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

                                  FORM 10-KSB/A

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

                    For the fiscal year ended March 29, 2003

                         BEVSYSTEMS INTERNATIONAL, INC.




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


                              1315 Cleveland Street
                            Clearwater, Florida 33755
                    (Address of Principal Executive Offices)

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

                  Securities registered under Section 12(b) of
                                the Exchange Act:

        Common Stock par value $0.0001 per share National Association of
                               Securities Dealers

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 there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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. [X]

State issuer's revenues for its most recent fiscal year: $944,255.

State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and ask prices to such stock as of a specified date within 60 days:
$5,166,703 (Based on price of $0.32 on September 8, 2003 and 16,145,948 shares
held by non-affiliates).

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. Outstanding as of September 8, 2003:
38,283,323 shares of common stock, $.0001 par value.

Documents incorporated by reference: None
<PAGE>
                  BEVSYSTEMS INTERNATIONAL, INC. & SUBSIDIARIES



                            TABLE OF CONTENTS


                                                                           Page
                                  PART I

Item 1.    Description of Business                                          1
Item 2.    Description of Property                                         14
Item 3.    Legal Proceedings                                               14
Item 4.    Submission of Matters to a Vote of Security Holders             16

                                  PART II

Item 5.    Market for Common Equity and Related Stockholder Matters        17
Item 6.    Management's Discussion and Analysis of Financial
             Condition and Results of Operations                           25
Item 7.    Financial Statements                                            33
Item 8.    Changes in and Disagreements with Accountants
             on Accounting and Financial Disclosure                        33
Item 8A.   Controls and Procedures                                         33


                                 PART III

Item 9.    Directors, Executive Officers, Promoters and Control Persons;
             Compliance With Section 16(a) of the Exchange Act             34
Item 10.   Executive Compensation                                          36
Item 11.   Security Ownership of Certain Beneficial
             Owners and Management                                         37
Item 12.   Certain Relationships and Related Transactions                  38

                                  PART IV

Item 13.   Exhibits and Reports on Form 8-K                                39
Item 14.   Principal Accountant Fees and Services                          39
Signatures                                                                 40




<PAGE>



                                     PART I

Item 1. Business

Overview

BEVsystems International, Inc. ("BEVsystems") produces and markets bottled water
infused with dissolved oxygen in concentrations up to approximately 15 times
greater than that found in ordinary bottled water. Our core product, trademarked
as Life O2, combines water and oxygen, the two essential requirements for human
life. Our products and manufacturing processes are protected under seven U.S.
and eighteen International patents, and are marketed under various registered
trademarks. We believe that consumption of oxygen-enriched water can be shown to
improve performance and well being. In a variety of studies, athletes who
consumed Life O2 bottled water were shown to measurably improve their
performance.

Over the last four years Life O2 bottled water has been sold in eighteen
International markets, making Life O2 bottled water the global category leader
in super oxygenated water. Currently, we have agreements in Europe, Japan,
Canada, and Latin America. In International markets, we sell and license our
products to bottlers and distributors who bottle and sell either Life 02 branded
products or co-branded products that are produced using our equipment and
processes. In November 2001 we began to launch our products into the United
States market and are currently selling our products in Florida, the greater New
York City metropolitan area, and selected other markets. In the United States we
bottle our products in our own Clearwater, Florida bottling facility and under
co-packing arrangements with independent bottlers and sell them to distributors
under our Life O2 label.

Industry Background

Bottled water has been and continues to be one of the fastest growing segments
of the beverage industry. Growing consumer concerns over the quality of
municipal water supplies and the perceived detrimental effects of carbonated
soft drinks have propelled consumption of bottled water. According to Beverage
Digest Newsletter, the volume of single-serve bottled water produced in the
United States grew 31% from 2000 to200.1. Moreover, according to Beverage
Marketing Corporation, per capita consumption of bottled water in the United
States increased from 5.2 gallons to 15.6 gallons from 1985 to 1999, an increase
of 200% over the period. We believe that we will be able to position our
oxygenated water as a distinct, value-added offering in the expanding bottled
water segment.

Within the many beverage categories, there is a subcategory that is rapidly
growing in importance. This category is the functional beverage category (sport
drinks and energy drinks), of which one of the most prominent examples is
Gatorade. This type of beverage is believed to provide the consumer with
benefits beyond that of purity or taste. In the case of Gatorade, it is
commercialized on the premise that it replenishes the body's supply of minerals
depleted during the course of heavy physical activity or dehydration. The
success of this type of beverage lies in the consumers' desire to obtain direct
results from drinking the beverage. As a category, functional beverages have
also reached sales volumes in the billions of dollars. In the last two years
super oxygenated bottled water has emerged as a functional beverage of growing
importance.

Company History

BEVsystems International, Ltd. was formed in March 2001 to acquire the beverage
assets and further develop the oxygenated beverage business of Life
International Products, Inc. and Life O2 Beverages, LLP ("Life International").
The Asset Purchase was completed on July 13, 2001. The assets acquired included
an exclusive, perpetual, royalty-free license to its domestic and foreign
patents for the production of super oxygenated water in the field of use of
human consumables, ownership of the Life O2 and OXYLOC

                                        1
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trademarks, all of the oxygenating equipment, and inventories installed at
various locations worldwide, as well as contracts with 10 bottlers and 13
distributors covering water production and distribution to 18 countries in North
and South America, Asia, and Europe. Prior to the acquisition, our products had
already been successfully introduced in a wide variety of International markets
and two test markets in the United States, covering parts of Colorado and
Hawaii.

On February 25, 2002 we finalized an agreement for the purchase and sale of
stock with Aqua Clara Bottling & Distribution, Inc., a Colorado corporation. The
agreement was structured as a reverse acquisition and provided for Aqua Clara to
purchase all of the shares held by BEVsystems International, Ltd. shareholders
who then became the controlling shareholders of Aqua Clara. After the
acquisition, Aqua Clara was renamed BEVsystems International, Inc., and
BEVsystems' Chairman and CEO, G. Robert Tatum, III, became the new Chairman and
CEO. The Aqua Clara acquisition gave BEVsystems control of a bottling facility
here in the United States, which has allowed us to launch Life O2 domestically
in a cost-effective manner. From a legal perspective, Aqua Clara was the
surviving company and thus continues its public company reporting obligations.
BEVsystems is currently traded on the NASDAQ bulletin board under the symbol
OTCBB: BEVI. From an accounting perspective, however, BEVsystems acquired Aqua
Clara; thus, all financial information reported to the SEC is presented using
generally accepted accounting principles for purchase accounting, and includes
BEVsystems results from the period April 1, 2001 to March 30, 2002 and Aqua
Clara's results from the period February 25, 2002 to March 30, 2002. Therefore,
financial information submitted to the SEC for the old Aqua Clara prior to the
Company's most recent form 10K, submitted on July 12, 2002, is not directly
comparable to the current company.

Company Strategy

BEVsystems plans to continue to sell its products directly to large merchants
and distributors under its trademarked Life O2 label in selected U.S. markets
and to license our technology to bottlers and distributors in other markets who
will bottle and sell water under their own label or co-branded labels using our
equipment and process technology.

Our growth strategy is to:

o Increase Consumer Awareness and Strengthen Brand Imaging: A key to the growth
of our company is educating the consumer on the advantages of oxygen enriched
water through published research, clinical studies, innovative product
marketing, and advertising including the use of unique packaging. We believe
that these activities increase the visibility and range of well-known brands. We
intend to continue to develop the type of innovative packaging that catches a
consumer's eye and increases sales.

o Expand and Improve Distribution: We plan to continue to expand in existing and
new geographic markets and channels of trade. We intend to focus our sales force
on continually improving relationships with distributors by assisting our
distributors in developing local marketing promotion campaigns, training
personnel, and participating in local customer visits. Finally, we intend to
pursue additional distributors in underserved markets to drive sales.

o Develop multiple brands: We are continually evaluating brand extensions such
as table waters, medical beverages, and beverages aimed at the nightlife market
that can be cost effectively introduced through our distribution network. In
addition, we are also evaluating other beverage categories that can be
introduced through our distribution network.

o Provide a balanced portfolio of revenue sources: We are developing multiple
revenue models such as direct selling, joint venturing and licensing to increase
the scale and global market footprint of the company. For each new market and
new initiative, we select from a wide variety of financial and partnering

                                        2
<PAGE>
options to execute the appropriate risk/reward solution.

o We believe that the initiatives underway, the portfolio approach to our
strategic initiatives, and the expertise and success record of our management
team in having developed similar business and revenue models in prior companies,
enable us to execute on our strategy. However, in order to develop and expand
the business, our plans call for us to expend significant funds in marketing,
sales and related product development and there can be no assurance that such
funds will be available to us or available on commercially reasonable terms.

Marketing

BEVsystems' marketing strategy is focused on positioning Life O2 as being a new
and exciting beverage that's first in its category within an important new niche
of the beverage industry.

o Life O2 is first in the category of oxygen-enhanced bottled waters. Pioneering
a new category incites curiosity in the consumer and almost guarantees an
initial trial and a desire to learn more about it. By claiming to be "The
Original", Life O2 is already drawing considerable attention to itself. By
asserting its position as the pioneer of the category, the consumer is urged to
consider Life O2 's product history and longevity in the marketplace. A
by-product of Life O2's claim as "The Original" pushes competitors to address
the issue of which product is "the oldest and wisest" in the category.

o Life O2 is a new beverage. Not only is Life O2 in a new category, it is also a
new beverage on the market. Consumers are constantly looking for the newest
thing on the shelf, and Life O2, with its limited exposure, is still considered
a new product, thereby sparking interest in the customer. Life O2 's
award-winning packaging also enhances the attraction to Life O2. The copy on the
label and the label's see-through design and graphics draw consumers to take a
closer look.

o Life O2 has created a niche market in the production of one of the first
"performance waters". It is not the goal to capture the entire water market, but
rather to position Life O2 as the leader and pioneer of this specific niche in
both the bottled water and sports drink categories.

The marketing agendas for both the domestic business (including retail trade and
home and office delivery) and the international business (licensees, bottlers
and distributors) segments of BEVsystems is based on the cost-effective,
"Gorilla Marketing" concepts used by PowerBar and Arizona Iced Tea and include
the following major components:

Published Research

Market Research - To identify target market segments and the ideal approach for
each group.

Medical/ Scientific Research - To further validate the beneficial impact of
oxygenation on athletic performance and human well-being.

Website

The Company's interactive website (www.LifeO2.com) and www.Bevsystems.com are
designed to communicate with retailers, distributors and Life O2 consumers. The
content of the site includes sections and web pages devoted to each of the
following: Company, Management, Product, Research, Investor Information, Stock
History, Press Kit, Press Releases, In The News Calendar of Promotional Events,
and Frequently Asked Questions. Also to be included are listings of retailers
and distributors, both domestic and international; an online store with product
and branded merchandise available for purchase with shipping available
world-wide;

                                        3
<PAGE>
and electronic versions of the BEVsystems custom-published LifeStyle magazine
and company newsletter, Oxygen.

Point-of-Purchase (P.O.P.) Materials

BEVsystems' Sales Representatives outfit many new retail stores with stacker
posters, hanging mobiles (3-sided posters), bottleneck rings, window posters,
Q&A tri-fold brochures, and barrel & refrigerated coolers. The Company will
continue to enhance the current P.O.P. materials and will develop new
promotional pieces to attract the attention of shoppers and to further promote
the Life O2 products.

Event Marketing

BEVsystems sponsors a variety of high-profile and grass roots events and
activities to promote product and brand awareness. In the initial model market
of South Florida, BEVsystems has focused on a mix of athletic contests, sporting
events and community-related charity activities, including the NASDAQ-100
International Tennis Open, the Coconut Grove Art Festival, the Veteran's Day
N'SYNC Benefit Concert for Victims of 9/11, the Miami Corporate Run and the
Ocean Drive Magazine VolleyPalooza Beach Volleyball Tournament. Life O2 is the
"Official" Water of all of these events. Most of the aforementioned events are
negotiated to include product sale opportunities resulting in reduced cost to
the Company based on product trade or profits earned from the sale of water in
exchange for sponsorship fees charged upfront by the event.

Trademarks

In connection with the purchase of assets from Life International previously
described, we acquired the exclusive rights to use Life International's patents
for the oxygen enrichment of human consumables, including bottled water. Life
International has been granted seven U.S. patents and eighteen international
patents covering the processes our distributors and co-packers use to enhance
the oxygen content of bottled water. Life International has made applications
for one or more of these patents in a number of other countries, certain of
which are presently pending and certain of which have been issued. We also
acquired the trademarks Life O2 and OXYLOC. These trademarks have been
registered in the U.S. and 35 other countries, and applications have been made
for the Life O2 mark in a number of other nations. In many cases our
distributors have chosen to market the oxygenated water product under their own
private labels, in which case the label still displays the Life O2 logo
somewhere on the bottle.

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

The Company believes that its common law and registered trademarks have
significant value and goodwill and that some of these trademarks are
instrumental in its ability to create demand for and market its products. There
can be no assurance that the Company's common law or registered trademarks do
not or will not violate the proprietary rights of others, that they would be
upheld if challenged or that the Company would, in such an event, not be
prevented from using the trademarks, any of which could have an adverse effect
on the Company.

                                        4
<PAGE>
Domestic Business Unit

Market Analysis

The Company competes in a new, rapidly evolving and highly competitive and
fragmented market. We expect competition to intensify in the future. We believe
that the main competitive factors in the bottled water market are brand
recognition, product quality, product placement and availability and cost. We
compete in the oxygenated bottled water market with Talking Rain (Airwater),
O2Go and a variety of start-ups, and in general with other bottled waters and
sports drinks. Many large bottled water companies that may become our
competitors have strong relationships with mass merchandisers and entrenched
shelf space commitments. They may be able to leverage their existing
relationships to carry alternative oxygenated water offerings. We also
anticipate that other companies may enter our market with comparable or better
products, greater financial resources or greater brand recognition, although we
are not aware of any such introductions. We plan to continue to improve the
dissolved oxygen content and shelf life of our current products and introduce
new products, and we expect our competitors to continue to improve their
products. We plan to continually research ways to improve the oxygen content of
our product.

To be competitive, the company must continue to invest significant resources in
research and development, advertising and marketing. However, given the current
worldwide intense level of interest in fitness and health, we believe that the
super-oxygenated water category will grow to very high levels of use. The
oxygenated water category is relatively new, and less than 1% of all bottled
water sold worldwide has an enriched oxygen content. Company efforts will be
focused on increasing revenue in the future by raising consumer awareness of the
benefits of using oxygenated bottled water instead of mineral waters and sports
drinks. We expect that the oxygenated water market will be characterized by
rapid technological change; therefore company efforts will also include
continued research into ways to improve our product lines and manufacturing
technology. Increased competition in the oxygenated water category will require
us to rapidly evolve and adapt our products to remain competitive. The
successful operation of our business depends on our ability to implement new
bottling technology and packaging enhancements that respond to evolving industry
standards on a timely and cost-effective basis.

The U.S. bottled water market is very competitive and is dominated by six large
bottled water companies: Perrier Group (Arrowhead, Poland Springs, Zephyrhills,
Ozarka, Deer Park); Suntory International (Hinckley & Schmitt, Crystal Springs);
McKesson Corporation (Sparkletts, Alhambra); Great Brands of Europe (Evian,
Dannon); Pepsi (Aqua Fina); and Coke (Dasani). The top eleven bottled water
brands together represent only a 40% brand share with over 44% of bottled water
market share being attributed to a large number of small companies.

Most bottled water companies are small, regional enterprises because the vast
majority of bottled waters are spring waters. Due to the high cost of
transportation, these companies are limited in the geographical range in which
they can sell their product and still maintain an acceptable profit margin.

The spring water manufacturers typically sell their products within 250 miles of
the water source. The largest bottled water companies (such as Perrier) have
grown their business primarily through the acquisition of regional producers and
then the promotion of each regional brand. Consolidation and acquisition appear
to be the trend in the industry for the foreseeable future.

The Bottled Water Web states that within the bottled water business there are
two distinct industries and segmentations. The biggest by volume is the
five-gallon or returnable container water business. The PET segment of the
industry, also known as 'Single Serve', is primarily positioned in retail. It
has developed only over the past decade, but now surpasses the five-gallon
segment in both volume and value. In many cases the industry leaders are the
same in both segments. For example, the Perrier group of America represents a
diverse

                                        5
<PAGE>
group of strong regional brands that include Arrowhead, Zephyrhills, Ozarka and
Poland Springs. All of these brands are available to consumers in both
five-gallon and Single Serve in the retail, home, and commercial markets in
their respective regional areas. As such, the Perrier Group of America currently
dominates both segments.

Bottled water consumers often purchase these and other brands at home or at the
office in the five-gallon format, but also purchase the smaller bottles from
retail for convenience. Bottled water industry experts also expect that many new
customers for home and commercial bottled water delivery will migrate to this
segment after being fully initiated to the benefits of bottled water by the
retail outlets. One of the factors driving the industry is the growth of the PET
sector in package sizes of 1.5 liter and smaller. In 1998, that sector of the
industry grew by more than 30 percent. 1997 figures indicate that more than 55.5
percent of all bottled water was sold at retail. That figure compares to 19.6
percent for home delivery and 17.9 percent for commercial sales. Information
Resources, Inc. reports that for the year ending July 15, 2001 US sales of
non-carbonated water reached $2.167 billion, a growth rate of 19.2 % for the
year.


The market universe for delivery of beverages is vast, and includes everything
from retail grocery and drug store chains to convenience store chains, vending
machines, health food and nutrition stores, to high schools, colleges,
restaurants and high-volume catering services. BEVsystems has identified other
markets specific to Life O2's properties and characteristics that will be
included in our primary list of distribution channels. These additional venues
include health clubs, spas, gyms, and high-altitude resorts, as well as sporting
events, nightclubs, concerts and other large venues. All of these venues are
serviced by two main distribution methods: direct sales and delivery (DSD) or
warehouse direct. DSD is primarily developed through beer and soft drink
distributors. Because margins are shrinking in the beer industry, some beer
distributors have been actively seeking non-alcohol beverages such as Life O2 to
expand their business into higher margin products. Soft drink distributors are
also ideal for a product like Life O2. We are presently in discussion with firms
representing both beer and soft drink distributors.

While some major grocery, drug and convenience store chains and buying clubs are
serviced through DSD, many receive their beverages directly from the warehouse.
Access to warehouse direct purchasing often requires that brokers have
established successful relationships with various chains, providing them with
profitable products from reliable companies. Due to the far-reaching geographic
nature of many national chains, a variety of brokers are usually necessary in
order to completely penetrate certain segments of the market universe for
beverages. A combination of DSD and brokers will be essential to the short and
long term success of Life O2.

Retail Trade

BEVsystems will grow retail sales through a network of independent distributors
and direct to chain opportunities with the following packages:

20 oz. Sport Cap 16.9 oz.

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We will utilize a hybrid distribution strategy so that each market will be
launched with nonexclusive independent distributors focused by county and class
of trade. Specifically, in each market we will pursue distributors that focus on
the following classes of trade:

Natural Food Stores Gyms and Health Clubs Convenience Stores and Gas Stations
Independents retailers

We will pursue large pharmacy, drug and grocery chain relationships through
distributors, brokers and direct through our own sales force depending on the
conditions in each market.

Domestic Marketing Plan - Retail Trade

The marketing plan for the Retail Trade business of BEVsystems will employ the
goals and direction outlined previously in the Marketing Division Section.. Life
O2 will promote its product through event marketing at major public venues like
marathon races, outdoor concerts, sporting events and anywhere that people
interested about health and wellness might gather. At these events Life O2 will
be providing samples of our SuperOxygenated product, informing the consumer
about the benefits of drinking water and oxygen, promoting the brand name and
recognition and introducing more consumers to Life O2. These trades include
individual convenience stores, health clubs, gas stations, delis, etc.

Pricing and Revenue Model

                            Independent Distributors:

Life O2 Retail case pricing and system profit for independent distributors will
be as follows:


20 oz. Sport Cap
----------------
Life O2 Front Line Price to Retailers                         $16.95
--------------------------------------------------------------------
Distributor COGS                                              $12.00
--------------------------------------------------------------------
Introductory Discount                                         $ 1.50
--------------------------------------------------------------------
Distributor Gross Profit per case                             $ 3.45
--------------------------------------------------------------------
Life O2 Price to the Distributor                              $12.00
--------------------------------------------------------------------
BEVsystems COGS                                               $ 6.50
--------------------------------------------------------------------
Introductory Discount                                         $ 1.50
--------------------------------------------------------------------
BEVsystems Gross Profit per case                              $ 4.00
--------------------------------------------------------------------
16.9 oz. Flat Cap
-----------------

Life O2 Front Line Price to Retailers                         $14.95
--------------------------------------------------------------------
Distributor COGS                                              $10.00
--------------------------------------------------------------------
Introductory Discount                                         $ 1.00
--------------------------------------------------------------------
Distributor Gross Profit per case                             $ 3.95
--------------------------------------------------------------------
Life O2 Price to the Distributor                              $10.00
--------------------------------------------------------------------
BEVsystems COGS                                               $ 6.50
--------------------------------------------------------------------
BEVsystems Gross Profit per case                              $ 3.50
--------------------------------------------------------------------


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Government Regulations

The Federal Food and Drug Administration ("FDA") regulates bottled water as a
"food." Accordingly, the Company's bottled water must meet FDA requirements of
safety for human consumption, of processing and distribution under sanitary
conditions and of production in accordance with the FDA "good manufacturing
practices." To assure the safety of bottled water, the FDA has established
quality standards that address the substances that may be present in water which
may be harmful to human health as well as substances that affect the smell,
color and taste of water. These quality standards also require public
notification whenever the microbiological, physical, chemical or radiological
quality of bottled water falls below standard. The labels affixed to bottles and
other packaging of the water is subject to FDA restrictions on health and
nutritional claims for foods under the Fair Packaging and Labeling Act. In
addition all drinking water must meet Environmental Protection Agency standards
established under the Safe Drinking Water Act for mineral and chemical
concentration and drinking water quality and treatment, which are enforced by
the FDA.

The Company is subject to the food labeling regulations required by the
Nutritional Labeling and Education Act of 1990. The Company believes it is in
substantial compliance with these regulations.

The Company is subject to periodic, unannounced inspections by the FDA. Upon
inspection, the Company must be in compliance with all aspects of the quality
standards and good manufacturing practices for bottled water, the Fair Packaging
and Labeling Act, and all other applicable regulations that are incorporated in
the FDA quality standards.

In May 1996, new FDA regulations became effective which redefined the standards
for the identification and quality of bottled water. The Company believes that
it meets the current regulations of the FDA.

The Company's product labels are subject to state regulation (in addition to the
federal requirements) in each state where the water products are sold. These
regulations set standards for the information that must be provided and the
basis on which any therapeutic claims for water may be made. The Company
believes that it meets state regulations.

The bottled water industry has a comprehensive program of self-regulation. The
Company is a member of the International Bottled Water Association ("IBWA"). As
a member of the IBWA, the Company's Facilities are inspected annually by an
independent laboratory, the National Sanitation Foundation ("NSF"). By means of
unannounced NSF inspections, IBWA members are evaluated on their compliance with
the FDA regulations and the association's performance requirements, which in
certain respects are more stringent than those of the federal, and various state
regulations.

                                        8
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                           International Business Unit

                                (GRAPHIC OMITTED)

Eighty seven percent (87%) of the single-serve bottled water market is outside
the U.S. Europe is the single largest region, accounting for 49% of the world;
the U.S. accounts for 13%.

Whereas many U.S. based companies are only able to develop the U.S. before
moving overseas, BEVsystems' experience has been one of successfully addressing
the global markets concurrently.

BEVsystems has sold over 10 million bottles in international markets.

BEVsystems' International capabilities provide a strategic advantage. In
addition to providing a more balanced regional revenue portfolio, our global
scope and scale also provides us with cross-market synergies, and
barriers-to-entry for companies that can only compete on a local market basis.

Distributor, Licensee and Bottler Strategy

Distributors, Licensees, and Bottlers work in partnership with BEVsystems to
market, sell and distribute BEVsystems brand waters. The product itself is
either sold as Life O2 SuperOxygenated Water, or it is sold as a co-branded
oxygenated water product branded with the BEVsystems logo. This logo, placed on
the back of the bottle, indicates that the product is bottled to BEVsystems'
strict specifications using BEVsystems equipment and technology.

Critical to the short and long-term success of our business, to building
long-term sustainable brand equity and to ensuring our aggressive rollout
schedule, is to carefully choose and align with partners that possess the
critical success factors. We will be very selective in order to develop
partnerships with companies / business groups that exhibit:

o Local Knowledge (know-how and know-who)

o Philosophy consistent with ours of providing a superior product and exceeding
customer expectations

o Marketing expertise (and specifically in our consumer target segments)

o Distribution strength, which may require several distributors to ensure we are
penetrating multiple relevant channels. For instance for Life O2 positioning to
the health and fitness target consumer, distribution will need to reach health
and fitness clubs, health food stores, gourmet food stores, sporting

                                        9
<PAGE>
goods stores, pharmacies, etc.

o Product Sourcing Logistics, either for importation of product or local
production (bottling, proximity to water source)

o Extensive Financial Resources

BEVsystems is the global category leader in super oxygenated water, and we will
align ourselves with world-class partners.

Parameters for granting an Exclusive Master Country License

BEVsystems typically does not provide exclusive agreements for a country, since
we prefer to partner with multiple distributors to ensure we have the requisite
regional and channel coverage. However, we will grant an exclusive agreement for
a country if we are convinced that the local group has the required financial,
marketing and distribution resources.

The parameters to grant exclusivity are:

1. Master Franchising Fee for a country: this is an upfront fee in return for
granting country exclusivity for distribution of our products. The fee is based
on the size of the market, but in any event it is at least US$50,000.

2. Royalty (typically US$ 0.04 per liter) on sales

3. When converting to local production, versus importing from one of our
sources, leasing of BEVsystems patented equipment (which connects to most water
or soft drink bottling lines). The latest version of our equipment leases for
US$75,000.

4. Strong local partners and resources, including the following competencies in
the business group:

o Consumer Marketing Savvy

o Distribution Expertise and Strength

o Logistics or Local Production capability

o Extensive Financial Resources and access to capital

Parameters for developing International Joint Ventures

BEVsystems will create joint ventures with strong local partners if this is
required to proactively develop an international market.

o BEVsystems would form a JV company with a few, selected local partners that
would provide BEVsystems with the resources and infrastructure necessary to make
a rapid and successful entry into the market

o Levels of participation would be determined on the value of assets and
intangibles pledged; in the case of BEVsystems, we would provide the
intellectual property, know how and specialized support for the project.

o The shareholders would appoint the managing director who would form an
executive board reporting to the shareholder board. In the event of a transfer
of ownership of BEVsystems, we would have a call on the JV. The shareholders
would be aware of the exit strategies and anticipated duration of their
investment.

                                       10
<PAGE>
Revenue Model - A Balanced Portfolio of Short and Long-term Revenue Streams

International Revenue benefits from three revenue streams:

Direct Sales

Product sales, which consist of revenues from bottle water sales of product that
is produced for us at a co-packing facility and sold to a wholesale distributor.
There is no royalty or any type of fees associated with this revenue stream. We
produce the water and sell it to customers.

Licensing

We approach licensing not as a Strategic direction but as a Financial Model. Our
Strategic direction is to focus on the Consumer and our Partners with a unique
"point-of-difference" product and business proposition. Licensing provides
faster rollout, access to capital, local knowledge know-how, and the highest
margins (around 50%) and IRR.

Our licensing program benchmarks against leading licensing and bottling
companies, both in terms of Licensor fees / Royalty rates and the Licensor
services, marketing, research and support which will be required to support
BEVsystems licensing proposition. There are three revenue elements:

1. License Fees, which are revenues derived from a bottler that uses our
proprietary technology to produce Life O2 SuperOxygenated water. A license fee
of at least $50,000 is paid up front to begin the installation of the equipment
required to SuperOxygenate the bottler's water.

2. Lease Sales are derived from the lease of the oxygenating equipment described
above to the bottler. Equipment lease sales begin at $75,000 for a 3-year lease,
depending on the machine specifications, paid in full at the beginning of the
lease term. We plan to increase future lease fees to reflect various factors,
including the size of each licensee's market.

3. Royalty revenues are due on sales of product produced using our technology
and the leased equipment. Royalty ranges from 4% to 6% of the wholesale price of
water in the local market. Typical royalties are approximately $0.04/liter of
SuperOxygenated water.

The Partnership Approach

BEVsystems provides our partners with a unique, point-of-difference product
which will enhance their competitiveness / positioning in the marketplace. Our
line of products delivers a unique selling proposition "USP":
super oxygenated water and its attendant benefits.

BEVsystems supports the international business by providing:

o Equipment and technical support

o Proprietary technology and trade secrets protected by patents and trademarks.

o On-going research to provide scientific data and support in the form of white
papers and published results

o Collateral support explaining the benefits of Life O2 SuperOxygenated water.
This material is suitable for limited distribution to first-tier corporate-level
clientele.

o Marketing materials outlining the corporate goals of BEVsystems International.

o Point-of-Purchase materials designed to support the domestic marketing of Life
O2 bottled water is available, when appropriate, for international use.

o Quarterly newsletters designed to keep global BEVsystems licensees aware of
what other international partners are accomplishing and to keep up-to-date on
industry happenings.

                                       11
<PAGE>
o Marketing support for new product launches and Co-op funds for mutually agreed
marketing programs.

BEVsystems Licensees, Bottlers and Distributors provide support in the following
ways:

o Conducting market research on customer base specific to the licensee.

o Implementing marketing programs to achieve sales projections.

o Forming sales force, promotional team, and operations to support these
efforts.

o Creating and supplying marketing materials to support the sales and promotions
groups.

o Print, radio and TV advertising campaigns.

o Event Marketing to promote benefits of BEVsystems through regional and
national sports competitions.

o Sports endorsements from both professional and amateur athlete via performance
and testimonials.

o Ensuring distribution coverage and logistics in each targeted distribution
channel and geographic region.

The licensee is best suited for communicating directly with its own customer
base because they know their clientele and market base better than anyone else.
It is crucial that industry-wide buying practices, known often from only a
global perspective, be tempered with cultural and regional factors known best by
the local licensee.

The results of a successful product launch and profitable sales benefit both
BEVsystems and the licensee; therefore, both share the costs and
responsibilities. BEVsystems supports the international side of the business
with communications on a corporate level, providing supporting materials
relative to the efficacy of oxygenated water on health and well-being, on the
bottled water industry and about the company itself. The international
licensees, bottlers and distributors supplement the BEVsystems marketing agenda
and materials with their own marketing plan and resources. BEVsystems licensees
have a vested interest in supporting their own business and are committed,
thereby, to supporting their BEVsystems venture. For example, the recent launch
in Chile, South America, of Life O2 's co-branded product was supported with
radio, TV and print advertising, a national sales organization, and a team of
professional promoters targeted at sporting events, health clubs, etc.

Current Distribution / Licensee Network

We have a network of distributors or licensees that have exclusive and
non-exclusive rights to sell oxygenated water using our proprietary technology
in their respective territories. The following table sets forth for each
territory the distributor, the bottler(s) that use the BEVsystems units to
produce the oxygenated bottled water they sell, the branding of the product and
packaging and the actual or estimated future launch date. In some cases we are
relaunching our product line with more impactful packaging and a comprehensive
marketing program.

                                       12
<PAGE>
<TABLE>
<CAPTION>
Country                Distributor             Bottler or Co-Packer              Product                Launch Date
---------------------- ----------------------- --------------------------------- ---------------------- -------------------
<S>                           <C>                    <C>                                <C>              <C>
Canada                 Clearly Canadian         Clearly Canadian Beverages (US)  Clearly Canadian O +2  Spring 1999
                                                Burlington, WA                   20oz.PET bottle
                                                                                 Flavors Plain, Berry
                                                                                 Citrus, fruit Citrus

---------------------- ----------------------- --------------------------------- ---------------------- -------------------
Japan                  Nihon  Shokken           Stonepoint   Group,   Vancouver, Balance  Date +02 500  June 1999
                       Company, Ltd.            B.C., Canada                     ml PET bottle
---------------------- ----------------------- --------------------------------- ---------------------- -------------------
Chile                  ECUSA                    CCT / ECUSA                      CachantunO2 500 ml     July 2001
                                                Santiago, Chile                  PET 44 gm bottle
---------------------- ----------------------- --------------------------------- ---------------------- -------------------
Norway,   Sweden,      Fontana Mineralvann AS   Telemark   Kildevann  AS  (TKV), Life 02                Relaunch
Denmark,  Finland,  &                           Telemark, Norway                 20 oz. PET bottle      April 2002
Iceland
---------------------- ----------------------- --------------------------------- ---------------------- -------------------
United Kingdom         Ceuta Healthcare         Telemark   Kildevann  AS  (TKV), Life 02                Relaunch
                                                Telemark, Norway                 20 oz. PET bottle      April 2002
---------------------- ----------------------- --------------------------------- ---------------------- -------------------
Germany,   Austria  &  Schweizer/Dega Sport     Telemark   Kildevann  AS  (TKV), Life 02                Summer 2002
Switzerland                                     Telemark, Norway                 20 oz. PET bottle
---------------------- ----------------------- --------------------------------- ---------------------- -------------------
Slovak & Czech         Life Water s.r.o.        Life Water s.r.o.                                       Summer 2002
Republics
---------------------- ----------------------- --------------------------------- ---------------------- -------------------
Hungary                Green Water ktf.         Green Water kft.                 Life 02                Summer 2002
                                                Budapest, Hungary                20 oz. PET bottle
                                                                                 1.5 L PET bottle
                                                                                 500 ml glass bottle
---------------------- ----------------------- --------------------------------- ---------------------- -------------------
Brazil                 Madesa do Brasil         CTF Comercial LTDA               Life 02                TBD
                                                Budapest, Hungary                20 oz. PET bottle
                                                                                 1.5 L PET bottle
                                                                                 500 ml glass bottle
---------------------- ----------------------- --------------------------------- ---------------------- -------------------
Australia/ N.Z.        Marketing Brokers N.Z.                                    Life 02                TBD
                                                                                 20 oz. PET bottle
---------------------- ----------------------- --------------------------------- ---------------------- -------------------
</TABLE>
BEVsystems has written agreements with each of the distributors or licenses
referred to in the preceding table. The agreements are typically either for a
fixed term renewable at the option of the distributor, unless the distributor
has not met certain performance requirements.

Each of the current agreements provides that we may terminate the agreements for
cause and that the distributor may generally terminate its agreement upon
specified prior notice.

Market Development Schedule

We have an aggressive, yet realistic new market rollout schedule. As previously
discussed, carefully choosing our partners is critical to attaining these tight
deadlines. Based on prior experience our executive team has had in both the
beverage and licensing businesses, it typically requires 6 to 9 months to launch
a new international market, moving through the following steps:

1. Market Research / Identification of Partners
2. Preparation of a business plan and prospectus outlining the structure,
capitalization and anticipated results of the license or joint venture, specific
to that market
3. Negotiation
4. Approval from the relevant Government entities
(local version of FDA, IRS, Dept. of Commerce, etc)
5. Contract and License
6. Phase 1 Launch, utilizing imported product supported with a focused marketing
program

                                       13
<PAGE>
7. Installation of patented BEVsystems equipment
8. Phase 2 Launch, with local production supported with a comprehensive
marketing program.

Employees

As of July 15, 2003, the company had three employees. Unions represent none of
our employees and we believe our employee relations are good. All of the senior
management and officers have employment agreements with the Company. All
employees participate in the Company's Employee Stock Option Plan after 90 days
of employment.

Item 2. Description of Property

Facilities

Our principal executive offices occupy approximately 1,600 square feet of office
space in Miami, Florida, at an annual cost of approximately $69,000 per year.
The Company also owns a bottling facility in Clearwater, Florida that includes
the plant building with approximately 14,000 sq. ft. under roof with an exposed
four-bay loading dock sitting on 2.1 acres. Our manufacturing plant in
Clearwater, Florida has been shut down and the Company accepted a bid for the
plant and land for $850,000. As such, the plant and land have been written down
to their fair value of $850,000 less estimated costs of sale of $69,500 at March
29, 2003. All of the staff required for the operations of the plant have been
laid off.

Item 3. Legal Proceedings

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

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

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

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

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

                                       14
<PAGE>
an indemnification agreement Wasser executed with the Company to assume all
payroll as of February 2003. Defenses have been filed. The Company has a
reasonable likelihood of prevailing on the merits of the case.

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

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

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

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

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

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

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

The real estate in Clearwater, Florida is in foreclosure with the first and
second mortgage holder, Yale Mortgage and Brickell Bay Fund. Mortgages amount to
approximately $720,000.

                                       15
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders

On October 21, 2002, the Board of Directors and shareholders for BEVsystems
International, Inc. approved a Certificate of Amendment to the Articles of
Incorporation to authorize the increase of the Company's authorized capital
common shares from one hundred million (100,000,000) (no par value) common
shares to six hundred fifty million (650,000,000) (no par value) common shares.

Also, on October 21, 2002, the shareholders approved a recommendation by the
Company's Board of Directors that the shareholders direct the President to
conclude the negotiations with Alfresh Beverages of Canada and enter a
definitive agreement.

On October 21, 2002, the shareholders approved the Board of Directors'
recommendation that the Company's domicile be changed from Colorado to Florida.

                                       16

<PAGE>
                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters

The Company's Common Stock is eligible to be traded in the over-the-counter
market and quotations are published on the OTC Bulletin Board under the symbol
"BEVI.OB," and in the National Quotation Bureau, Inc. ("NQB") "pink sheets"
under BEVsystems International, Inc. Inclusion on the OTC Bulletin Board permits
price quotations for the Company's shares to be published by such service.

The following table sets forth the range of high and low bid prices for the
Company's Common Stock for each quarterly period. Such information reflects
inter dealer prices without retail mark-up, mark- down or commissions and may
not represent actual transactions. The prices have been adjusted to reflect the
reverse 10-for-1 split declared on March 15, 2002.



Fiscal Year Ending March 29, 2003            High           Low
---------------------------------            ----           ---

  First Quarter                              1.07           0.19
  Second Quarter                             0.44           0.06
  Third Quarter                              0.10           0.02
  Fourth Quarter                             1.90           0.05

Fiscal Year Ending March 30, 2002            High           Low
---------------------------------            ----           ---

  First Quarter                              1.90           1.40
  Second Quarter                             1.20           0.51
  Third Quarter                              0.70           0.60
  Fourth Quarter                             1.16           0.57

Fiscal Year Ending March 31, 2001            High           Low
---------------------------------            ----           ---

  First Quarter                              3.35           1.35
  Second Quarter                             1.80           1.00
  Third Quarter                              1.20           0.48
  Fourth Quarter                             1.90           0.66

Fiscal Year Ending April 1, 2000             High           Low
---------------------------------            ----           ---

  First Quarter                              4.75           2.20
  Second Quarter                             4.30           1.20
  Third Quarter                              2.00           0.80
  Fourth Quarter                             4.70           1.25



On January 2, 2003, the Board of Directors authorized a 200:1 reverse stock
split.

As of March 29, 2003, there were approximately 548 record holders of Company
common stock, which figure does not take into account those shareholders whose
certificates are held in the name of broker-dealers.

                                       17
<PAGE>
Below is a summary of securities transactions from inception to date.

In April 2001, the Company issued 4,200,000 shares of common stock to founders
of the Company for $42,000.

On April 18, 2002 the Company filed a Form S-8 registration statement
registering the issuance of 6,000,000 shares of common stock for past and
continued services of officers, directors, third party consultants and certain
employees.

On August 30, 2002 the Company filed a Form S-8 registration statement
registering the issuance of 8,000,000 shares of common stock for past services
provided by its officers, directors, certain employees and consultants and to
provide for continued services to the Company.

On September 27, 2002 the Company filed a Form S-8 registration statement
registering the issuance of 8,000,000 shares of common stock for past services
provided by its officers, directors, certain employees and consultants and to
provide for continued services to the Company.

On November 8, 2002 the Company filed a Form S-8 registration statement
registering the issuance of 17,500,000 shares of common stock for past services
provided by its officers, directors, certain employees and consultants and to
provide for continued services to the Company.

On February 25, 2003 the Company filed a Form S-8 registration statement
registering the issuance of 900,000 shares of common stock under certain
consulting agreements.

On May 8, 2003 the Company filed a Form S-8 registration statement registering
the issuance of 7,550,000 shares of common stock under the Company's 2003 Stock
Incentive Plan and under certain consulting agreements.

On July 10, 2003 the Company filed a Form S-8 registration statement registering
the issuance of 9,500,000 shares of common stock under the Company's 2003 Stock
Incentive Plan #1 and under certain consulting and settlement agreements.

Life International Asset Acquisition

BEVsystems International, Ltd. entered into an asset purchase agreement with
Life International, an oxygenated beverage company. The asset purchase was
completed on July 13, 2001, and included patent and trademark rights,
distributor contracts, and the oxygenated equipment and inventories. To acquire
the assets, BEVsystems International, Ltd. paid Life International $1,020,000 in
cash, and issued to Life International 6,917,647 shares of common stock and
1,991,210 warrants to acquire additional shares.

Aqua Clara Acquisition

BEVsystems International, Ltd. entered into an Agreement for the Purchase and
Sale of Stock (the "Agreement") with Aqua Clara Bottling & Distribution, Inc.
and Subsidiaries ("Aqua Clara") on January 15, 2002. As of February 25, 2002,
Aqua Clara had 79,991,535 common shares issued and outstanding prior to a 1 for
10 reverse stock split which reduced this number to 7,999,196. The Company also
had 100 shares of preferred stock issued and outstanding as of February 25,
2002. Upon execution of the Agreement, holders received for each share of
BEVsystems International, Ltd. common stock and warrants, 1.6738 shares of Aqua
Clara's common stock and warrants.

The Company recorded an additional 7,999,196 shares of common stock, 100 shares
of preferred stock

                                       18
<PAGE>
(valued as if converted to 174,825 shares of common stock) and 5,176,754 options
to purchase shares of common stock in connection with the acquisition of Aqua
Clara.

The Company has determined the net purchase price of Aqua Clara to be
$13,831,661 calculated as follows: A gross valuation of $14,685,806, based on
the closing price as of the date of acquisition of $1.10 per share multiplied by
the outstanding shares, options, less proceeds from the exercise of options of
$2,573,561, plus net liabilities assumed of $1,719,416.

Private Placements

In July 2001, the Company completed a private placement of $1,787,500,
consisting of 27,199 shares of the Company's common stock at $66 per share and
27,199 warrants, exercisable at $132 and expiring on May 1, 2003.

In December 2001, the Company raised an additional $247,500 through a private
placement of 3,766 shares of common stock at $66 per share.

In February 2002, the Company raised an additional $965,000 through a private
placement of 10,768 shares of common stock at $90 per share.

Mortgage

On July 31, 2002, one of the Company's shareholders entered into a $420,000
mortgage note payable on behalf of the Company. The note is due on August 1,
2012 and has an initial interest rate of 12.99%. The interest rate will be
adjusted annually, commencing August 1, 2003, to a rate equal to 6.00% above the
prime rate and shall never be less than 12.00% per year. The mortgage is secured
by the shareholder's property. At March 29, 2003, the balance of the mortgage
was $419,200.

Mortgage Loan and Collateral Assignment

In May 2002, the Company entered into an agreement with Brickell Bay Capital
Fund, LLC to extend the maturity date of its $300,000 convertible promissory
note to October 4, 2002. As part of the agreement, the Company is required to
pay past due interest totaling $18,375 and issue warrants to purchase 502,140
shares of the Company's common stock at an exercise price of $0.33 per share. In
addition, on April 4, 2002, the Company entered into a Collateral Assignment of
Rents, Leases and Profits ("Collateral Assignment") with Brickell Bay Capital
Fund, LLC whereby the underlying property was assigned to Brickell Bay as
collateral for the $300,000 note. The warrants were exercised on May 30, 2002.

Issuance of Convertible Promissory Notes

On October 22, 2001, the Company entered into a series of three convertible
promissory notes with Financial Partners Network Corporation in the amount of
$100,000, $100,000 and $62,584. The notes were due April 22, 2002 and had an
interest rate of 10.5% per year. The notes were convertible, at the option of
the holder, into shares of the Company's common stock at an initial conversion
price of $0.55 per share. The conversion price was subject to adjustment if the
Company issued additional shares of its common stock without consideration or
for a consideration per share less than the conversion price in effect
immediately prior to the issuance of such additional shares of common stock. On
January 21, 2003, all three notes, inclusive of accrued interest, were converted
into 1,710,753 shares of the Company's common stock at a rate of $0.108 per
share. The Company also granted warrants to Financial Partners Network
Corporation to purchase 2,198 shares of the Company's common stock at an
exercise price of $65.99 per share expiring November 10, 2006. In lieu of
exercising the warrant by paying the per share warrant price, the holder may
execute a cashless exercise in

                                       19
<PAGE>
accordance with the formula set forth in the warrant agreement.

On November 5, 2001, the Company entered into a $100,000 convertible promissory
note with F. Howard Walsh, Jr. The note was due November 5, 2002 and had an
interest rate of 10.5% per year. The note was convertible, at the option of the
holder, into shares of the Company's common stock at an initial conversion price
of $0.55 per share. The conversion price was subject to adjustment if the
Company issued additional shares of its common stock without consideration or
for a consideration per share less than the conversion price in effect
immediately prior to the issuance of such additional shares of common stock. The
note, including accrued interest, was converted into 837 shares of the Company's
common stock. The Company also granted warrants to F. Howard Walsh, Jr. to
purchase 609 shares of the Company's common stock at an exercise price of $65.99
per share expiring November 5, 2004. The warrants were exercised on January 24,
2002 for a total of $40,000.

On November 15, 2001, the Company entered into a $200,000 convertible promissory
note with Robert & Elaine Tatum. The note was due May 15, 2002 and had an
interest rate of 10.5% per year. The note was convertible, at the option of the
holder, into shares of the Company's common stock at an initial conversion price
of $0.55 per share. The conversion price was subject to adjustment if the
Company issued additional shares of its common stock without consideration or
for a consideration per share less than the conversion price in effect
immediately prior to the issuance of such additional shares of common stock. On
January 21, 2003, the note, including accrued interest, was converted into
3,571,424 shares of the Company's common stock at a rate of $0.108 per share.

On December 21, 2001, the Company entered into a $20,000 convertible promissory
note with Antony DaCruz. The note is currently in default and was due June 21,
2002 and has an interest rate of 10.5% per year. The note is convertible, at the
option of the holder, into shares of the Company's common stock at an initial
conversion price of $0.55 per share. The conversion price is subject to
adjustment if the Company issues additional shares of its common stock without
consideration or for a consideration per share less than the conversion price in
effect immediately prior to the issuance of such additional shares of common
stock. The Company also granted warrants to Antony DaCruz to purchase 122 shares
of the Company's common stock at an exercise price of $65.99 per share expiring
November 5, 2004.

On December 21, 2001, the Company entered into a $40,000 convertible promissory
note with Irarrazaval. The note is currently in default and was due June 21,
2002 and has an interest rate of 10.5% per year. The note is convertible, at the
option of the holder, into shares of the Company's common stock at an initial
conversion price of $0.55 per share. The conversion price is subject to
adjustment if the Company issues additional shares of its common stock without
consideration or for a consideration per share less than the conversion price in
effect immediately prior to the issuance of such additional shares of common
stock. The Company also granted warrants to Irarrazaval to purchase 243 shares
of the Company's common stock at an exercise price of $65.99 per share expiring
November 5, 2004.

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

                                       20
<PAGE>
In May 2002, the Company entered into an agreement with Brickell Bay Capital
Fund, LLC ("Brickell Bay") to extend the maturity date of its $300,000
convertible promissory note to October 4, 2002. As part of the agreement, the
Company was required to pay past due interest totaling $18,375 and issue
warrants to purchase 2,511 shares of the Company's common stock at an exercise
price of $65.99 per share. In addition, on April 4, 2002, the Company entered
into a Collateral Assignment of Rents, Leases and Profits ("Collateral
Assignment") with Brickell Bay whereby the Company's manufacturing plant in
Clearwater, Florida and land was assigned to Brickell Bay as collateral for the
$300,000 note. On May 30, 2002, Brickell Bay exercised warrants relating to a
previous agreement to purchase 2,511 shares of the Company's common stock for a
total consideration of $165,706. In June 2003, Brickell Bay filed a foreclosure
action against the Company for nonpayment.

On May 15, 2002, the Company entered into an $80,000 convertible promissory note
with Douglas and Kristen Cifers. The note was due August 15, 2002 and had an
interest rate of 12.0% per year. The note was convertible, at the option of the
holder, into shares of the Company's common stock at an initial conversion price
per share equal to the lesser of (i) the average of the lowest 3 day trading
prices during the 5 trading days immediately prior to the conversion date
discounted by 25%, or (ii) the average of the lowest 3 day trading prices during
the 5 trading days immediately prior to the funding date. On January 21, 2003,
the note, including accrued interest of was converted into shares of the
Company's common stock at a rate of $0.108 per share. The Company also granted
warrants to Douglas and Kristen Cifers to purchase 1,200 shares of the Company's
common stock at an exercise price equal to the lesser of (i) the average of the
lowest three day trading prices during the five trading days immediately prior
to the conversion date discounted by 25%, or (ii) the average of the lowest
three day trading prices during the five trading day immediately prior to the
funding date. The warrant is callable by the Company when the five-day average
closing stock price exceeds 120% of the five day average closing price prior to
the funding date. The warrant expires on April 30, 2005.


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


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

                                       21
<PAGE>
On July 5, 2002, the Company entered into a $250,000 convertible promissory note
with Crescent International, Ltd. The note is due July 5, 2003 and does not bear
interest, except in the case of default. The note is convertible, at the option
of the holder, into shares of the Company's common stock at an initial
conversionprice per share equal to the lesser of (i) the average of the 5 day
closing bid prices during the 5 trading days immediately prior to the conversion
date discounted by 25%, or (ii) $60. The conversion price is subject to
adjustment if the Company issues additional shares of its common stock without
consideration or for a consideration per share less than the conversion price in
effect immediately prior to the issuance of such additional shares of common
stock. The conversion price is also subject to adjustment so that the number of
shares into which the note is converted does not exceed the number of shares
such that, when aggregated with all other shares of common stock then
beneficially or deemed beneficially owned by the holder, would result in the
holder owning more than 9.999% of all such shares of common stock as would be
outstanding on the conversion date. The balance of the note at March 29, 2003
was $250,000. In August 2003, $30,000 of the note was converted into 2,500
shares of the Company's common stock. The Company also granted warrants to
Crescent International, Ltd. to purchase 1,667 shares of the Company's common
stock at an exercise price equal to the closing bid price of the Company's
common stock on the day Crescent International, Ltd. wired the funds for the
convertible note, which was agreed to be $72.00 per share. The warrant is
callable at the Company's option, provided that the closing bid prices for the
five days preceding the date the Company exercises such option exceeds 140% of
the warrant exercise price and that an effective registration statement is in
place.

On August 4, 2002, the Company executed a $75,000 promissory note to Joseph
Canouse bearing interest at 10% per annum with principal and all accrued
interest payable in full on March 4, 2003. The note is secured by 50,000 shares
of the Company's common stock. The holder of the note is entitled, at its
option, to convert at any time, the principal amount of the note and accrued
interest at a conversion price equal to the latest five day average of the
closing bid price of the Company's common stock into such shares of the
Company's common stock. The shares to be issued pursuant to this note shall
contain unlimited piggyback registration rights. Any overdue payment of
principal on the note shall bear interest at 15% per annum until paid. On
February 5, 2003, the Company issued 50,000 shares of its common stock in
satisfaction of the note.

Issuance of Warrants

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

Issuance of Warrants for Settlement of Debt:

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


Issuance of Common Stock for Settlement of Debt

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

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


                                       22
<PAGE>
Issuance of Common Stock and Warrants for Consulting Services

In January 2002, the Company issued 110 shares of common stock for services
rendered.

In March 2002, the Company entered into a one-year agreement with a consultant
for services to be provided. The Company agreed to issue the consultant 500
shares of its common stock each month. In addition, the Company agreed to pay
the consultant up to $600,000 of its common stock over the term of the
agreement. The Company also agreed to grant the consultant the right to purchase
3,000 shares of its common stock at a price of $80 per share during the term of
the agreement. The consultant is also entitled to receive additional
compensation for other services provided, as defined in the agreement. The
agreement was amended on June 6, 2002, whereby the Company agreed to grant the
consultant the right to purchase 3,000 shares of the Company's common stock at a
40% discount to the average of the three highest closing bid prices of the
Company's common stock as of the date of notice. In April 2002, the consultant
exercised her right to purchase 500 shares of the Company's common stock at a
40% discount.

In March 2002, the Company entered into a one-year agreement with a consultant
for services to be provided. The Company agreed to issue the consultant 500
shares of its common stock each month. In addition, the Company agreed to pay
the consultant up to $600,000 of its common stock over the term of the
agreement. The Company also agreed to grant the consultant the right to purchase
3,000 shares of its common stock at a price of $80 per share during the term of
the agreement. The consultant is also entitled to receive additional
compensation for other services provided, as defined in the agreement. The
agreement was amended on June 6, 2002, whereby the Company agreed to grant the
consultant the right to purchase 3,000 shares of the Company's common stock at a
40% discount to the average of the three highest closing bid prices of the
Company's common stock as of the date of notice. On January 15, 2003, the
Company entered into another agreement with the same consultant for a period of
six months. The Company agreed to pay the consultant an amount of common stock
in an amount not less than 7.00% of the fully diluted post recapitalization
shares of the Company. The consultant was issued 718,553 common shares valued at
$1,221,540 under this agreement, which is being expensed over the term of the
agreement. The consultant is also entitled to receive additional compensation
upon the occurrence of certain events, as defined in the agreement. During
fiscal 2003, the consulting firm exercised its right to purchase 1,125 shares of
the Company's common stock. The Company has valued the warrants at $160 using
the Black-Scholes Pricing Model. The value of the warrants has been expensed.

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


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

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

In April 2002, the Company issued 150 shares of its common stock to a consultant
for services to be provided. In addition, on April 10, 2002, the Company agreed
to pay the consultant $6,000 per month, beginning April 1, 2002, as a consulting
fee on an annual basis, which will be applied against media expenditures. Should
no media be placed, the $6,000 monthly consulting fee will be paid to the
consultant. On April 29, 2002, the Company agreed to set up a production account
with the consultant to cover various media-

                                       23
<PAGE>
related expenses to be incurred on behalf of the Company. The Company will issue
approximately $600,000 worth of restricted common stock to the consultant to
fund this account. The consultant is to liquidate the stock as needed to pay for
various media purchases made on behalf of the Company. The consultants handling
of the production account is currently being reviewed by the Company.

In June 2002, the Company entered into a three month consulting agreement with a
consultant for services to be provided. The Company agreed to pay the consultant
4,500 shares of its unrestricted common stock, which vest pro-rata over the life
of the agreement. On August 30, 2002, the agreement was amended such that the
Company agreed to issue the consultant 7,500 shares of unrestricted common
stock, which vest pro-rata over the life of the agreement. The agreement was
further modified to extend the term to eight months. As of March 29, 2003, 375
shares are owed to the consultant.


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

In August 2002, the Company entered into a six-month agreement with a consultant
whereby the consultant would provide the Company services in connection with
marketing, public relations, strategic planning and business opportunities for
the Company. The Company is required to pay the consultant a fee of 2,500 shares
of the Company's common stock and a warrant to purchase 1,250 shares of the
Company's stock at a purchase price equal to 120% of the closing market price of
the Company's common stock on the date of the agreement. The warrants were
exercised during the year ended March 29, 2003. In November 2002, the Company
issued additional warrants to the same consultant for services to be provided to
purchase 25,000 shares of the Company's common stock at an exercise price equal
to a 40% discount to the closing price on the day of notice. As of March 29,
2003, 3,792 warrants were exercised. The warrants have a term of six months.

In August 2002, the Company issued warrants to a consultant for services to be
provided to purchase 25,000 shares of the Company's common stock at an exercise
price of $20 per share. The warrants have a term of one year.

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

In September 2002, the Company entered into a consulting agreement with Douglas
Cifers, a shareholder of the Company, whereby the consultant agreed to serve as
a member of the Board of Directors of the Company and assist the Company in
increasing shareholders equity. The consultant is to provide services to the
Company for as long as he is a duly elected member of the Board of Directors.
Compensation is $5,000 per month in the form of cash or free-trading S-8 shares
of the Company's common stock. If common stock is to be issued, they are to have
a 25% discount to the closing price on the date of issue.

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

In September 2002, the Company entered into a consulting agreement with a
consultant for services to be provided. Under the agreement, the Company issued
125 shares of its common stock on October 1, 2002, October 15, 2002 and November
1, 2002.

                                       24
<PAGE>
In September 2002, the Company entered into a consulting agreement with a
consultant for services to be provided. Under the agreement, the Company issued
163 shares of its common stock on October 1, 2002, October 15, 2002, November 1,
2002 and November 15, 2002.

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

In November 2002, the Company issued warrants to a consultant for services to be
provided to purchase 62,500 shares of the Company's common stock at an exercise
price of a 40% discount to the closing bid price of the Company on the day of
notice of execution. The warrants expire six months from the date of issuance.

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

Marketing Agreement:

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


Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following information should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this Form 10-KSB.

Results of Operations

Forward-looking statements in this report are made pursuant to the "safe-harbor"
provisions of the Private Securities Litigation Reform Act of 1995. The Company
wishes to advise readers that actual results may differ substantially from such
forward-looking statements. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially from those
expressed in or implied by the statements, including, but not limited to, the
following: Changing economic conditions, interest rate trends, continued
acceptance of the Company's products in the marketplace, competitive factors,
and other risks detailed in the Company's periodic report filings with the
Securities and Exchange Commission.

The net revenues for the fiscal year ending March 29, 2003 are $944,255 compared
to $1,379,384 for the fiscal year ending March 30, 2002. The Cost of Revenues
Sold for the fiscal year ended March 29, 2003 was $730,057, compared to
$1,457,354 for the fiscal year ending March 30, 2002,for a gross margin of
$214,198 compared to $(77,970) for the fiscal year ending March 30, 2002. The
net loss for the fiscal year ending March 29, 2003 was $29,560,198 compared to
$4,585,208 for the fiscal year ending March 30, 2002. Selling and general
administrative expenses for the fiscal year ended March 29, 2003 were $9,021,117
compared to $4,402,933 for the fiscal year ending March 30, 2002.

The Company does not intend to manufacture bottled water products without firm
orders in hand for its products. The Company intends to expend costs over the
next twelve months in advertising, marketing and distribution, which amounts are
expected to be expended prior to the receipt of significant revenues. There can
be no assurance that the company will generate significant revenues as a result
of its investment in advertising, marketing and distribution and there can be no
assurance that the company will be able to continue to attract the

                                       25
<PAGE>
capital required to fund its business plan.

Net Operating Losses

The Company has accumulated approximately $34,145,406 of net operating loss
carryforwards as of March 29, 2003, which may be offset against future taxable
income. The carryforwards begin to expire in 2011. The use of these losses to
reduce future income taxes will be limited based on Internal Revenue Code
Section 382. The Company has reserved a valuation allowance for the deferred tax
asset arising from net operating loss carryforwards.

Liquidity and Capital Resources

Our primary source of liquidity has historically consisted of sales of equity
securities and debt instruments. In the fiscal year ending March 29, 2003, the
Company raised $ 1,681,529 through the issuance of common stock. The company
also received proceeds from debt instruments of $1,171,387. These proceeds were
used to finance our continued operations.

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

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

Business Strategy

During the past quarter of our fiscal year the Company conducted a review of its
business plan and strategy for achieving profitability. The major strategy in
the old plan under review was to continue to expand the penetration of
BEVsystems products, in the health and performance market for single serve
bottled water, in selected territories including Florida, the Mid-Atlantic
States, New York, and New Jersey. This old strategy utilized Company owned and
funded direct sales force. The plan also called for the Company to manufacture
its own products in the Company owned bottling plant located in Clearwater,
Florida.

The review of our old business plan included an assessment of the results of
this plan. While we always knew that `Branding' a new product would be
expensive, we concluded that expansion of our product into new areas would
constantly require additional capital resources and continue to delay
profitability. During the past year, our manufacturing plant was operating at
less than full capacity, therefore the manufacturing overheads were being
allocated to a less than optimum size. Our manufacturing costs were too high,
further eroding profits.

We also examined the strategies of other successful beverage companies. These
companies did not employ a direct sales force. Instead, they license their
products including the intellectual property, technology, marketing materials
and trademarks. The licensees employ their own sales force, and using the
materials prepared by the beverage company, sell and distribute the licensor's
products. Also the successful beverage companies do not manufacture their own
products. They license the rights to manufacture the products to co-packers.
Some companies provide the co-packers with their secret formulas. Coca-Cola
produces the ingredients that are added back to the purified water produced at
the bottler's plant after reverse osmosis removes all of the minerals. Following
in this model, BEVsystems' co-packers are required to install the proprietary
equipment designed and manufactured by BEVsystems in order to be able to produce
Life O2.

                                       27
<PAGE>
The successful beverage companies do not employ a large direct sales force. They
license their products to distribution companies. The successful beverage
companies do not manufacture their own products. They license their proprietary
technology to co-packers.

BEVsystems has revised its business plan to incorporate the above conclusions.
We intend to concentrate our sales efforts upon licensing our proprietary
technology to co-packers and to license our products to distributors. In
implementing this strategy we have eliminated our entire sales force and are
negotiating with additional co-packers to produce our products. In a subsequent
event the Company announced its multi-step restructuring plan, a far-reaching
change to its core business. The new strategic direction focuses on three areas
to include transitioning from a direct sales organization for sales and
distribution to an expansion of local and international licensees and products;
continuing the reduction in its overhead expenses while restructuring the
balance sheet; and commencing a multi-step recapitalization of the Company
through new efforts that will include benefits for its existing shareholders.

The Company is determined to improve its balance sheet. In January, 2003 the
directors and the CEO converted, $1,048,000 in debt, into equity. This resulted
in decreasing liabilities by $1,048,000 and also increasing equity by
$1,048,000. In July of 2003 the directors converted an additional $158,355 of
debt into equity.

Our manufacturing plant in Clearwater, Florida has been shut down is being
disposed of. The sale will eliminate the long-term mortgage debt on the plant.
Eliminating the manufacturing plant will result in a reduction in our cost of
goods revenues by over 60%. All of the staff required for the operations of the
plant have been laid off. With the reduction in headcount for sales and
operations, the administrative overheads have also been reduced. For instance,
our annual rent has decreased from $144,000 to approximately $69,000. We have
decreased our headcount by 20, reduced salary expense annually by $1,076,920 and
benefits an additional $333,560. An offer of $850,000 for the manufacturing
facility was recently excepted. Disposing of the manufacturing plant will result
in an estimated $825,000 reduction in liabilities.

The Company has recently concluded a co-packing agreement with Water One in
Chicago, IL for production of Life 02 in the mid-west, decreasing the cost to
manufacture the Company's products by greater than 40%. The savings in
production costs will position BEVsystems as a competitive player in the
increasingly congested bottled water market.

Expanding and supporting its licensee base will allow the BEVsystems to reach a
wider geographic area and larger consumer base, while reducing direct product
costs. Licensees will absorb the costs of marketing and distribution of Life O2
in their exclusive territories, and co-packing arrangements will reduce
production costs. The net effect will assist BEVsystems in achieving greater
distribution, sales, and revenues, while driving down overhead and increasing
profits.

We have taken great strides in reducing our overhead expenses, improving gross
profits by driving down the cost of goods sold, improving margins by
out-sourcing manufacturing, and improving our balance sheet by converting debt
into equity and disposing of assets that do not generate profits.

Financing Strategy

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

The Company has used both cash and stock in negotiating with creditors. Some
have converted from debt to equity and many of these agreements call for payouts
in restricted shares at significant discounts or payouts over time. The Company
used its best efforts to not create significant pressure on its stock by the

                                       28
<PAGE>
methodology it employed in these negotiated settlements that have resulted in
either the issuance of restricted stock or the issuance of shares on a monthly
basis. Some of these issues were covered under a recent S-8 registration
statement. This registration statement also included amongst other expenses,
future professional fees to the Company's attorneys, out-sourced professional
services and other consultants.

2003 / 2004 Brand Development and Marketing:

BEVsystems plans to utilize endorsements from respected well known athletes and
entertainers to gain public awareness of the Life O2 SuperOxygenated bottled
water product. Our initial product launch with these celebrities will coincide
with the beginning of the fall 2003 NFL football season. We have reached initial
agreement with four professional football players that are household names with
the San Francisco `49ers, Buffalo Bills, Miami Dolphins, and Washington
Redskins. These athletes have agreed to endorse the product, provide memorable
quotes, allow their photo with the product to be used in advertising, wear our
logos on apparel, visit retail outlets promoting the product, and introduce Life
O2 to their teammates.

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

BEVsystems is setting up a separate fund containing BEVsystems' common stock for
the athletes. An outside independent group will manage this fund for the
athletes.

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

We have a well thought-out plan for announcing each step of our 2003 / 2004
Brand Development and Marketing Plan. During early September we will be
announcing that the water was being consumed by the players in their training
camps. Each training camp will be announced separately in Press Releases. We
will then follow-up with introducing the player's endorsement.

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

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

Risk Factors and Cautionary Statements

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

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

                                       29
<PAGE>
stockholders would be reduced. New investors may demand rights, preferences or
privileges senior to those of existing holders of our common stock.

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

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

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

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

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

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

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

The oxygenated water category is relatively new. Less than 1% of all bottled
water sold worldwide has enriched oxygen content. Our ability to increase
revenue in the future depends on consumers becoming aware of and selecting
oxygenated bottled water instead of mineral waters and sports drinks. In order
to achieve acceptance, we will have to convince consumers to prefer
oxygen-enriched water. If these efforts fail or if

                                       30
<PAGE>
oxygen enriched water does not achieve commercial acceptance, our business,
financial condition and results of operations could be seriously harmed. As
competition increases, our inability to introduce enhanced bottling equipment
and packaging could prevent us from competing effectively with others. We expect
that the oxygenated water market will be characterized by rapid technological
change. We also expect that increased competition in the oxygenated water
category will require us to rapidly evolve and adapt our products to remain
competitive. The successful operation of our business depends on our ability to
develop new bottling technology and packaging enhancements that respond to
evolving industry standards on a timely and cost-effective basis. We cannot be
certain that we will successfully develop these technologies or capabilities.
Our failure to produce technologically competitive products in a cost-effective
manner and on a timely basis will seriously harm our business, financial
condition and results of operations.

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

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

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

We expect to generate most of our revenue from small, private distributors.
Failure to generate revenue from these distributors would have a negative impact
on our business. Many of these distributors are still building their
infrastructures and introducing their products. We cannot guarantee that any of
these companies will achieve commercial viability. Given that these distributors
may be small or start-up operations with uncertain financial resources, we
cannot be sure that these distributors will be able to properly market and sell
the products in their territories, produce oxygenated water that meets
applicable quality standards, or pay their obligations to us. Life International
recently terminated a distributor that had been delinquent for over one year in
the payment of a minimum royalty for the use of the Life O2 technology. The
failure of our distributors to achieve commercial viability or to pay their
obligations to us would, in turn, seriously harm our business, financial
condition and results of operations.

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

We expect to derive a majority of our revenue from a small number of
distributors. While many of the agreements with distributors provide minimum
annual payments, failure to make such payments in most cases would result in a
reevaluation of the relationship rather than the collection of the amount.
Accordingly, we cannot be certain that present or future distributors will not
terminate their purchasing arrangements with us or significantly reduce or delay
their orders. A substantial number of the distributors of Life International
have

                                       31
<PAGE>
been recently established and we will need to provide substantial assistance in
order for them to succeed. Many of the distributors of Life International have
not yet reached volumes that are adequate to achieve commercial success. The
continued inability of distributors to increase volumes could cause the
distributors to discontinue their efforts to bottle and sell our products. Any
termination, reduction or delay in orders could seriously harm our business,
financial condition and results of operations.

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

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

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

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

* greater difficulty in collecting accounts receivable;

* satisfying import or export licensing and product certification requirements;

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

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

* fluctuations in currency exchange rates;

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

* unexpected changes in regulatory requirements;

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

* difficulties and costs of staffing and managing foreign operations;

* political instability;

* the impact of economic recessions outside of the United States; and

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

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

                                       32
<PAGE>
While we have established quality standards, our distributors may not comply
with these standards and may ship bottled water products that have lower oxygen
content or shorter shelf life than as advertised.

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

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

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

We may be liable for product liability damages.

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

Pending Claim by Third Party

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

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

To the extent that we earn a majority of our income from the payment of
royalties, together with other "passive" income (for United States federal
income tax purposes), we may be treated as a foreign personal holding company or
a passive foreign investment company. In that event, holders of our common stock
that are United States persons would be required to pay tax on their pro rata
share of the Company's or its relevant non-United States subsidiary's
undistributed foreign personal holding company income. If the Company were a
passive foreign investment company, then any holder of our common stock that is
a United States person could be liable to pay tax at the then prevailing rates
on ordinary income plus an interest charge upon some distributions by the
Company or when that shareholder sold our common stock at a gain.

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

                                     33
<PAGE>
Item 7. Financial Statements

Financial Statements and their footnotes are set forth on pages F-1 through
F-34.

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

Accountants have not expressed any disagreeing opinions regarding the Company's
treatment of accounting matters.

Item 8A. Controls and Procedures

As of March 29, 2003, an evaluation was performed under the supervision and with
the participation of the Company's management, including the Chief Executive
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based on that evaluation, the Company's
management, including the Chief Executive Officer, concluded that the Company's
disclosure controls and procedures were effective as of March 29, 2003. There
have been no significant changes in the Company's internal controls or in other
factors that could significantly affect internal controls subsequent to March
29, 2003.

                                       34
<PAGE>
                                    PART III

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

The following table sets forth the names, offices held with the Company, and age
of its directors and executive officers as of March 29, 2003:

Directors and Executive Officers



Name                    Age           Position
---------------------------------------------------------------

G. Robert Tatum         60            Chief Executive Officer,
                                      Chief Financial Officer
                                      and Chairman of the Board

Joel Stohlman           39            Senior Vice President
                                      of Sales And Marketing

E. Douglas Cifers       51            Director

James Dale Davidson     53            Director


All directors hold office until the next annual meeting of stockholders and
until there successors have been duly elected and qualified. There are no
agreements with respect to the election of directors. Any non-employee director
of the Company is reimbursed for reasonable expenses incurred for attendance at
meetings of the Board of Directors and any committee of the Board of Directors.
The Executive Committee of the Board of Directors, to the extent permitted under
Colorado law, exercises all of the power and authority of the Board of Directors
in the management of the business and affairs of the Company between meetings of
the Board of Directors. Each executive officer serves at the discretion of the
Board of Directors.

G. Robert Tatum, III, has served as our Chairman of the Board, Chief Executive
Officer and as a Director since the inception of our company. He has and
continues to serve as Chairman of the Board and President of Financial Partners
Network Corporation, a provider of corporate advisory services, based in Miami,
Florida, since its formation in October 2000, and since its inception in August
2001 until December 2001, he served as the Managing Director of SB Venture
Capital Management III LLC, a New York limited liability company that serves as
the member-manager of Sands Brothers Venture Capital III LLC, a venture capital
company based in New York, New York. From April 1998 until August 2001, he
served as President and Chief Executive Officer of Nanovation Technologies,
Inc., a developer of fiber optic networking components. From 1995 to 1998, Mr.
Tatum served as Senior Partner of Financial Partners Network, a sole
proprietorship. From 1992 to 1995, Mr. Tatum was Chief Executive Officer and
Chairman of DaVinci Scientific Corporation, and from 1991 to 1992, was a
candidate for U.S. Congress. Prior to this, Mr. Tatum founded Vitarel
Microelectronics in 1986, where he served as President until 1991, served as
Senior Vice President of Technology for General Electric Information Services
Company from 1984 to 1986, served as Senior Vice President of Operations for
Mid-Continent Computer Services from 1980 to 1984 and worked as a Sales Manager
for Control Data Corporation from 1977 to 1980. Mr. Tatum received an A.S. from
Grossmont College in 1970, a B.S. from San Diego State University in 1972 and
completed the course requirements of the M.B.A. program of San Diego State
University in 1974.

                                       34
<PAGE>
Joel Stohlman, has held a number of senior management positions including
director of US operations with a large multinational corporation. Through his
years Joel has worked closely with and maintained relationships with key players
in the beverage industry and distribution industry. Through his help of bringing
to market a reusable filtered water bottle Joel has gained vast knowledge of
water purity and water filtration. Having worked in these various industries
Joel has also made contact with highly regarded sports agents.

E Douglas Cifers, has served as a Director of BEVsystems since the merger with
Aqua Clara where he previously was Chairman and Director. Mr. Cifers is
President and Publisher of Florida Media, Inc, which publishes 17 statewide
magazines and guides reaching more than 2.25 million households. His flagship
magazine, 22 year-old Florida Monthly, the largest magazine in Florida with more
than 220,000 paid monthly subscribers, has circulation in all 67 Florida
counties, all 50 states and 35 foreign countries. Cifers has devoted his entire
professional career to publishing after attending schools in North Carolina,
Florida and graduating from Wallace College with computer science and journalism
degrees. He previously worked in senior media management positions with Thomson
Newspapers, Inc., Scripps-Howard Publishing Company, Lesher Newspapers, Inc.,
and Tribune Publishing Company Guam. He is a former board member of Continental
Airlines, PBS Radio at San Diego State University, Make A Wish Foundation, Very
Special Arts Florida, Florida Audubon Society, Save the Manatee Club, A Gift For
Teaching, The Cris Collinsworth Foundation, and former Chairman of Aqua Clara
Bottling & Distribution Inc. He currently sits on the board of Friends of
Florida State Parks. The Wall Street Journal, who in 1998 featured him for
creating the largest statewide magazine in Florida, refers to him as a
`hard-charging entrepreneur with a flair for promotion'. Cifers was named one of
the top 100 most influential Floridians by the Orlando Business Journal in 2001
and the Florida Magazine Association(1)s first Publisher of the Year (1996). He
is a recipient of the President(1)s Point of Light Award and recognized as a
business leader and entrepreneur by the US Small Business Administration and The
Service Corps of Retired Executives. A former President of the Society of
Professional Journalists and author of two books, Cifers resides in Orlando.

James Dale Davidson, has served as a Director since inception. Mr. Davidson is a
private investor and analyst. He founded Agora, Inc. a worldwide publishing
group with offices in Baltimore, London, Dublin, Paris, Johannesburg, Melbourne
and other cities, The Hulbert Financial Digest and Strategic Investment. In
conjunction with Lord Rees-Mogg, co-editor of Strategic Investment and former
editor of the Times of London, he co-authored a series of books on financial
markets. Mr. Davidson also is a current or recent director of a number of
companies, many of which he founded. They include MIV Therapeutics, GeneMax, New
Paradigm Capital (Bermuda), Anatolia Minerals Development Corporation, and
Wharekauhau Holdings (New Zealand). In addition, Mr. Davidson is a director of
Plasmar, S.A. (La Paz, Bolivia) Martinborough Winery Ltd. (New Zealand) and New
World Premium Brands Ltd. (New Zealand). He is the editor of Vantage Point
Investment Advisory, a private financial newsletter with a worldwide
circulation. Mr. Davidson has a B.A., M.A. in Literature, Oxford University,
U.K.

Directors Terms and Compensation

Mr. Davidson, and any future outside directors will be entitled to director's
fees paid in monthly installments. Currently, we have set directors fees for the
outside directors at a rate of $60,000 per year. Mr. Douglas Cifers, Chairman of
Aqua Clara Bottling & Distribution, Inc. joined our board upon the close of the
merger with Aqua Clara.

Code of Ethics

The Company has adopted its Code of Ethics and Business Conduct for Officers,
Directors and Employees that applies to all of the officers, directors and
employees of the Company, previously filed as an exhibit to Form 10-KSB for the
year ended March 29, 2003.

                                       35

<PAGE>
Item 10. Executive Compensation

The Company does not have a bonus, profit sharing, or deferred compensation plan
for the benefit of its employees, officers or directors.

Cash Compensation

The following table sets forth all cash compensation paid by the Company to its
officers and directors for services rendered to the Company for the current
fiscal year. The remuneration described in the table does not include the cost
to the Company of benefits furnished to the named executive officers, including
premiums for health insurance and other benefits provided to such individual
that are extended in connection with the conduct of the Company's business. The
value of such benefits cannot be precisely determined, but the executive
officers named below did not receive other compensation in excess of the lesser
of $25,000 or 10% of such officer's cash compensation.

Summary Compensation Table


<TABLE>
<CAPTION>
Name and                    Fiscal                                Other Annual        Common Stock
Principal Position          Year       Salary        Bonus        Compensation           (Value)
-----------------------------------------------------------------------------------------------------
<S>                          <C>        <C>          <C>               <C>                <C>
G. Robert Tatum III 2003 125,000 CEO & Chairman

Joel Stohlman               2003       75,000 (1)

James Davidson              2003                                     60,000
Director

Douglas Cifers              2003                                     60,000
Director
</TABLE>


(1) Joined Company on July 1, 2003 with annual salary of $75,000. No salary
earned in FYE 2003

Employment Agreements

On March 30, 2001, we entered into an employment agreement with Mr. Tatum (the
"Tatum Employment Agreement"). The Tatum Employment Agreement provides for Mr.
Tatum's employment as our Chief Executive Officer at a base salary of $125,000
per year, with eligibility to receive an incentive bonus as determined by the
Board of Directors. The Tatum Employment Agreements also provide for an
automobile allowance of up to $1,000 per month and other employee benefits. The
Tatum Employment Agreement provides for an initial term of five years with
automatic one-year renewal unless terminated by either the Board of Directors or
Mr. Tatum in writing at least 120 days prior to a renewal at the end of the
initial term. The Tatum Employment Agreement contains confidentiality and
non-compete provisions by Mr. Tatum in our favor. In the event of the
termination by the Company of Mr. Tatum, other than for cause, or in the event
that Mr. Tatum terminates his employment "for good cause" as defined in the
Tatum Employment Agreement, Mr. Tatum will be entitled to $250,000 in severance
payments.

All of the senior management and officers have Employment Agreements with the
Company and they participate in the Company's Employee Stock Option Plan.

Stock Option Plan

We have adopted a Stock Option Plan (the "Option Plan") in order to provide our
officers, directors, key employees and consultants an opportunity to acquire a
proprietary interest in our company, to encourage them

                                       36
<PAGE>
to remain involved with the company, and to attract and retain new employees,
consultants and directors. We have reserved 10,000,000 shares of our common
stock to issue to participants in the Option Plan. Our board administers the
Option Plan, and it is expected to have the authority to delegate its
ministerial duties to a committee of the board. The Option Plan administrator
will have complete discretion over who will receive option grants, the number of
shares in a grant, the status of any granted option as either an incentive stock
option or non-statutory option, the vesting schedule for the option grant, and
the term for any granted option.

Each option granted under the Option Plan has a maximum term of ten years,
unless the term is shortened because the optionee no longer is associated with
us. Options granted under the Option Plan may be exercised only for fully vested
shares. The Option Plan administrator will have the authority to determine the
fair market value of the stock. The purchase price will be payable immediately
upon the exercise of the option. Provision may be made for payment in cash, in
outstanding shares of common stock, through a promissory note payable in
installments over a period of years or any combination of the foregoing.

We anticipate that the Option Plan will provide our board with the authority to
amend the Option Plan at any time. However, unless the participants consent to
the amendment, an amendment cannot adversely affect the participants' rights and
obligations with respect to their outstanding options or vested shares. In
addition, to be effective, a majority of the holders of our common stock must
vote in favor of an amendment to the Option Plan that would (i) modify the class
of individuals eligible for participation, (ii) increase the number of shares
available for issuance, except in the event of certain changes to our capital
structure, or (iii) end the term of the Option Plan.

Item 11. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information, to the best knowledge of the Company
as of March 29, 2003, with respect to each person known by the Company to own
beneficially more than 5% of the Company's outstanding common stock, each
director and all directors and officers as a group.



Name and Address             Amount and Nature of      Percent
of Beneficial Owner          Beneficial Ownership      of Class(1)

G. Robert Tatum III (1,2)           9,679,417          25.28%
2780 Brickell Ct.
Miami, FL  33131

E. Douglas Cifers (1)               8,705,384          22.74%
102 Drennen Road, Suite 5C
Orlando, FL  32806

James Davidson (1)                  3,752,574           9.80%
321 SO Street, Asaph
Alexandria, VA 22314

All Directors and Executive
Officers as a Group
(3 persons)                        22,137,375          57.83%


                                       37
<PAGE>
(1) Unless otherwise noted below, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares of
common stock beneficially owned by them. For purposes hereof, a person is deemed
to be the beneficial owner of securities that can be acquired by such person
within 60 days from the date hereof upon the exercise of warrants or options or
the conversion of convertible securities. Each beneficial owner's percentage
ownership is determined by assuming that any such warrants, options or
convertible securities that are held by such person (but not those held by any
other person) and which are exercisable within 60 days from the date hereof,
have been exercised.
(2) Includes exercise of 3,000,000 stock options issued to G. Robert Tatum III.

Item 12. Certain Relationships and Related Transactions

G. ROBERT TATUM. Financial Partners Network Corporation ("FPN"), a corporation
owned 100% by G. Robert Tatum, advanced funds and provided services to the
company. A fee of $250,000 was paid for services rendered in connection with
acquiring the assets of the beverage division of Life International Products and
the first private placement stock offering. FPN also advanced $314,319 for
operating expenses incurred by the company. The operating expenses are reflected
on the statement of operations in general and administrative expenses. The
company entered into a convertible note payable for $262,584 with FPN for
repayment of the advances. FPN was repaid $51,735 by the company during the year
ended March 31, 2002. The company also purchased $48,603 of equipment from FPN,
which is included in due to shareholders at March 31, 2002. In FYE 2003 these
notes were sold and/or converted into equity at $.108/share.

                                       38
<PAGE>
                                     PART IV

Item 13. Exhibits and Reports on Form 8-K



        (a)   Exhibits

Exhibit No.    Exhibit Name
-------------      ------------

*3.1              Articles of Incorporation and all amendments thereto

*3.2              By-Laws

**21.1            Subsidiaries

31.1              31.1 Certification by G. Robert Tatum, Principal Chief
                  Executive Officer
31.2              and Chief Financial Officer ,
                  pursuant to Section 302 of the
                  Sarbanes-Oxley Act of
                  2002.

32.1              32.1 Certification by G. Robert Tatum, Chief Executive Officer
                  and
32.2              Chief Financial Officer, ,
                  Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to o
                  Section 906 of the Sarbanes-Oxley Act of 2002.

**99.1            Code of Ethics and Busienss Conduct for Officers, Directors
                  and Employees of BEVsystems International, Inc.


* Previously filed as Exhibit to Form SB-2
** Previously filed as Exhibit to Form 10-KSB for year ended March 29, 2003

(b) Reports on Form 8-K.

On February 19, 2003, the Company filed a Form 8-K reporting under Item 4 the
replacement of its independent auditor, Gerson, Preston, Robinson & Company,
P.A., with Rosenberg Rich Baker Berman & Co. as the new independent auditor for
the Company.

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

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

Item 14. Principal Accountant Fees and Services

Audit Fees

For the Company's fiscal year ended March 29, 2003, we were billed approximately
$24,395 for professional services rendered for the audit of our financial
statements. We also were billed approximately $31,000 for the review of
financial statements included in our periodic and other reports filed with the
Securities and Exchange Commission for our year ended March 29, 2003.

                                       39
<PAGE>
                                   SIGNATURES

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





Date: September 15, 2003            BEVSYSTEMS INTERNATIONAL, INC.




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

         Pursuant to the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

     Signature              Capacity                 Date
     ---------              --------                 ----

/s/G. Robert Tatum            CEO, CF0 & Chairman    September 15, 2003
------------------
G. Robert Tatum

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

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


                                       40
<PAGE>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                                      INDEX
                                 MARCH 29, 2003


<TABLE>
<CAPTION>
                                                                                            Page Number

<S>                                                                                              <C>
INDEPENDENT AUDITORS' REPORTS                                                               F-1 to F-2

CONSOLIDATED FINANCIAL STATEMENTS

         Consolidated Balance Sheet at  March 29, 2003                                      F-3 to F-4

         Consolidated Statement of Operations
           for the years ended March 29, 2003 and March 30, 2002                                F-5

         Consolidated Statement of Changes in Shareholders' Deficiency
           for the years ended March 29, 2003 and March 30, 2002                                F-6

         Consolidated Statement of Cash Flows
           for the years ended March 29, 2003 and March 30, 2002                            F-7 to F-8

         Notes to Consolidated Financial Statements                                         F-9 to F-32
</TABLE>
<PAGE>
                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Shareholders:
BEVsystems International, Inc.
Miami, Florida


We have audited the accompanying consolidated balance sheet of BEVsystems
International, Inc. and Subsidiaries (the "Company") as of March 29, 2003 and
the related consolidated statement of operations, shareholders' deficiency, and
cash flows for the year then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects the financial position of BEVsystems
International, Inc. and Subsidiaries as of March 29, 2003, and the results of
their operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 3 to the
consolidated financial statements, the Company has suffered recurring
consolidated losses from operations, negative cash flows from operating
activities, negative working capital and has a shareholders' deficit. These
conditions raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 3. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

The consolidated financial statements for the year ended March 30, 2002 were
audited by another independent auditor whose report dated July 8, 2002.


MASSELLA ROUMBOS LLP
Syosset, New York
September 8, 2003

                                       F-1
<PAGE>
             [GERSON, PRESTON, ROBINSON & COMPANY, P.A. LETTERHEAD]


Board of Directors and Shareholders
BEVsystems International, Inc. and Subsidiaries
Miami, Florida

                          INDEPENDENT AUDITORS' REPORT

In our opinion, the consolidated statements of operations, shareholders' equity
and cash flows present fairly, in all material respects, the results of
operations and cash flows of BEVsystems International, Inc. and Subsidiaries for
the year ended March 30, 2002 in conformity with generally accepted accounting
principles. These consolidated financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

The consolidated financial statements referred to above have been prepared
assuming that BEVsystems International, Inc. and Subsidiaries will continue as a
going concern. As more fully described in Note 3, the Company has incurred
operating losses, negative cash flows from operating activities, negative
working capital and has a shareholders' deficit. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans as to these matters are also described in Note 3. The
accompanying consolidated financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that might result from
the outcome of this uncertainty.

                                    /s/Gerson, Preston, Robinson & Company, P.A.

July 8, 2002                           CERTIFIED PUBLIC ACCOUNTANTS
Miami Beach, Florida

                                       F-2
<PAGE>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                 MARCH 29, 2003



                                     ASSETS

<TABLE>
<CAPTION>
Current assets:
<S>                                                                                                        <C>
     Cash and cash equivalents                                                                             $      136
      Accounts receivable, net                                                                                      -
      Marketable securities
                                                                                                                5,500
                                                                                                         ------------
          Total current assets                                                                                  5,636

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

          Total assets                                                                                   $  1,008,999
                                                                                                         ============

</TABLE>


     The accompanying notes and independent auditors' report should be read
                      in conjunction with the consolidated
                              financial statements

                                       F-3
<PAGE>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                 MARCH 29, 2003



                    LIABILITIES AND SHAREHOLDERS' DEFICIENCY


<TABLE>
<CAPTION>
Current liabilities:
<S>                                                                                                      <C>
     Accounts payable                                                                                    $ 1,665,132
     Accrued expenses                                                                                      2,320,371
     Convertible notes payable                                                                               785,000
     Notes payable secured by assets                                                                         778,873
     Deferred revenue                                                                                         94,170
                                                                                                ---------------------

          Total current liabilities                                                                        5,643,546
                                                                                                ---------------------
</TABLE>
Commitments and contingencies

<TABLE>
<CAPTION>
Shareholders' deficiency:
<S>                                                                                                               <C>
     Preferred stock; no par value, 5,000,000 shares authorized 100 shares
      issued and outstanding nonvoting and convertible
      into 874 shares of common stock                                                                         74,601
     Common stock; $.0001 par value, 650,000,000 shares
       authorized, 11,311,272 issued and outstanding                                                           1,132
     Additional paid-in capital                                                                           30,064,193
     Deferred consulting services                                                                           (629,067)
     Accumulated deficit                                                                                 (34,145,406)
                                                                                                ---------------------

          Total shareholders' deficiency                                                                  (4,634,547)
                                                                                                ---------------------
Total liabilities and shareholders' deficiency                                                           $ 1,008,999
                                                                                                =====================
</TABLE>
    The accompanying notes and independent auditors' report should be read in
             conjunction with the consolidated financial statements

                                       F-4
<PAGE>
                 BEVSYSTEMS INTERNATIONAL INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
              FOR THE YEARS ENDED MARCH 29, 2003 AND MARCH 30, 2002

<TABLE>
<CAPTION>
                                                                                   2003                     2002
                                                                            -----------------       -----------------
<S>                                                                           <C>                   <C>
Net revenues                                                                  $      944,255        $      1,379,384


Cost of revenues                                                                     730,057               1,457,354
                                                                            -----------------       -----------------

Gross profit (loss)                                                                  214,198                 (77,970)
                                                                            -----------------       -----------------

Operating expenses:
    Selling and marketing                                                            244,030               1,472,575
    General and administrative                                                     8,777,087               2,930,358
                                                                            -----------------       -----------------
             Total operating expenses                                              9,021,117               4,402,933
                                                                            -----------------       -----------------

Loss before other income (expense)                                                (8,806,919)             (4,480,903)
                                                                            -----------------       -----------------

Other income (expense):
     Interest and financing expense                                               (1,551,476)               (104,305)
     Exclusive licensing agreement                                                 1,342,000                       -
     Impairment loss on repossessed/foreclosed
      fixed assets                                                                  (176,192)                     -
     Impairment loss on fixed assets                                                (569,523)                      -
     Other income                                                                      8,748                       -
     Other expense                                                                  (331,804)                      -
     Settlements                                                                  (1,362,000)                      -
     Impairment loss on intangibles                                              (18,113,032)                      -
                                                                            -----------------       -----------------
              Total other income (expense)                                       (20,753,279)               (104,305)
                                                                            -----------------       -----------------

Net loss                                                                      $  (29,560,198)        $    (4,585,208)
                                                                            -----------------       -----------------

Basic loss per common share                                                   $       (15.06)        $        (39.36)
                                                                            =================       =================


Weighted average common shares outstanding                                         1,961,739                 116,498
                                                                            =================       =================

</TABLE>
     The accompanying notes and independent auditors' report should be read
           in conjunction with the consolidated financial statements

                                       F-5
<PAGE>

                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
          CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIENCY
              FOR THE YEARS ENDED MARCH 29, 2002 AND MARCH 30, 2003
<TABLE>
<CAPTION>
                                          Common Stock $.0001 par value
                                                 Number of            Additional
Accumulated                                                           Paid-in     Preferred      Unearned   Accumulated
                                             Shares       Amount      Capital      Stock         Services    Deficit        Total
                                         ------------ ------------ ------------  ------------ ------------ ------------ ------------
<S>                                          <C>      <C>           <C>            <C>         <C>          <C>         <C>
Issuance of Common stock to founders         35,150   $      4      $    41,996    $        -  $        -   $        -  $    42,000

Issuance of common stock and warrants in
various private placements,  net issuance
costs                                        41,733          4        2,484,996             -           -            -    2,485,000

Issuance of common stock and warrants for
the acquisition of Life International        74,558          7        4,899,864             -           -            -    4,899,871

Common stock issued for services                110          -            7,200             -           -            -        7,200

Warrants exercised                              609          -           40,000             -           -            -       40,000

Issuance of options in connection with
convertible note payable                          -          -           73,800             -           -            -       73,800

Issuance of stock and warrants for the
acquisition of Aqua Clara                    39,996          4       12,037,640        74,601           -            -   12,112,245


Net loss for year ended March 30, 2002            -          -                -             -           -   (4,585,208)  (4,585,208)
                                         ------------ ------------ ------------  ------------ ------------ ------------ ------------

Balance at March 30, 2002                   192,156         19       19,585,496        74,601           -   (4,585,208)  15,074,908
                                         ------------ ------------ ------------  ------------ ------------ ------------ ------------

Common stock issued for services            818,766         82        3,758,873             -  (1,243,468)           -    2,515,487

Common stock issued upon conversion
of debt                                   9,968,021        997        1,493,995             -           -            -    1,494,992

Common stock issued for satisfaction of
trade payables                               29,232          3          732,445             -           -            -      732,448

Common stock issued for officer and
director compensation                       104,478         10        1,616,906             -           -            -    1,616,916

Sale of common stock                          5,921          1           71,052             -           -            -       71,053

Common stock issued for advances from
employees                                    15,000          2           11,996             -           -            -       11,998

Exercise of warrants                        173,198         17        1,601,729             -           -            -    1,601,746

Exercise of options                           4,500          1            8,999             -           -            -        9,000

Amortization of unearned services                 -          -                -             -     614,401            -      614,401

Issuance of warrants in connection
with debt settlements                             -          -           89,691             -           -            -       89,691

Issuance of warrants in connection with
notes payable                                     -          -          750,471             -           -            -      750,471

Issuance of warrants in connection with
consulting agreements                             -          -          342,540             -           -            -      342,540

Net loss for year ended March 29, 2003            -          -                -             -           -  (29,560,198) (29,560,198)
                                         ------------ ------------ ------------  ------------ ------------ ------------ ------------

Balance at March 29, 2003                11,311,272   $  1,132      $30,064,193    $   74,601   $(629,067) (34,145,406) $(4,634,547)
                                         ============ ============  ============  ============ =========== ============ ============
</TABLE>
         The accompanying notes and independent auditors' report should
       be read in conjunction with the consolidated financial statements

                                       F-6

<PAGE>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
              FOR THE YEARS ENDED MARCH 29, 2003 AND MARCH 30, 2002
<TABLE>
<CAPTION>
                                                                              2003            2002

                                                                         -------------   -------------
Cash flows from operating activities:
<S>                                                                      <C>             <C>
  Net loss ...........................................................   $(29,560,198)   $ (4,585,208)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
      Depreciation ...................................................        181,668          50,418
      Allowance for bad debt expense .................................         66,508               -
      Amortization of debt discount ..................................         22,550          51,250
      Amortization of unearned services ..............................        614,401               -
      Asset impairment charges .......................................     18,858,837               -
      Issuance of common stock for services and financing ............      5,444,511           7,200
      Issuance of warrants in connection with financing and services .      1,182,702               -
   Changes in operating assets and liabilities, net of acquisitions:
      Decrease (increase) in accounts receivable .....................         39,635         (83,562)
      Decrease (increase) in inventory ...............................         66,184         (29,045)
      Decrease (increase) in prepaid expenses and other current assets        101,666         (94,269)
      Increase in accounts payable and accrued expenses ..............        767,377       1,855,261
      Decrease (increase) in deposits ................................       (400,000)        400,000
      Increase in deferred revenue ...................................         94,170               -
                                                                         -------------   -------------

        Net cash used in operating activities ........................     (2,519,989)     (2,427,955)
                                                                         -------------   -------------

Cash flows from investing activities:
     Purchase of property and equipment ..............................        (10,833)       (186,604)
     Acquisition of Life International ...............................              -      (1,020,000)
     Cash from Aqua Clara Bottling & Distribution, Inc. acquisition ..              -           6,559
                                                                         -------------   -------------

        Net cash used in investing activities ........................        (10,833)     (1,200,045)
                                                                         -------------   -------------

Cash flows from financing activities:
     Proceeds from notes payable and shareholder advances ............        416,387       1,069,296
     Sale of common stock ............................................         71,053       2,527,000
     Repayments of  notes payable ....................................       (330,254)              -
     Proceeds from issuance of convertible notes payable .............        755,000               -
     Proceeds from exercise of stock options .........................          9,000               -
     Net proceeds from exercise of warrants ..........................      1,601,476          40,000
                                                                         -------------   -------------

        Net cash provided by financing activities ....................      2,522,662       3,636,296
                                                                         -------------   -------------

Net (decrease) increase in cash and cash equivalents .................         (8,160)          8,296

Cash and cash equivalents, beginning of year .........................          8,296               -
                                                                         -------------   -------------

Cash and cash equivalents, end of year ...............................   $        136    $      8,296
                                                                         =============   =============

</TABLE>


        The accompanying notes and independent auditors' report should be
         read in conjunction with the consolidated financial statements
                                       F-7
<PAGE>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
         FOR THE YEARS ENDED MARCH 29, 2003 AND MARCH 30, 2002 (cont'd)


<TABLE>
<CAPTION>
Supplemental disclosure of non-cash information:

<S>                                                                                   <C>               <C>
     Cash paid during the year for:
           Interest                                                             $          11,434   $        12,082
                                                                                =================   ===============
           Income taxes                                                         $               -   $             -
                                                                                =================   ===============

Schedule of non-cash investing and financing activities:

     Stock and warrants issued in connection with
        the acquisition of Life International                                   $               -   $     4,899,871
                                                                                =================   ===============


     Stock and warrants issued in connection with the
       acquisition of Aqua Clara Bottling & Distribution, Inc.                  $               -   $    12,112,245
                                                                                =================   ===============

     Equipment acquired under shareholder loan                                  $               -   $        48,603
                                                                                =================   ===============

     Issuance of common stock and warrants for services                         $       5,718,319   $             -
                                                                                =================   ===============

     Stock issued in connection with the settlement of trade payables           $         732,448   $             -
                                                                                =================   ===============

     Stock and warrants issued in connection with conversion of debt            $       2,245,463   $        73,800
                                                                                =================   ===============
</TABLE>

     The accompanying notes and independent auditors' report should be read
            in conjunction with the consolidated financial statements

                                       F-8
<PAGE>
NOTE 1   -    ORGANIZATION, HISTORY AND NATURE OF BUSINESS

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

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

NOTE 2    -       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   a)    Principals of consolidation

         The financial statements include the accounts of the Company and all
         subsidiaries. All significant intercompany accounts and transactions
         have been eliminated in consolidation.

   b)    Cash and cash equivalents

         The Company maintains cash balances in several banks. Accounts at these
         institutions are insured by the Federal Deposit Insurance Corporation
         up to $100,000. The Company's accounts may, at times, exceed the
         federally insured limits. For purposes of the statement of cash flows,
         the Company considers all highly liquid debt instruments purchased with
         maturity dates of three months or less to be cash equivalents.

   c)    Accounts receivable

         The Company utilizes the allowance method for recognizing the
         collectibility of its accounts receivable. The allowance method
         recognizes bad debt expense based on a review of the individual
         accounts outstanding based on the surrounding facts. As of March 29,
         2003, an allowance of $66,508 was deemed necessary by management.

   d)    Marketable securities

         Marketable securities, which consist of equity securities, have been
         categorized as available for sale and, as a result, are stated at fair
         value based generally on quoted market prices. Marketable securities
         available for current operations are classified as current assets.
         Unrealized holding gains and losses, net of applicable deferred taxes,
         are included as a component of shareholders' equity until realized. For
         the year ended March 29, 2003, the unrealized gain on marketable
         securities was diminimus. For purposes of determining gross realized
         gains and losses, the cost of investment securities sold is based upon
         specific identification.

    e)   Property, plant and equipment

         Property, plant and equipment are carried at cost, less accumulated
         depreciation and amortization. Major improvements are capitalized and
         maintenance and repairs are expensed as incurred. Depreciation is
         computed using the straight-line method over the useful lives of the
         assets.

   f)    Long-lived assets

         The Company evaluates the recoverability of long-lived assets for
         impairment on an annual basis or whenever events or changes in
         circumstances indicate that the carrying amount of an asset may not be
         recoverable. Such evaluation involves the use of an independent
         appraisal or is based on various analyses, including cash flows and
         profitability projections. If the sum of the expected future cash flows
         or the appraised value is less than the carrying amount of the assets,
         an impairment loss is recognized. Accordingly, impairment loss is the
         difference between the sum of the estimated future cash flows or
         appraised value and the carrying amount of the asset.

   g)    Intangible assets

         Intangible assets consisted of goodwill, process technology, trademarks
         and customer relations. The capitalized costs of the assets were based
         on their current market value at the time of the acquisition. Goodwill
         was not amortized. All other intangible assets were deemed to have
         indefinite useful lives because they were expected to generate cash
         flows indefinitely and were, therefore, not amortized.

                                      F-9
<PAGE>
NOTE 2    -       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

   h)    Revenue recognition

         The Company's revenues are derived principally from the sale of
         oxygenated beverages. Revenues are recognized upon delivery of the
         product to the customers. Revenue recognized during the year ended
         March 30, 2002 has been reduced for recalled water. (see Note 14). Upon
         delivery, the Company has no further obligations.

   i)    Income taxes

         The Company accounts for income taxes in accordance with the "liability
         method" of accounting for income taxes. Pursuant to Statement of
         Financial Accounting Standards ("SFAS") No. 109, under which method
         recorded deferred income taxes reflect the tax consequences on future
         years of temporary differences. Accordingly, deferred tax assets and
         liabilities are determined based on the differences between the
         financial statement amounts and the tax basis of assets and liabilities
         using enacted tax rates in effect for the year in which the differences
         are expected to reverse. Current income taxes are based on the
         respective periods' taxable income for federal and state income tax
         reporting purposes.

   j)    Loss per common share

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

   k)    Use of estimates

         The preparation of financial statements in accordance with accounting
         principles generally accepted in the United States of America requires
         management to make estimates and assumptions that affect the reported
         amounts of assets and liabilities and the disclosure of contingent
         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.

   l)    Advertising costs

         All costs related to advertising are expensed in the period incurred.

   m)    Research and development

         Research and development costs are expensed as incurred.

   n)    Web-site technology and content

         Technology and content costs consist principally of payroll and related
         costs for development, editorial systems, consultants and costs of
         acquired content for the Company's website. Technology and content
         costs related to planning, development and acquisition of content and
         operations of the Company's website are expensed as incurred and
         included in selling, general and administrative expenses. Costs to
         acquire or develop both hardware and software needed to operate the
         site are capitalized and depreciated over estimated useful lives.

   o)    Fair value of financial instruments

         The Company's financial instruments, primarily consisting of cash,
         accounts receivable, marketable securities, accounts payable, accrued
         expenses and debt, approximate fair value due to their short-term
         nature or interest rates that approximate market.

   p)    Reclassifications

          Certain prior year amounts have been reclassified to conform to the
          current year presentation.

                                      F-10
<PAGE>
NOTE 3   -    GOING CONCERN

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

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

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

NOTE 4   -    ACQUISITIONS

         LIFE INTERNATIONAL

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

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

                           DESCRIPTION                                   AMOUNT
                           -----------                              ------------
                           Customer relations                       $    400,000
                           Process technology                          3,887,000
                           Trademarks                                    830,000
                           Goodwill                                      796,490
                                                                    ------------
                                                                    $  5,913,490
                                                                    ============

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

                                      F-11
<PAGE>
NOTE 4   -    ACQUISITIONS (Continued)

         AQUA CLARA BOTTLING & DISTRIBUTION, INC.

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

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

          DESCRIPTION                                        AMOUNT
         ----------------                                 --------------
         Land                                             $       90,000
         Building                                                784,454
         Equipment                                               757,665
         Goodwill                                             11,149,542
         Trademarks                                              910,000
         Customer relations                                      140,000
                                                          --------------
                                                             $13,831,661

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

                                      F-12
<PAGE>
NOTE 5   -    PROPERTY AND EQUIPMENT

         The property and equipment consists of the following at March 29, 2003:


                                                  Useful Lives
                                                  ------------
            Building                                        -      $   690,500
            Computer and office equipment        5 to 7 years          124,008
            Land                                          N/A           90,000
            Machinery and equipment                   7 years           80,148
            Vehicles                                        -           53,880
                                                                    -----------
                                                                     1,038,536
            Less: accumulated depreciation                             (35,173)
                                                                  $  1,003,363

         Total depreciation expense for the years ended March 29, 2003 and March
         30, 2002 was $181,668 and $50,418, respectively.

         During the year ended March 29, 2003, the Company revised its business
         plan to concentrate its sales efforts on licensing its proprietary
         technology to co-packers and licensing its products to distributors. In
         implementing this strategy, the Company eliminated its entire sales
         force and is in negotiations with additional co-packers to produce its
         products. In addition, the Company's manufacturing plant in Clearwater
         Florida was shut down and is being disposed of.

         The building and land related to the plant had a net book value of
         $834,011 at March 29, 2003. In September 2003, the Company accepted a
         bid for the manufacturing plant and land for $850,000. As such, the
         plant and land have been written down to their fair value of $850,000
         less estimated costs of sale of $69,500 at March 29, 2003.

                                      F-13
<PAGE>
NOTE 5   -    PROPERTY AND EQUIPMENT (cont'd)

         In connection with the plant shutdown, cessation of production and
         nonpayment of amounts owed under leases, secured debt and mortgages,
         the majority of the Company's property and equipment have been
         repossessed, foreclosed on, donated or otherwise abandoned. Such
         property and equipment consists of machinery and processing equipment,
         transportation equipment - pledged, computer and office equipment.
         These assets had a net book value of $821,084 at March 29, 2003 and
         were deemed to have fair value of $128,880 at March 29, 2003.

         The impairment loss of $745,715 is included in other income (expense)
         on the accompanying consolidated statements of operations for the year
         ended March 29, 2003.

NOTE 6    -   ACCRUED EXPENSES

         Accrued expenses consisted of the following at March 29, 2003:


              Payroll and related costs                $    767,554
              Settlements                                   765,559
              Other                                         455,136
              Interest                                      137,990
              Professional fees                             154,132
              Directors fees                                 40,000
                                                       -------------
                                                       $  2,320,371
                                                       -------------
NOTE 7    -   CONVERTIBLE NOTES PAYABLE

         On October 22, 2001, the Company entered into a series of three
         convertible promissory notes with Financial Partners Network
         Corporation in the amount of $100,000, $100,000 and $62,584. The notes
         were due April 22, 2002 and had an interest rate of 10.5% per year. The
         notes were convertible, at the option of the holder, into shares of the
         Company's common stock at an initial conversion price of $65.99 per
         share. The conversion price was subject to adjustment if the Company
         issued additional shares of its common stock without consideration or
         for a consideration per share less than the conversion price in effect
         immediately prior to the issuance of such additional shares of common
         stock. On August 29, 2002, in consideration for extending the maturity
         date on the notes, the Company granted warrants to purchase 2,574
         shares of the Company's common stock at an exercise price of $2.00 per
         share expiring May 15, 2005. On January 21, 2003, all three notes,
         inclusive of accrued interest of $34,464, were converted into 1,710,753
         shares of the Company's common stock at a rate of $0.108 per share. The
         Company also granted warrants to Financial Partners Network Corporation
         to purchase 2,198 shares of the Company's common stock at an exercise
         price of $65.99 per share expiring November 10, 2006. In lieu of
         exercising the warrant by paying the per share warrant price, the
         holder may execute a cashless exercise in accordance with the formula
         set forth in the warrant agreement.

         On November 5, 2001, the Company entered into a $100,000 convertible
         promissory note with an investor. The note is currently in default and
         was due November 5, 2002 and has an interest rate of 10.5% per year.
         The note is convertible, at the option of the holder, into shares of
         the Company's common stock at an initial conversion price of $65.99 per
         share. The conversion price is subject to adjustment if the Company
         issued additional shares of its common stock without consideration or
         for a consideration per share less than the conversion price in effect
         immediately prior to the issuance of such additional shares of common
         stock. Accrued interest of $13,832 is included in accrued expenses in
         the accompanying consolidated balance sheet. The Company also granted
         warrants to the investor to purchase 609 shares of the Company's common
         stock at an exercise price of $65.99 per share expiring November 5,
         2004. The warrants were exercised on January 24, 2003 for a total of
         $40,000.

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

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

         On December 21, 2001, the Company entered into a $20,000 convertible
         promissory note with an investor. The note is currently in default and
         was due June 21, 2002 and has an interest rate of 10.5% per year. The
         note is convertible, at the option of the holder, into shares of the
         Company's common stock at an initial conversion price of $65.99 per
         share. The conversion price is subject to adjustment if the Company
         issues additional shares of its common stock without consideration or
         for a consideration per share less than the conversion price in effect
         immediately prior to the issuance of such additional shares of common
         stock. Accrued interest of $2,625 is included in accrued expenses in
         the accompanying consolidated balance sheet. The Company also granted
         warrants to the investor to purchase 122 shares of the Company's common
         stock at an exercise price of $65.99 per share expiring November 5,
         2004.

         On December 21, 2001, the Company entered into a $40,000 convertible
         promissory note with an investor. The note is currently in default and
         was due June 21, 2002 and has an interest rate of 10.5% per year. The
         note is convertible, at the option of the holder, into shares of the
         Company's common stock at an initial conversion price of $65.99 per
         share. The conversion price is subject to adjustment if the Company
         issues additional shares of its common stock without consideration or
         for a consideration per share less than the conversion price in effect
         immediately prior to the issuance of such additional shares of common
         stock. Accrued interest

         of $5,250 is included in accrued expenses in the accompanying
         consolidated balance sheet. The Company also granted to the investor
         warrants to purchase 243 shares of the Company's common stock at an
         exercise price of $65.99 per share expiring November 5, 2004. On July
         30, 2002, in consideration for extending the maturity date on the note
         to June 21, 2003, the Company granted warrants to purchase 100 shares
         of the Company's common stock at an exercise price of $48.00 per share
         expiring May 15, 2005.

         In April 2002, the Company entered into several convertible promissory
         notes with several investors for a total value of $200,000. The notes
         are due April 30, 2003 and have an interest rate of 12%. The notes are
         convertible, at the option of the holders, into shares of the Company's
         common stock at an initial conversion price per share equal to the
         lesser of (i) the average of the lowest three-day trading prices during
         the five trading days immediately prior to the conversion date
         discounted by 25%, or (ii) the average of the lowest three-day trading
         prices during the five trading days immediately prior to the funding.
         The conversion price is subject to adjustment if the Company issues
         additional shares of its common stock without consideration or for a
         consideration per share less than the conversion price in effect
         immediately prior to the issuance of such additional shares of common
         stock. During the year ended March 29, 2003, one investor converted his
         note into 1,755 shares of the Company's common stock. The balance of
         the notes were $150,000 at March 29, 2003. Accrued interest of $16,967
         is included in accrued expenses in the accompanying consolidated
         balance sheet. The Company also granted these investors warrants to
         purchase a total of 3,000 shares of the Company's common stock at an
         exercise price equal to the lesser of (i) the average of the lowest
         three day trading prices during the five trading days immediately prior
         to the conversion date discounted by 25%, or (ii) the average of the
         lowest three day trading prices during the five trading days
         immediately prior to the funding date. The warrants are callable by the
         Company when the five-day average closing stock price exceeds 120% of
         the five-day average closing price prior to the funding date. The
         warrants expire on April 30, 2005. In August 2003, another investor
         converted his note into 773,333 shares of the Company's common stock at
         a rate of $0.108 per share.

                                      F-15
<PAGE>
NOTE 7    -   CONVERTIBLE NOTES PAYABLE (cont'd)

         On May 15, 2002, the Company entered into an $80,000 convertible
         promissory note with a director. The note was due August 15, 2002 and
         had an interest rate of 12.0% per year. The note was convertible, at
         the option of the holder, into shares of the Company's common stock at
         an initial conversion price per share equal to the lesser of (i) the
         average of the lowest 3 day trading prices during the 5 trading days
         immediately prior to the conversion date discounted by 25%, or (ii) the
         average of the lowest 3 day trading prices during the 5 trading days
         immediately prior to the funding date. The conversion price was subject
         to adjustment. On August 29, 2002, in consideration for extending the
         maturity date on the note, the Company granted warrants to purchase 784
         shares of the Company's common stock at an exercise price of $2.00 per
         share expiring May 15, 2005. On January 21, 2003, the note, including
         accrued interest of $6,180, was converted into 4,440,044 shares of the
         Company's common stock at a rate of $0.108 per share. The Company also
         granted warrants to purchase 1,200 shares of the Company's common stock
         at an exercise price equal to the lesser of (i) the average of the
         lowest three day trading prices during the five trading days
         immediately prior to the conversion date discounted by 25%, or (ii) the
         average of the lowest three day trading prices during the five trading
         day immediately prior to the funding date. The warrants to purchase
         1,200 shares of the Company's common stock were exercised on August 7,
         2002. The Company also had a secured note with this director. On

         August 29, 2002, in consideration for extending the maturity date on
         the secured note with the director mentioned above, the Company granted
         warrants to purchase 3,845 shares of the Company's common stock at an
         exercise price of $2.00 per share expiring May 15, 2005.

NOTE 7    -   CONVERTIBLE NOTES PAYABLE (cont'd)

         On June 4, 2002, the Company entered into a $100,000 convertible
         promissory note with an investor. The note is due June 4, 2003 and has
         an interest rate of 12%. The note is convertible, at the option of the
         holder, into shares of the Company's common stock at an initial
         conversion price per share equal to the lesser of (i) the average of
         the lowest three-day trading prices during the five trading days
         immediately prior to the conversion date discounted by 25%, or (ii) the
         average of the lowest three-day trading prices during the five trading
         days immediately prior to the funding. The conversion price is subject
         to adjustment if the Company issues additional shares of its common
         stock without consideration or for a consideration per share less than
         the conversion price in effect immediately prior to the issuance of
         such additional shares of common stock. Accrued interest of $9,867 is
         included in accrued expenses in the accompanying consolidated balance
         sheet. The Company also granted warrants to this investor to purchase
         1,500 shares of the Company's common stock at an exercise price equal
         to the lesser of (i) the average of the lowest three day trading prices
         during the five trading days immediately prior to the conversion date
         discounted by 25%, or (ii) the average of the lowest three day trading
         prices during the five trading day immediately prior to the funding
         date. The warrant is callable by the Company when the five-day average
         closing stock price exceeds 120% of the five day average closing price
         prior to the funding date. The warrant expires on April 30, 2005.

         On June 27, 2002, the Company entered into a $50,000 convertible
         promissory note with an investor. The note is due April 30, 2003 and
         has an interest rate of 12%. The note is convertible, at the option of
         the holder, into shares of the Company's common stock at an initial
         conversion price per share equal to the lesser of (i) the average of
         the lowest three-day trading prices during the five trading days
         immediately prior to the conversion date discounted by 25%, or (ii) the
         average of the lowest three-day trading prices during the five trading
         days immediately prior to the funding. The conversion price is subject
         to adjustment if the Company issues additional shares of its common
         stock without consideration or for a consideration per share less than
         the conversion price in effect immediately prior to the issuance of
         such additional shares of common stock. Accrued interest of $4,550 is
         included in accrued expenses in the accompanying consolidated balance
         sheet. The Company also granted warrants to this investor to purchase
         750 shares of the Company's common stock at an exercise price equal to
         the lesser of (i) the average of the lowest three day trading prices
         during the five trading days immediately prior to the conversion date
         discounted by 25%, or (ii) the average of the lowest three day trading
         prices during the five trading day immediately prior to the funding
         date. The warrant is callable by the Company when the five-day average
         closing stock price exceeds 120% of the five day average closing price
         prior to the funding date. The warrant expires on April 30, 2005.

                                      F-16
<PAGE>
         On July 5, 2002, the Company entered into a $250,000 convertible
         promissory note with an investor. The note is due July 5, 2003 and does
         not bear interest, except in the case of default. The note is
         convertible, at the option of the holder, into shares of the Company's
         common stock at an initial conversion price per share equal to the
         lesser of (i) the average of the 5 day closing bid prices during the 5
         trading days immediately prior to the conversion date discounted by
         25%, or (ii) $60. The conversion price is subject to adjustment if the
         Company issues additional shares of its common stock without
         consideration or for a consideration per share less than the conversion
         price in effect immediately prior to the issuance of such additional
         shares of common stock. The conversion price is also subject to
         adjustment so that the number of shares into which the rate is
         converted does not exceed the number of shares such that, when
         aggregated with all other shares of common stock then beneficially or
         deemed beneficially owned by the holder, would result in the holder
         owning more than 9.999% of all such shares of common stock as would be
         outstanding on the conversion date. The balance of the note at March
         29, 2003 was $250,000. Accrued interest of $15,000 is included in
         accrued expenses in the accompanying consolidated balance sheet. In
         August 2003, $30,000 of the note was converted into 500,000 shares of
         the Company's common stock. The Company also granted warrants to
         purchase 1,667 shares of the Company's common stock at an exercise
         price of $72.00 per share. The warrant is callable at the Company's
         option, provided that the closing bid prices for the five days
         preceding the date the Company exercises such option exceeds 140% of
         the warrant exercise price and that an effective registration statement
         is in place.

NOTE 7    -   CONVERTIBLE NOTES PAYABLE (cont'd)

         On August 4, 2002, the Company entered into a $75,000 convertible
         promissory note with an investor bearing interest at 10% per annum with
         principal and all accrued interest payable in full on March 4, 2003.
         The note is secured by 50,000 shares of the Company's common stock. The
         holder of the note is entitled, at its option, to convert at any time,
         the principal amount of the note and accrued interest at a conversion
         price equal to the latest five-day average of the closing bid price of
         the Company's common stock into such shares of the Company's common
         stock. The shares to be issued pursuant to this note shall contain
         unlimited piggyback registration rights. Any overdue payment of
         principal on the note shall bear interest at 15% per annum until paid.
         On February 5, 2003, the Company issued 50,000 shares of its common
         stock, valued at $85,000 in consideration for extending the maturity
         date of the note. Accrued interest of $3,750 is included in accrued
         expenses in the accompanying consolidated balance sheet.

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

                                      F-17
<PAGE>
NOTE 8     -NOTES PAYABLE  - SECURED BY ASSETS

         On July 31, 2002, the Company refinanced their manufacturing plant
         located in Clearwater, Florida. The amount of the mortgage note
         totaled $420,000. The mortgage note is secured by the underlying
         building and land. The note was due in monthly installments of
         principal and interest through 2032 and has an initial interest rate
         of 12.99%. The interest rate will be adjusted annually to a rate equal
         to 6.00% above the prime rate and shall never be less than 12.00% per
         year. At March 29, 2003, the interest rate was 18.00%. Due to the
         default, the mortgage is now currently due and has been reclassified
         as a current liability. At March 29, 2003, the outstanding principal
         balance was $419,806. Accrued interest of $50,400 is included in
         accrued expenses in the accompanying consolidated balance sheet.

         In May 2002, the Company entered into an agreement with Brickell Bay
         Capital Fund, LLC ("Brickell Bay") to extend the maturity date of its
         $300,000 convertible promissory note to October 4, 2002. As part of the
         agreement, the Company was required to pay past due interest totaling
         $18,375 and issue warrants to purchase 2,511 shares of the Company's
         common stock at an exercise price of $65.99 per share. The fair value
         of the warrants of $290,531 was calculated using the Black-Scholes
         Option Pricing Model and was accounted for as additional paid-in
         capital and interest and financing expense. Accrued interest of $15,750
         is included in accrued expenses in the accompanying consolidated
         balance sheet. On May 30, 2002, Brickell Bay exercised warrants
         relating to a previous agreement to purchase 2,511 shares of the
         Company's common stock for a total consideration of $165,706. In
         addition, on April 4, 2002, the Company entered into a Collateral
         Assignment of Rents, Leases and Profits ("Collateral Assignment") with
         Brickell Bay whereby the Company's manufacturing plant in Clearwater,
         Florida and land was assigned to Brickell Bay as collateral for the
         $300,000 note. In June 2003, Brickell Bay filed a foreclosure action
         against the Company for nonpayment (See Note 14). The balance due to
         Brickell Bay has been included in notes payable - secured by assets.

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

                                      F-18
<PAGE>
NOTE 9    -   STOCKHOLDERS' DEFICIENCY

         Reverse Stock Split:

         On January 2, 2003, the Board of Directors authorized a 200:1 reverse
         stock split. All references in the accompanying consolidated financial
         statements to the number of common shares and per share amounts for
         March 29, 2003 and March 30, 2002 have been restated to reflect the
         reverse stock split.

         Change in Domestication and Common Stock:

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

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

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

         Private Placement:

         In July 2001, the Company completed a private placement of $1,787,500,
         consisting of 27,199 shares of the Company's common stock at $66 per
         share and 27,199 warrants, exercisable at $132 and expiring on May 1,
         2003. The options had no value using the Black-Scholes Option Pricing
         Model.

         In December 2001, the Company raised an additional $247,500 through a
         private placement of 3,766 shares of common stock at $66 per share.

         In February 2002, the Company raised an additional $965,000 through a
         private placement of 10,768 shares of common stock at $90 per share.

         The issuance costs associated with these private placements were
         $515,000 and is reflected in the net proceeds.

                                      F-19
<PAGE>
         Issuance of Warrants:

NOTE 9     -      STOCKHOLDERS' DEFICIENCY (cont'd)

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

         Issuance of Warrants for Settlement of Debt:

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

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

         Issuance of Common Stock for Settlement of Debt:

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

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

         Issuance of Common Stock and Warrants for Consulting Services:

         In January 2002, the Company issued 110 shares of common stock for
         services rendered. The Company recorded $7,200 of expense during the
         year ended March 30, 2002.

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

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

         In March 2002, the Company entered into a six-month consulting
         agreement with another consulting firm for services to be provided. The
         agreement automatically renewed on a month-to-month basis. During the
         year ended March 29, 2003, this contract was terminated. The Company
         was required to pay a monthly retainer of $3,750. In addition, the
         Company agreed to pay the consultant an amount not less than 2.9% of
         the Company's fully diluted shares of common stock. The Company also
         agreed to issue the consulting firm a warrant to purchase an additional
         2.9% of the Company's fully diluted shares of common stock, exercisable
         for five years, at an exercise price of $1.00. Should the agreement be
         terminated prior to the end of its term, the compensation vests
         pro-rata. In addition to any amounts payable to the consulting firm
         noted above, the consulting firm shall also be paid additional
         compensation in connection with certain transactions and events as
         defined in the

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

         agreement. The Company issued 8,440 shares of its common stock, valued
         at $354,456, in connection with the agreement during the year ended
         March 29, 2003. In addition, on August 29, 2002, the Company granted
         warrants to purchase 9,564 shares of the Company's common stock at an
         exercise price of $200 per share expiring August 29, 2007. The Company
         has valued the warrants at $322,508 using the Black-Scholes Pricing
         Model. The value of the warrants has been expensed.

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

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

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

         In April 2002, the Company issued 150 shares of its common stock to a
         consultant for services to be provided, valued at $21,600. In addition,
         on April 10, 2002, the Company also agreed to pay the consultant $6,000
         per month, beginning April 1, 2002, as a consulting fee on an annual
         basis, which will be applied against media expenditures. Should no
         media be placed, the $6,000 monthly consulting fee will be paid to the
         consultant. On April 29, 2002, the Company also agreed to set up a
         production account with the consultant to cover various media-related
         expenses to be incurred on behalf of the Company. The Company will
         issue approximately $100,000 worth of restricted common stock to the
         consultant to fund this account. The consultant is to liquidate the
         stock as needed to pay for various media purchases made on behalf of
         the Company. The consultants handling of the production account is
         currently being reviewed by the Company.

         In June 2002, the Company entered into a three month consulting
         agreement with a consultant for services to be provided. The Company
         agreed to pay the consultant 4,500 shares of its unrestricted common
         stock, which vest pro-rata over the life of the agreement. On August
         30, 2002, the agreement was amended such that the Company agreed to
         issue the consultant 7,500 shares of unrestricted common stock, which
         vest pro-rata over the life of the agreement. The agreement was further
         modified to extend the term to eight months. As of March 29, 2003, 375
         shares are owed to the consultant.

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

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

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

         In August 2002, the Company issued warrants to a consultant for
         services to be provided to purchase 25,000 shares of the Company's
         common stock at an exercise price of $20 per share. The warrants have a
         term of one year. The warrants were exercised during the year ended
         March 29, 2003. In November 2002, the Company issued additional
         warrants to the same consultant for services to be provided to purchase
         25,000 shares of the Company's common stock at an exercise price equal
         to a 40% discount to the closing price on the day of notice. As of
         March 29, 2003, 3,792 warrants were exercised. The warrants have a term
         of six months.

         In September 2002, the Company issued warrants to a consultant for
         services to be provided to purchase 30,000 shares of the Company's
         common stock at an exercise price of a 40% discount to the closing bid
         price of the Company on the day of notice of execution. The warrants
         expire six months from the date of issuance. At the same time, the
         Company entered into a Stock Option Purchase Agreement with this
         consultant whereby the consultant has the option to purchase up to
         30,000 shares of the Company's common stock at a 40% discount to the
         closing bid price of the Company on the day of notice of execution. The
         option expires six months from the date of the agreement. In November
         2002, the Company issued additional warrants to the consultant for
         services to be provided to purchase 62,500 shares of the Company's
         common stock at an exercise price of a 40% discount to the closing bid
         price of the Company on the day of notice of execution. The warrants
         expire six months from the date of issuance. The consultant has
         exercised a total of 81,500 warrants during the year ended March 29,
         2003. The Company has valued the warrants at $802 using the
         Black-Scholes pricing model. The value of the warrants has been
         expensed.

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

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

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

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

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

         Marketing Agreement:

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

                                      F-23
<PAGE>
NOTE 10  -        INCOME TAXES

         Total income tax benefit consists of the following:

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

           A reconciliation of income tax benefit resulting from applying U.S.
           federal statutory rates to pretax loss and the reported amount of
           income tax benefit is as follows:
                Tax benefit at federal statutory rate
                       applied to pretax loss                   $     4,242,750
                State and income taxes, net of
                       federal income tax benefit, applied
                       to pretax loss                                 1,442,500
                Permanent differences                                (4,832,800)
                Valuation allowance                                    (852,450)
                                                                ----------------
                       Total income tax benefit                 $             -
                                                                ================

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

           The tax effect of significant items comprising the Company's net
           non-current deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
                                                                                        March 29, 2003
                                                                                        ---------------
                                  <S>                                                        <C>
                              Net operating loss carryfowards                           $    2,100,000
                              Stock compensation                                             1,030,600
                              Asset impairment                                               3,801,500
                              Valuation allowance                                           (6,932,100)
                                                                                        ---------------
                              Deferred non-current tax asset                                         -
                                                                                        ---------------
                              Depreciable assets                                                     -
                                                                                        ---------------
                              Deferred non-current tax liability                                     -
                                                                                        ---------------
                              Net non-current deferred tax asset                        $            -
                                                                                        ===============
</TABLE>
           Based on management's present assessment, the Company has not yet
           determined it to be more likely than not that a deferred tax asset
           attributable to the future utilization of the net operating loss
           carry forwards will be realized. Accordingly, the Company has
           provided a 100% valuation allowance against the deferred tax asset in
           the consolidated balance sheet at March 29, 2003.

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

                                      F-24
<PAGE>
NOTE 11   -       RELATED PARTY TRANSACTIONS

         Employment Agreements:

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

         Transactions:

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

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

         On March 29, 2003, the Company accrued expenses of $144,838 for
         disbursements paid by a director on behalf of the Company for
         operating expenses and payroll. In addition, the Company accrued
         $10,000 for directors fees due the director.

         On March 29, 2003, the Company accrued $25,000 for directors fees due
         another director.

         As of March 29, 2003 the Company owed the CEO $54,296 for disbursements
         made by the CEO on behave of the Company for operational expenses.

         As of March 29, 2003, the Company owed the daughter of the CEO $28,682
         for services rendered.

NOTE 12   -       STOCK OPTION PLAN

         In April 2001, the Company adopted a Stock Option Plan intended to
         provide officers, directors, key employees and consultants of the
         Company an opportunity to acquire stock in the Company. As of March 30,
         2002, 1,732,383 options to purchase shares at $0.33 per share had been
         issued and 900,000 options to purchase shares at $0.01 per share had
         been issued. During the year ended March 29, 2003, the 900,000 options
         were exercised and the 1,732,383 options were canceled due to
         terminations. The fair value of the options on the grant date was
         calculated using the Black-Scholes Option Pricing Model. As of March
         29, 2003, no options were outstanding (See note 15 for subsequent
         events).

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

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

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

                                      F-25
<PAGE>
NOTE 13    -      RECENT ACCOUNTING PRONOUNCEMENTS

         In April 2002, the Financial Accounting Standards Board ("FASB") issued
         SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
         Amendment of FASB Statement No. 13, and Technical Corrections" ("SFAS
         No. 145"). This statement eliminates the requirement to report gains
         and losses from extinguishment of debt as extraordinary unless they
         meet the criteria of APB Opinion 30. SFAS No. 145 also requires
         sale-leaseback accounting for certain lease modifications that have
         economic effects that are similar to sale-leaseback transactions. The
         changes related to lease accounting are effective for transactions
         occurring after May 15, 2002 and the changes related to debt
         extinguishment are effective for fiscal years beginning after May 15,
         2002. The adoption of SFAS No. 145 did not have a material impact on
         the Company's financial position or results of operations.

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

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

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

                                      F-26
<PAGE>
NOTE 13    -      RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

         In January 2003, the FASB issued FASB Interpretation No. 46
         "Consolidation of Variable Interest Entities" ("FIN 46"). In general, a
         variable interest entity is a corporation, partnership, trust, or any
         other legal structure used for business purposes that either (a) does
         not have equity investors with voting rights or (b) has equity
         investors that do not provide sufficient financial resources for the
         entity to support its activities. A variable interest entity often
         holds financial assets, including loans or receivables, real estate or
         other property. A variable interest entity may be essentially passive
         or it may engage in activities on behalf of another company. Until now,
         a company generally has included another entity in its consolidated
         financial statements only if it controlled the entity through voting
         interests. FIN 46 changes that by requiring a variable interest entity
         to be consolidated by a company if that company is subject to a
         majority of the risk of loss from the variable interest entity's
         activities or entitled to receive a majority of the entity's residual
         returns or both. FIN 46's consolidation requirements apply immediately
         to variable interest entities created or acquired after January 31,
         2003. The consolidation requirements apply to older entities in the
         first fiscal year or interim period beginning after June 15, 2003.
         Certain of the disclosure requirements apply in all financial
         statements issued after January 31, 2003, regardless of when the
         variable interest entity was established. The Company adopted FIN 46
         effective January 31, 2003. The adoption of FIN 46 will not have a
         material impact on the Company's consolidated financial condition or
         results of operations taken as a whole.

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

                                      F-27
<PAGE>
NOTE 14    -      COMMITMENTS AND CONTINGENCIES

         Litigation:

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

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

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

         Subsequent to the year ended March 29, 2003, the Company entered into
         settlement agreements with certain professionals, consultants, vendors
         and former employees. These settlements aggregate approximately
         $428,000 and are included in accrued expenses at March 29, 2003.

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

                                      F-28
<PAGE>
NOTE 14    -      COMMITMENTS AND CONTINGENCIES (cont'd)

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

              Operating Leases

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

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

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

         Total rent expense under the operating lease for the years ended March
         29, 2003 and March 30, 2002 was $126,000 and $86,000, respectively.
         During the year ended March 29, 2003, the Company occupied a different
         leased office space which was abandoned. A final judgment is currently
         held by the lessor and the Company is seeking to settle this matter.
         Included in accrued expenses is in an amount related to this matter.

         License and Trademark Agreement:

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

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

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

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

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

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

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

                                      F-29
<PAGE>
NOTE 15    -      SUBSEQUENT EVENTS (cont'd)

         Lack of Insurance:

         The Company, at March 29, 2003, did not maintain any liability
         insurance or any other form of general insurance. The Company is also
         lacking insurance coverage for Directors and Officers Liability,
         workman's compensation, disability, and business discontinuance.
         Although the Company is not aware of any claims resulting from
         non-coverage, there is no assurance that none exist. Management plans
         to obtain coverage as soon as possible.

         2003 Equity Incentive Plan:

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

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

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

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

         Consulting Agreements:

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

                                      F-30
<PAGE>
NOTE 15    -      SUBSEQUENT EVENTS (cont'd)

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

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

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

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


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

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

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

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

                                      F-31
<PAGE>
NOTE 15    -      SUBSEQUENT EVENTS (cont'd)

         In June 2003, the Company entered into a Settlement Agreement with
         Michael Berry whereby the Company agreed to pay $87,000 in satisfaction
         of debt.

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

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

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