BALANCE at December 31, 1999                                                                     |                    | 5,536,727 |          | $ | 8,076,886 |         | 5,709,458 |          | $ | 3,705,529 |        | 319 |      | $ | 205,755 |         | $ | (9,894,059 | )       | $ | 2,094,111  |         
|Issuance of common stock bonus to executive officer                                              |                    |           |          |   |           |         |           |          |   |           |        |     |      |   |         |         |   |            |         |   |            |         
|                                                                                                 | December 15, 2000  |           | 350,000  |   |           | 84,370  |           |         |   |           |       |     |     |   |         |        |   |            |        |   |            | 84,370  
|Issuance of common stock and common stock warrants in private offering                           |                    |           |          |   |           |         |           |          |   |           |        |     |      |   |         |         |   |            |         |   |            |         
|                                                                                                 | February 1, 2000   |           | 50,000   |   |           | 26,548  |           | 83,333   |   |           | 23,452 |     |     |   |         |        |   |            |        |   |            | 50,000  
|                                                                                                 | February 20, 2000  |           | 50,000   |   |           | 26,548  |           | 83,333   |   |           | 23,452 |     |     |   |         |        |   |            |        |   |            | 50,000  
|Exercise of common stock warrants by private investor                                            |                    |           |          |   |           |         |           |          |   |           |        |     |      |   |         |         |   |            |         |   |            |         
|                                                                                                 | March 3, 2000      |           | 50,000   |   |           | 50,000  |           | (50,000  | ) |           |       |     |     |   |         |        |   |            |        |   |            | 50,000  
|                                                                                                 | May 25, 2000       |           | 35,000   |   |           | 35,000  |           | (35,000  | ) |           |       |     |     |   |         |        |   |            |        |   |            | 35,000  
|                                                                                                 | June 1, 2000       |           | 15,000   |   |           | 15,000  |           | (15,000  | ) |           |       |     |     |   |         |        |   |            |        |   |            | 15,000  
|                                                                                                 | June 16, 2000      |           | 14,600   |   |           | 14,600  |           | (14,600  | ) |           |       |     |     |   |         |        |   |            |        |   |            | 14,600  
|                                                                                                 | June 16, 2000      |           | 35,000   |   |           | 35,000  |           | (35,000  | ) |           |       |     |     |   |         |        |   |            |        |   |            | 35,000  
|                                                                                                 | June 29, 2000      |           | 15,000   |   |           | 15,000  |           | (15,000  | ) |           |       |     |     |   |         |        |   |            |        |   |            | 15,000  
|                                                                                                 | July 21, 2000      |           | 26,000   |   |           | 26,000  |           | (26,000  | ) |           |       |     |     |   |         |        |   |            |        |   |            | 26,000  
|                                                                                                 | August 25, 2000    |           | 40,000   |   |           | 40,000  |           | (40,000  | ) |           |       |     |     |   |         |        |   |            |        |   |            | 40,000  
|Issuance of common stock to
Non-employee directors                                               |                    |           |          |   |           |         |           |          |   |           |        |     |      |   |         |         |   |            |         |   |            |         
|                                                                                                 | February 16, 2000  |           |         |   |           |        |           | 900      |   |           | 486    |     |     |   |         |        |   |            |        |   |            | 486     
|                                                                                                 | May 11,2000        |           |         |   |           |        |           | 900      |   |           | 486    |     |     |   |         |        |   |            |        |   |            | 486     
|                                                                                                 | June 13, 2000      |           |         |   |           |        |           | 600      |   |           |       |     |     |   |         |        |   |            |        |   |            |        
|                                                                                                 | August 8, 2000     |           |         |   |           |        |           | 900      |   |           |       |     |     |   |         |        |   |            |        |   |            |        
|                                                                                                 | September 28, 2000 |           |         |   |           |        |           | 900      |   |           |       |     |     |   |         |        |   |            |        |   |            |        
|Redemption of preferred Stock                                                                    |                    |           |          |   |           |         |           |          |   |           |        |     |      |   |         |         |   |            |         |   |            |         
|                                                                                                 | February 7, 2000   |           |         |   |           |        |           |         |   |           |       |     | (50  | ) |         | (32,250 | ) |            | (17,750 | ) |            | (50,000 
|                                                                                                 | March 6, 2000      |           |         |   |           |        |           |         |   |           |       |     | (50  | ) |         | (32,250 | ) |            | (17,750 | ) |            | (50,000 
|                                                                                                 | May 1, 2000        |           |         |   |           |        |           |         |   |           |       |     | (35  | ) |         | (22,575 | ) |            | (12,425 | ) |            | (35,000 
|                                                                                                 | May 26, 2000       |           |         |   |           |        |           |         |   |           |       |     | (15  | ) |         | (9,675  | ) |            | (5,325  | ) |            | (15,000 
|                                                                                                 | June 29, 2000      |           |         |   |           |        |           |         |   |           |       |     | (29  | ) |         | (18,705 | ) |            | (10,295 | ) |            | (29,000 
|                                                                                                 | October 2, 2000    |           |         |   |           |        |           |         |   |           |       |     | (40  | ) |         | (25,800 | ) |            | (14,200 | ) |            | (40,000 
|                                                                                                 | October 23, 2000   |           |         |   |           |        |           |         |   |           |       |     | (100 | ) |         | (64,500 | ) |            | (35,500 | ) |            | (100,000
|Issuance of common stock and common stock warrants to professional advisor                       |                    |           |          |   |           |         |           |          |   |           |        |     |      |   |         |         |   |            |         |   |            |         
|                                                                                                 | February 1, 2000   |           | 10,000   |   |           | 5,310   |           | 16,667   |   |           | 4,690  |     |     |   |         |        |   |            |        |   |            | 10,000  
|                                                                                                 | February 15, 2000  |           | 10,000   |   |           | 5,310   |           | 16,667   |   |           | 4,690  |     |     |   |         |        |   |            |        |   |            | 10,000  
|                                                                                                 | March 17, 2000     |           | 50,000   |   |           | 50,000  |           |         |   |           |       |     |     |   |         |        |   |            |        |   |            | 50,000  
|Issuance of common stock to professional advisor                                                 |                    |           |          |   |           |         |           |          |   |           |        |     |      |   |         |         |   |            |         |   |            |         
|                                                                                                 | March 31, 2000     |           |         |   |           |        |           | 12,500   |   |           | 12,500 |     |     |   |         |        |   |            |        |   |            | 12,500  
|Issuance of common stock in merger with Aloha Water Co                                           |                    |           |          |   |           |         |           |          |   |           |        |     |      |   |         |         |   |            |         |   |            |         
|                                                                                                 | March 17, 2000     |           | 750,000  |   |           | 937,500 |           |         |   |           |       |     |     |   |         |        |   |            |        |   |            | 937,500 
|Return of common stock in conjunction with rescission of agreement to merge with Aloha Water Co. |                    |           |          |   |           |         |           |          |   |           |        |     |      |   |         |         |   |            |         |   |            |         
|                                                                                                 | December 27, 2000  |           | (750,000 | ) |           |        |           |         |   |           |       |     |     |   |         |        |   |            |        |   |            |        
|Exercise of stock option by institutional investor                                               |                    |           |          |   |           |         |           |          |   |           |        |     |      |   |         |         |   |            |         |   |            |         
|                                                                                                 | March 3, 2000      |           | 100,000  |   |           | 1,000   |           | (100,000 | ) |           |       |     |     |   |         |        |   |            |        |   |            | 1,000   

F-5

---

|Issuance of common stock to marketing consultant                                |                    |           |         |   |           |         |           |   |   |           |          |   |   |  |   |   |   |             |   |   |            |       
|------------------------------------------------------------------------------- | ------------------ | --------- | ------- | - | --------- | ------- | --------- | - | - | --------- | -------- | - | - |  | - | - | - | ----------- | - | - | ---------- | ------
|                                                                                | March 31, 2000     |           | 20,000  |   |           | 20,000  |           |  |   |           |         |   |  |  |   |  |   |             |  |   |            | 20,000
|                                                                                | April 12, 2000     |           | 3,000   |   |           | 3,000   |           |  |   |           |         |   |  |  |   |  |   |             |  |   |            | 3,000 
|                                                                                | June 30, 2000      |           | 2,250   |   |           | 2,250   |           |  |   |           |         |   |  |  |   |  |   |             |  |   |            | 2,250 
|                                                                                | September 30, 2000 |           | 10,000  |   |           | 10,000  |           |  |   |           |         |   |  |  |   |  |   |             |  |   |            | 10,000
|                                                                                | September 30, 2000 |           | 6,750   |   |           | 6,750   |           |  |   |           |         |   |  |  |   |  |   |             |  |   |            | 6,750 
|                                                                                | December 31, 2000  |           | 4,500   |   |           | 4,500   |           |  |   |           |         |   |  |  |   |  |   |             |  |   |            | 4,500 
|Issuance of common stock pursuant to Co-Packing Agreement                       |                    |           |         |   |           |         |           |   |   |           |          |   |   |  |   |   |   |             |   |   |            |       
|                                                                                | May 5, 2000        |           | 3,490   |   |           | 3,490   |           |  |   |           |         |   |  |  |   |  |   |             |  |   |            | 3,490 
|                                                                                | June 30, 2000      |           | 2,618   |   |           | 2,618   |           |  |   |           |         |   |  |  |   |  |   |             |  |   |            | 2,618 
|                                                                                | July 31, 2000      |           | 2,643   |   |           | 512     |           |  |   |           |         |   |  |  |   |  |   |             |  |   |            | 512   
|                                                                                | September 13, 2000 |           | 700,000 |   |           | 106,250 |           |  |   |           | (106,250 | ) |  |  |   |  |   |             |  |   |            |      
|                                                                                | September 30, 2000 |           | 4,483   |   |           | 869     |           |  |   |           |         |   |  |  |   |  |   |             |  |   |            | 869   
|                                                                                | December 31, 2000  |           | 1,905   |   |           | 310     |           |  |   |           |         |   |  |  |   |  |   |             |  |   |            | 310   
|Issuance of common stock for U.S. Mainland office rental                        |                    |           |         |   |           |         |           |   |   |           |          |   |   |  |   |   |   |             |   |   |            |       
|                                                                                | June 5, 2000       |           | 1,000   |   |           | 406     |           |  |   |           |         |   |  |  |   |  |   |             |  |   |            | 406   
|                                                                                | June 30, 2000      |           | 1,000   |   |           | 438     |           |  |   |           |         |   |  |  |   |  |   |             |  |   |            | 438   
|                                                                                | July 3, 2000       |           | 1,000   |   |           | 406     |           |  |   |           |         |   |  |  |   |  |   |             |  |   |            | 406   
|                                                                                | September 1, 2000  |           | 1,000   |   |           | 188     |           |  |   |           |         |   |  |  |   |  |   |             |  |   |            | 188   
|                                                                                | October 31, 2000   |           | 1,000   |   |           | 200     |           |  |   |           |         |   |  |  |   |  |   |             |  |   |            | 200   
|                                                                                | December 31, 2000  |           | 2,000   |   |           | 562     |           |  |   |           |         |   |  |  |   |  |   |             |  |   |            | 562   
|Issuance of common stock to key management executives as incentive compensation |                    |           |         |   |           |         |           |   |   |           |          |   |   |  |   |   |   |             |   |   |            |       
|                                                                                | August 31, 2000    |           | 30,000  |   |           | 5,625   |           |  |   |           |         |   |  |  |   |  |   |             |  |   |            | 5,625 
|Accrued dividend to Series B preferred holder
December 31, 2000                 |                    |          |         |   |          |         |          |   |   |          |          |  |   |  |  |   |   | (50,000     | ) |   | (50,000    | )     
|Adjustment of previously accrued dividend to Series A preferred holder          |                    |          |         |   |          |         |          |   |   |          |          |  |   |  |  |   |   | 26,547      |   |   | 26,547     |       
|Net loss                                                                        |                    |          |         |   |          |         |          |   |   |          |          |  |   |  |  |   |   | (2,937,658  | ) |   | (2,937,658 | )     
|                                                                                |                    |           |         |   |           |         |           |   |   |           |          |   |   |  |   |   |  
|BALANCE at December 31, 2000                                                    |                    | 7,185,966 |         | $ | 9,612,446 |         | 5,595,558 |   | $ | 3,669,035 |          |  |   |  |  |   | $ | (12,968,415 | ) | $ | 313,066    |       
|                                                                                |                    |           |         |   |           |         |           |   |   |           |          |   |   |  |   |   |  

The accompanying notes are an integral part of these financial statements

F-6

---



HAWAIIAN NATURAL WATER COMPANY, INC.    STATEMENTS OF CASH FLOWS    FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

|                                                                                   |                                                                             | 2000                                                             |                                           | 1999       |          
|---------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ---------------------------------------------------------------- | ----------------------------------------- | ---------- | ---------
|CASH FLOWS FROM OPERATING ACTIVITIES:                                              |                                                                             |                                                                  |                                           |            |          
|                                                                                   | Net loss                                                                    |                                                                  | $                                         | (2,937,658 | )        
|                                                                                   | Adjustments to reconcile net loss to net cash used in operating activities: |                                                                  |                                           |            |          
|                                                                                   |                                                                             | Depreciation and amortization                                    |                                           |            | 384,880  
|                                                                                   |                                                                             | Amortization of debt discount                                    |                                           |            | 35,574   
|                                                                                   |                                                                             | Impairment charge                                                |                                           |            | 1,025,935
|                                                                                   |                                                                             | Net income from subsidiary                                       |                                           |            | (18,435  
|                                                                                   |                                                                             | Issuance of common stock to Co-Packer, landlord and consultants  |                                           |            | 56,499   
|                                                                                   |                                                                             | Issuance of common stock bonuses to executive officer            |                                           |            | 84,370   
|                                                                                   |                                                                             | Issuance of common stock compensation to executives              |                                           |            | 5,625    
|                                                                                   |                                                                             | Issuance of common stock options to consultants and distributors |                                           |            | 12,500   
|                                                                                   |                                                                             | Issuance of common stock options to non-employee directors       |                                           |            | 972      
|                                                                                   |                                                                             | Warrants granted for preferred standstill agreement              |                                           |            |         
|                                                                                   |                                                                             | Loss on sale of equipment                                        |                                           |            |         
|                                                                                   |                                                                             | Net decrease(increase) in current assets                         |                                           |            | 304,751  
|                                                                                   |                                                                             | Increase in other noncurrent liabilities                         |                                           |            |         
|                                                                                   |                                                                             | Net increase in current liabilities                              |                                           |            | 436,474  
|                                                                                   |                                                                             |                                                                  |                                           |            |          
|                                                                                   |                                                                             |                                                                  | Net cash used in operating activities     |            |          
|                                                                                   |                                                                             |                                                                  |                                           |            |          
|CASH FLOWS FROM INVESTING ACTIVITIES:                                              |                                                                             |                                                                  |                                           |            |          
|                                                                                   | Purchases of property and equipment                                         |                                                                  |                                           | (100,877   | )        
|                                                                                   | Acquisition of intangible asset                                             |                                                                  |                                           |           |          
|                                                                                   | Proceeds from sale of equipment                                             |                                                                  |                                           |           |          
|                                                                                   |                                                                             |                                                                  |                                           |            |          
|                                                                                   |                                                                             |                                                                  | Net cash used in investing activities     |            |          
|                                                                                   |                                                                             |                                                                  |                                           |            |          
|CASH FLOWS FROM FINANCING ACTIVITIES:                                              |                                                                             |                                                                  |                                           |            |          
|                                                                                   | Proceeds from issuance of notes payable                                     |                                                                  |                                           | 796,903    |          
|                                                                                   | Repayments of principal on notes payable                                    |                                                                  |                                           | (62,669    | )        
|                                                                                   | Repayment of principal on capital leases                                    |                                                                  |                                           | (31,802    | )        
|                                                                                   | Net proceeds from sale of preferred stock and common stock warrants         |                                                                  |                                           |           |          
|                                                                                   | Net proceeds from sale of common stock and common stock warrants            |                                                                  |                                           | 100,000    |          
|                                                                                   | Redemption of preferred stock                                               |                                                                  |                                           | (319,000   | )        
|                                                                                   | Proceeds from exercise of common stock warrants and options                 |                                                                  |                                           | 231,600    |          
|                                                                                   |                                                                             |                                                                  |                                           |            |          
|                                                                                   |                                                                             |                                                                  | Net cash provided by financing activities |            |          
|                                                                                   |                                                                             |                                                                  |                                           |            |          
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                               |                                                                             | $                                                                | 5,642                                     |            | $        
|CASH AND CASH EQUIVALENTS, beginning of period                                     |                                                                             |                                                                  | 8,988                                     |            |          
|                                                                                   |                                                                             |                                                                  |                                           |            |          
|CASH AND CASH EQUIVALENTS, end of period                                           |                                                                             | $                                                                | 14,630                                    |            | $        
|                                                                                   |                                                                             |                                                                  |                                           |            |          
|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:               |                                                                             |                                                                  |                                           |            |          
|ACQUISITION OF NET OPERATING ASSETS OF ALII WATER BOTTLING, INC. WITH COMMON STOCK |                                                                             | $                                                                |                                          |            | $        
|                                                                                   |                                                                             |                                                                  |                                           |            |          
|CO-PACKING AGREEMENTPAID WITH COMMON STOCK                                        |                                                                             | $                                                                |                                          |            | $        
|                                                                                   |                                                                             |                                                                  |                                           |            |          
|ADDITION OF CAPITALIZED EQUIPMENT LEASES                                           |                                                                             | $                                                                | 17,243                                    |            | $        
|                                                                                   |                                                                             |                                                                  |                                           |            |          
|CAPITAL ADDITIONACQUIRED WITH NOTE PAYABLE                                        |                                                                             | $                                                                |                                          |            | $        
|                                                                                   |                                                                             |                                                                  |                                           |            |          
|ACQUISITION AND RESCISSION OF NET OPERATING ASSETS OF ALOHA WATER CO:              |                                                                             |                                                                  |                                           |            |          
|                                                                                   | Issuance of common stock and common stock warrants to professional advisor  |                                                                  | $                                         | 70,000     |          
|                                                                                   | Issuance of common stock in merger                                          |                                                                  |                                           | 937,500    |          
|                                                                                   | Issuance of note payable                                                    |                                                                  |                                           | 500,000    |          
|                                                                                   | Return of common stock                                                      |                                                                  |                                           |           |          
|                                                                                   | Cancellation of note payable                                                |                                                                  |                                           | (500,000   | )        
|                                                                                   |                                                                             |                                                                  |                                           |            |          
|                                                                                   |                                                                             |                                                                  | $                                         | 1,007,500  |          
|                                                                                   |                                                                             |                                                                  |                                           |            |          

The accompanying notes are an integral part of these financial statements.

F-7

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HAWAIIAN NATURAL WATER COMPANY, INC.    NOTES TO FINANCIAL STATEMENTS    DECEMBER 31, 2000

1.  Summary of Significant Accounting Policies and Risk Factors

a.  Organization and Going Concern

Hawaiian Natural Water Company, Inc. (the "Company") was incorporated in the state of Hawaii on September 13, 1994. The Company was formed for
the purpose of bottling, marketing and distributing Hawaiian natural water in Hawaii, the United States mainland and foreign markets. The Company's initial product introduction occurred in the first
quarter of 1995.

In
June 1999 the Company acquired certain assets of Ali'i Water Bottling Co., Inc. (see Note 3), which extended the Company's product line to include (1) premium
purified bottled water, and (2) the home and office large bottle (3 gallon and 5 gallon) delivery market. This business is concentrated in the Kailua-Kona area of the Big Island of Hawaii.

In
January 2000, the Company introduced a line of herbal beverages under the "East Meets West XEN" name. The beverages are manufactured for the Company pursuant to a
co-packing agreement with a Los Angeles area bottler (see Note 10d to the financial statements). Sales efforts in 2000 were concentrated in Southern California, Hawaii and the Vancouver, Canada
area.

In
March 2000, the Company acquired Aloha Water Company Co. Inc., a distributor of purified water in the home and office market in the Honolulu area. This acquisition was
subsequently rescinded in December, 2000 (see Note 4).

In
November 2000, the Company agreed to be acquired by Amcon Distributing Company, an Omaha, Nebraska based distributor, by means of a merger of the Company into a wholly owned
subsidiary of Amcon (see Note 5).

Since
the execution of the merger agreement, the Company has been substantially dependent upon Amcon for its financing requirements. If the merger agreement were terminated for any
reason, the Company would likely not be able to continue as a going concern.

As
shown in the accompanying financial statements, the Company has incurred significant losses and negative cash flows from operations since inception. Management expects that the
Company will continue to incur additional losses and negative cash flows until the Company achieves significant levels of sales. To date, the Company has been unable to generate cash flow sufficient
to support its operations. Additionally, the Company has past due accounts payable of approximately $944,000 and mandatorily redeemable preferred stock and notes payable amounts due in near term of
approximately $1,211,000. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to continue as a going concern.

b.  Basis of Accounting

The Company's accounting policies are in accordance with generally accepted accounting principles in the United States.

c.  Cash and Cash Equivalents

Cash and cash equivalents include savings accounts and investments in a money market account with original maturities less than 90 days.

F-8

---

d.  Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market. As of December 31, 2000, inventories were comprised of the following:

Raw materials

$
315,873Finished goods


255,291$
571,164


Raw
materials inventory consists of PET "pre-forms", caps, labels and various packaging and shipping materials. Finished goods inventory includes materials, labor and
manufacturing overhead costs.

e.  Property and Equipment

Property and equipment are stated at cost, which includes the cost of labor used to install equipment and construct major leasehold improvements. Maintenance
and repairs are expensed as incurred. Depreciation and amortization are provided on the straight-line method over the following estimated useful lives:




Leasehold improvements

The shorter of the useful
life or the lease termMachinery, equipment and assets under capital lease

7-15 years


Property
and equipment is summarized as follows:

Machinery and equipment

$
2,610,658Leasehold improvements


529,960Assets under capital lease


104,9883,245,606LessAccumulated depreciation and amortization


(989,490)$
2,256,116


f.  Revenue Recognition

The Company recognizes revenue on the accrual method of accounting when title transfers: upon shipment, for bottled water products and other beverages, and
upon delivery for home and office delivery products. The Company grants customers the right to return goods which are defective or otherwise unsuitable for sale. The Company issues refunds to
customers or replaces goods which are rejected.

The
Company's policy is to provide a reserve for estimated uncollectible trade accounts receivable. The Company also provides a reserve for estimated sales returns and related
disposal costs. Net sales revenue reflects reductions for the reserve for sales returns, discounts, promotional allowances and freight-out. The Company also estimates the amount of billbacks from
certain distributors which represents price adjustments for quantity or other discounts to distributors' customers.

g.  Advertising

The Company charges the cost of advertising to expense as incurred. The Company incurred approximately $85,000 and $113,000 of advertising expense during the
years ended December 31, 2000 and 1999, respectively.

F-9

---

h.  Stock-Based Compensation

The Company accounts for transactions in which its equity instruments are issued to acquire goods or services from non-employees. Those transactions must be
accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably determinable. The Company has elected to account for
the issuance of equity instruments to employees, using this intrinsic value method under APB Opinion No. 25. (See Note 8).

i.  Basic and Diluted Loss Per Share

Basic and diluted loss per share is calculated using net loss adjusted for dividends to preferred shareholders. The Company's basic and diluted loss per share
are the same for both 2000 and 1999 in that any conversion of stock options and warrants would have been anti-dilutive. Basic and diluted loss per share is based on the weighted average number of
common shares issued and outstanding during the period of 6,844,744 and 4,476,554 for 2000 and 1999, respectively.

j.  Fair Value of Financial Instruments

The carrying amounts for trade receivables and payables are considered to be their fair values. The fair value of the Company's notes payable at
December 31, 2000 may be significantly different from their carrying value as a result of the matters discussed in Note 1a. above and as a result of fluctuations in market interest rates.

k.  Income Taxes

Income tax liabilities and assets are recognized at enacted tax rates for the expected future tax consequences of temporary differences between carrying
amounts and the tax basis of assets and liabilities. A reserve is provided to reduce deferred tax assets to estimated realizable value (See Note 9).

l.  Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.

m.  New Accounting Pronouncement

In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities", which is effective for fiscal years beginning
after June 15, 2000 as amended by SFAS No. 137 and SFAS No. 138. SFAS No. 133 establishes accounting and reporting standards for derivative instruments. The statement
requires that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value, and that changes in the derivative's fair value be recognized
currently in the earnings unless specific hedge accounting criteria are met. The Company did not have any derivative instruments as of December 31, 2000 and believes that the adoption of SFAS
No. 133 will not have a material impact on its financial statements.

In
December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." SAB 101
provides guidance on the recognition, disclosure and presentation of revenue in financial statements. SAB 101, as amended by SAB 101A and SAB 101B, is required to be implemented
no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. The adoption of SAB 101 did not have a material impact on its financial position or the results
of operations.

F-10

---

In March 2000, the FASB issued interpretation No. 44, "Accounting For Certain Transactions Involving Stock Compensationan Interpretation of APB Opinion
No. 25." The Interpretation clarifies the application of APB Opinion No. 25 in certain situations, as defined. The Interpretation is effective July 1, 2000, but covers certain
events occurring during the period after December 15, 1998, but before the effective date. To the extent that events covered by the effective date, the effects of applying this Interpretation
would be recognized on a prospective basis from the effective date. Accordingly, upon initial application of the final Interpretation, (a) no adjustments would be made to the financial statements for
periods before the effective date and (b) no expense would be recognized for any additional compensation cost measured that is attributable to periods before the effective date. The adoption of this
new Interpretation had no impact on the Company's financial statements, based on its current structure and operations.

n. Long-Lived Assets

Whenever there are recognized events or changes in circumstances that could affect the carrying amount of long-lived assets, management reviews these assets
for possible impairment. Management uses estimated expected future net cash flows (undiscounted and excluding interest costs) to measure the recoverability of these assets. The estimation of expected
future net cash flows is inherently uncertain and, relies to a considerable extent on the availability of capital. If in future periods, there are changes in the estimates or assumptions incorporated
into the impairment review analysis, the changes could impact the carrying amount of these assets.

o.  Reclassifications

Certain 1999 amounts have been reclassified to conform to their 2000 presentation.

2.  Equity Transactions

a.
Investor Relations

On
July 31, 1998, the Company engaged a financial public relations advisor for a two-year term. As compensation for its services, the Company issued to this advisor 100,000
shares of Common Stock, plus options to purchase an aggregate of 565,000 additional shares at exercise prices ranging from $2.50 to $6.00 per share. On January 11, 1999 the advisor exercised
50,000 of these options, at an exercise price of $2.50 per share, which resulted in cash proceeds to the Company of $125,000. All of the remaining options have expired unexercised.

b.  Series A
Convertible Preferred Stock

In
1999, the Company issued an aggregate of 1,250 shares ($1.25 million in aggregate liquidation preference amount) of Series A convertible preferred stock to an institutional
investor. The Company also issued to this investor for no additional consideration warrants to purchase 100,000 shares of common stock at an original exercise price of $3.625 per share.

Each
share of Series A preferred stock had a liquidation preference of $1,000, and was entitled to cumulative dividends at an annual rate of 4%, payable quarterly commencing
May 31, 1999, in cash or common stock at the election of the Company. The Series A preferred stock was convertible into common stock, in whole or in part at the election of the holder, at a
variable conversion price based upon a discount to the market price (as defined) of the common stock as of each conversion date (the "beneficial conversion feature").

In
August 1999, the investor converted six shares of Series A preferred into an aggregate of 11,429 shares of common stock. In September 1999, the Company entered
into a standstill agreement with the investor, pursuant to which the investor agreed not to convert any additional shares of Series A

F-11

---

preferred and granted the Company an option to redeem the outstanding shares. This standstill agreement was extended continuously until November 2, 2000. Pursuant to this standstill
arrangement, the Company redeemed an aggregate of (i) 925 shares of Series A preferred stock for an aggregate of $808,750 in 1999, (ii) 100 shares for an aggregate of $100,000
during the first quarter of 2000, (iii) 79 shares for an aggregate of $79,000 during the second quarter of 2000, and (iv) the remaining 140 shares for an aggregate of $140,000 in
October 2000. As a result of these redemptions, there were no shares of Series A preferred outstanding at December 31, 2000.

As
partial consideration for the extension of the standstill agreement, the Company reduced the exercise price of the warrants held by the investor in several increments to $.01 per
share. The investor exercised these warrants in full in March 2000.

Primarily
as a result of the amortization of the beneficial conversion feature and redemption of the Series A preferred shares, the Company recorded an aggregate preferred
stock dividend of $416,379 during 1999. In 2000, the Company redeemed the remaining Series A preferred shares and adjusted the previously accrued preferred stock dividend to the holder,
resulting in an aggregate preferred stock dividend of $86,698 for the Series A preferred shares.

c.  Series B
Convertible Mandatorily Redeemable Preferred Stock

In
March 2000, the Company issued 100 shares ($100,000 aggregate liquidation preference amount) of Series B convertible preferred stock to a private investor. Each share
of Series B preferred stock has a liquidation preference of $1,000. The Series B preferred stock is mandatorily redeemable, at the election of the holder, at any time within 90 days
following the first anniversary date of the date of issuance in the event that the market price (as defined) of the common stock is less than $1.50 per share on the first anniversary date. The
redemption price in such event is $1,500 per share ($150,000 in the aggregate).

The
market price of the common stock was less than $1.50 on the first anniversary date, and the investor has delivered to the Company a notice of redemption with respect to all of the
outstanding Series B preferred stock. The Company recorded the $50,000 redemption premium as a preferred stock dividend and classified the original $100,000 of mandatorily redeemable preferred
stock as currently payable as of December 31, 2000 in the accompanying Financial Statements.

d.  Private
Offering of Common Stock and Warrants

In
September 1999, the Company raised $850,000 ($830,000 net of offering expenses) through a private offering of 850,000 Units at a purchase price of $1.00 per Unit. Each Unit
consisted of (i) one share of common stock, (ii) one five year warrant to purchase one share of common stock at an exercise price of $1.00 per share (a $1.00 warrant), and
(iii) one five year warrant to purchase 2/3 of one share of common stock at an exercise price of $1.50 per share. An investment of $750,000 was received from two unaffiliated private investors
(and certain of their affiliated entities), and an additional investment of $100,000 was received from the Company's Chief Executive Officer. The unaffiliated investors purchased an additional 200,000
Units in December 1999 and 100,000 Units in February 2000 for an aggregate additional investment of $300,000. The unaffiliated investors exercised (i) 50,000 $1.00 warrants for an
aggregate of $50,000 in the first quarter of 2000, (ii) 114,600 $1.00 warrants for an aggregate of $114,600 in the second quarter of 2000, and (iii) 66,000 $1.00 warrants for an
aggregate of $66,000 in the third quarter of 2000.

Approximately
$530,000 of the net proceeds of the initial offering was allocated to the warrants granted to the investors, based upon the trading price of the common stock on the date
of grant and the Black-Scholes option pricing model.

e.  Stock
Bonus

F-12

---

In December 2000, the Company awarded its Chief Executive Officer bonus compensation for 2000, payable in 350,000 shares of common stock. In connection with this award, the
$100,000 bonus awarded the Company's Chief Executive Officer for 1999 (issued in January 2000) was rescinded. This earlier award had been granted subject to a commitment by the Chief Executive Officer
to purchase an addtional 100,000 Units at $1.00 per Unit. See Note 2b. The purchase of these Units was also rescinded in December 2000. The effect of these transactions was in substance a
repricing of the January 2000 stock award in December 2000. The compensation expense related to these transactions was $84,370 in accordance with FIN 44. The withholding tax related to
the December 2000 award was advanced to the Chief Executive Officer and included in the amount due from officers.

3.  Acquisition of Ali'i Water Bottling, Inc.

Effective June 30, 1999, the Company purchased all of the operating assets, net of certain liabilities, of Ali'i Water Bottling, Inc. ("Ali'i").
Ali'i bottles and distributes purified water to the home and office market on the Big Island of Hawaii and also sells purified water in PET plastic bottles through retail channels throughout the
Hawaiian Islands. The consideration for the net assets purchased was 263,040 shares of common stock of the Company. The Company assumed Ali'i's trade payables and contractual obligations related to
continuing operations but did not assume any note(s) payable, line of credit or liabilities for federal, state, or local taxes incurred by Ali'i. The net assets acquired were recorded in the
accounting records of the Company on June 30, 1999 in the amount of $312,359, which was the fair value of the 263,040 issued shares. No significant goodwill resulted from this acquisition.
Acquisition costs were not material. The shares issued are "restricted securities" as defined in Rule 144 under the Securities Act of 1933, and may not be sold except in compliance with such
Rule or other exemption from registration under the Securities Act. Had the acquisition occurred at January 1, 1999, the unaudited and pro forma net sales, net loss, diluted net loss per
share and diluted weighted average common shares outstanding for 1999 would be as follows:

Twelve Months Ended1999Net sales

$
3,303,984Net loss

$
(1,913,388
)Diluted net loss per share

$
(0.43
)Diluted weighted average common shares outstanding


4,476,554


4.  Acquisition of Aloha Water Company, Inc. and Impairment Charge

On March 17, 2000, the Company acquired Aloha Water Company, Inc., ("Aloha"), a distributor of purified water to the home and office delivery
market in the Honolulu area. The acquisition was accomplished through a merger of Aloha into a wholly owned subsidiary of the Company formed for this purpose. The purchase price for Aloha consisted of
an aggregate of (i) 750,000 shares of common stock of the Company and (ii) a promissory note of the Company in the amount of $500,000 (the "Aloha note") to the stockholders of Aloha.
Interest on the note was payable monthly at the annual rate of 10%. The entire principal amount was due on April 1, 2000. The Aloha note was secured by a first priority security interest on all
of the capital stock of Aloha.

In
August, 2000 the holders of the Aloha note declared a default for failure to make certain interest payments, and foreclosed on their collateral, which was all of the stock of
Aloha. As a result, the Company has written off its investment in Aloha, the related goodwill and the Aloha note. This writeoff is reflected as a total impairment charge in 2000 of $1,025,935, which
represented the Company's entire investment in Aloha.

F-13

---

In December 2000, the parties agreed to rescind the acquisition, as a result of which Aloha returned the Aloha note and the 750,000 shares of the Company's common stock. The fair
value of the Company's shares returned was not material.

5.  Amcon Merger

In November 2000, the Company entered into a merger agreement with Amcon Distributing Company ("Amcon"), pursuant to which the Company has agreed to
merge with and into, and thereby become, a wholly-owned subsidiary of Amcon. The merger consideration values the entire common equity interest in the Company at $2,865,348, payable in common stock of
Amcon, which will be priced at not less than $6.00 or more than $8.00 per share, based on a 20 trading day measuring period ending three trading days before the date of the Company's stockholder vote
on the merger. As a result, Amcon will issue an aggregate of not less than 358,168 or more than 477,558 shares. Holders of outstanding options and warrants of the Company would receive comparable
options and warrants of Amcon with the exercise price and number of shares covered adjusted based upon the exchange ratio.

The
merger is expected to qualify as a tax-free reorganization. It is subject to various conditions, including the effectiveness of a registration statement covering the shares to be
issued in the merger, the listing of such shares on the American Stock Exchange, and the approval of the Company's stockholders. All of the Company's officers and directors and any of their affiliated
entities that own shares of the Company's common stock have agreed to vote their shares in favor of the merger.

If
the Merger Agreement is terminated for any reason, it is likely that the Company will not be able to continue as a going concern.

6.  Notes Payable

In anticipation of acquiring the Company, Amcon has provided certain debt financing to the Company for working capital and other general corporate purposes.
Amcon advanced $350,000 in September 2000, and an additional $400,000 in October 2000. These loans are evidenced by secured promissory notes (the "Amcon notes") bearing interest at a
rate of 10% per annum, payable quarterly. The Amcon notes are convertible at the election of Amcon, under certain circumstances, into Series C convertible preferred stock bearing dividends,
payable quarterly, of 10% per annum and giving effective control of the Board of Directors to Amcon. The Amcon notes are secured by a lien on all of the Company's assets. The due date of the Amcon
notes, originally February 28, 2001, has been extended to May 31, 2001.

In
September 1997, the Company acquired certain bottle making equipment used in its bottling operations. The consideration for the equipment was an aggregate of $1.2 million, a
portion of which was paid through the issuance of a promissory note in the original principal amount of $825,000, payable in installments, as defined. The Company discounted this equipment note
payable using an estimated weighted average cost of capital of 12%, and amortized the resulting discount to interest expense using the effective interest method over the term of the loan. In
October 2000, the Company renegotiated the payment terms for this promissory note.

In
September 1999, the Company acquired a prefabricated warehouse, which it assembled and installed on its property in Kea'au. The warehouse was purchased for $24,995 with a down payment of
$2,000 and a 5 year note, with monthly payments aggregating $22,995, including interest.

F-14

---

The following summarizes the Company's notes payable as of December 31, 2000:

Equipment note payable

$
466,457Less: Unamortized discount


(19,108
)Net equipment note payable


447,349First Amcon note


350,000Second Amcon note


400,000Note payable to service provider


22,135Vehicle installment note payable


3,490Warehouse note payable


16,180Subtotalnotes payable


1,239,154Less: Current portion


(1,061,437
)Non-current portion

$
177,717


Maturities
of notes payable, net of discount at December 31, 2000 are as follow:

2001

$
1,061,4372002


169,0252003, and thereafter


8,692$
1,239,154


7.  Consulting Arrangements

During 2000 and 1999, the Company hired various consultants to perform sales, marketing and other functions. The Company recognized consulting expenses of
approximately $111,000 and $88,000 for 2000 and 1999, respectively.

8.  Stock Options

The Board of Directors has authorized an aggregate of 1,000,000 shares of common stock for issuance upon the exercise of stock options which may be granted
from time to time to directors, officers, employees and consultants of the Company under the Company's stock option plan. Under this plan, the Company granted to certain consultants and distributors
options to purchase an aggregate of 12,500 shares of common stock options in 2000, and 136,500 shares of common stock options in 1999. These options are exercisable for five years at exercise prices
ranging from $1.00 to $4.00 per share. Certain of these options were valued based upon the value of services provided and others were valued using the Black-Scholes option pricing model, at $12,500 in
2000, and $75,398 in 1999, which amounts were charged to expense as incurred. These options vested upon grant.

Using
the Black-Scholes option valuation model (and the following assumptions), the estimated fair values of options granted ranged from $.13 to $2.21 in 1999. Management believes
that the fair value results from using the Black-Scholes calculation may not be indicative of the Company's economic cost of issuing stock options. Principle weighted-average assumptions used in
applying the Black-Scholes model were as follow:

1999Expected volatility

60.00%Expected dividend yield

0.00%Expected term

5 yrsRisk-free interest rate

5.63% to 5.78%


F-15

---

In
addition, as further described below, at December 31, 2000, outstanding options to purchase an aggregate of 438,367 shares of common stock were held by employees and former
employees of the Company. These options are not reflected on the balance sheet as "Common Stock warrants and options, issued and outstanding."

The
following summarizes information about stock options granted to employees and former employees during the years ended December 31, 2000 and 1999:

Shares

Weighted-Average
Exercise PriceBalance at December 31, 1998

487,000

$
4.00Granted

70,000

$
4.00Forfeited

(109,833
)
$
4.00Balance at December 31, 1999

447,167

$
4.00Granted

Forfeited

(8,800
)
$
4.00Balance at December 31, 2000

438,367

$
2.25


In
February 2000, the Company reduced the exercise price of all stock options held by the current employees from $4.00 to $2.00 per share. This had no impact on compensation expense
during 2000.

At
December 31, 2000 and 1999, respectively, the Company had 337,825 and 265,925 vested employee options outstanding, exercisable at a weighted-average exercise price of $2.25
and $4.00, respectively.

The
Company accounts for stock options granted to employees under APB No. 25, under which expense is recognized if the exercise price of options granted is less than the market
price on the date of grant. If compensation expense for stock options granted to employees had been accounted for under SFAS. 123, the Company's net loss per share for 2000 and 1999 would have been
$(.47) and $(.51), respectively.

9.  Income Taxes

Certain items of expense are recognized in different periods for income tax purposes than for financial reporting purposes. As of December 31, 2000, the
Company had approximately $7.5 million of net operating loss (NOL) carryforwards available to reduce future taxable income. These NOL carryforwards expire on various dates beginning in 2012 through
2021. The deferred tax asset as of December 31, 2000 consisted primarily of net operating loss carryforwards. A valuation allowance has been provided for the entire deferred tax asset due to
the uncertainty of its realization.

The
Company is subject to Internal Revenue Code Section 382 which limits the Company's ability to utilize net operating losses generated prior to the closing of its initial
public offering (of approximately $2.3 million). The annual net operating loss limitation under Section 382 is approximately $361,000. The current limitation is subject to change as a result of
recent equity transactions.

The
Company paid no income taxes and had no net deferred or current tax provision/benefit for the years ended December 31, 2000 and 1999.

F-16

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10.  Commitments and Contingencies

a.  Capital Lease Obligations

The Company leases machinery and equipment under capital leases which expire on various dates through August 2005.

As
of December 31, 2000, future minimum lease payments were as follows:

2001


36,1742002


8,8012003


5,5962004


5,5962005


2,798Total future minimum payments


58,965LessAmount representing interest


(12,169
)Total capital lease obligations


46,796LessCurrent portion


(30,375
)Noncurrent portion

$
16,421


The
capital leases bear interest ranging from 12.5% to 27%, per year.

b.  Operating Lease Obligations



The Company leases its bottling facility and surrounding property, including the water source and pumping equipment from an affiliate, under a 50 year lease.
The lease can be renewed at the Company's option for an additional 50 years. The lease includes the following provisions:

Rent
is the greater of $5,335 per month (Base Rent), adjusted every five years based upon changes in the consumer price index in Hawaii, as defined, or two percent of the Company's
net revenue, as defined.

The
lease entitles the Company to exclusive use of the water source, except that the lessor may draw up to 50% of the water flow for use in beverage production other than the sale of
natural water. The Company believes the remaining 50% is adequate for the current and projected future needs of the Company's business.

During
2000, the Company incurred approximately $4,000 for leasehold improvements to this property.



On February 1999, the Company entered into a one-year lease for warehouse space located near its bottling plant with lease payments of $2,560 per month. In
January 2000, this lease was terminated and the warehouse space was replaced with a prefabricated warehouse erected on the Company's leased bottling facility property.



In October 1996, the Company entered into a three-year office and warehouse lease in Honolulu, with a renewal option. Monthly rental payments were
$3,000 through November 1997. Thereafter, monthly rental payments were $4,000. Commencing October 1, 1999 the Company entered into a 45 month lease of office and warehouse space in Pearl
City, containing approximately 13,500 square feet

F-17

---

of warehouse and 1,500 square feet of office space. Terms of the lease provided for no rental fee for the first month. Thereafter, monthly payments are $6,800 through May 2001, $7,800 through May
2002, and $8,800 through May 2003.

On
December 2000, the Company relocated its accounting and administrative operations to its bottling plant in Keaau on the Big Island. In January 2001, the Company
entered into an agreement to sublease
11,770 square feet of its Pearl City office space. The sublease is for a 29 month period, ending on May 31, 2003, and the monthly sublease income is $7,062.

On
July 1, 1999 the Company entered in to a month-to-month rental agreement for 5,043 square feet of manufacturing and office space for its Ali'i home and office delivery
business in Kailua-Kona, Hawaii. The lease is terminable on a 14 day advance notice. Monthly payments are $2,747.

The
Company incurred approximately $203,000 and $184,000 in lease expense under all existing facility lease agreements in 2000 and 1999, respectively.

The
future minimum lease payments for the plant, warehouse and office leases as of December 31, 2000 were as follow:

2001

$
167,4282002


172,4282003


110,8282004


66,8282005


66,828Thereafter


2,522,757$
3,107,097


The
future sublease income for the Pearl City office and warehouse space are as follow:

2001

$
84,7442002


84,7442003


35,310$
204,798


c.  Sponsorship and Sales Agreement

In June 1999, the Company entered into a five year sponsorship and beverage sales agreement with the USS Missouri Memorial Association, Inc., a
nonprofit corporation which operates the Battleship Missouri Memorial (the "Missouri") as a visitor attraction at Pearl Harbor, Hawaii. Under the terms of this agreement, the Company became an
official sponsor of the Missouri, and agreed to supply bottled water and vending machines to the Missouri, in exchange for a license to certain of Missouri's trademarks for use in various marketing
and promotional activities, and a lease of space for the operation of vending machines at the Missouri. The aggregate sponsorship fee is $100,000, payable $20,000 annually in monthly installments of
$1,667. Additionally, the Company is obligated to provide cash and in-kind support for events promoting the Missouri in an aggregate amount of $432,500 (none of which had been provided as of
December 31, 2000). In July 2001, the Company has the option to re-negotiate or terminate the agreement if the prior 12 month sales of the Company's bottled water to the Missouri are less than
$144,000. In February 2001, based on sales to date, the Company advised the Missouri that it intends to exercise its right to re-negotiate or terminate this agreement. As of December 31, 2000,
the Company has accrued approximately $12,000 for unpaid sponsorship fees. In the opinion of management, the outcome of the re-negotiation or termination will not have a material adverse effect on the
financial statements.

F-18

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d.  Co-Packing Agreement

In June 1999, the Company entered into a five year agreement with an independent bottler in Los Angeles, California (the "Bottler") for the production,
warehousing, and shipment of herbal beverages. On September 13, 1999, the Company issued 100,000 shares of common stock to the principals of the Bottler in partial consideration for these
services. The agreement was recorded as an asset on the Company's accounting records in the amount of $150,000. Initially, $43,750 was allocated to the
common stock account (based on the aggregate market value of the 100,000 common shares issued) and the balance ($106,250) was allocated to common stock options. The agreement provided that in the
event the market price (as defined) of the Company's common stock on the first anniversary of the date of issuance was less than $1.50 per share, the Company would issue, for no additional
consideration, sufficient additional shares of common stock to bring the then market value of all shares issued (including the initial 100,000 shares) up to $150,000. Pursuant to this provision, on
September 13, 2000, the Company issued an additional 700,000 shares of common stock to the principals of the Bottler. Upon issuance of these additional 700,000 shares, the $106,250 initially
allocated to common stock options was reclassified to the common stock account.

11.  Acquisition of Intangible Asset

In June 1999, the Company purchased for $150,000 the beverage products, trademarks and all other rights related to a line of herbal beverages. The
acquisition cost and related trademark registration expenses have been capitalized and are being amortized over a five year period.

12.  Significant Customer

For the years ended December 31, 2000 and 1999 approximately 49% and 47%, respectively, of the Company's sales were made through one Hawaii distributor.
No other single customer accounted for greater than 10% of sales.

F-19

---

13.  Segment Information

For the years ended December 31, 2000 and 1999, the Company had the following sales by business segment:

2000

%

1999

%PET products

$
2,795,000

76

$
2,903,000

95Home & office delivery


598,000

16


147,000

5XEN herbal beverage products


288,000

8




$
3,681,000

100

$
3,050,000

100


Included
in the home and office delivery sales for the year ended December 31, 2000 are $280,132 of sales of Aloha products. The acquisition of Aloha was rescinded in December
2000 (see Note 4).

The
Company sells its product directly to certain foreign distributors. All sales are made in U.S. dollars. For the years ended December 31, 2000 and 1999, the Company had the
following sales by geographic region:

2000

%

1999

%Hawaii

$
3,227,000

88

$
2,690,000

88International


130,000

4


273,000

9United States Mainland


324,000

8


87,000

3$
3,681,000

100

$
3,050,000

100


14.  401 K Plan

In 1999, the Company established a defined contribution retirement plan (the Plan) governed under Section 401(k) of the Internal Revenue Code. In 2000,
prior to implementation of the Plan, the Company determined that based on the Company's current financial condition, it would not be prudent to proceed with the Plan. In December 2000 the Plan
was terminated.

15.  Subsequent Events



In February 2001, the Company issued 750,000 shares of common stock to Amcon at $.40 per share for an aggregate equity investment of $300,000. These shares
will participate in the Merger consideration (see Note 5). Amcon now owns approximately 9.5% of the Company's common stock.



The Company has ordered new blow molding and related equipment for installation at the Company's bottling facility. The Company expects this equipment, which
will be fully operational by August 2001, to significantly enhance the efficiency of its bottling operations. The equipment was acquired by Amcon in its own name. Upon installation, the Company
expects to lease this equipment from Amcon, on terms to be agreed upon. This lease is expected to be accounted for as an operating lease.

F-20

---

16.  Quarterly Data (Unaudited)

In the opinion of management, the following unaudited, quarterly data reflects all adjustments (consisting primarily of normal recurring adjustments)
considered necessary to fairly present the Company's results of operations in accordance with generally accepted accounting principles and the rules and regulations of the Securities and
Exchange Commission.

|                                           |                                      | 1999 Quarter Ended* |          
|------------------------------------------ | ------------------------------------ | ------------------- | ---------
|
|
|Net Sales                                  |                                      | $                   | 485,805  
|Cost of Sales                              |                                      |                     | 448,645  
|                                           |                                      |                     |          
|Gross Margin                               |                                      |                     | 37,160   
|Expenses                                   |                                      |                     |          
|                                           | General and Administrative           |                     |          
|                                           | Selling and Marketing                |                     |          
|                                           |                                      |                     |          
|                                           |                                      |                     | 433,966  
|Other Income (Expenses)                    |                                      |                     |          
|                                           | Interest Income                      |                     |          
|                                           | Interest Expense                     |                     |          
|                                           |                                      |                     |          
|                                           |                                      |                     | (19,742  
|                                           |                                      |                     |          
|Net Loss                                   |                                      | $                   | (416,548 
|                                           |                                      |                     |          
|                                           | Preferred Stock Dividend (**)        |                     |          
|Net Loss Applicable to Common Shareholders |                                      | $                   | (416,548 
|                                           |                                      |                     |          
|                                           | Basic and Diluted Net Loss Per Share |                     | $        
|                                           |                                      |                     |          
|Weighted Average Shares Outstanding        |                                      |                     | 4,070,619
|                                           |                                      |                     |          

|                                           |                                      | 2000 Quarter Ended* |          
|------------------------------------------ | ------------------------------------ | ------------------- | ---------
|
|
|Net Sales                                  |                                      | $                   | 1,024,692
|Cost of Sales                              |                                      |                     | 799,982  
|                                           |                                      |                     |          
|Gross Margin                               |                                      |                     | 224,710  
|Expenses                                   |                                      |                     |          
|                                           | General and Administrative (***)     |                     |          
|                                           | Selling and Marketing                |                     |          
|                                           |                                      |                     |          
|                                           |                                      |                     | 659,865  
|Other Income (Expense)                     |                                      |                     |          
|                                           | Impairment Charge                    |                     |          
|                                           | Interest Expense                     |                     |          
|                                           |                                      |                     |          
|Net Loss                                   |                                      | $                   | (456,165 
|                                           |                                      |                     |          
|                                           | Preferred Stock Dividend             |                     | $        
|Net Loss Applicable to Common Shareholders |                                      | $                   | (491,665 
|                                           |                                      |                     |          
|                                           | Basic and Diluted Net Loss Per Share |                     | $        
|                                           |                                      |                     |          
|Weighted Average Shares Outstanding.       |                                      |                     | 5,883,760
|                                           |                                      |                     |          

---

F-21

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