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

                                   FORM 10-KSB

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

                    For the fiscal year ended March 31, 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 to 2001 and is on track to grow approximately
30% in 2002. 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
<PAGE>
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. Industry experts project that by 2002 nearly 60 percent of all bottled
water will be sold at retail. 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.

         Although home delivery's market share of distribution channels is
expected to drop to 18.6 percent in 2002, down from 19.6 percent in 1997,
gallonage in home delivery is expected to grow by 40 percent over the same
period from 669.8 million gallons in 1997 to 917.6 million gallons in 2002. It
is also projected that the home delivery sector of the bottled water industry
will continue to maintain its market share lead over the commercial sector in
2002.

         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.

                                       6
<PAGE>
         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
         --------------------------------------------------------------------

                                       7
<PAGE>
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
<PAGE>
                           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 $54,000
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. Approximately 2,400 sq. ft.
is utilized for office facilities and the rest is used for bottling and
warehouse operations. Our manufacturing plant in Clearwater, Florida has been
shut down and is listed for sale with a commercial real estate broker. The
property is listed for $950,000. If this sale is realized it will eliminate the
long-term mortgage debt on the plant. Eliminating the manufacturing plant will
result in a reduction in our cost of goods sold by over 60%. All of the staff
required for the operations of the plant have been laid off. Disposing of the
manufacturing plant could result in an estimated $825,000 reduction in
liabilities.

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. The Plaintiff has not specified an amount of damages. The Company
filed a motion to transfer venue and the motion is pending. There is a strong
likelihood of success on the merits for the Company.

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

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

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

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

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

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

                                       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 31, 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 31, 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 2, 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 31, 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 31, 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 $65.68 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 $65.68 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 $65.68
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 $65.68
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 31, 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 3,500 shares of the
Company's common

                                       20
<PAGE>

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 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.

         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.

         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 conversion

                                       21
<PAGE>
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) $0.30. 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 31, 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.

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.

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 9,722,222
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.

                                       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.

         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 31, 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.

         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 $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.

         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.

         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.

         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

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 sales for the fiscal year ending March 30, 2003 are $2,286,255
compared to $1,379,384 for the fiscal year ending March 30, 2002. The Cost of
Goods Sold for the fiscal year ended March 30, 2003 was $730,057, compared to $
1,457,354 for the fiscal year ending March 30, 2002,for a gross margin of
$1,556,198 compared to $ (77,970) for the fiscal year ending March 30, 2002. The
net loss for the fiscal year ending March 30, 2003 was $ 29,560,194 compared to
$4,585,208 for the fiscal year ending March 30, 2002. Selling and general
administrative expenses for the fiscal year ended March 30, 2003 were $244,030
compared to $1,472,575 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 30, 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 30,
2003, the Company raised $ 1,543,246 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 sold 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 $54,000. We have
decreased our headcount by 20, reduced salary expense annually by $1,076,920 and
benefits an additional $333,560. 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.

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.



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 31, 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 31,
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 31, 2003.

                                       33
<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 31, 2003:

Directors and Executive Officers



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

G. Robert Tatum         60            Chief Executive 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, attached hereto as Exhibit 99.1.

                                       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 31, 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              Certification by G. Robert Tatum, Principal Executive Officer,
                  pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.
32.1              Certification by G. Robert Tatum, Chief Executive Officer,
                  Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
                  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

(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 31, 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 31, 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 9, 2003                BEVSYSTEMS INTERNATIONAL, INC.




                                      By: /s/ G. Robert Tatum
                                      ------------------------
                                      G. Robert Tatum
                                      President/C.E.O.

                                       40
<PAGE>

             [GERSON, PRESTON, ROBINSON & COMPANY, P.A. LETTERHEAD]

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

                          INDEPENDENT AUDITORS' REPORT

We have audited the accompanying consolidated balance sheet of BEVsystems
International, Inc. and Subsidiaries as of March 31, 2003 and the related
consolidated statements of operations, shareholders' equity 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 31, 2003 and the results of its
operations and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.

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.
September 8, 2003
Miami Beach, Florida      CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
                              Financial Statements

                         BEVsystems International, Inc.
                                And Subsidiaries

                        For the Year Ended March 31, 2003

<TABLE>
<CAPTION>

<S>                                                                                           <C>

CONSOLIDATED FINANCIAL STATEMENTS

         Consolidated Balance Sheet at March 29, 2003                                       F-1 to F-2

         Consolidated Statement of Operations
           for the years ended March 29, 2003 and March 30, 2002                                F-3

         Consolidated Statement of Changes in Shareholders' Deficiency
           for the years ended March 29, 2003 and March 30, 2002                                F-4

         Consolidated Statement of Cash Flows
           for the years ended March 29, 2003 and March 30, 2002                            F-5 to F-6

         Notes to Consolidated Financial Statements                                         F-7 to F-34
</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.

Except as discussed in the following paragraphs, 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.

                                       F-1
<PAGE>
In our opinion, the financial statements referred to in the first paragraph
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 expressed
a qualified opinion on those statements, as a result of a going concern
contingency.




MASSELLA ROUMBOS LLP
Syosset, New York
September 8, 2003

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



                                     ASSETS





Current assets:
     Cash and cash equivalents                        $                   360
     Accounts receivable, net                                               -
     Marketable securities                                              5,500
                                                      -----------------------

        Total current assets                                            5,636

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

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



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

                                       F-1
<PAGE>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                 MARCH 29, 2003

<TABLE>
<CAPTION>
                    LIABILITIES AND SHAREHOLDERS' DEFICIENCY



Current liabilities:
<S>                                                                                             <C>
     Accounts payable                                                                   $             1,665,132
     Accrued expenses                                                                                 2,157,527
     Convertible notes payable                                                                          785,000
     Notes payable secured by assets                                                                    778,873
     Deferred revenue                                                                                    94,170
                                                                                        ------------------------

         Total current liabilities                                                                    5,480,702
                                                                                        ------------------------


Commitments and contingencies

Shareholders' deficiency:
     Preferred stock; no par value; 5,000,000 shares authorized; 100 shares
       issued and outstanding; nonvoting and convertible
        into 874 shares of common stock                                                                  74,601
     Common stock; $.0001 par value; 650,000,000 shares authorized;
       11,311,272 issued and outstanding and                                                              1,132
Additional paid-in capital                                                                           28,881,491
     Deferred consulting services                                                                      (629,067)
     Accumulated deficit                                                                            (32,799,860)
                                                                                        ------------------------

              Total shareholders' deficiency                                                         (4,471,703)
                                                                                        ------------------------

         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                                                                  $  2,286,255              $  1,379,384

Cost of goods sold                                                                 730,057                 1,457,354
                                                                              -------------              ------------

Gross profit (loss)                                                              1,556,108                   (77,970)

Operating expenses:
    Selling and marketing                                                          244,030                 1,472,575
    General and administrative                                                   8,305,479                 2,930,358
                                                                              -------------              ------------
             Total operating expenses                                            8,549,509                 4,402,933
                                                                              -------------              ------------

Loss before other income (expense)                                              (6,993,311)               (4,480,903)

Other income (expense):
     Interest and financing expense                                               (711,314)                 (104,305)

     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                                                                (1,328,224)

     Asset impairment                                                          (18,912,627)                        -
                                                                              -------------              ------------
              Total other income (expense)                                     (21,221,341)                 (104,305)
                                                                              -------------              ------------

Net loss from operations                                                      $(28,214,341)              $(4,585,208)
                                                                              -------------              ------------
Basic loss per common share                                                   $     (14.38)              $    (39.36)
                                                                              =============              ============



Weighted average common shared 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 YEAR ENDED MARCH 29, 2003
<TABLE>
<CAPTION>

                                                      Common Stock
                                                    .001 par value
                                            Number of                Additional     Preferred  Unearned   Accumulated
                                            Shares       Amount      Paid-in Capital   Stock    Services    Deficit         Total
                                               -------------------------------------------------------------------------------------
<S>                                             <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 Acqua 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)           -    2,151,487

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 reimbursements to
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 of debt
settlements                                          -         -         89,691          -              -            -       89,691
Issuance of warrants in connection with
convertible notes payable                            -         -        727,920          -              -            -      727,920
Issuance of warrants in connection with
consulting agreements                                -         -        342,540          -              -            -      342,540

Net loss for year ended March 30, 2003               -         -              -          -              -  (28,284,339) (28,284,339)

                                          ------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance at March 29, 2003                   11,311,272    $1,132    $28,993,573    $74,601      $(629,067) (32,869,547) $(4,429,309)
                                          ============ ============ ============ ============ ============ ============ ============
</TABLE>

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

                                       F-6
<PAGE>
<TABLE>
<CAPTION>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
              FOR THE YEARS ENDED MARCH 29, 2003 AND MARCH 30, 2002
                                                                                      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                                             5,255,167             7,200
      Issuance of warrants in connection with extension of note payable                 1,267,702                 -
   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                                   930,221         1,855,261
      Decrease (increase) in deposits                                                    (400,000)          400,000
      Increase in deferred revenue                                                         94,170                 -
                                                                                -----------------   ---------------

        Net cash used in operating activities                                          (2,461,489)       (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         2,252,000
     Repayments of  notes payable                                                        (330,524)                -
     Proceeds from issuance of convertible notes payable                                  755,000                 -
     Proceeds from exercise of stock options                                                9,000                 -
     Net proceeds from exercise of warrants                                             1,543,246            40,000
                                                                                -----------------   ---------------

        Net cash provided by financing activities                                       2,464,162         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:

     Cash paid during the year for:
<S>                                                                             <C>                 <C>
           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
                                                                                =================   ===============

     Warrants issued in connection with convertible
        notes payable                                                           $               -   $        73,800
                                                                                =================   ===============

     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 for services                                      $       1,243,468   $             -
                                                                                =================   ===============

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

     Stock issued in connection with settlement of accrued expenses             $       1,628,916   $             -
                                                                                =================   ===============

     Stock issued in connection with conversion of notes payable                $       1,522,079   $             -
                                                                                =================   ===============

</TABLE>


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

                                       F-8
<PAGE>

                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003

NOTE 1   -       ORGANIZATION, HISTORY AND NATURE OF BUSINESS

          BEVsystems  International,  Inc. and  Subsidiaries  (collectively  the
          "Company") is a provider of  oxygenated  water.  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).

          The   Company   distributes   its   products   primarily   through  an
          international distribution network.

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 $ 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.

                                       F-9
<PAGE>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003

NOTE 2    -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)


     e)   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.

     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.

                                      F-10
<PAGE>
                 BEVSYSTEMS INTERNATIONAL INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                        FOR THE YEAR ENDED MARCH 29, 2003

NOTE 2    -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

     j)   Loss per common share

          Loss per common  share is computed  pursuant to  Financial  Accounting
          Standards  Board,  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,  accounts payable, accrued expenses and debt, the
          financial  instruments  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-11
<PAGE>
                 BEVSYSTEMS INTERNATIONAL INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                        FOR THE YEAR ENDED MARCH 29, 2003

NOTE 3   -       GOING CONCERN

          The accompanying  consolidated financial statements have been prepared
          assuming  that the  Company  will  continue  as a going  concern.  The
          Company  has  incurred  operating  losses,  negative  cash  flows from
          operating activities, negative working capital and has a shareholder's
          deficit.  At March 29, 2003,  the  Company's  accumulated  deficit was
          $32,869,547 and its working capital deficiency was $5,378,791. For the
          years ended March 29, 2003 and March 30,  2002,  the Company had a net
          loss from operations of $28,284,339 and $4,585,208,  respectively.  In
          addition,  the  Company  is in  default  of  its  debt  agreement  for
          nonpayment and certain debtors have filed actions against the Company,
          including  foreclosing  property.  These conditions raise  substantial
          doubt about the Company's ability to continue as a going concern.

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

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

NOTE 4   -       ACQUISITIONS

          LIFE INTERNATIONAL

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

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

                           DESCRIPTION                     AMOUNT

                           Customer relations              $    400,000
                           Process technology                 3,887,000
                           Trademarks                           830,000
                           Goodwill                             796,490
                                                            ------------
                                                           $  5,913,490
                                      F-12
<PAGE>
NOTE 4   -       ACQUISITIONS (Cont'd)

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

          AQUA CLARA BOTTLING & DISTRIBUTION, INC.

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


NOTE 4   -    ACQUISITIONS (cont'd)

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


          DESCRIPTION                                      AMOUNT

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

                                     F-13
<PAGE>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003

NOTE 4   -    ACQUISITIONS (cont'd)

         The Company obtained an independent valuation of the assets of Aqua
         Clara in order to determine the fair value of the assets purchased at
         February 25, 2002. Subsequent to the purchase, the Company obtained
         additional independent valuations of the assets and determined that the
         above assets were impaired. Based upon the valuations, the Company
         recorded a one-time non-cash charge of $13,831,661 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 $2,682,119 recorded during the fourth quarter of fiscal 2003, the
         fair value was estimated using the discounted cash flow method. The
         amount of the impairment primarily reflects the Company's insolvency,
         the cessation of production, and the fact that the Company is not
         currently producing significant revenues to cover its cost of
         operations and continue as a going concern.


NOTE 5   -    PROPERTY AND EQUIPMENT


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


                                              Useful Lives
                                            --------------

        Machinery and equipment                    7 years   $  80,148
        Building                                         -     690,500
        Computer and office equipment         5 to 7 years     124,008
        Land                                           N/A      90,000
                                                             ----------
                                                               984,656
        Less: accumulated depreciation                         (35,173)
                                                             ----------
                                                             $ 949,483
                                                             ----------

         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 to license its products to distributors.
         In implementing this strategy, the Company eliminated its entire sales
         force and is in negotiation 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.

         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 $821,174 at March 29, 2003 and
         were deemed to have fair value of $75,000 at March 29, 2003.

         The impairment loss due to the write-down to fair value of $799,685 is
         included in other income (expense) on the accompanying consolidated
         statements of operations for the year ended March 29, 2003.

                                      F-14
<PAGE>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        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                                               455,135
              Interest                                            137,990
              Professional fees                                   154,132
              Directors fees                                       40,000
                                                             --------------
                                                             $  2,320,370


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 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.

                                      F-15

                BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003

          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 $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. 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,
          2003 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 $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 January 21, 2003, the note,  including  accrued  interest of
          $24,500 was converted  into 3,571,424  shares of the Company's  common
          stock at a rate of $0.108 per share.

          On December 21, 2001, the Company  entered into a $20,000  convertible
          promissory  note with 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 $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 $2,652 is
          included in accrued expenses in the accompanying  consolidated balance
          sheet.  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.

                                      F-16
<PAGE>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003


NOTE 7    -   CONVERTIBLE NOTE PAYABLE (cont'd)

          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 3,500
          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 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.

                                      F-17
<PAGE>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003


NOTE 7    -   CONVERTIBLE NOTE PAYABLE (cont'd)

          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. The conversion  price was subject to adjustment.  On January 21,
          2003, the note,  including  accrued interest of $6,180,  was converted
          into 4,440,044shares 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 June 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  $9,867  is  included  in  accrued  expenses  in  the  accompanying
          consolidated balance sheet.

          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.

          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 conversion price per share equal
          to the lesser of (i) the average of the 5 day closing bid prices
          during the 5 trading days immediately prior to the conversion date
          discounted by 25%, or (ii) $60. The conversion price is subject to
          adjustment if the Company issues additional shares of its common stock
          without consideration or for a consideration per share less than the
          conversion price in effect immediately prior to the issuance of such
          additional shares of common stock. The conversion price is also
          subject to adjustment so that the number of shares into which the note
          is converted does not exceed the number of shares such that, when
          aggregated with all other shares of common stock then beneficially or
          deemed beneficially owned by the holder, would result in the holder
          owning more than 9.999% of all such shares of common stock as would be
          outstanding on the conversion date. The balance of the note at March
          31, 2003 was $250,000. In August 2003, $30,000 of the note was

                                      F-18
<PAGE>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003


NOTE 7    -   CONVERTIBLE NOTES PAYABLE (cont'd)


          converted  into 500,000  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  convertible
          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 250 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 250 shares of its
          common stock 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 on the grant date was calculated  using
          the  Black-Scholes  Option  Pricing  Model  and was  accounted  for as
          additional   paid-in  capital  and  as  prepaid  costs  -  convertible
          debentures, which is being amortized to interest expense over the term
          of the notes.

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.  The interest  rate is also subject to adjustment to the maximum
          amount  permitted  under Florida law should the Company  default under
          the note.  The Company is currently  in default of the  mortgage  note
          and,  therefore,  the  interest  rate has been  adjusted  to 18.00% in
          accordance  with the note.  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 $36,372 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

                                      F-19
<PAGE>
                 BEVSYSTEMS INTERNATIONAL INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                        FOR THE YEAR ENDED MARCH 29, 2003


NOTE 8     -NOTES PAYABLE  - SECURED BY ASSETS (cont'd)

          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.
          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.


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

                                      F-20
<PAGE>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003


NOTE 9    -   STOCKHOLDERS' DEFICIENCY (cont'd)

          10,768 shares of common stock at $90 per share.

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

          Issuance of Warrants:

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

          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 $53,670 using the  Black-Scholes  pricing model. The value
          of the warrants has been expensed.

          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  9,722,222  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 approximatley $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 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

                                      F-21
<PAGE>

                BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003

NOTE 9      -     STOCKHOLDERS' DEFICIENCY (cont'd)

          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
         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 Company also agreed to grant the
         firm 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 firm 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 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. The firm is also entitled to
         receive additional compensation upon the occurrence of certain events,
         as defined in the agreement.

         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 April 2002, the Company entered into a consulting agreement with
         Douglas Cifers, 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 is $5,000
         per month and the consultant is 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 is payable 10%
         in cash and 90% in the Company's common stock. In September 2002, a new
         agreement was entered into.

                                      F-22
<PAGE>

                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003


NOTE 9      -   STOCKHOLDERS' DEFICIENCY (cont'd)

         In April 2002, the Company issued 148 shares of its common stock to a
         consultant for services to be provided, valued at $23,680. The common
         stock was valued at $160 per share.

         In April 2002, the Company issued 109 shares of its common stock to a
         consultant for services to be provided, valued at $17,440. The common
         stock was valued at $160 per share.

         In April 2002, the Company issued 150 shares of its common stock to a
         consultant for services to be provided. The common stock was valued at
         $160 per share. 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.

         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. The Company has valued the warrants using the
         Black-Scholes pricing model. The value of the warrants has been
         expensed.

         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 using the Black-Scholes pricing model. The value of the
         warrants has been expensed.

         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 Company has valued the warrants at using
         the Black-Scholes pricing model. The value of the warrants has been
         expensed. The warrants were exercised during the year ended March 29,
         2003.

                                      F-23
<PAGE>
                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003


NOTE 9     -      STOCKHOLDERS' DEFICIENCY (cont'd)

         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. The Company has valued the
         warrants using the Black-Scholes pricing model. The value of
         the warrants has been expensed. 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 Company has valued the
         warrants using the Black-Scholes pricing model. The value of the
         warrants has been expensed. The consultant has exercised a total of
         81,500 warrants during the year ended March 29, 2003.

         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, valued at $3,160.

         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, valued at $3,500.

         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, valued at
         $3,260.

         In September 2002, the Company issued 145 shares of its common stock to
         a consultant for services to be provided. ,The common stock was valued
         at $20 per share. valued at $2,900.

         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. Valued at $22,000 on
         April 9, 2003. 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

                                       24
<PAGE>
                BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003


NOTE 9     -      STOCKHOLDERS' DEFICIENCY (cont'd)

         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 rendered by the Company relating to the use of their
         beverage knowledge and distributing the other firm's beverage product.
         On May 20, 2003, the Company and ChampionLyte mutually agreed to
         terminate this agreement.

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

                                      F-25
<PAGE>

                BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003


NOTE 10  -        INCOME TAXES (cont'd)

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

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

                                                                                              March  30,   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 30, 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 30, 2003 or March
                  29, 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-26
<PAGE>

                BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003

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.

         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.

                                       27

<PAGE>

                BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003


NOTE 11   -          RELATED PARTY TRANSACTIONS (cont'd)

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

         As of March 29, 2003, the Company owed certain former employees
         $1,253,354 for payment of accrued salaries, bonuses and reimbursement
         of expenses.

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
          29, 2003, 9,250,000 options to purchase shares at $0.01 per share had
          been issued. 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. 9,250,000 of the
          options are vested at March 29, 2003, 0 options have been exercised
          and 2,632,383 options were canceled during the year ended at March 29,
          2003 and March 30, 2002, respectively. The fair value of the options
          on the grant date was calculated using the Black-Scholes Option
          Pricing Model.

          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
          years ended March 29, 2003 and March 30, 2002, respectively, as
          presented in the table below. Using the Black-Scholes Option Pricing
          Model, the Company's pro forma net loss is as follows:

                                                          2003          2002
                                                          ----          ----
                  Pro Forma Net Loss                      $       $  (4,653,620)
                  Pro Forma Net Loss Per Share            $       $       (0.20)
                  Risk Free Interest Rate                                  5.71%
                  Expected Lives                                        2 Years
                  Expected Volatility                                      None

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




                                      F-28

                BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003


NOTE 13    -      RECENT ACCOUNTING PRONOUNCEMENTS

         In April 2002, the Financial Accounting Standards Board ("FASB") issued
         SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
         Amendment of FASB Statement No. 13, and Technical Corrections" ("SFAS
         No. 145"). This statement eliminates the requirement to report gains
         and losses from extinguishment of debt as extraordinary unless they
         meet the criteria of APB Opinion 30. SFAS No. 145 also requires
         sale-leaseback accounting for certain lease modifications that have
         economic effects that are similar to sale-leaseback transactions. The
         changes related to lease accounting are effective for transactions
         occurring after May 15, 2002 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-29
<PAGE>
                BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003



NOTE 13    -      RECENT ACCOUNTING PRONOUNCEMENTS (cont'd)

         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.

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 30th 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.

         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


                                      F-30
<PAGE>

                BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003


NOTE 14    -      COMMITMENTS AND CONTINGENCIES (cont'd)

          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 in to
         settlement agreements with certain professionals, consultants, vendors
         and a former employee. These settlements aggregate approximately
         $265,000 and are included in accrued expenses at March 29, 2003.

         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.

                                      F-31
<PAGE>
                BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003


NOTE 14    -      COMMITMENTS AND CONTINGENCIES (cont'd)

         License and Trademark Agreement:

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

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

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

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

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

         As a result of the above, the Company recognized $1,342,000 in
         settlement expense, of which $1,092,000 was recognized during the year
         ended March 29, 2003 and $250,000 was recognized during the year ended
         March 30, 2002, and $1,742,000 in license revenue, of which $1,702,999
         was recognized during the year ended March 29, 2003 and $39,001 was
         recognized during the year ended March 30, 2002. Such amounts are
         included in other income and expense in the accompanying consolidated
         statements of operations.

         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.


                                      F-32
<PAGE>
                BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003


NOTE 15    -      SUBSEQUENT EVENTS

         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. As of September 8, 2003, the Company has not
         granted any options under this plan.

         In April 2003, the Company granted certain directors and employees
         options to purchase 9,250,000 shares of the Company's common stock. 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.

         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. The lawyer is required to
         sell the shares and the net proceeds to be applied as a credit against
         the balance due. In the event there is an excess of proceeds, the
         consultant is required to credit the Company for future legal services.

         In April 2003, the Company entered into an additional 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.

         In April 2003, the Company entered into an additional 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.

                                      F-33
<PAGE>
                BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003



NOTE 15    -      SUBSEQUENT EVENTS (cont'd)

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

         In April 2003, the Company entered into a consulting agreement with a
         consultant for services provided and to be provided. In exchange for
         providing consulting services to the Company and as payment for
         services already provided amounting to $27,000, the consultant received
         500,000 shares of the Company's S-8 common stock. 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 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.

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

         In May 2003, the Company issued 500,000 shares of its common stock 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 pay the attorney $15,000 upon execution of the
         agreement and then a monthly fee of $3,000 commencing July 1, 2003. In
         addition, the Company agreed to issue 500,000 shares of unrestricted
         S-8 common stock upon execution of the agreement. The agreement was
         amended in June 2003 such that the Company agreed to issue the attorney
         250,000 shares of unrestricted S-8 common stock upon execution of the
         agreement.

                                      F-34
<PAGE>


                 BEVSYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE YEAR ENDED MARCH 29, 2003

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 $74,000 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.

         In July 2003, the Company and one of its directors (Michael Goeree)
         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
         an Form SB-2 registration statement with the SEC 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.