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UNITED STATES



SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-KSB


(Mark One)
 [ X ]
      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934 For the fiscal year ending December 31, 2002 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934






Commission file number 000-22785



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AMERICAN WATER STAR, INC. (Exact name of registrant as specified in its charter)


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|                                                                                            |          |                                           
|------------------------------------------------------------------------------------------- | -------- | ------------------------------------------
|                                                                                            |          |                                           
|Nevada                                                                                      |          | 87-0636498                                
|(State or other jurisdiction of
      incorporation or organization)                        |          | (I.R.S. Employer
      Identification No.)
|                                                                                            |          |                                           
|4560 S. Decatur, Suite 204, Las Vegas, NV                                                   | 89103   
|(Address of principal executive offices)                                                    | Zip Code
|                                                                                            |          |                                           
|Registrant's telephone
      number, including area code:      (702) 740-7036              
|                                                                                            |          |                                           
|(Former name, former address and former fiscal year,
        if changed since last report.)

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common Stock,
  $0.0001 par value per share

Check whether the issuer (1) filed all reports required to be file by Section
  13 or 15(d) of the Exchange Act during the past 12 months 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 not contained in this form, and no disclosure will be contained,
  to the best of registrant's knowledge, in definitive proxy or information statements
  incorporated by reference in Part III of this Form 10-KSB or any amendments
  to this Form 10-KSB. [ ]

Issuer's Revenue during the year ended December 31, 2002: $458,152

Aggregate market value of the voting and non-voting common equity, 13,325,028
  shares of common stock, held by non-affiliates based on the price of $0.22 per
  share (the average bid and asked price as of April 11, 2003): $2,931,506

As of March 31, 2003, the issuer had 32,926,321 shares of its common stock
  outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

The Company's definitive Information Statement filed with the Securities and
  Exchange Commission on April 12, 2002, which was mailed to shareholders of record
  at April 5, 2002.





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TABLE OF CONTENTSPART IPageITEM 1.
      Description of Business
      3ITEM 2.
      Description of Properties
      8ITEM 3.
      Legal Proceedings
      9ITEM 4.
      Submission of Matters to a Vote of Security
        Holders
      9PART IIITEM 5.
      Market for Common Equity and Related Stockholder
        Matters
      10ITEM 6.
      Managements' Discussion and Analysis
      20ITEM 7.
      Financial Statements
      25ITEM 8.
      Changes in and Disagreements With Accountants
        on Accounting and
        Financial Disclosure
      42PART IIIITEM 9.
      Directors, Executive Officers, Promoters
        and Control Persons
      42ITEM 10.
      Executive Compensation
      43ITEM 11.
      Security Ownership of Certain Beneficial
        Owners and Management
      44ITEM 12.
      Certain Relationships and Related Transactions
      45ITEM 13.
      Exhibits and Reports on Form 8-K
      46ITEM 14.
      Controls and Procedures
      48Signatures
      50Certifications
      51


2  PART I ITEM 1. DESCRIPTION OF BUSINESS American Water Star, Inc. (the "Company" or "AMWS")
    with its administrative offices located in Las Vegas, Nevada, operates as
    a publicly held holding company of entities and brands engaged in the beverage
    industry. Our products and brands are licensed and developed in-house. Our main objective is to position the Company to sell our products
    directly to major national chains and food service channels. Although our
    products are not sold in these stores at the date of this filing, we are actively
    developing the systems and national production capability to service these
    types of accounts. Our beverage products are sold by the truckload, principally
    to distributors, who, in turn sell to retail stores, corner grocery stores,
    convenience stores, schools and other outlets. A truckload consists of 20
    pallets holding 72 cases per pallet. Each case holds 24 16-ounce bottles.
    So, each truckload consists of 1,440 cases. Business Development The Company was incorporated as American Career Centers, Inc.
    in the State of Nevada on June 15, 1999. The Company was formed as a holding
    company for the acquisition of information technology career training centers
    and related businesses. Effective December 3, 1999, the Company acquired 100%
    of the outstanding shares of Tunlaw International Corporation, a publicly-held
    reporting company, in exchange for an aggregate of 200,000 shares of common
    stock of the Company, with Tunlaw becoming a wholly-owned subsidiary of the
    Company. With the completion of this acquisition, the Company became the successor
    issuer to Tunlaw, and retained public company reporting status under the Securities
    Exchange Act of 1934. Tunlaw has had no operations to date. On May 7, 2002, the Company changed its name to American Water
    Star, Inc. to reflect the significant change in the Company's character and
    strategic focus relating to its water bottling and distribution business. Acquisition of American Distribution & Packaging, Inc. On December 23, 2002, the Company completed the acquisition
    of American Distribution & Packaging, Inc., a privately-held Nevada corporation
    ("AD&P"), pursuant to an Acquisition Agreement dated December
    23, 2002. Pursuant to the Agreement, AD&P exchanged 100% of its outstanding
    common stock for 5,200,000 newly issued shares of the Company's common stock.
    Accordingly, each outstanding share of common stock of AD&P was surrendered
    in exchange of approximately 5.2 shares of the Company's common stock. Upon
    completion of the Acquisition, AD&P became the wholly-owned subsidiary
    of the Company. Although the consideration exchanged by the Company in the Acquisition
    was not negotiated at "arms-length," the directors and executive
    officers of the Company deemed it reasonable based on certain criteria such
    as the valuation of the assets of AD&P; AD&P's present and past business
    operations; the future potential of AD&P; and the potential benefit to
    the stockholders of the Company. The directors of the Company determined that
    the consideration for the exchange was reasonable, under these circumstances.
    The valuation is subject to an appraisal being secured by the Company. 3   AD&P specializes in packaging and distribution of products
    focusing in warehousing, storage and specialized processing of non-bottling
    products such as the Company's new line of beverage sold in mini-sip pouches
    under the brand name of Cal-Sun. The specialized mini-sip market requires
    alternative manufacturing and distribution coordination as compared to traditional
    bottling procedures. The Company intends to continue the business operations
    conducted by AD&P. Acquisition of All-Star Beverages, Inc. On December 24, 2002, the Company completed the acquisition
    of All-Star, a privately-held Nevada corporation, pursuant to an Acquisition
    Agreement dated as of September 6, 2002. Pursuant to the Agreement, All-Star
    exchanged 100% of its outstanding common stock for 12,645,824 newly issued
    shares of the Company's common stock. Accordingly, each outstanding share
    of common stock of All-Star was surrendered in exchange of approximately 12.6
    shares of the Company's common stock. Upon completion of the Acquisition,
    All-Star became the wholly-owned subsidiary of the Company. Although the consideration exchanged by the Company in the Acquisition
    was not negotiated at "arms-length," the directors and executive
    officers of the Company deemed it reasonable based on certain criteria such
    as the valuation of the assets of All-Star; All-Star's present and past business
    operations; the future potential of All-Star; and the potential benefit to
    the stockholders of the Company. The directors of the Company determined that
    the consideration for the exchange was reasonable, under these circumstances.
    The valuation is subject to an appraisal being secured by the Company. All-Star is now the primary sales arm for the Company. It has
    contractual relationships with various Independent Distributors around the
    United States. All sales of the Company's products have been processed through
    All-Star which includes brands such as Geyser, Cool Luc and Power Punch. The
    bottling and distribution of the Company's bottle sales is through All-Star.
    The Company intends to continue the business operations conducted by All-Star. Principal Products As of December 2002, our product line includes: Power Punch - Our new non-sugared, 0 calorie, 0 carbohydrate,
    0 sodium, vitamin and mineral enriched, fruit flavored beverage brand. Developed
    for the school market and mass market, we will be test marketing two flavors:
    a red fruit punch called "Tight" and a yellow citrus punch called
    "Extreme." Cool Luc-Our licensed underground extreme energy drink
    is primarily sold in the Midwest, but expanding. Geyser Fruit Beverages - Our line of eight different
    fruit flavored waters. Flavors include: Cherry, Peach, Wildberry, Cranberry
    Raspberry, Strawberry Kiwi, Kiwi Watermelon, Cherry Lime, and Lemonade. A
    Latin flavor profile is planned for 1st quarter roll out. This brand will
    be named Geyser Fruta and preliminary feedback from our brokers suggests good
    acceptance. The flavors include: Mango, Jamaica, Tamarindo, and Kiwi Melon. 4   Hawaiian Tropic- Our latest licensed product featuring
    a sugar free, no carb, caffeine free, sodium free tropical drink. Flavors
    include Strawberry Kiwi, Lemon Lime, Orange Guava and Pineapple Grapefruit.
    These products will be sold in Drug Stores and other mass marketing outlets
    and will be present at various events sponsored by Hawaiian Tropic, a trademark
    owned by Tanning Research Laboratories, Inc. Our products take advantage of major trends in the beverage
    industry. Increasingly consumers want healthy, refreshing drinks. In fact,
    because of the passage of SB-19 in California (The Pupil Nutrition, Health,
    and Achievement Act of 2001), which prohibits the sale of carbonated beverages
    in elementary schools and establishes nutrient standards, schools in California
    are banning the sugared carbonated beverages that have been the mainstay of
    Coke and Pepsi. We believe our great tasting new zero sugar, zero calorie
    flavored water beverages have positioned us to capture a large share of the
    market for healthy flavored waters. Mini-Sip® Pouch In February 2003, the Company, through its wholly-owned subsidiary,
    All-Star Beverages, Inc., entered into a Letter of Intent with Liqui-Box Canada
    Inc., a Division of DuPont Canada, for the delivery and installation of equipment
    designed to package our beverages in Mini-Sip® pouches. Liqui-Box Canada
    Inc. is a global leading manufacturer of flexible films and systems for the
    packaging of liquids and pumpable food products. They offer a wide spectrum
    of proprietary films for the containment of beverages such as milk, juice,
    shelf stable drinks and water in flexible pouches ranging in size from four
    ounces to one-half gallon. Their filler technologies include pasteurized cold
    fill, hot fill and UHT aseptic. All-Star plans to market our Power Punch, Cal Sun and H2O beverages
    in the Mini-Sip® pouch because of the many benefits of the pouch such
    as differentiation in the market place and cost savings related to operations,
    packaging, storage and shipping. The pouch is an environmentally responsible
    alternative to other packages because of source reduction that also brings
    additional savings in trash disposal - a very attractive benefit to schools
    and institutions with ever-decreasing budgets. This type of packaging seems
    to appeal to children of all ages primarily because of its ease of use. All-Star will utilize the Mini-Sip® pouch in the marketing
    of our beverages to schools, hospitals, military personnel and retail consumers
    with hopes that the cost advantages of the pouch will position our products
    well against other products in the mass market and retail space. Production and Distribution The Company's product brands are both licensed and developed
    in-house, and bottled in strategic locations throughout the U.S. In March 2003, the Company began co-packing the Mini-Sip®
    pouch with water product in a Gary, Indiana bottling facility. This co-packing
    arrangement was entered into under the Letter of Intent with Liqui-Box Canada
    Inc. The co-packing facility is capable of producing 256 8-ounce Mini-Sip®
    pouches per minute. This equates to 52 truckloads per month. The initial production
    will be purified water bottled under the H2O brand. H2O is the Company's own
    brand. Each case of beverage will contain 30 pouches. In these troubled times
    and in the event of a natural disaster, the American Red Cross recommends
    that groups and families store at least 1 gallon of water per person per day
    and maintain a three-day supply per person. We believe the cases of our H2O
    are easy to carry and a safe way to store water to suit the need for an emergency
    water supply. Also in March 2003, the Company began producing its Hawaiian
    Tropic beverage brand out of two co-packing facilities, Coast to Coast Distributing
    in Florida and Adirondack Beverages in New York. These two facilities will
    distribute the Hawaiian Tropic tropical beverage along the Eastern Seaboard.
    Four flavors will be distributed initially: pineapple, pink grapefruit, strawberry
    kiwi, passion orange guava and kiwi lemon lime. . In late March 2003, the Company added 15 new distributors to
    carry its full line of beverages. These additional distributors will market
    the Geyser Fruit and Geyser Fruta beverages, Hawaiian Tropic Beverages, Power
    Punch and purified water under the H2O brand. Geyser Fruit and Geyser Fruta
    contain calories and sugar while both the Hawaiian Tropic and Power Punch
    beverage lines are sugar free, non-carbonated, caffeine free, sodium free. 3   The Market and Competition The marketplace is robust in the Company's product market segments.
    Our new products and formulations developed for the school market, mass merchandising
    and active adult markets are being received with great excitement. The beverage industry is currently undergoing unprecedented
    change. Driven by health conscious consumers and various U.S. regulatory bodies
    that are increasingly recommending health conscious diets, flavored water
    and fruit flavored beverages are increasingly the consumer's choice. Beverage
    makers are introducing flavored water and enhanced water on the heels of the
    success of bottled water. We intend to continue to address this new and growing
    market that children and adults alike enjoy. Our products are sold nationwide, however, our largest sales
    have been in the states of New York and Pennsylvania due to the accounts we've
    developed are derived from previous Geyser Products, LLC contacts. Even though
    we have a presence in New York, as a percent of the population, our market
    share is very small. We have a beginning presence in California and no presence
    to date in major retailer chains or food service channels. We believe these
    companies represent markets with excellent sales growth opportunity for our
    Company, especially so in the Mini-Sip®, sugar-free, product segment. We are in the process of developing the production capacity
    and the systems necessary to service national accounts which is necessary
    for the Company to gain a larger percentage of the available market share.
    We believe we have the management expertise and a known and successful distribution
    network to rapidly grow the business. 6   Sources and Availability of Raw Materials We purchase beverage flavors and the raw materials used in our
    packaging and labeling from independent suppliers located in the United States. We are dependent on the ability of our suppliers to provide
    products on a timely basis and on favorable pricing terms. Our goal is to
    ensure that the raw materials used in the manufacture and packaging of our
    products, including flavors, bottles, caps, labels and boxes, are readily
    available from two or more sources. Accordingly, the Company has engaged in
    developing strategic partnerships in these critical supply areas. Dependence on Third-Parties The Company is dependent on third-party water bottling companies
    and bottle makers. In 2002, products purchased from the Company's largest
    supplier accounted for approximately 70% of product purchases. The Company
    is dependent on the ability of its supplier to provide products on a timely
    basis and on favorable pricing terms. The loss of certain principal suppliers
    or a significant reduction in product availability from principal suppliers
    could have a material adverse effect on the Company. Management believes that
    its relationship with suppliers are satisfactory. Copyrights, Trademarks and Licenses On November 1, 2002, the Company, through its wholly-owned subsidiary,
    All-Star Beverages, Inc., entered into an Exclusive License Agreement with
    Cool Luc, L.L.C. ("Licensor") granting All-Star an exclusive license
    to make, use and sell the Cool Luc brand for all markets and industries except
    for the Chicago Metropolitan Area and Michigan. The Licensor retained the
    rights to those markets. In consideration, All-Star will pay Licensor a royalty
    4% of the gross revenues received for the licensed products sold. The Agreement
    is for a period of 100 years, however, in the event that All-Star pays Licensor
    the cumulative sum of $1,000,000 within 5 years, Licensor will irrevocably
    assign and sell to All-Star the copyrighted property (Cool Luc Spring Water,
    1L, 0.5L and 20 oz.), and the Cool Luc trademarks. On January 1, 2003, the Company entered into a Trademark and
    Design License Agreement with Tanning Research Laboratories, Inc. ("Tanning")
    granting the Company authorization to use the trademarked name, Hawaiian Tropic.
    Under the Agreement, Tanning licensed the Company to produce, market and sell
    on an exclusive basis in the U.S. and Canada items bearing the Hawaiian Tropic
    trademark for a period of three years. In consideration, the Company will
    pay Tanning a royalty of 4% of invoice sales (net of shipping and sales taxes),
    payable each quarter. The Agreement calls for guaranteed minimum royalties
    in the amounts of $40,000 for the 1st year, $120,000 for the 2nd year and
    $200,000 for the 3rd year. The Agreement has a renewal option of three years
    if the Company meets minimum sales amounts under the Agreement and if renewed,
    the minimum royalties will be $200,000 year. Governmental Regulation Flavored and bottled waters are subject to a number of strict
    federal, state and industry regulations. These serve to ensure that the product
    is consistent in public safety and quality. The United States Food and Drug
    Administration (FDA) regulates flavored and bottled water as a packaged food
    product. Flavored and bottled waters also must meet state regulations that,
    in some cases, are more stringent than the prevailing FDA and EPA standards.
    The FDA also regulates the labeling of our products. We have not encountered
    any regulatory action as a result of our operations, and no such action is
    anticipated. 7   Investment in Technology The Company is committed to using technology to meet our business
    objectives and to keep our operating costs as low as possible. We have installed EDI, a state-of-the-art software inventory
    management and tracking system, which is mandatory when dealing with the type
    of large accounts that the Company intends to acquire. This will enable us
    to significantly speed up the processing of orders from raw materials purchasing
    to plant operations. This becomes especially critical as we move to having
    national production capability with plants capacity nationwide. We have also completed a company website with a feature reflecting
    where the company products are being sold which can be accessed at www.americanwaterstar.com. At our headquarters facility in Las Vegas, Nevada, we operate
    with full ISP capabilities. We plan to operate in a paperless environment
    as much as possible. Documents we do receive will be imaged and retained electronically. Compliance with Environmental Laws Other than normal cleaning and sanitation supplies, our business
    does not involve the use, handling, storage and disposal of potentially toxic
    substances or wastes. Accordingly, we are not subject to regulation by federal,
    state, and local authorities establishing requirements for the use, management,
    handling, and disposal of these materials and health and environmental quality
    standards, liability related to those standards, and penalties for violations
    of those standards. Compliance with environmental laws, ordinances and regulations
    has not had, and we do not expect such compliance to have, a material adverse
    effect on our business, financial condition, or results of operation. Employees As of April 2003, there were two full-time employees of the
    Company, Roger Mohlman, its CEO and President, and Thomas F. Krucker, its
    CFO, Secretary/Treasurer. In addition the Company has contractual arrangements
    with three independent contractors to provide administrative services to the
    Company, and three persons who receive commissions for the sale of the Company's
    products. Management believes the Company's future success will depend in
    large part upon its ability to attract and retain qualified employees. The
    Company has no collective bargaining agreements with its employees and believes
    its relations with its employees are good. ITEM 2. DESCRIPTION OF PROPERTY The Company maintains its corporate headquarters at 4560 S.
    Decatur Blvd., Suite 204, Las Vegas, Nevada 89103. Since June 2002, we have
    leased approximately 2,500 square feet of office space under a non-cancelable
    lease, expiring on October 31, 2005. The minimim annual rent for the premises
    is $35,919.24, payable in 12 equal monthly installments of $2,993.27 per month.
    In addition, the Company pays property taxes, insurance and certain operating
    expenses applicable to the leased premises. The lease is subject to annual
    rent increases. 8   The Company stores its products and inventory at a 60,000 square
    foot distribution center located in the north portion of the former Norton
    Air Force Base Building at 350 South Del Rosa Drive, San Bernadino, California
    92408. We also lease this property from Camelot, Ltd. The lease is for a term
    of three years commencing October 1, 2002 until October 1, 2005 at the rate
    of $6,000 per month. The Company maintains a pre- and post-production distribution
    facility at 2618 S. Oak Street, Santa Ana, California 92707, consisting of
    39,000 square feet. The property is located next to the Tustin bottling plant
    which commenced the bottling the Company's products when it received its permit
    from the State of California on March 7, 2003. We also lease this property
    from Camelot, Ltd. The lease is for a term of two years commencing January
    1, 2003 until January 1, 2005 at the rate of $10,600 per month which includes
    common area and maintenance charges (CAM). ITEM 3. LEGAL PROCEEDINGS From time to time, we are involved in various legal proceedings
    relating to claims arising in the ordinary course of business. We are not
    a party to any such legal proceedings, the adverse outcome of which, individually
    or taken together with all other legal proceedings, is expected to have a
    material adverse effect on our prospects, financial condition or result of
    operation. The Company was previously engaged in an action filed in the
    Superior Court of California, County of Orange, on September 20, 2002 by Feldhake,
    August & Roquemore LLP for alleged non-payment of legal fees for services
    rendered to the Company's predecessor, American Career Centers, Inc. In lieu
    of litigation, the parties entered into a Settlement Agreement on December
    18, 2002. The Settlement Agreement provides, among other things, that the
    Company will pay to the plaintiff $120,000, with $20,000 to be paid upon execution
    of the Settlement Agreement and $10,000 to be paid every month until the balance
    is paid in full commencing January 1, 2003 and continuing up to and including
    October 1, 2003. Each party will bear its own costs and attorneys' fees in
    connection with all matters reserved by the Settlement Agreement. On plaintiff's
    receipt of good and sufficient funds in full and timely satisfaction, plaintiff
    shall file a Request for Dismissal, with prejudice, of the Complaint. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The information required by this Item 4 is incorporated by reference
    to the Company's definitive Information Statement filed with the Securities
    and Exchange Commission on April 12, 2002, which was mailed to shareholders
    of record at April 5, 2002. 9   PART II ITEM 5. MARKET FOR COMMON EQUITY AND
    RELATED STOCKHOLDER MATTERS Market Information Our common stock began trading on the Over-the-Counter Electronic
    Bulletin Board in December 2000, and currently trades under the symbol "AMWS."
    The following table sets forth, for the periods indicated, quotations for
    the high and low bid prices for our common stock for each quarter within the
    last two fiscal years. 
 High
        Low1st Qtr. 2001
        $3.00
        $0.082nd Qtr. 2001
        $0.85
        $0.073rd Qtr. 2001
        $0.52
        $0.114th Qtr. 2001
        $0.24
        $0.041st Qtr. 2002
        $0.44
        $0.062nd Qtr. 2002
        $1.80
        $0.033rd Qtr. 2002
        $0.44
        $0.174th Qtr. 2002
        $0.38
        $0.221st Qtr. 2003
        $0.46
        $0.17


> 

The source of this information is Yahoo! Finance quotation services
    and broker-dealers making a market in the Company's common stock. As of the
    close of business on April 2, 2002, the Company effected a 1:12 reverse stock
    split of its Common Stock. Unless indicated otherwise, all stock prices and
    all share amounts quoted in this Report have been adjusted to give effect
    to the stock split. These quotations reflect inter-dealer prices, without
    retail mark-up, markdown or commission and may not represent actual transactions. Effect of Penny Stock Rules The "penny stock" rules could make selling shares
    more difficult for the selling security holders. Our common stock will be
    a "penny stock," under Rule 3a51-1 under the Securities Exchange
    Act of 1934 unless and until the shares reach a price of at least $5.00 per
    share, we meet the financial size and volume levels for our common stock not
    to be considered a penny stock, or we register the shares on a national securities
    exchange or they are quoted on the NASDAQ system. The shares are likely to
    remain penny stocks for a considerable period after the shares that are being
    offered are sold. A "penny stock" is subject to Rules 15g-l through
    15g-10 of the Securities exchange Act that require securities broker-dealers,
    before carrying out transactions in any "penny stock," to deliver
    a disclosure document to the customer describing the risks of penny stocks,
    and get a written receipt for that document, to disclose the compensation
    received by the broker-dealer or any associated person of the broker-dealer;
    and to send monthly statements to customers with market and price information
    about the "penny stock." Our common stock will also be subject to
    a rule which requires the broker-dealer, in some circumstances, to approve
    the "penny stock" purchaser's account under standards specified
    in the rule, and deliver written statements to the customer with information
    specified in the rule. These additional requirements could prevent broker-dealers
    from carrying out transactions and limit the ability of the selling security
    holders in the Public Offering to sell their shares into any secondary market
    for our common stock and also limit the ability of any subsequent shareholders
    to sell the shares in the secondary market. 10   Holders As of March 31, 2003, there were 541 holders of record of the
    Company's Common Stock. This number of holders of record does not include
    beneficial owners of the Company's Common Stock whose shares are held in the
    names of various security holders, dealers and clearing agencies. The Company
    believes that the number of beneficial owners of its Common Stock held by
    others or in nominee names exceeds 800 in number. Dividends We do not have a policy of paying dividends, and it is currently
    anticipated that no cash dividends will be paid in order to retain earnings
    to finance future growth. Any future decision to pay cash dividends will be
    made on the basis of earning, alternative needs for funds and other conditions
    existing at the time. Shares Eligible for Future Sale As of March 31, 2003, we had an aggregate of 32,926,321 shares
    of our common stock issued and outstanding, 27,394,445 of which are "restricted
    securities," which may be sold only in compliance with Rule 144 under
    the Securities Act of 1933, as amended or exemptions from registration requirements
    of this act. Rule 144 provides, in essence, that a person holding restricted
    securities for a period of one year after payment therefore may sell, in brokers'
    transactions or to market makers, an amount not exceeding 1% of the outstanding
    class of securities being sold, or the average weekly reported volume of trading
    of the class of securities being sold over a four-week period, whichever is
    greater, during any three-month period. (Persons who are not our affiliates
    and who had held their restricted securities for at least two years are not
    subject to the volume or transaction limitations.) The sale of a significant
    number of these shares in the public market may adversely affect prevailing
    market prices of our securities. Changes in Securities On April 1, 2002, the Company effected a 1:12 reverse split
    of its common stock which correspondingly decreased its authorized common
    stock from 100,000,000 to 8,333,333 shares. On April 5, 2002, the Board of Directors approved, and its majority
    stockholder owning 78.7% of the shares entitled to vote on matters presented
    to shareholders on April 5, 2002 consented in writing to an amendment to the
    Company's Articles of Incorporation to increase the authorized common stock
    from 8,333,333 to 150,000,000 shares. Such approval and consent constituted
    the approval and consent of a majority of the total number of shares entitled
    to vote and were sufficient to approve the actions under the Company's By-Laws
    and Section 78.320 of the Nevada Revised Statutes. The increase in the authorized
    common stock was effected on May 7, 2002, 20 days following mailing of the
    definitive Information Statement to the shareholders of record at April 5,
    2002. 11   Recent Sales of Unregistered Securities Unless otherwise noted, all shares amounts and values have been
    adjusted to reflect the 1:12 reverse split of the Company's common stock effected
    April 1, 2002. On May 7, 2002, the Company entered into a Stock Purchase Agreement
    with Brighton Opportunity Fund, L.P. in connection with a private equity line
    financing transaction pursuant to which the Company shall offer and sell to
    Brighton up to $10,000,000 of the Company's common stock. The shares will
    be offered and sold to accredited investors only in reliance upon the provisions
    of Section 4(2) of the Securities Act of 1933, as amended (the "Act")
    and Regulation D promulgated thereunder. Pursuant to the Purchase Agreement,
    Brighton's obligation to purchase stock in any monthly period shall be limited
    to the lesser of $500,000; remaining amounts available under the line; or
    an amount equal to 10% of the total dollar trading volume in the Company's
    common stock during the month in question. Notwithstanding the foregoing,
    Brighton shall not be obligated to purchase the Company's common stock if
    they would own more than 4.9% of the Company's outstanding common stock. Under
    the Purchase Agreement, the purchase price per share is equal to 90% of the
    lowest closing bid price of the Company's common stock for the ten days immediately
    prior to the date the Company notifies Brighton to purchase shares of the
    Company's Common Stock. Additionally, the Company entered into a Registration
    Rights Agreement with Brighton whereby the common stock to be offered and
    sold to Brighton shall be registered in an effective registration statement
    with the Securities and Exchange Commission. As of the date of this Report,
    no shares have been sold under the equity line of credit. Simultaneously with the execution of the Purchase Agreement,
    on May 7, 2002, the Company entered into a Common Stock Purchase Agreement
    with Brighton for the purchase of 300,000 shares of its common stock for the
    purchase price of $300,000. The shares were sold in reliance upon the provisions
    of Section 4(2) of the Act and Regulation D promulgated thereunder, based
    upon the it being a sole offeree, its relationship to the Company, its accredited
    investor status, the limited amount of securities offered, the size of the
    offering and the manner of the offering. The shares are restricted against
    resale and may only be sold pursuant to Rule 144 or an effective registration
    statement. On May 15, 2002, the Company sold 5,000 shares of its common
    stock to one investor for the aggregate purchase price of $3,500 in reliance
    on Sections 4(2) and/or 3(b) of the Act, based upon his being the sole offeree,
    his relationship to the Company, his accredited investor status, the amount
    of securities offered, and the size and manner of the offering. The shares
    are restricted against resale and may only be sold pursuant to Rule 144 or
    an effective registration statement. On June 26, 2002, for lack of consideration given to the Company,
    certificates representing an aggregate 1,325,870, issued in the names of 2
    individuals and 6 entities, were returned to the Company for cancellation.
    The shares were cancelled and returned to the authorized but unissued shares
    of the Company's common stock. In addition, one of the entities returned 300,000
    warrants held by it for cancellation. The warrants consisted of the following:
    (a) 100,000 Class A Warrants that entitle the holder to purchase common stock
    for $1.50 per share until February 24, 2004; (b) 100,000 Class B Warrants
    that entitle the holder to purchase common stock for $2.004 per share until
    February 24, 2004; and (c) 100,000 Class C Warrants that entitle the holder
    to purchase common stock for $2.496 per share until February 24, 2004. 12   On August 15, 2002, the Company sold 100,000 shares of its common
    stock to one investor for the aggregate purchase price of $20,000 in reliance
    on Sections 4(2) and/or 3(b) of the Act, based upon his being the sole offeree,
    his relationship to the Company, his accredited investor status, the amount
    of securities offered, and the size and manner of the offering. The shares
    are restricted against resale and may only be sold pursuant to Rule 144 or
    an effective registration statement. On September 17, 2002, the Company sold 15,000 shares of its
    common stock to one investor for the aggregate purchase price of $6,000 in
    reliance on Sections 4(2) and/or 3(b) of the Act, based upon her being the
    sole offeree, her relationship to the Company, the amount of securities offered,
    and the size and manner of the offering. The shares are restricted against
    resale and may only be sold pursuant to Rule 144 or an effective registration
    statement. On December 23, 2002, the Company sold 325,000 shares of its
    common stock to one accredited investor for the purchase price of $87,750,
    $0.27 per share, in reliance on Sections 4(2) and/or 3(b) of the Act, based
    upon his being the sole offeree, his relationship to the Company, his accredited
    investor status, the amount of securities offered, and the size and manner
    of the offering. The shares are restricted against resale and may only be
    sold pursuant to Rule 144 or an effective registration statement. On January 7, 2003, the Company sold 50,000 shares of its common
    stock to one accredited investor for the purchase price of $10,000, $0.20
    per share, in reliance on Sections 4(2) and/or 3(b) of the Act, based upon
    his being the sole offeree, his relationship to the Company, his accredited
    investor status, the amount of securities offered, and the size and manner
    of the offering. The shares are restricted against resale and may only be
    sold pursuant to Rule 144 or an effective registration statement. On March 10, 2003, the Company sold 5,000 shares of its common
    stock to one accredited investor for the purchase price of $1,250, $0.25 per
    share, in reliance on Sections 4(2) and/or 3(b) of the Act, based upon his
    being the sole offeree, his relationship to the Company, his accredited investor
    status, the amount of securities offered, and the size and manner of the offering.
    The shares are restricted against resale and may only be sold pursuant to
    Rule 144 or an effective registration statement. Private Placements During April and May 2002, the Company sold 1,512,063 shares
    of its common stock at $0.30 per share for the gross proceeds of $453,620.35
    to 33 accredited investors. The private placement was conducted by the Company's
    Registered Sales Agent, Camden Securities, Inc., and made in reliance upon
    the private offering exemptions contained in Rule 506 of Regulation D of the
    Act. The shares are restricted against resale and may only be sold pursuant
    to Rule 144 or an effective registration statement. The offering closed on
    May 24, 2002. The Company paid Camden commissions and fees totaling $86,419.88;
    net proceeds to the Company were $367,200.47. The Placement Agent will also
    receive 227,000 warrants exercisable at 120% of the offering price, or $0.36
    per share, exercisable for a period of five years. As of the date of this
    Report, the warrants have not yet been granted to the Placement Agent. 13   From August 10, 2002 to October 1, 2002, the Company sold 10%
    Convertible Notes in the aggregate principal amount of $177,990 to 13 accredited
    investors. The offering was conducted by the Company's Registered Sales Agent,
    Camden Securities, Inc. The notes accrue interest from the date of issuance
    at the rate of 10% per annum. The holder may convert the then outstanding
    principal amount, together with all accrued and unpaid interest, at any time
    within one month after completion of the offering, at the conversion price
    of 30% discount of the bid price per share on the trading day immediately
    preceding the date of conversion into shares of common stock with a floor
    price of $0.20 and a maximum conversion price of $0.40 per share. The maximum
    $0.40 conversion price is only valid if the bid price is less than $1.00.
    The shares issuable upon conversion will be restricted against resale and
    may only be sold pursuant to Rule 144 or an effective registration statement.
    The investors were granted "piggy-back" registration rights entitling
    the investor to include the shares issuable to them upon conversion to be
    included in a registration of the Company's common stock under the Securities
    Act of 1933, excluding registration statements relating to any employee benefit
    plan or corporate reorganization. The offering closed on October 30, 2002.
    The Company paid Camden commissions and fees totaling $35,948.50, net proceeds
    to the Company were $142,041.50. The Placement Agent will also receive 10%
    on all shares to be converted of common stock (pro-rata based on an aggregate
    amount of the notes sold in the offering). Forms of the Convertible Note Purchase
    Agreement and 10% Convertible Note are attached at Exhibit 4.2. Between September 25, 2002 and December 31, 2002, the Company
    sold 25% Convertible Notes in the aggregate principal amount of $225,000 to
    13 accredited investors. Interest accrues at the rate of 25% per annum. The
    Note mature in six months from the date of issue. Commencing 4 months after
    issuance of the Note, the holder may convert the then outstanding principal
    amount, together with all accrued and unpaid interest, at the conversion price
    of 25% discount to the previous 10-day average closing price per share into
    shares of common stock, provided, however, that in no event shall the conversion
    price be less than $0.40 or greater than $1.50 per share. The outstanding
    principal amount and all accrued interest on the Notes will automatically
    be converted into shares of Common Stock at the then effective Conversion
    Price in the event the Holder fails to deliver to the Company written notice
    of his/her/its intent to receive cash payment for the total indebtedness due
    under the Note no later than 30 days prior to the Maturity Date. The shares
    issuable upon conversion will be restricted against resale and may only be
    sold pursuant to Rule 144 or an effective registration statement. On March
    3, 2003, the Company issued 27,500 shares of its restricted common stock to
    one individual as a finder's fee in relation to this offering. Forms of the
    Convertible Note Purchase Agreement and 25% Convertible Note are attached
    at Exhibit 4.3. On February 27, 2003, after receiving requests from several
    of the 25% Noteholders who wished to maintain their investment in the Company,
    the Company offered each of the Noteholders the opportunity to extend the
    maturity date of their Note an additional 6-months and in consideration of
    the extension each investor, upon his acceptance, received one share of restricted
    common stock for each $5.00 of principal amount of his Notes. All but one
    investor returned their written letter of acceptance to the Company. Accordingly,
    the Company issued an aggregate 39,000 shares of restricted common stock to
    the accepting Noteholders and the maturity dates were extended an additional
    six months on each of the Notes, the first of which will mature on September
    25, 2003 and the last on December 30, 2003. 14   From October 17, 2002 to December 27, 2002, the Company sold
    15% Convertible Notes in the aggregate principal amount of $190,000 to 17
    accredited investors. The offering was conducted by the Company's Registered
    Sales Agent, Camden Securities, Inc. The notes accrue interest from the date
    of issuance at the rate of 15% per annum. The holder may convert the then
    outstanding principal amount, together with all accrued and unpaid interest,
    at any time within one month after completion of the offering, at the conversion
    price of 30% discount of the bid price per share on the trading day immediately
    preceding the date of conversion into shares of common stock with a floor
    price of $0.20 and a maximum conversion price of $0.40 per share. The maximum
    $0.40 conversion price is only valid if the bid price is less than $1.00.
    The outstanding principal amount and all accrued interest on the Notes will
    automatically be converted into shares of Common Stock at the then effective
    Conversion Price in the event the Holder fails to deliver to the Company written
    notice of his/her/its intent to receive cash payment for the total indebtedness
    due under the Note no later than 30 days prior to the Maturity Date. The shares
    issuable upon conversion will be restricted against resale and may only be
    sold pursuant to Rule 144 or an effective registration statement. The investors
    were granted "piggy-back" registration rights entitling the investor
    to include the shares issuable to them upon conversion to be included in a
    registration of the Company's common stock under the Securities Act of 1933,
    excluding registration statements relating to any employee benefit plan or
    corporate reorganization. The offering closed on December 31, 2002. The Company
    paid Camden commissions and fees totaling $35,630, net proceeds to the Company
    were $154,370. The Placement Agent will also receive 10% on all shares to
    be converted of common stock (pro-rata based on an aggregate amount of the
    notes sold in the offering). Forms of the Convertible Note Purchase Agreement
    and 15% Convertible Note are attached at Exhibit 4.4. Between November 19, 2002 and December 28, 2002, the Company
    sold 890,315 shares of its common stock at $0.22 per share for the gross proceeds
    of $195,870 to 14 accredited investors. The private placement was conducted
    by the Company's Registered Sales Agent, Camden Securities, Inc., and made
    in reliance upon the private offering exemptions contained in Rule 506 of
    Regulation D of the Act. The shares are restricted against resale and may
    only be sold pursuant to Rule 144 or an effective registration statement.
    The offering closed on May 24, 2002. The Company paid Camden commissions and
    fees totaling $86,419.88; net proceeds to the Company were $166,239.50. The
    Placement Agent will also receive 10% on all shares issued for a total of
    89,032 shares. These shares have not yet been issued to the Placement Agent. On March 1, 2003, the Company commenced its offering of 10%
    Convertible Notes in the aggregate principal amount of up to $1,500,000 to
    accredited investors. Interest accrues at the rate of 10% per annum. The Notes
    mature in 6 months from the date of issue. Commencing 2 months after issuance
    of the Note, the holder may convert the then outstanding principal amount,
    together with all accrued and unpaid interest, at the conversion price of
    50% discount to the previous 5-day average closing price per share into shares
    of common stock, provided, however, that in no event shall the conversion
    price be less than $0.25 or greater than $1.00 per share. The outstanding
    principal amount and all accrued interest on the Notes will automatically
    be converted into shares of Common Stock at the then effective Conversion
    Price in the event the Holder fails to deliver to the Company written notice
    of his/her/its intent to receive cash payment for the total indebtedness due
    under the Note no later than 30 days prior to the Maturity Date. The Note
    provides that the Company shall prepare and file a registration statement
    registering the shares issuable upon conversion of the Note within 30 days
    of (a) the Maturity Date of the last Note issued in this offering; or (b)
    the date on which all of the principal and accrued interest has been converted
    by all holders of the Notes issued in this offering. This Offering will close
    on the earlier of (a) the date the aggregate principal amount of $1,500,000
    of Notes are sold, or (b) June 30, 2003. The shares issuable upon conversion
    will be restricted against resale and may only be sold pursuant to Rule 144
    or an effective registration statement. As of the date of this Report, the
    Company has sold one Note in the principal amount of $50,000 maturing on November
    6, 2003. Forms of the Convertible Note Purchase Agreement and 10% Convertible
    Note are attached at Exhibit 4.5. 15   The above sales were made in reliance upon the private offering
    exemptions contained in Rule 506 of Regulation D of the Act. Each investor
    represented that he/she/it were acquiring the Notes and the common stock issuable
    upon conversion of the Notes for investment purposes only and not with a view
    to distribute. Each investor further represented that he/she/it (a) has such
    knowledge and experience in financial and business matters and is capable
    of evaluating the merits and risks of the investment, (b) is able to bear
    the complete loss of the investment, and (c) has had the opportunity to ask
    questions of, and receive answers from, the Company and its management concerning
    the terms and conditions of the offering and to obtain additional information.
    Each investor further represented to the Company that he/she/it was an "accredited
    investor" as such term is defined in Rule 501 of the Securities Act. Rescission of Acquisition On February 28, 2002, the Company acquired 82,875 shares or
    97.5% of Water Star Bottling, Inc. for 48,000,000 (pre-split) shares of the
    Company's common stock and 4,000,000 shares of Series A Convertible Preferred
    Stock (the "Series A Stock"). The shares were issued in reliance
    on Section 4(2) of the Act. On September 6, 2002, the Company rescinded its acquisition
    of Water Star Bottling, Inc., which was reported in the Company's Current
    Report on Form 8-K filed on September 19, 2002. Pursuant to the Rescission
    Agreement, DeBaux Holdings, LLC returned the stock options it acquired in
    exchange for the consideration given to it pursuant to the acquisition. DeBaux
    surrendered any and all rights it had or may have with respect to the options
    and the common stock underlying the options. The options which were cancelled
    consisted of the following: (a) an option to purchase 500,000 shares of the
    Company's restricted common stock at the purchase price of par value ($0.0001
    per share), exercisable commencing January 1, 2003; (b) An option to purchase
    500,000 shares of the Company's restricted common stock at the purchase price
    equal to fifty percent (50%) of the average bid price for the 30 trading days
    preceding the Exercise Date, exercisable commencing January 1, 2004; and (c)
    an option to purchase 500,000 shares of the Company's restricted common stock
    at the purchase price equal to fifty percent (50%) of the average bid price
    for the 30 trading days preceding the Exercise Date, exercisable commencing
    January 1, 2005. Issuance of Stock For Services or In Satisfaction of Obligations All shares amounts and values have been adjusted to reflect
    the 1:12 reverse split of the Company's common stock effected April 1, 2002. On January 3, 2002, the Company issued 1,250,000 shares of its
    restricted common stock to five consulting firms, each of which assisted the
    Company in the development and evaluation of a number of business opportunities.
    The shares were issued in reliance on Section 4(2) of the Securities Act of
    1933, as amended (the "Act"). 16   On January 16, 2002, the Company issued 41,667 shares of its
    common stock to its President in lieu of payment for services to be provided
    to the Company through February 2002, and 12,500 shares to William G. Anthony
    in lieu of payment for services previously provided to the Company. The shares
    were issued in reliance on Section 4(2) of the Act. On February 6, 2002, the Company issued 12,500 shares to the
    Company's former CFO for past services. The shares were issued in reliance
    on Section 4(2) of the Act. On February 13, 2002, the Company issued of a total of 125,868
    shares of its common stock to two individuals for consulting services valued
    at $1.44 per share. The shares were issued in reliance on Section 4(2) of
    the Act. On February 14, 2002, the Company issued 29,167 shares of restricted
    common stock to a shareholder in full satisfaction of a loan in the amount
    of $25,000. The shares were issued in reliance on Section 4(2) of the Act. On January 8, 2002, the Company filed a Registration Statement
    on Form S-8 for the registration of 4,400,000 shares (pre-split) which were
    issued to five persons pursuant to a Business Advisory Agreement with each
    person dated November 30, 2001. The stock was issued to each individual in
    lieu of cash compensation for services provided to the Company from August
    1, 2001 through November 20, 2001, valued at $0.05 per share. On May 8, 2002, the Company issued 50,000 shares of its common
    stock to one individual in full and final settlement of any and all debt owed
    to him by the Company. The shares were issued in reliance on Section 4(2)
    of the Act, based upon his relationship to the Company, including his status
    as a prior existing shareholder, and the amount of securities being issued.
    The shares are restricted against resale and may only be sold pursuant to
    Rule 144 or an effective registration statement. On May 8, 2002, the Company issued 35,000 shares of its common
    stock to one individual in full and final settlement of any and all debt owed
    to him by the Company for services performed on the Company's behalf from
    January 7, 2002 through April 30, 2002. The shares were issued in reliance
    on Section 4(2) of the Act, based upon his relationship to the Company, including
    his status as a prior existing shareholder, and the amount of securities being
    issued. The shares are restricted against resale and may only be sold pursuant
    to Rule 144 or an effective registration statement. On March 3, 2003, the Company issued 50,000 shares of its common
    stock to one individual in full and final settlement of any and all debt owed
    to him by the Company for services performed on the Company's behalf through
    January 20, 2003. In addition, the Company granted him piggy-back registration
    rights. The shares were issued in reliance on Section 4(2) of the Act, based
    upon his relationship to the Company, including his status as a prior existing
    shareholder, and the amount of securities being issued. The shares are restricted
    against resale and may only be sold pursuant to Rule 144 or an effective registration
    statement. On November 1, 2002, the Company entered into an Independent
    Contractor Agreement with Donald Hejmanowski whereby Mr. Hejmanowski will
    provide Investor Relation services to the Company. Pursuant to the Agreement,
    in addition to his cash compensation, Mr. Hejmanowski will receive 20,000
    shares of restricted common stock each month for a period of one year commencing
    the month of November, 2002. As of the date of this Report, Mr. Hejmanowski
    has received a total of 100,000 shares for the months of November, December,
    January, February and March. 17   On November 24, 2002, the Company issued 105,555 shares of restricted
    common stock to a family trust in exchange for cash and services provided
    by the Trustee of the trust to the Company with a total combined value of
    $28,500. On September 2, 2002, the Company entered into a note payable
    with its President, Roger Mohlman, in the principal amount of $255,864.50
    with interest accruing at the rate of 7% per annum, due quarterly. On December
    27, 2002, Mr. Mohlman elected to convert the principal amount due under the
    Note into shares of restricted common stock of the Company at the conversion
    rate of $0.28 per share, and waive all accrued interest, which resulted in
    the issuance of 913,802 shares. On December 26, 2002, Darwin Software, LLC elected to convert
    debt owed by the Company in the amount of $320,959 and debt owed by the Company's
    wholly-owned subsidiary, All-Star Beverages, Inc., in the amount of $296,335,
    into shares of the Company's restricted common stock at the conversion rate
    of $0.28 shares, which resulted in the issuance of 2,204,621 shares. The issuances of the restricted securities listed above were
    deemed to be exempt from registration under Section 4(2) of the Securities
    Act, as transactions by an issuer not involving a public offering. Issuance of Stock for Acquisitions of Wholly-Owned Subsidiaries On December 23, 2002, the Company completed the acquisition
    of American Distribution & Packaging, Inc., a privately-held Nevada corporation
    ("AD&P"), pursuant to an Acquisition Agreement dated December
    23, 2002. Pursuant to the Agreement, AD&P exchanged 100% of its outstanding
    common stock for 5,200,000 newly issued shares of the Company's common stock.
    Accordingly, each outstanding share of common stock of AD&P was surrendered
    in exchange of approximately 5.2 shares of the Company's common stock On December 24, 2002, the Company acquired All-Star Beverages,
    Inc., a privately-held Nevada corporation ("All-Star"), pursuant
    to an Acquisition Agreement dated as of September 6, 2002. Pursuant to the
    Agreement, All-Star exchanged 100% of its outstanding common stock for 8,200,000
    newly issued shares of the Company's common stock. On January 9, 2003, the Company issued additional shares to
    the shareholders of All-Star based on the adjusted valuation of All-Star's
    assets. Accordingly, the Company issued an additional 4,445,824 shares of
    restricted common stock, on a pro rata basis, to the two shareholders of All
    Star, both of whom are officers and directors of the Company. The shares were
    considered issued as of the date of the acquisition, December 24, 2002, on
    the books and records of the Company. 18   Securities Authorized for Issuance Under Equity Compensation
    Plans On April 4, 2002, the Company adopted a Consulting and Legal
    Services Plan (the "Plan") which provides for the issuance of the
    Company's equity securities as compensation for consulting and/or legal services
    provided to the Company from time to time. The Company limits the recipients
    of stock issued pursuant to the Plan to natural persons who performed bona-fide
    services to the Company which were not in connection with the offer or sale
    of securities in a capital-raising transaction, and which do not directly
    or indirectly promote or maintain a market for the Company's securities. All
    shares issued pursuant to the Plan were registered with the Securities and
    Exchange Commission on Form S-8, as follows:  SEC Registration Number
        Effective Date of Registration Statement
        Number of securities issued under equity compensation
          plan
        Number of securities remaining available for
          future issuance under equity compensation plans (excluding securities
          reflected in column (c))(a)
        (b)
        (c)
        (d)333-85652
        04/05/02
        4,900,000
        10,000333-87846
        05/08/02
        1,815,000
        185,000333-103529
        02/28/03
        2,600,000
        2,400,000
  On May 24, 2002, one individual who received 420,000 shares
    of the Company's common stock registered on Form S-8, SEC File No. 333-87846,
    terminated his Consulting Agreement with the Company, and agreed to return
    the 420,000 shares to the Company for cancellation. The 420,000 shares were
    subsequently cancelled on July 24, 2002 and returned to the authorized but
    unissued shares of the Company's common stock. On September 6, 2002, for failure to provide consulting services
    to the Company, one individual who received 100,000 shares of the Company's
    common stock registered on Form S-8, SEC File No. 333-87846, returned the
    shares to the Company for cancellation. The shares were cancelled and returned
    to the authorized but unissued shares of the Company's common stock. On December 27, 2002, the Company adopted a Stock Plan which
    includes a total of 10,000,000 shares of common stock for issuance pursuant
    to a Stock Award or pursuant to the exercise of options. The authority to
    determine the person to whom shares shall be issued or options shall be granted,
    the amount of such option, the exercise price and number of shares subject
    to each option, the time or times on which all or a portion of each option
    may be exercised, and certain other provisions of each option, shall be in
    the Board of Directors of the Company. On December 27, 2002, the Company granted a Stock Award under
    the Stock Plan to Thomas F. Krucker in consideration of his continued services
    to the Company. In accordance with Section 5 of the Plan, the shares were
    issued pursuant to Mr. Krucker's Employment Agreement described elsewhere
    in this Report. 19   ITEM 6. MANAGEMENT'S DISCUSSION AND
    ANALYSIS AND PLAN OF OPERATION This Report contains forward-looking statements. Actual results
    and events could differ materially from those projected, anticipated, or implicit,
    in the forward-looking statements as a result of the risk factors set forth
    below and elsewhere in this report. With the exception of historical matters, the matters discussed
    herein are forward looking statements that involve risks and uncertainties.
    Forward looking statements include, but are not limited to, statements concerning
    anticipated trends in revenues and net income, the date of introduction or
    completion of our products, projections concerning operations and available
    cash flow. Our actual results could differ materially from the results discussed
    in such forward-looking statements primarily as the result of insufficient
    cash to pursue production and marketing efforts. The following discussion
    of our financial condition and results of operations should be read in conjunction
    with our financial statements and the related notes thereto appearing elsewhere
    herein. OVERVIEW As previously disclosed, the Company rescinded its acquisition
    of Water Star Bottling Inc. and its subsidiary, Geyser Products LLC, by mutual
    consent (the "Rescission") which was reported on Form 8-K filed
    on September 19, 2002. Accordingly, the Company's financial statements for
    the year do not reflect the sales accomplished under the Geyser brand until
    after the rescission period when the Company initiated its sales of Geyser
    Fruit branded products. The significant accomplishment for the year was the acquisition
    of two operating companies and their attendant assets. The addition of All-Star
    Beverages, Inc. ("All-Star") and American Distribution & Packaging,
    Inc. ("AD&P") has resulted in marked improvements to the consolidated
    financial statements. On December 23, 2002, the Company acquired 100% of AD&P
    which specializes in packaging and distribution of products in warehousing,
    storage and specialized processing of non-bottling products such as beverages
    sold in mini-sip pouches. On December 24, 2002, the Company acquired 100% of All-Star
    which specializes in sales of bottled beverage products to distributors and
    retailers. The combined acquisition of these two subsidiaries resulted
    in an additional $5,627,583 in net cash, accounts receivable and equipment
    to the balance sheet of the Company with an additional $1,470,130 in current
    assets at the time, resulting in total assets of $7,156,213. It must be pointed
    out that the $1,214,215 in paid inventories reflected has set the Company
    up to meet the current demand of incoming orders which would suggest the Company
    is on track to meet its 12 month projection of $35 million in gross sales. Due to the Rescission, the only financials audited were for
    the period of late August through the end of last year. Accordingly, the Company
    realized a gross profit of nearly $200,000. Leaving stock for legal services
    as an ongoing expense and ignoring the stock for services expense item, which
    charged over $600,000 as an expense, the Company would not reflect a net loss
    but would actually result in a net profit of $59,102 in the winter season. 20   As outlined in the Company's Quarterly Report for the period
    ended September 30, 2002, a comparative to the audited financials contained
    in the Company's Form 10-KSB for the year ended December 31, 2001 would be
    irrelevant because the Company as we know it today is not in the same field
    of business, is operating under new management, and has developed a real asset
    base with a positive cash flow operation. The Company was restructured during
    late 2002 to accomplish its significant projections for 2003. Within the accompanying financial statements, the equipment
    acquired from the acquisitions of All-Star and AD&P was valued using the
    cost basis method, which may be less than the appraised value considering
    the fact that the equipment is installed and operational in 2003. PLAN OF OPERATION During the next 12 months, we plan to focus our efforts on our
    development of a national manufacturing, distribution, and sales organization,
    that can contract, sell and supply all types of accounts: national mass merchandise,
    regional chains, food service, convenience, and total retail. To accomplish our goals of gross sales of $35 million, we have
    placed major emphasis on contracting Independent Distributors and Co-Packers
    in geographic areas throughout the US. The Company has organized a seasoned
    and experienced sales team to oversee its sales and manage its growth efficiently.
    The Company strategy to utilize existing independent organizations to accomplish
    sales growth has initially resulted in continued reductions to cost of goods
    thereby increasing margins and constantly improving the turnaround on receivables
    to an average of 21 days. Brand development in sales has been an integral factor in the
    Company's initial success. Licensing brands such as Cool Luc and Hawaiian
    Tropic when added to the Geyser Fruit brands facilitates sales by integrating
    with maximum efficiency full truckloads made up of more than one product. Based on increasing sales and orders as we approach our major
    selling season, we do not experience the typical small startup company syndrome
    of slow sales, lack of working capital and low margins. Our challenge is the
    need to contract a fair and reasonable account receivable relationship. Management
    believes the Company's sales are ramping up on target with projections. The
    Company's receivables are turning at 21 days and maintaining in excess of
    40% gross margins. Growth is a wonderful accomplishment, but the A/R relationship
    remains a priority and a necessity if we are going to accelerate as projected. Although we have no operating history to speak of in this industry,
    our adherence to basic business principles, our master plan of utilizing already
    established specialists (Co-packers and Distributors) to eliminate non-sales
    cash requirements, and management's extensive and diversified background and
    experience in other more challenging industries, should provide a little edge
    over the typical startup operation. Notwithstanding the analysis of our existing business in the
    bottled beverage marketplace, the Company has identified an ancillary market
    for its beverages and assorted unique flavors. The mini-sip category in the
    beverage industry is easily in multi-billion dollar territory. Mini-sip is
    a plastic bag containing juice and other type beverages. Ten mini-sip bags
    containing various sugar flavored juices are sold in each box to the consumer. 21   The Company has entered into an Agreement with DuPont (Liqui-Box
    Division) to enter the mini-sip category beginning 3rd Quarter this year.
    DuPont historically was the innovator of the mini-sip category utilizing its
    patented technology toward the development of the mini-sip milk program prevalent
    around the country today. DuPont has ignored the mini-sip category in the
    mass merchandising category until now. The Company has begun the process of
    setting up its first locations beginning in the Mid-West and the West. Because of DuPont's patent protections projected costs to compete
    are projected to be significantly less than the competition in the category
    due to higher cost manufacturing methods that cannot be reduced to DuPont
    cost levels. Accordingly, the Company foresees significant opportunities both
    with national as well as major regional retail accounts. In addition to the
    cost of production advantages, the Company plans to initiate its sales within
    this category with its vitamin enhanced no sugar mini-sip product. Limited
    production of the Company H2O brand of pure water has been implemented and
    increased demand suggests this program will be successful from a pure cost
    factor versus bottles. The timing of most of our capital expenditures for this program
    is discretionary. Currently there are no material long-term commitments associated
    with our capital expenditure plans. Consequently, we have a significant degree
    of flexibility to adjust the level of such expenditures as circumstances warrant.
    The level of our capital expenditures will vary in future periods depending
    on market conditions and other related economic factors. The Company has explored
    additional financing primarily for this mini-sip project and has received
    extremely positive interest. However, several million in new capital will
    be required to make this category national. Unlike the existing expanding
    sales utilizing the Independent network, the mini-sip category is a unique
    category requiring capitalization by us to be national in scope. Regional
    sales in water is the sole involvement at this point while the financial expansion
    aspects continue. Risks that could cause actual performance to differ from expected
    performance are detailed in the remainder of this section, and under the section
    titled "Factors That May Affect the Company's Future Operating Results." RESULTS OF OPERATIONS For the Period From August 20, 2002 to December 31, 2002 Revenues. Revenues from August 20, 2002 through December 31,
    2002 were $458,152. Cost of sales were $260,636, providing a gross profit
    of $197,516. General and Administrative. General and administrative expenses
    for the period August 20, 2002 through-December 31, 2002 were $63,898. Loss from Operations. As a result of the common stock issued
    for services expense item, primarily a one time extraordinary cost, loss from
    operations for the period August 20, 2002 through December 31, 2002 was $577,298.
    Without this charge, the Company would have had a net profit of $59,102 for
    the period. Liquidity and Capital Resources. 22   Our past cash requirements were offset through the receipt of
    funds from private placement offerings and loans obtained through private
    sources. Since inception, we have financed cash flow requirements through
    debt financing and issuance of common stock for cash and services. As we expand
    operational activities, we may continue to experience cash flow needs from
    operations, pending receipt of servicing or licensing fees, and will be required
    to obtain additional financing to fund operations through stock offerings
    and bank borrowings to the extent necessary to provide working capital. If
    we decide to expand nationally with mini-sip. Over the next twelve months, we believe that existing capital
    and anticipated funds from operations will be sufficient to sustain operations
    and planned development for the existing sales in bottled beverage sales.
    Consequently, if we pursue the mini-sip expansion with DuPont, we will be
    required to seek additional capital in the future to fund growth and expansion
    through additional equity or debt financing or credit facilities. No assurance
    can be made that such financing would be available, and if available it may
    take either the form of debt or equity. In either case, the financing could
    have a negative impact on our financial condition and our stockholders. We anticipate increasing cash flow and growth over the next
    twelve months. Our lack of operating history in this industry makes predictions
    of future operating results difficult to ascertain however our projections
    are on target with our perceived plan. Our prospects must be considered in
    light of the risks, expenses and difficulties frequently encountered by companies
    in their early stage of development, particularly companies in new and rapidly
    evolving markets such as development related companies. Such risks include,
    but are not limited to, an evolving and unpredictable business model and the
    management of growth. To address these risks we must, among other things,
    implement and successfully execute our business and marketing strategy, continue
    to develop and upgrade technology and products, respond to competitive developments,
    and attract, retain and motivate qualified personnel. There can be no assurance
    that we will be successful in addressing such risks, and the failure to do
    so can have a material adverse effect on our business prospects, financial
    condition and results of operations. As of December 31, 2002, we had current assets of $7,156,213,
    and current liabilities of $911,472. FACTORS THAT MAY AFFECT OUR FUTURE OPERATING RESULTS We are a development stage company, recently reorganized,
    and have minimal operating history, which makes an evaluation of us extremely
    difficult. At this stage of our business operations, even with our good faith
    efforts, potential investors have a high probability of losing their investment. As a result of our recent reorganization, we have still demonstrated
    the ability to generate revenues from operations. We have a number of recognized
    brands to market, and our initial success in generating positive cash flow
    in the winter season as a start up re-organized company reflects our feelings
    we will continue to be able to operate profitably. Our future operating results
    will depend on many factors, including our ability to raise capital if we
    wish to expand into the non-bottled beverage category. Other considerations
    to point out are what will be the continued demand and acceptance of our product,
    the level of our competition and our ability to attract and maintain key management
    and employees. 23   While Management believes its estimates of projected occurrences
    and events are within the timetable of its business plan, there can be no
    guarantees or assurances that the results anticipated will occur. Our auditor's report reflects the fact that we have only
    been a business since August 20, 2002 and it would be unlikely for us to continue
    as a going concern. The consolidated financial statements included in this filing
    have been prepared in conformity with generally accepted accounting principles
    that contemplate the continuance of the Company as a going concern. They reflect
    that the Company's cash position may be inadequate to pay all of the costs
    associated with production and marketing. If necessary, the Company intends
    to use borrowings and sales of its securities to mitigate the effects of its
    cash position, however no assurance can be given that debt or equity financing,
    if and when required will be available. There is a limited current public market for our common stock. Although our common stock is listed on the OTCBB, there is a
    limited volume of sales, thus providing a limited liquidity into the market
    for our shares. This is not just limited to the OTCBB or our Company, the
    general stock market has been in a major downward spiral for some time. There
    are no accurate projections we know of as to when the market will rebound.
    As a result of the foregoing, stockholders may be unable to liquidate their
    shares for any reason.     24  ITEM 7. FINANCIAL STATEMENTS.         AMERICAN WATER STAR, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS
      AS OF DECEMBER 31, 2002  CONTENTS  PAGE
          F-1
          INDEPENDENT AUDITORS' REPORTPAGE
          F-2
          CONSOLIDATED BALANCE SHEET
              AS OF DECEMBER 31, 2002PAGE
          F-3
          CONSOLIDATED STATEMENT OF
              OPERATIONS FOR THE PERIOD FROM AUGUST 20, 2002 (INCEPTION) TO DECEMBER 31,
              2002PAGE
          F-4
          CONSOLIDATED STATEMENT OF
              STOCKHOLDERS' EQUITY FOR THE PERIOD FROM AUGUST 20, 2002 (INCEPTION)
              TO DECEMBER 31, 2002PAGE
          F-5
          CONSOLIDATED STATEMENT OF
              CASH FLOWS FOR THE PERIOD FROM AUGUST 20, 2002 (INCEPTION) TO DECEMBER 31,
              2002PAGES
          F-6 - F-16
          NOTES TO CONSOLIDATED FINANCIAL
              STATEMENTS AS OF DECEMBER 31, 2002
 25
 INDEPENDENT AUDITORS' REPORT To the Board of Directors
      of: American Water Star, Inc. and Subsidiaries We have audited the accompanying consolidated
      balance sheet of American Water Star, Inc. and subsidiaries as of December
      31, 2002 and the related statements of operations, changes in stockholders'
      equity and cash flows for the period from August 20, 2002 (inception) to
      December 31, 2002. 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. These 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 American Water Star, Inc. and subsidiaries as of December
      31, 2002, and the results of their operations and their cash flows for the
      period from August 20, 2002 (inception) to December 31, 2002, in conformity
      with accounting principles generally accepted in the United States of America. The accompanying financial
      statements have been prepared assuming that the Company will continue as
      a going concern. As discussed in Note 12 to the financial statements, the
      Company has a net loss of $577,299 and a negative cash flow from operations
      of $419,734 for the period from August 20,2002 (inception) to December 31,
      2002. These conditions raise substantial doubt about the Company's ability
      to continue as a going concern. Management's Plan in regards to these matters
      is also described in Note 12. The financial statements do not include any
      adjustments that might result from the outcome of this uncertainty. WEINBERG & COMPANY, P.A. Boca Raton, Florida April 4, 2003
 F-1    26   AMERICAN WATER STAR, INC. AND SUBSIDIARIES
          CONSOLIDATED BALANCE SHEET
          DECEMBER 31, 2002
          ASSETSCURRENT ASSETSCash
        $
        85,990Accounts receivable, net
        
        88,671Inventories
        
        1,214,215Note receivable - current
        
        5,000Deferred offering costs
        
        76,254Total Current Assets
        
        1,470,130PROPERTY & EQUIPMENT - NET
        
        5,627,583OTHER ASSETSDeposits
        
        3,500Note receivable
        
        55,000Total Other Assets
        
        58,500TOTAL ASSETS
        $
        7,156,213  LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIESAccounts payable and other accrued expenses
        $
        257,362Note payable - stockholder
        
        61,120Notes payable - convertible
        
        592,990Total Current Liabilities
        
        911,472COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS' EQUITYPreferred stock, $.0001 par value, 20,000,000 shares authorized
        
        -Series A preferred convertible, 6,000,000 shares authorized
        
        -Common stock, $.0001 par value, 150,000,000 shares authorized, 30,158,398
            shares issued and outstanding
        
        3,016Additional paid in capital
        
        7,455,424Common stock issued for future services
        
        (636,400)Accumulated deficit
        
        (577,299)Total Stockholders' Equity
        
        6,244,741TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
        $
        7,156,213  See accompanying notes consolidated to financial statements F-2 27  AMERICAN WATER STAR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE PERIOD FROM AUGUST 20, 2002 (INCEPTION) TO
      DECEMBER 31, 2002 NET SALES
        $
        458,152COST OF SALES
        
        260,636GROSS PROFIT
        
        197,516OPERATING EXPENSESGeneral and administrative
        
        63,899Consulting and legal services for stock
        
        689,320Depreciation and amortization
        
        21,596Total Operating Expenses
        
        774,815NET LOSS
        $
        (577,299)NET LOSS PER COMMON SHARE - BASIC AND DILUTED
        $
        (.04)WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED
        
        13,528,523 See accompanying notes consolidated to financial statements F-3 28   AMERICAN WATER STAR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN
      STOCKHOLDERS' DEFICIENCY FOR THE PERIOD FROM AUGUST 20, 2002
      (INCEPTION) TO DECEMBER 31, 2002  Preferred Stock
        
        Common Stock
        
        Additional Paid-In
        
        Stock Issued For Future
        
        AccumulatedStock
        
        Amount
        
        Stock
        
        Amount
        
        Capital
        
        Services
        
        Deficit
        
        TotalStock issued for equipment and inventory
        
        -
        $
        -
        
        11,103,433
        $
        1,110
        $
        3,125,697
        $
        -
        $
        -
        $
        3,126,807Stock issued for officer services
        
        -
        
        -
        
        2,562,393
        
        256
        
        689,064
        
        -
        
        -
        
        689,320Stock issued in recapitalization of American Distributing & Packaging,
            Inc.
        
        -
        
        -
        
        5,200,000
        
        520
        
        2,590,356
        
        -
        
        -
        
        2,590,876Stock issued in recapitalization of American Water Star, Inc.
        
        -
        
        -
        
        6,915,256
        
        692
        
        (99,621)
        
        (636,400)
        
        -
        
        (735,329)Stock issued for cash, net
        
        -
        
        -
        
        1,258,892
        
        126
        
        273,493
        
        -
        
        -
        
        273,619Stock issued for related party note payable
        
        -
        
        -
        
        913,802
        
        92
        
        259,361
        
        -
        
        -
        
        259,453Stock issued for equipment and software
        
        -
        
        -
        
        2,204,622
        
        220
        
        617,074
        
        -
        
        -
        
        617,294Net loss
        
        -
        
        -
        
        -
        
        -
        
        -
        
        -
        
        (577,299)
        
        (577,299)BALANCE,
          DECEMBER 31, 2002
        
        -
        $
        -
        
        30,158,398
        $
        3,016
        $
        7,455,424
        $
        (636,400)
        $
        (577,299)
        $
        6,244,741  See accompanying notes consolidated to financial statements F-4 29  AMERICAN WATER STAR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM AUGUST 20, 2002
      (INCEPTION) TO DECEMBER 31, 2002 CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
        $
        (577,299)Adjustments to reconcile net loss to net cash used
            in operating activities:Depreciation and amortization
        
        21,596Stock issued for services
        
        689,320Changes in operating assets and liabilities:(Increase) decrease in:Accounts receivable
        
        (88,671)Inventories
        
        (308,669)Increase (decrease) in:Accounts payable and accrued expenses
        
        (156,011)Net Cash Used In Operating Activities
        
        (419,734)CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
        
        (16,658)Issuance of notes receivable
        
        (55,000)Net Cash Used In Investing Activities
        
        (71,658)CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of common stock
        
        273,619Net proceeds on note payable - stockholder
        
        303,763Net Cash Provided By Financing Activities
        
        577,382NET INCREASE IN CASH
        
        85,990CASH - BEGINNING OF PERIOD
        
        -CASH - END OF PERIOD
        $
        85,990 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
      FINANCING ACTIVITIES: The Company issued 3,219,996 shares of common stock to a
      stockholder for inventory with a cost of $905,546. The Company issued 7,883,437 shares of common stock to a
      stockholder for office and bottling equipment with a cost of $2,221,260. The Company issued 913,802 shares of common stock to a stockholder
      in exchange for a note payable of $259,453. The Company issued 2,204,622 shares of common stock for
      equipment and software with a cost of $617,294.  See accompanying notes consolidated to financial statements F-5 30   AMERICAN WATER STAR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        AND ORGANIZATION


> (A) Description of Business
>   American Water Star, Inc. f/k/a American Career Centers, Inc. was incorporated
>           in the State of Nevada on June 15, 1999. The operations have been limited
>           to fund raising activities during 2002. American Distribution &
>           Packaging, Inc. (a subsidiary acquired on December 23, 2002) was incorporated
>           in the State of Nevada on August 20, 2002. They specialize in packaging
>           and distribution of products in warehousing, storage and specialized
>           processing of non-bottling products such as beverages sold in mini-sip
>           pouches. As of December 31, 2002, formal business operations did not
>           commence. All Star Beverage, Inc. (a subsidiary acquired on December
>           24, 2002) was incorporated in the State of Nevada on August 20, 2002.
>           They sell various bottled beverage products to distributors and retailers.
>   (B) Basis of Presentation
>   On December 23, 2002, American Water Star acquired 1,000,000 shares
>           or 100% of American Distribution & Packaging, Inc. for 5,200,000
>           shares of American Water Star common stock. A principal of American
>           Distribution and Packaging was an officer of American Water Star at
>           the date of acquisition. As a result of the exchange agreement, the
>           reorganization was treated as an acquisition by the acquiree and as
>           a reverse merger by the acquirer for accounting purposes. Pursuant to
>           the merger, all capital stock shares and amounts and per share data
>           have been retroactively restated.
>   On December 24, 2002, American Water Star acquired 1,000,000 shares
>           or 100% of All Star Beverage, Inc. for 12,645,824 shares of American
>           Water Star common stock. As a result of the exchange agreement, the
>           reorganization was treated as an acquisition by the acquiree and as
>           a reverse merger by the acquirer for accounting purposes. Pursuant to
>           the merger, all capital stock shares and amounts and per share data
>           have been retroactively restated.
>   Accordingly, the financial statements include the following:
>   (1)        The balance sheet consists
>           of the net assets of the accounting acquirer at historical cost and
>           the net assets of the acquiree at historical cost.
>   (2)        The statements of operations
>         include the operations of the accounting acquirer for the periods presented
>         and the operations of the acquiree from the date of the merger.
>   (C) Principles of Consolidation
>   The accompanying consolidated financial statements include the accounts
>         of American Water Star, Inc. and its subsidiaries, All Star Beverage,
>         Inc., American Distributing & Packaging, Inc., and Tunlaw Corporation
>         (an inactive subsidiary) hereafter referred to as (the "Company").
>         All significant intercompany transactions and balances have been eliminated
>         in consolidation.

F-6 31
  AMERICAN WATER STAR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002


> (D) Use of Estimates
>   In preparing financial statements in conformity with generally accepted
>         accounting principles, management is required 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 revenues and expenses during the reported period. Actual results could
>         differ from those estimates.
>   (E) Cash
>   The Company maintains cash at financial institutions.
>   (F) Inventory
>   Inventories are started at the lower of cost or market. Cost is determined
>         using the first-in, first-out method.
>   (G) Property and Equipment
>   Property and equipment are recorded at cost. Owned property and equipment
>         is depreciated on a straight-line basis over the estimated useful lives
>         of the assets: 3-10 years for warehouse and bottling equipment. Amortization
>         expense of leasehold improvements and lease equipment is included in depreciation
>         expense.
>   (H) Deferred Offering Costs
>   The costs related to the issuance of debt are capitalized and amortized
>           to interest expense using the effective interest method over the lives
>           of the related debt.
>   (I) Income Taxes
>   Income taxes are accounted for under the asset and liability method
>           of Statement of Financial Accounting Standards No. 109, "Accounting
>           for Income Taxes" ("SFAS 109"). Under Statement No. 109,
>           deferred tax assets and liabilities are recognized for the future tax
>           consequences attributable to differences between the financial statement
>           carrying amounts of existing assets and liabilities and their respective
>           tax bases. Deferred tax assets and liabilities are measured using enacted
>           tax rates expected to apply to taxable income in the years in which
>           those temporary differences are expected to be recovered or settled.
>           Under SFAS 109, the effect on deferred tax assets and liabilities of
>           a change in tax rates is recognized in income in the period that includes
>           the enactment date.

F-7 32   AMERICAN WATER STAR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002


> (J) Revenue Recognition
>   Revenue is recorded when title and risk of loss have passed to the
>         customer. Revenue is typically recognized at the time of shipment. Sales
>         are recorded net of discounts, rebates and returns.
>   (K) Advertising Costs
>   Advertising and sales promotion costs are expensed as incurred. Advertising
>         and sales promotion expense totaled approximately $8,800 for December
>         31, 2002.
>   (L) Fair Value of Financial Instruments
>   Statement of Financial Accounting Standards No. 107, "Disclosure
>         About Fair Value of Financial Instruments," requires certain disclosures
>         regarding the fair value of financial instruments. Cash, accounts and
>         notes receivable, accounts payable, accrued liabilities, notes payable
>         and amounts due to stockholder are reflected in the financial statements
>         at fair value because of the short-term maturity of the instruments.
>   (M) Segments
>   The Company operates in only one segment and therefore segment information
>         is not presented.
>   (N) Per Share Data
>   Net loss per share for the period ended December 31, 2002 is computed
>         based on the weighted average common stock and dilutive stock equivalents
>         outstanding during the period. The effect of common stock equivalents
>         was not used because the effect was anti-dilutive.
>   (O) Recent Accounting Pronouncements
>   The Financial Accounting Standards Board has recently issued several
>         new Statements of Financial Accounting Standards.
>   In July 2002, the FASB issued SFAS No. 146, "Accounting for Restructuring
>         Costs." SFAS 146 applies to costs associated with an exit activity
>         (including restructuring) or with a disposal of long-lived assets. Those
>         activities can include eliminating or reducing product lines, terminating
>         employees and contracts and relocating plant facilities or personnel.
>         Under SFAS 146, the Company will record a liability for a cost associated
>         with an exit or disposal activity when that liability is incurred and
>         can be measured at fair value. SFAS 146 will require the Company to disclose
>         information about its exit and disposal activities, the

F-8 33    AMERICAN WATER STAR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002


> related costs, and changes in those costs in the notes to the interim
>         and annual financial statements that include the period in which an exit
>         activity is initiated and in any subsequent period until the activity
>         is completed. SFAS 146 is effective prospectively for exit or disposal
>         activities initiated after December 31, 2002, with earlier adoption encouraged.
>         Under SFAS 146, a company cannot restate its previously issued financial
>         statements and the new statement grandfathers the accounting for liabilities
>         that a company had previously recorded under Emerging Issues Task Force
>         Issue 94-3.
>   In December 2002, the Financial Accounting Standards Board issued Statement
>           No. 148, "Accounting for Stock-Based Compensation-Transition and
>           Disclosure - an amendment of FASB Statement No. 123," ("SFAS
>           148"). SFAS 148 amends FASB Statement No. 123, "Accounting
>           for Stock Based Compensation" ("SFAS 123") and provides
>           alternative methods for accounting for a change by registrants to the
>           fair value method of accounting for stock-based compensation. Additionally,
>           SFAS 148 amends the disclosure requirements of SFAS 123 to require disclosure
>           in the significant accounting policy footnote of both annual and interim
>           financial statements of the method of accounting for stock based-compensation
>           and the related pro forma disclosures when the intrinsic value method
>           continues to be used. The statement is effective for fiscal years beginning
>           after December 15, 2002, and disclosures are effective for the
>           first fiscal quarter beginning after December 15, 2002.
>   The adoption of these pronouncements will not have a material effect
>         on the Company's financial position or results of operations.

NOTE 2 ACCOUNTS RECEIVABLE


> Accounts receivable at December 31, 2002 consisted of the following:

Accounts receivable
            $
            88,671Less allowance for doubtful accounts
            
            -$
            88,671


> For the year ended December 31, 2002 the Company recorded no provision
>         for doubtful accounts because the accounts receivable were deemed to be
>         fully collectable.

NOTE 3 INVENTORIES


> At December 31, 2002 inventories consisted of the following:

Raw materials
      $
      975,408Finished goods
      
      238,807$
      1,214,215  F-9  34     AMERICAN WATER STAR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 NOTE 4 NOTES RECEIVABLE


Notes receivable at December 31, 2002 are as follows: Note receivable from stockholder, unsecured, due on demand
            $
            5,000Note receivable from licensee, interest of 8% per annum, payments
                of $12,620, secured by intangible assets (See Notes 9(D) and 14(A))
            
            622,375Note receivable from vendor, interest of 7% per annum, due December
                2004, unsecured
            
            55,000682,375Less allowance for doubtful accounts
            
            (622,375)60,000Less current portion
            
            5,000$
            55,000
 NOTE 5 PROPERTY AND EQUIPMENT
 Property, plant and equipment at December 31, 2002 consisted of the
        following: Office equipment
            $
            356,202Furniture and fixtures
            
            76,500Website
            
            357,589Vehicles
            
            7,900Idle equipment
            
            4,820,395Improvements
            
            74,1725,692,758Less accumulated depreciation
            
            (65,175)$
            5,627,583
 Property, plant and equipment with a book value of $4,820,395 have
        not been put into use at December 31, 2002.
  Depreciation expense for the year ended December 31, 2002 was $21,596. NOTE 6 RELATED PARTY TRANSACTIONS
 During 2002, the Company entered into a note receivable of $5,000 with
          a stockholder. F-10 35    AMERICAN WATER STAR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002
 
 During 2002, the Company exchanged 913,802 shares of common stock for
        a note payable to an officer of $259,453. 
 During 2002 the Company issued 2,562,391 shares of common stock for
        services to an officer having a fair value of $689,320.
  During 2002, the Company exchanged 11,103,433 shares of common stock for
        bottling equipment and inventory from an officer with a fair value of
        $3,126,807. 
 Prior to the reverse merger, the Company exchanged 5,000,000 shares
        of common stock for bottling equipment from an officer (See Note 1(B)).
  The Company entered into lease agreements with the wife of the Chief Executive
        Officer and President (See Notes 8(B) and 14(F)). NOTE 7 CONVERTIBLE NOTES PAYABLE  During 2002, the Company issued one-year 10% convertible notes
                payable. The notes are convertible 30 days after issuance at 70%
                of the market price on the date of conversion with a floor conversion
                price of $0.20. The Company recorded a beneficial conversion on
                these notes of $76,282 prior to the recapitalization (See Note
                1). None of the notes have been converted as of December 31, 2002
                (See Note 9(C)).
            $
            177,990During 2002, the Company issued one-year 15% convertible notes
                payable. The notes are convertible 30 days after issuance at 70%
                of the market price on the date of conversion with a floor conversion
                price of $0.20 and a ceiling conversion price of $0.40. The Company
                recorded a beneficial conversion on these notes of $76,228 prior
                to the recapitalization (See Note 1). None of the notes have been
                converted as of December 31, 2002 (See Note 9(C)).
            
            190,000During 2002, the Company issued six-month 25% convertible notes
                payable. The notes are convertible four months after issuance
                at 75% of the market price on the date of conversion with a floor
                conversion price of $0.40 and a ceiling conversion price of $1.50.
                There was no beneficial conversion feature on these notes. None
                of the notes have been converted as of December 31, 2002
                (See Notes 9(C) and 13(C)).
            
            225,000$
            592,990
  F-11 36   AMERICAN WATER STAR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 NOTE 8STOCKHOLDERS' EQUITY
 (A) Common Stock Issued for Cash
  During 2002, the Company sold 1,169,860 shares of common stock and
        issued 89,032 shares of common stock as direct offering costs for net
        proceeds of $273,619.
  (B) Common Stock Issued for Related Party Notes Payable
  During 2002, the Company exchanged 913,802 shares of common stock for
        a note payable to an officer of $259,453. The shares were recorded at
        the value of the note and no gain or loss on the exchange was recognized.
  (C) Common Stock Issued for Services
  During 2002 the Company issued 2,562,393 shares of common stock for
        services to an officer having a fair value of $689,320. In addition, the
        Company is currently seeking the return of 430,000 shares of common stock
        with a fair value of $636,400 due to the non-performance of services.
        This amount is recorded in deferred stock issued for future services.
  (D) Common Stock Issued for Equipment and Software
  During 2002, the Company exchanged 2,204,622 shares of common stock
        for equipment and software with a fair value of $617,294.
  During 2002, the Company exchanged 11,103,433 shares of common stock
        for bottling equipment and inventory from an officer with a fair value
        of $3,126,807.
  (E) Common Stock Warrants
  During 2002, the Company committed to issue 227,000 common stock warrants
        at an exercise price of $0.36 to a consultant for stock placement services.
        The warrants expire in 2007. Using the Black-Scholes model, the warrants
        were valued at $95,691 using the following assumptions; no annual dividend
        volatility of 349%, risk free interest rate of 3.25% and a term of five
        years. The amount was recorded as a stock placement cost prior to the
        recapitalization (See Note 1). NOTE 9 COMMITMENTS AND CONTINGENCIES
 (A) Legal Proceedings
  The Company is involved in various unresolved legal actions, administrative
          proceedings and claims in the ordinary course of business. Although
          it is not possible to predict with certainty the outcome of these unresolved
          actions, the Company believes these unresolved legal actions will not
          have a material effect on its financial position or results from operations. F-12 37    AMERICAN WATER STAR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 (B) Operating Leases
 The Company leases two facilities under long-term non-cancelable operating
        lease agreements expiring at various dates through October 2005. One of
        the facilities is owned by the wife of the Chief Executive Officer. The
        non-cancelable operating leases provide that the Company pays property
        taxes, insurance and certain operating expenses applicable to the leased
        premises. Rent expense for the period ended December 31, 2002 was approximately
        $33,000 (See Note 14(F)).
  The future minimum annual lease payments required under the operating
          leases are as follows: 
 2003
      $
      109,7932004
      
      111,3052005
      
      84,658$
      305,755  (C) Stock Placement Costs
 During 2002, the Company entered into an agreement with a
    consultant to provide advisory services and assist the Company with fundraising
    activities. The agreement calls for commissions of 10% to 15% of the gross
    proceeds raised. In addition, the agreement calls for the Company to pay a
    10% common stock contingent fee based on the number of shares issued for the
    conversion of the convertible notes payable (See Note 7). (D) License Agreement
 i) During 2002, the Company entered into an agreement to license
          copyrights, trade secrets, business methods, formulas, etc. for one
          year at a rate of 4% of net sales (See Note 13(A)).
    ii) During November 2002, the Company entered into an Exclusive License
            Agreement with a licensor granting it an exclusive license to make,
            use and sell the licensor's brand for all markets and industries except
            for the Chicago Metropolitan Area and Michigan. The licensor retained
            the rights to those markets. In consideration, the Company will pay
            the licensor a royalty 4% of the gross revenues received for the licensed
            products sold. The agreement is for a period of 100 years, however,
            in the event that the Company pays the licensor the cumulative sum
            of $1,000,000 within five years, the licensor will irrevocably assign
            and sell to the Company the copyrighted property and trademarks. F-13 38   AMERICAN WATER STAR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002
 (E) Consulting Agreement
  During November 2002, the Company entered into a one-year consulting
            agreement with an individual to provide investor relations services.
            The agreement calls for a monthly fee of $3,000 plus 20,000 shares
            of common stock. NOTE 10CONCENTRATIONS
 (A) Credit Risk
  During 2002, the Company relied on three customers for approximately
            61% of sales. At December 31, 2002, accounts receivable from those
            customers totaled approximately $13,820.
  (B) Significant Suppliers
  The Company is dependent on third-party water bottling companies
            and bottle makers. In 2002, products purchased from the Company's
            largest supplier accounted for approximately 70% of product purchases.
            The Company is dependent on the ability of their supplier to provide
            products on a timely basis and on favorable pricing terms. The loss
            of certain principal suppliers or a significant reduction in product
            availability from principal suppliers could have a material reverse
            effect on the Company. The Company believes that its relationships
            with suppliers are satisfactory. NOTE 11INCOME TAXES
 Income tax (benefit) consists of the following: Current
        $
        -Deferred
        
        -$
        -
 
 The Company's tax expense (benefit) differs from the "expected"
      tax expense for the period ended December 31, 2002 (computed by applying
      the Federal corporate tax rate of 34% to income (loss) before taxes) as
      follows: Computed "expected" tax expense (benefit)
        $
        (196,282)Valuation allowance
        
        196,282Income tax (benefit) expense
        $
        -  F-14 39    AMERICAN WATER STAR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002
 At December 31, 2002, the Company had a net operating loss carryforward
          of approximately $577,200 for U.S. Federal Income tax purposes available
          to offset future taxable income expiring beginning 2022. The Company
          recorded a valuation allowance of $196,282 at December 31, 2002 to fully
          offset the deferred tax asset benefit. NOTE 12GOING CONCERN
 The accompanying financial statements have been prepared assuming
          that the Company will continue as a going concern. The Company has a
          net loss of $577,299 and a negative cash flow from operations of $419,734
          for the period from August 20,2002 (inception) to December 31, 2002.
          These conditions raise substantial doubt about the Company's ability
          to continue as a going concern.
    The Company anticipates additional funding capital through the issuance
            of debt and/or equity securities. Additionally, management anticipates
            that operations which will commence during calendar year ending December
            31, 2003 will generate profits to absorb overhead expenses. NOTE 13SIGNIFICANT FOURTH QUARTER ADJUSTMENTS
 In the fourth quarter of 2002, the Company recorded adjustments that
          increased net loss. These adjustments included $434,000 in consulting
          fees, and $28,200 for other various expenses. The Company also adjusted
          the carrying value of bottling equipment, reducing it by $1,779,740. NOTE 14SUBSEQUENT EVENTS
 (A) Lawsuit Settlement
    During 2003, the Company exercised its rights upon default under
            a note receivable agreement for all the intangible assets under the
            license agreement (See Notes 4 and 9(D)).
    (B) Licensing Agreement
    In January 2003, the Company entered into a three-year exclusive
            licensing agreement with a corporation that owns the licensing rights
            to a consumer product trademark in which the Company can produce,
            market and sell flavored water bearing the trademark name in the United
            States and Canada. In consideration, the Company agreed to pay a royalty
            of four percent of invoice sales (net of shipping and sales taxes),
            payable each quarter. The agreement called for a guaranteed minimum
            annual royalty fee of $40,000 in the first year, $120,000 in the second
            year, and $200,000 in the third year. The agreement also has a renewal
            option of three years if the Company meets minimum sales amounts under
            the agreement. F-15 40    AMERICAN WATER STAR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002
 (C) Stock Issued as Interest on Notes Payable
    During 2003, the Company issued 39,000 shares of common stock to
            individual 25% convertible noteholders with a fair value of $13,280
            in consideration of extending the maturity of the notes for a period
            of six months.
    (D) Stock Issued for Cash
    During 2003, the Company issued 100,455 shares of common stock for
            cash of $19,750.
    (E) Stock Issued for Services
    During 2003, the Company issued 2,717,500 shares of common stock
            for services with a fair value of $836,400.
    (F) Operating Lease Agreement
    In January 2003, the Company entered into a two year operating lease
            agreement with a Company owned by the Chief Executive Officer and
            President's wife to occupy a distribution facility in Santa Ana, California.
            The lease commenced in January 2003 until January 2005 at a rate of
            $10,600 per month which includes common area and maintenance (See
            Notes 6 and 9(B)).
    (G) Employment Agreements
    On January 1, 2003, the Company entered into a one-year employment
            agreement with an individual. The agreement calls for the individual
            to become the Chief Financial Officer at an annual salary of $120,000.
    On January 1, 2003, the Company entered into a one-year employment
          agreement with an individual. The agreement calls for the individual
          to become the Chief Executive Officer and President at an annual salary
          of $120,000. F-16 41   ITEM 8. CHANGES IN AND DISAGREEMENTS
        WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE We have had no change in, or disagreements with, our principal
        independent accountant, Weinberg & Co., P.A., during our last two
        most recent fiscal years. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS,
        PROMOTERS, AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
        ACT  Name
              Age
              Position
              Director SinceRoger Mohlman
              55
              CEO, President and Director
              July 2002Thomas F. Krucker
              63
              CFO, Secretary, Treasurer
                and Director
              October 2001
  Roger Mohlman Mr. Mohlman brings over 30 years of experience in licensing
        products and business development. He has been engaged in several entrepreneurial
        ventures, highlighted by becoming owner of several clothes manufacturing
        operations selling to name brand outlets in the United States. From 1981
        to 1997, Mr. Mohlman was the owner of Pobeda Manufacturing, Inc. in Mexico,
        a licensee for manufacturing name brand clothing for U.S. companies. Since
        1981 to present, he has owned a number of additional companies, including
        Baja Stone, a manufacturer of stone and furniture for home and office
        decorations, Del Mundo, a manufacturer of wearing apparel, Interlave Commercial
        Laundry, a commercial launderer in Mexico, and Spectrum Trading, an import/export
        company dealing with hard and soft goods in Latin America. From 1986 to
        July 2002, Mr. Mohlman was the President of Camelot Ltd., LLC, a holding
        company for various businesses, including LA's Boiler, ATC, Baja Stone,
        Rumours, Delizia, Iron Works and Excalibur Awards. From January 1998 until
        June 2001 he was the CEO and President of Venda Tel, Inc. and Merlin Computers,
        manufacturers of slot machines and telco equipment and software. Mr. Mohlman
        currently devotes substantially all of his time to the business of the
        Company. Thomas F. Krucker Mr. Krucker graduated from the University of Arizona in
        1962 and received a Juris Doctorate degree from Pepperdine University
        in 1969. From 1970 to 1981 he held a number of executive positions with
        Toyota Motor Sales USA. During his tenure at Toyota, he attained the positions
        of Sales Manager for Southern California and National Import Manager.
        He left Toyota to become a partner in a real estate development firm active
        in condo conversion projects in Texas and on the East Coast of the United
        States. In 1984, he became a majority investor and served as President
        and CEO in a start up pizza business that became MamaMia Pizza. In 1990,
        after selling his interest in MamaMia, Mr. Krucker purchased another start-up,
        Pacific Snax, for which he served as President and CEO. Pacific Snax also
        became a public company. Mr. Krucker served as President of Fun City Popcorn,
        which in 1994 merged with Tone Products and became public. He was a founding
        investor in Elast Tech (and served as its President and CEO), which later
        merged into a public entity. Mr. Krucker currently sits on the Board of
        Directors of Photon, Inc., a privately-held company which manufactures
        and distributes natural health products. Since June 2001, Mr. Krucker
        has served as President, CEO and as a director of Elast Technologies Corp.,
        a company engaged in the development of two separate diagnostic tools:
        an allergy testing device and a chiropractic outcome-measuring instrument.
        Elast is a subsidiary of PTS, Inc., a publicly traded company. Since May
        2002, Mr. Krucker has served as Executive Vice President of Medsonix,
        Inc., a privately-held company in the process of developing an acoustic
        therapy system for use in the medical field. Mr. Krucker provides limited
        services to Medsonix on an as-needed basis. Mr. Krucker currently devotes
        substantially all of his time to the business of the Company. There is no family relationship between the officers and
        directors of the Company. 42   Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Act requires our officers, directors
        and persons who own more than ten percent of a registered class of our
        equity securities within specified time periods to file certain reports
        of ownership and changes in ownership with the SEC. The Company is not
        aware of any failure to file reports or report transactions in a timely
        manner during the fiscal year ended December 31, 2002, by either director
        or executive officer. Audit Committee and Code of Ethics The Company's Board of Directors has not yet appointed an
        audit committee. The Company is in the process of taking steps to form
        an audit committee and to establish a written code of ethics. ITEM 10. EXECUTIVE COMPENSATION The table below summarizes all compensation awarded to,
        earned by, or paid to the executive officers of AMWS by any person for
        all services rendered in any capacity to AMWS for the fiscal years ended
        December 31. Annual
                compensation
            Long term
                compensationAwards
            
            PayoutsName and Position
            Year
            Salary
              ($)
            Bonus ($)
            Other Annual
                Comp. ($)
            Restricted
                Stock Awards* (#)
            Securities
                underlying options / SARs*
              (#)
            LTIP Payouts
                ($)
            All other
                Comp. ($)Roger Mohlman (1)
            2002
            0Thomas F. Krucker (2)
            2001
              2002
            0
              0
            
            
            41,667
              1,000,000Ronald Mears (3)
            2001
            0
            
            
            416,667
            83,333William Anthony (4)
            2001
            0
    43  * Adjusted to reflect the 1:12 reverse split of the Company's common stock (1) Mr. Mohlman has served as President, CEO and director with the Company
        since June 2002. (2) Mr. Krucker served as President and CEO with the Company
        from December 2001 to June 2002. In June 2002, he resigned his position
        as President and CEO and was appointed Secretary/Treasurer. Mr. Krucker
        has been a director of the Company since October 2001. (3) Mr. Mears resigned as CEO of the Company in December
        2001 and resigned his director position in February 2002. (4) Mr. Anthony resigned as President and director of the
        Company in July 2001. Compensation of Directors The directors of the Company are not compensated for their
        services although such directors may from time to time be awarded options
        or other incentives under the Company's Stock Plan. Employment Agreements Effective January 1, 2003, the Company entered into formal
        employment agreements with both Roger Mohlman and Thomas F. Krucker. Under the employment agreement with Roger Mohlman, the Company
        has agreed to employ Mr. Mohlman as the Company's President and CEO. The
        term of the employment contract is one year from effective date. Both
        parties, upon mutual written agreement, may extend the contract for an
        additional two years. After the two-year extension, both parties may make
        additional extensions in one year increments thereafter. Mr. Mohlman's
        compensation will be a base salary of $120,000 per year (which may be
        increased by consent of the Board), stock options, annual bonus in accordance
        with Company performance, and various benefits. The employment agreement with Thomas F. Krucker to serve
        as the Company's Secretary, Treasurer and CFO is also a one-year contract
        and provides for an extension of the contract for an additional two years.
        After the two-year extension, both parties may make additional extensions
        in one-year increments thereafter. Under the contract, Mr. Krucker's base
        salary is $120,000 (which may be increased by consent of the Board), stock
        options, annual bonus in accordance with Company performance, and various
        benefits. ITEM 11. SECURITY OWNERSHIP OF
        CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth each person known to us,
        as of the date of this Report, to be a beneficial owner of five percent
        (5%) or more of AMWS's outstanding common stock, each officer and director
        individually, and all executive officers and directors as a group. No
        other class of voting securities is outstanding. None of the beneficial
        owners has the right to acquire any shares AMWS's common stock within
        60 days pursuant to options, warrants, rights, conversion privileges,
        or similar obligations. 44   Name of Beneficial Owner
              (1)
          Number of
              Shares
          Percent of
              Class (2)Roger Mohlman
          12,017,235
          28.0%Thomas F. Krucker
          7,584,058
          24.8%Darwin Software LLC
          2,204,621
          7.8%Includes all officers and
              directors as a group (2 individuals)
          19,601,293
          52.8%  (1) As used in this table, "beneficial ownership"
        means the sole or shared power to vote, or to direct the voting of, a
        security, or the sole or shared investment power with respect to common
        stock (i.e., the power to dispose of, or to direct the disposition of,
        a security). The address of each person is in care of the Company. (2) Based on 32,926,321 shares of common stock outstanding
        as of March 31, 2003. ITEM 12. CERTAIN RELATIONSHIPS
        AND RELATED TRANSACTIONS On September 2, 2002, the Company entered into a note payable
        with its President, Roger Mohlman, in the principal amount of $255,864.50
        with interest accruing at the rate of 7% per annum, due quarterly. On
        December 27, 2002, Mr. Mohlman elected to convert the principal amount
        due under the Note into shares of restricted common stock of the Company
        at the conversion rate of $0.28 per share, and waive all accrued interest,
        which resulted in the issuance of 913,802 shares. On December 23, 2002, the Company completed the acquisition
        of American Distribution & Packaging, Inc. Pursuant to the Agreement,
        AD&P exchanged 100% of its outstanding common stock for 5,200,000
        newly issued shares of the Company's common stock. Accordingly, each outstanding
        share of common stock of AD&P was surrendered in exchange of approximately
        5.2 shares of the Company's common stock. Thomas F. Krucker, an officer
        and director of the Company, was the majority shareholder of AD&P
        and received 5,000,000 shares of the Company's common stock in the exchange.
        Details of the acquisition are described elsewhere in this Report. On December 24, 2002, the Company completed the acquisition
        of All-Star Beverages, Inc. Pursuant to the Agreement, All-Star exchanged
        100% of its outstanding common stock for 12,645,824 newly issued shares
        of the Company's common stock. Accordingly, each outstanding share of
        common stock of All-Star was surrendered in exchange of approximately
        8 shares of the Company's common stock. Roger Mohlman and Thomas F. Krucker,
        officers and directors of the Company and the shareholders of All-Star,
        received 11,103,433 and 1,542,391 shares of the Company's common stock,
        respectively, in the exchange. Details of the acquisition are described
        elsewhere in this Report. 45   The Company currently has rental agreements for the lease
        of its production and distribution facilities with Camelot, Ltd., a company
        controlled by the wife of Roger Mohlman. See Description of Property for
        a detailed description of the agreements. From time to time, Mr. Mohlman will make loans to the Company
        and its subsidiaries. At March 31, 2003, the Company and its subsidiaries
        were indebted to Mr. Mohlman in the approximate amount of $495,000. ITEM 13. EXHIBITS AND REPORTS
        ON FORM 8-K (a) Exhibits.
 Number
        
        Description3.1
        
        The Company's Articles of Incorporation. (Incorporated
          by reference to Exhibit 3.1 of the Company's Amended Form 10-KSB filed
          on April 13, 2000.)3.2
        
        Certificate of Amendment to the Company's Articles of
          Incorporation. (Incorporated by reference to Exhibit 3.2 of the Company's
          Amended Form 10-KSB filed on April 13, 2000.)3.3
        
        Certificate of Change in Number of Authorized Shares Pursuant
          to NRS 78.209, which define the rights of holders of the equity securities
          being registered. (Incorporated by reference to Exhibit 4.3 to the Company's
          Registration Statement on Form S-8, SEC File No. 333-85652, filed on
          April 5, 2002.)3.4
        
        Certificate of Amendment to the Company's Articles of
          Incorporation changing the name of the Company and increasing its authorized
          common stock. (Incorporated by reference to Exhibit 3.2 of the Company's
          Amended Form 10-QSB filed on May 20, 2000.)3.5
        
        The Company's By-Laws. (Incorporated by reference to Exhibit
          3.3 of the Company's Amended Form 10-KSB filed on April 13, 2000.)3.6*
        
        Articles of Exchange completing the acquisition of American
            Distribution & Packaging, Inc.3.7*
        
        Articles of Exchange completing the acquisition of All-Star
          Beverages, Inc.4.1
        
        Certificate of Designation of Series A Convertible Preferred
          Stock. (Incorporated by reference to Exhibit 4.4 to the Company's Registration
          Statement on Form S-8, SEC File No. 333-85652, filed on April 5, 2002.)4.2
        
        Forms of Convertible Note Purchase Agreement and 10% Convertible
          Note. (Incorporated by reference to Exhibit 4.2 of the Company's Form
          10-QSB filed on November 19, 2002.)4.3*
        
        Forms of Convertible Note Purchase Agreement and 25%
          Convertible Note4.4*
        
        Forms of Convertible Note Purchase Agreement and 15% Convertible
          Note4.5*
        
        Forms of Convertible Note Purchase Agreement and 10% Convertible
          Note4.6
        
        Stock Plan. (Incorporated by reference to Exhibit 4.6
          to the Company's Registration Statement on Form S-8 filed on February
          28, 2003.)10.1
        
        Stock Purchase Agreement between the Company and Brighton
          Opportunity Fund, LP dated as of May 7, 2002. (Incorporated by reference
          to the Companys Quarterly Report on Form 10-QSB filed with on
          August 19, 2002.)10.2
        
        Registration Rights Agreement, dated as of May 7, 2002,
          between the Company and Brighton Opportunity Fund, LP (Incorporated
          by reference to the Companys Quarterly Report on Form 10-QSB filed
          with on August 19, 2002.)10.3
        
        Common Stock Purchase Agreement between the Company and
          Brighton Opportunity Fund dated May 7, 2002. (Incorporated by reference
          to the Companys Quarterly Report on Form 10-QSB filed with on
          August 19, 2002.)10.4*
        
        Employment Agreement with Roger Mohlman10.5*
        
        Employment Agreement with Tom Krucker10.6*
        
        Trademark and Design License Agreement dated January 1,
          2003 for the use of the Hawaiian Tropic name.21*
        
        Subsidiaries  * Filed herewith. 46   (b) Reports on Form 8-K: March 15, 2002
            Effective February 28, 2002, the Company completed
                the acquisition of Water Star Bottling, Inc., a Wyoming corporation,
                pursuant to a Definitive Agreement and Plan of Acquisition.April 3, 2002
            The Company filed an amendment to its Form 8-K filed
              on December 13, 1999 in accordance with the requirements set forth
              in Item 7 of the Form to include the audited financial statements
              of Tunlaw International Corporation, the business acquired.May 14, 2002
            The Company filed an amendment to its Form 8-K
                filed on March 15, 2002 in accordance with the requirements set
                forth in Item 7 of the Form to include the audited consolidated
                financial statements of Water Star Bottling and Geyser Products
                LLC, the business acquired.September 19, 2002
            Effective September 6, 2002 the Company rescinded
              the acquisition of Water Star Bottling, Inc., which acquisition
              had been previously reported.November 19, 2002
            The Company filed an amendment to its Form 8-K filed
              on September 19, 2002 in accordance with the requirements set forth
              in Item 7 of the Form to include pro forma financial information.January 7, 2003
            On December 23, 2002, the Company completed the acquisition
              of American Distribution & Packaging, Inc., a Nevada corporation,
              pursuant to an Acquisition Agreement; and on December 24, 2002,
              the Company completed the acquisition of All-Star Beverages, Inc.
              pursuant to an Acquisition Agreement.
  47   ITEM 14. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures Disclosure controls and procedures are designed to ensure
        that information required to be disclosed in the Company's periodic reports
        riled with the Securities and Exchange Commission under the Securities
        Exchange Act of 1934 is recorded, processed, summarized and reported,
        within the time periods specified in the rules and forms of the Securities
        and Exchange Commission. Disclosure controls and procedures include, without
        limitation, controls and procedures designed to ensure that information
        required to be disclosed in the periodic reports filed under the Securities
        Exchange Act of 1934 is accumulated and communicated to management, including
        the Chef Executive Officer and Principal Financial Officer, as appropriate,
        to allow timely decisions regarding required disclosure. Within the 90 days prior to the filing date of this Report,
        the Company conducted under the supervision and with the participation
        of the Company's Chief Executive Officer and Principal Financial Officer. (b) Effective Disclosure Controls Based upon that evaluation, the Company's officers concluded
        that many of the Company's disclosure controls and procedures are effective
        in gathering, analyzing and disclosing information needed to satisfy the
        Company's disclosure obligations under the Securities Exchange Act of
        1934. For example, the Company's internal controls, particularly the areas
        of payroll, control of cash and accounts payable, are effective. In addition,
        the Company's Chief Executive Officer and Chief Financial Officer meet
        on a regular basis to review and evaluate the Company's financial position. 48   (c) Weaknesses in Disclosure Controls The Company's officers also identified several weaknesses
        in the Company's disclosure controls. Such weaknesses, and the steps the
        Company plans to take remedy the weaknesses, are discussed below. 1. The Company recorded a significant number of audit adjustments
        during the fourth quarter, which were required to properly state the account
        balances at September 30, 2002. Remedy: The Company will implement comprehensive
        closing procedures, including an analysis of all balance sheet accounts
        and significant income statement accounts. 2. The minutes of the Board of Directors' and stockholders'
        meetings were not always complete. Remedy: The Company will implement
        procedures to be more comprehensive in the preparation of its minutes
        to include all important matters that affect the Company's operations.
        The Company will take appropriate steps to ensure that all minutes are
        properly approved and signed by the applicable parties. 3. The Company drafted several agreements without consulting
        its legal counsel. Therefore, some of the agreements had terms and provisions
        that either changed the purpose of the agreement or undermined the purpose
        or intent of management. Remedy: The Company will consult its legal counsel
        as to the legality of future agreements and consult its auditors regarding
        the proper accounting treatment of such agreements in order to preserve
        the purpose of the agreements and the intent of management. (d) Changes In Internal Controls There were no significant changes in the Company's internal
        controls or in other factors that could significantly affect those controls
        since the most recent evaluations of such controls. The Company intends
        to make extensive improvements, as outlined above, to its disclosure controls.   49   SIGNATURES  SIGNATURESIn accordance with the requirements of the Exchange
                Act, the registrant caused this report to be signed on its behalf
                by the undersigned, thereunto duly authorized.(Registrant) AMERICAN WATER STAR, INC.By:
            /s/Roger MohlmanPresident and Chief Executive OfficerDate:
            April 15, 2003By:
            /s/Thomas F. KruckerSecretary, Treasurer and Chief Financial OfficerDate:
            April 15, 2003In accordance with the Exchange Act, this report has
              been signed below by the following persons on behalf of the registrant
              and in the capacities and on the dates indicated.By:
            /s/Roger Mohlman, DirectorDate:
            April 15, 2003By:
            /s/Thomas F. Krucker, DirectorDate:
            April 15, 2003
      50  CERTIFICATION OF CHIEF EXECUTIVE OFFICER
        PURSUANT TO
        18 U.S.C. SECTION 1350,
        AS ADOPTED PURSUANT TO
        SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Roger Mohlman, Chief Executive Officer of American Water Star, Inc.
        (the "Company"), certify to the best of my knowledge, pursuant
        to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
        Act of 2002, that: (1) the Company's Annual Report on Form 10-KSB for the year
        ended December 31, 2002, as filed with the Securities and Exchange Commission
        on the date hereof (the "Report") fully complies with the requirements
        of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents,
        in all material respects, the financial condition and results of operations
        of the Company.  Date: April 15, 2003 /s/
        Roger Mohlman
        Chief Executive Officer       51  CERTIFICATION OF CHIEF FINANCIAL OFFICER
        PURSUANT TO
        18 U.S.C. SECTION 1350,
        AS ADOPTED PURSUANT TO
        SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Thomas F. Krucker, Chief Financial Officer of American Water Star,
        Inc. (the "Company"), certify to the best of my knowledge, pursuant
        to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
        Act of 2002, that: (1) the Company's Annual Report on Form 10-KSB for the year
        ended December 31, 2002, as filed with the Securities and Exchange Commission
        on the date hereof (the "Report") fully complies with the requirements
        of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents,
        in all material respects, the financial condition and results of operations
        of the Company.  Date: April 15, 2003 /s/
        Thomas F. Krucker
        Chief Financial Officer      52  CERTIFICATE PURSUANT TO
        PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934,
        RULES 13a-14 AND 15d-14
        AS ADOPTED PURSUANT TO
        SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Roger Mohlman, Chief Executive Officer of American Water Star, Inc.,
        certify that: (1) I have reviewed this Annual Report on Form 10-KSB of
        American Water Star, Inc.; (2) Based on my knowledge, this Annual Report does not contain
        any untrue statement of a material fact or omit to state a material fact
        necessary to make the statements made, in light of the circumstances under
        which such statements were made, not misleading with respect to the period
        covered by this Annual Report; and (3) Based on my knowledge, the financial statements, and
        other financial information included in this Annual Report, fairly present
        in all material respects the financial condition, results of operations
        and cash flows of the registrant as of, and for, the periods presented
        in this Annual Report. Date: April 15, 2003 /s/
        Roger Mohlman
        Chief Executive Officer     53  CERTIFICATE PURSUANT TO
        PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934,
        RULES 13a-14 AND 15d-14
        AS ADOPTED PURSUANT TO
        SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Thomas F. Krucker, Chief Financial Officer of American Water Star,
        Inc., certify that: (1) I have reviewed this Annual Report on Form 10-KSB of
        American Water Star, Inc.; (2) Based on my knowledge, this Annual Report does not contain
        any untrue statement of a material fact or omit to state a material fact
        necessary to make the statements made, in light of the circumstances under
        which such statements were made, not misleading with respect to the period
        covered by this Annual Report; and (3) Based on my knowledge, the financial statements, and
        other financial information included in this Annual Report, fairly present
        in all material respects the financial condition, results of operations
        and cash flows of the registrant as of, and for, the periods presented
        in this Annual Report. Date: April 15, 2003  /s/
        Thomas F. Krucker
        Chief Financial Officer      54