UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549
                                  FORM 10-Q SB

(MARK ONE)

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

    FOR THE QUARTERLY PERIOD ENDED June 30, 2001

                                       OR

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

    FOR THE TRANSITION PERIOD FROM     TO

    COMMISSION FILE NO. 0-29280

                      HAWAIIAN NATURAL WATER COMPANY, INC.
        (Exact name of small business issuer as specified in its charter)

               HAWAII                                         99-0314848
(State or jurisdiction of incorporation                   (I.R.S. Employer
            or organization)                           Identification Number)

                               98-746 Kuahao Place
                             Pearl City, Hawaii 96782
                    (Address of principal executive offices)

                                 (808) 483-0520
                           (Issuer's telephone number)

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

                                YES   X    NO
                                     ---        ---

     The issuer had issued and outstanding 7,935,982 shares of Common Stock
on
August 14, 2001.

           Transitional Small Business Disclosure Format (check one):

                                YES        NO    X
                                     ---        ---



                         Table of Contents





                             10QSB




Part I....................................................
Item I....................................................
Balance Sheet.............................................
Statements of Operations..................................
Statements of Stockholders' Equity........................
Statements of Cash Flow...................................
Item 2....................................................
Part II...................................................
Item 3....................................................
Item 4....................................................
Item 6....................................................
Exhibit Index.............................................







                       Hawaiian Natural Water Company, Inc.
                                 Balance Sheet
                                 June 30, 2001
                                  (Unaudited)

                                     ASSETS
<Table>
<Caption>

CURRENT ASSETS:
<S>                                                                         <C>
     Cash and cash equivalents                                         $     5,650
     Inventories                                                           524,082
     Trade accounts receivable, net of allowance for doubtful
          accounts of $68,056                                              303,777
     Other current assets                                                  130,763
                                                                       -----------
          Total Current Assets                                             964,272

PROPERTY AND EQUIPMENT, net of accumulated depreciation
     and amortization of $1,159,881                                      2,093,462

CO-PACKING AGREEMENT, net of accumulated amortization
     of $52,500                                                             97,500

INTANGIBLE ASSET, net of accumulated amortization of $54,061               105,088
                                                                       -----------
               Total Assets                                            $ 3,260,322
                                                                       ===========

                  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
     Trade accounts payable                                            $   969,751
     Operating account overdraft                                            36,204
     Accrued professional fees                                              29,928
     Insurance installment contracts payable                                59,784
     Accrued vacation, payroll and related taxes                            81,126
     Accrued commissions and billbacks                                     194,455
     Accrued other                                                         166,903
     Due to Amcon Distributing Company                                      73,707
     Notes payable - Current portion                                     1,410,720
     Capital lease obligation - Current portion                             18,031
                                                                       -----------
          Total Current Liabilities                                      3,040,609
                                                                       -----------
NON-CURRENT LIABILITIES:
     Capital lease obligation - net of current portion                       9,063
     Notes payable - net of current portion                                176,637
     Other                                                                  41,380
                                                                       -----------
          Total Non-Current Liabilities                                    227,080
                                                                       -----------
               Total Liabilities                                         3,267,689
                                                                       -----------
STOCKHOLDERS' EQUITY (DEFICIT):
     Preferred Stock, $1 par value; 5,000,000 shares authorized;
          no shares issued or outstanding                                        -
     Common stock, no par value; 20,000,000 shares authorized;
          7,935,982 shares issued and outstanding                        9,912,446
     Common stock warrants and options; 5,624,358 issued
          and outstanding                                                3,680,765
     Accumulated Deficit                                               (13,600,578)
                                                                       -----------
          Total Stockholders' Equity (Deficit)                              (7,367)
                                                                       -----------
               Total Liabilities and Stockholders' Equity (Deficit)    $ 3,260,322
                                                                       ===========

    The accompanying notes are an integral part of these financial statements
</Table>




                        Hawaiian Natural Water Company, Inc.
                             Statements of Operations
               For the Three and Six Months Ended June 30, 2000 and 2001
                                   (Unaudited)



<Table>
<Caption>
                                                 Three Months             Six Months
                                                Ended June 30,           Ended June 30,
                                          -------------------------   -------------------------
                                              2000         2001          2000          2001
                                          -----------   -----------   -----------   -----------
<S>                                          <C>           <C>            <C>          <C>

NET SALES                                 $ 1,173,421   $   778,681   $ 2,198,113   $ 1,599,400
COST OF SALES                                 955,964       632,322     1,755,946     1,365,910
                                          -----------   -----------   -----------   -----------
     Gross Margin                             217,457       146,359       442,167       233,490

EXPENSES:
     Selling and Marketing                    296,452       113,939       522,199       233,294
     General and Administrative               428,657       284,775       922,155       566,639
                                          -----------   -----------   -----------   -----------
                                              725,109       398,714     1,444,354       799,933
OTHER INCOME (EXPENSE)
     Interest expense                         (56,667)      (32,205)      (77,677)      (65,720)
     Impairment charge                       (903,094)            -      (903,094)            -
                                          -----------   -----------   -----------   -----------
                                             (959,761)      (32,205)     (980,771)      (65,720)

Net Loss                                  $(1,467,413)  $  (284,560)  $(1,982,958)  $  (632,163)
                                          ===========   ===========   ===========   ===========

Basic and Diluted
Net Loss Per Share:                       $     (0.22)  $     (0.04)  $     (0.31)  $     (0.08)
                                          ===========   ===========   ===========   ===========

Weighted Average Common
 Shares Outstanding                         6,800,471     7,935,982     6,339,583     7,807,526
                                          ===========   ===========   ===========   ===========




  The accompanying notes are an integral part of these financial statements

</Table>







                        Hawaiian Natural Water Company, Inc.

                  Statement of Stockholders' Equity(Deficit) For the
                          Six Months Ended June 30, 2001
                                   (Unaudited)

<Table>
<Caption>

                                                  Common Stock Warrants

                                                           and

                             Common Stock               Options
                        ----------------------   ----------------------

                                                                                              Total
                        Number of                Number of                  Accumulated    Stockholders'
                          Shares      Amount      Shares       Amount         Deficit     Equity (Deficit)
                        ---------  -----------   ---------  -----------    ------------   ----------------
<S>                       <C>         <C>           <C>        <C>              <C>            <C>
BALANCE AT
 DECEMBER 31, 2000      7,185,966  $ 9,612,446   5,595,558  $ 3,669,035    $(12,968,415)    $ 313,066

Sale of common stock
 to AMCON Distributing
 Company
   February 1, 2001       750,000      300,000                      --              --       300,000

Issuance of common
 stock options to
 non-employee
 directors
   January 1, 2001             --           --         900           --              --             -
   April 2, 2001               --           --         900           --              --

Issuance of common
 stock options to
 marketing consultants         --           --      27,000       11,730                       11,730

Issuance of common
 stock pursuant to
 Co-Packing Agreement          16           --                                     --            --

Net Loss                       --           --                               (632,163)     (632,163)
                        ---------  -----------   ---------  -----------   -------------   -----------

BALANCE AT
 JUNE 30, 2001          7,935,982  $ 9,912,446   5,624,358  $ 3,680,765   $ (13,600,578)  $   (7,367)
                        ========   ===========   =========  ===========   =============   ==========


   The accompanying notes are an integral part of these financial Statements

</Table>







                             Hawaiian Natural Water Company, Inc.
                                 Statements of Cash Flows
                       For the Six Months Ended June 30, 2000 and 2001
                                        (Unaudited)

<Table>
<Caption>

                                                                      Six Months Ended
                                                                          June 30,
                                                                    2000             2001
                                                               ------------     ------------
<S>                                                                <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                  $ (1,982,958)      $ (632,163)

     Adjustments to reconcile net loss to net cash used
        in operating activities:
             Depreciation and amortization                          209,556          200,054
             Impairment charge                                      903,094             -
             Issuance of stock and options to consultants
              and distributors                                       26,222           11,730

             Amortization of debt discount                           51,183           11,544
             Net decrease (increase) in current assets              225,281          (34,258)
             Net increase (decrease) in current liabilities         363,210          463,349
             Net increase in other liabilities                       10,505             -
                                                               ------------     ------------
                       Net cash (used in)provided by
                        operating activities                       (193,907)          20,256

CASH FLOWS FROM INVESTING ACTIVITIES:
             Purchase of property and equipment                     (43,506)          (7,737)
             Cash acquired in merger with Aloha                     183,111             -
                                                               ------------     ------------
                       Net cash (used in) provided by
                        investing activities                        139,605           (7,737)

CASH FLOWS FROM FINANCING ACTIVITIES:
             Net proceeds from sale of preferred stock and
               common stock warrants                                100,000             -
             Net proceeds from private placement of common stock
               and common stock warrants                            200,000          300,000
             Exercise of common stock options and warrants          165,600             -
             Redemption of preferred stock                         (179,000)        (150,000)
             Repayments of notes payable                             (6,454)        (151,797)
             Repayment of principal on capital leases               (24,194)         (19,702)
                                                               ------------     ------------
                       Net cash provided by (used by)
                        financing activities                        255,952          (21,499)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS           $    201,650           (8,980)

CASH AND CASH EQUIVALENTS, beginning of period                        8,988           14,630
                                                               ------------     ------------
CASH AND CASH EQUIVALENTS, end of period                       $    210,638     $      5,650
                                                               ============     ============

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
 FINANCING ACTIVITIES:

   Merger with Aloha Water Company, Inc., in exchange
     for common stock and promissory note                      $  1,334,769             -
                                                               ============     ============

   Preferred shareholder dividends                             $     41,351             -
                                                               ============     ============

    The accompanying notes are an integral part of these financial statements
</Table>


                      HAWAIIAN NATURAL WATER COMPANY, INC.
                         NOTES TO FINANCIAL STATEMENTS
                                  June 30, 2001
                                   (UNAUDITED)

1.  GENERAL

    The accompanying unaudited financial statements of Hawaiian Natural Water
Company, Inc.,(the "Company") should be read in conjunction with the audited
financial statements for the year ended December 31, 2000 of Hawaiian Natural
Water Co., Inc. and notes thereto as filed with the Securities and Exchange
Commission in the Company's Annual Report on Form 10-KSB. The auditor's report
on those financial statements included an explanatory fourth paragraph
indicating that there is substantial doubt about the Company's ability to
continue as a going concern.

    In the opinion of management, the accompanying financial statements
reflect all adjustments(which consist primarily of normal recurring
adjustments) considered necessary to fairly present the financial position of
the Company at June 30, 2001, the results of its operations for the three
month and six month periods ended June 30, 2001 and 2000, and the cash flows
for the six month periods ended June 30, 2001 and 2000, in accordance with
accounting principles generally accepted in the United States and the rules
and regulations of the Securities and Exchange Commission. The results of
operations for interim periods are not necessarily indicative of results to be
achieved for full fiscal years. Certain amounts from prior periods have been
reclassified to conform to their current period presentation.

Organization and Going Concern

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

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

    In January 2000, the Company introduced a line of herbal beverages under
the East Meets West XEN-TM-("XEN") name. The beverages are manufactured for
the Company pursuant to a co-packing agreement with a Los Angeles area bottler
(see Note 6). Sales efforts to date have concentrated in Southern California,
Hawaii and the Vancouver, Canada area.

    In March 2000, the Company acquired Aloha Water Company Co. Inc., a
distributor of purified water in the home and office market in the Honolulu
area. This acquisition was subsequently rescinded in December, 2000 (see
Note 7).

    In November 2000, the Company agreed to be acquired by Amcon Distributing
Company, an Omaha, Nebraska based distributor, by means of a merger of the
Company into a wholly owned subsidiary of Amcon (see Note 8).

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

    As shown in the accompanying financial statements, the Company has
incurred significant losses and negative cash flows from operations since
inception. Management expects that the Company will continue to incur
additional losses and negative cash flows until the Company achieves
significant levels of sales. To date, the Company has been unable to generate
cash flow sufficient to support its operations. Additionally, the Company has
past due accounts payable of approximately $851,000 and notes payable amounts
due in near term of approximately $1,400,000. The accompanying financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern.

Estimates

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

Revenue Recognition

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

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

Gross Margin

    The Company's plant currently has a normal production capacity of
approximately 200,000 cases per calendar quarter. The Company is currently
operating its plant at approximately 58 percent of this capacity. Since a
significant portion of the Company's cost of sales includes fixed production
costs, the Company anticipates higher gross margins as production and sales
increase.

Recent Accounting Pronouncements

     The Company adopted Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133")
effective January 1, 2001.  Under the provisions of SFAS 133, the Company is
required to recognize all derivatives as either assets or liabilities in the
balance sheet and measure these instruments at fair value.  The adoption of
SFAS 133 did not have a material effect on the Company's financial statements.

     In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS 141").  This Statement addresses financial accounting and reporting for
business combinations and supersedes APB Opinion No. 16, "Business
Combinations," and FASB Statement No. 38, "Accounting for Preacquisition
Contingencies of Purchased Enterprises."  All business combinations in the
scope of this Statement are to be accounted for using one method, the purchase
method.  The Company will adopt SFAS 141 for all business combinations
initiated after June 30, 2001.

       Also in June 2001, the FASB issued Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142").  SFAS
142 addresses financial accounting and reporting for acquired goodwill and
other intangible assets and supersedes APB Opinion No. 17, "Intangible
Assets." This pronouncement addresses, among other things, how goodwill and
other intangible assets should be accounted for after they have been initially
recognized in the financial statements.  Goodwill would no longer be amortized
but would be assessed at least annually for impairment using a fair value
methodology.  The Company will adopt this statement for all goodwill and other
intangible assets acquired after June 30, 2001 and for all existing goodwill
and other intangible assets beginning January 1, 2002.  The Company does not
anticipate that the adoption of SFAS 142 will have a significant effect on the
Company's financial position or the results of  operations.

2.  LOSS PER SHARE

    Basic and Diluted Loss Per Share is computed by dividing the Net Loss
(adjusted for preferred dividends) by the Weighted Average Common Shares
Outstanding during the period.

    The Company's Basic and Diluted Loss Per Share is the same for the first
and second quarters of both 2000 and 2001 in that any exercise of stock
options or warrants would have been anti-dilutive.

3.  CASH AND CASH EQUIVALENTS

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

4.  INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out method) or
market. As of June 30, 2001, inventories were comprised of the following:

            Raw materials                                  $383,242
            Finished goods                                  140,840
                                                           --------
                                                           $524,082
                                                           ========

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

5.  ACQUISITION OF INTANGIBLE ASSET

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

6.  CO-PACKING AGREEMENT

    In June 1999, the Company entered into a five-year agreement with an
independent bottler in Los Angeles, California (the "Bottler") for the
production, warehousing, and shipment of herbal beverages. On September 13,
1999, the Company has issued an aggregate of 850,000 shares of common stock to
the principals of the Bottler in partial consideration for these services
which were recorded as an asset on the Company's accounting records in the
amount of $150,000, based on the fair value of the securities issued, which is
being amortized over a five year period.

7.  ACQUISITION OF ALOHA WATER COMPANY, INC. AND IMPAIRMENT CHARGE

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

    In August, 2000 the holders of the Aloha note declared a default for
failure to make certain interest payments, and foreclosed on their collateral,
which was all of the stock of Aloha. As a result, the Company wrote off its
investment in Aloha, the related goodwill and the Aloha note.

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

8.  AMCON MERGER

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

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

    The Company does not currently anticipate completion of the Merger before
December 31, 2001.  However, the Merger Agreement is terminable under certain
circumstances, and there can be no assurance that the Merger will be
completed. Pending completion of the Merger, Amcon has made certain interim
financing available to the Company. If the Merger Agreement is terminated for
any reason, it is likely that the Company will not be able to continue as a
going concern.

9.  NOTES PAYABLE

    In anticipation of acquiring the Company, Amcon has provided certain debt
financing to the Company for working capital and other general corporate
purposes. Amcon advanced $350,000 in September 2000, $400,000 in October 2000,
and an additional $500,000 in June 2001. These loans are evidenced by secured
promissory notes (the "Amcon notes") bearing interest at a rate of 10% per
annum, payable quarterly. The Amcon notes are convertible at the election of
Amcon, under certain circumstances, into Series C convertible preferred stock
bearing dividends, payable quarterly, of 10% per annum and giving effective
control of the Board of Directors to Amcon. The Amcon notes are also
convertible into common stock of the Company at Amcon's election at a
conversion price of $.40 per share.  The Amcon notes are secured by a lien on
all of the Company's assets. The due date of the Amcon notes, originally
February 28, 2001, has been extended to September 30, 2001.  The Company
anticipates a further extension of the due date of the Amcon notes to the
expected completion date of the Merger.

    In September 1997, the Company acquired certain bottle making equipment
used in its bottling operations. The consideration for the equipment was an
aggregate of $1.2 million, a portion of which was paid through the issuance of
a promissory note in the original principal amount of $825,000, payable in
installments, as defined. The Company discounted this equipment note payable
using an estimated weighted average cost of capital of 12%, and amortized the
resulting discount to interest expense using the effective interest method
over the term of the loan. In
October 2000, the Company negotiated a restructuring of the $189,000
installment due on September 30, 2000, so as to extend the payment over six
months. This installment was paid in full as of May 11, 2001. There are
currently two equal installments of $165,000 (plus interest)due on this
promissory note on September 30, 2001 and 2002.

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

    The following summarizes the Company's notes payable as of June 30, 2001:

                       First Amcon note                    $  350,000
                       Second Amcon note                      400,000
                       Third Amcon note                       500,000
                       Equipment note payable                 330,000
                       Less: Unamortized discount              (7,564)
                                                            ---------
                       Net notes payable                    1,572,436
                       Vehicle installment note payable           517
                       Warehouse note payable                  14,404
                                                            ---------
                       Subtotal--notes payable              1,587,357
                       Less: Current portion               (1,410,720)
                                                            ---------
                       Non-current portion                 $  176,637
                                                            =========

10. STOCK OPTIONS

    The total number of Common Stock warrants and options shown at June 30,
2001 excludes an aggregate of 438,367 options outstanding at such date held by
officers and employees of the Company. Stock options granted to employees are
accounted for under APB Opinion No. 25, under which compensation expense is
recognized only if the exercise price is less than the market price at the
date of grant. All employee stock options outstanding at June 30, 2001 had an
original exercise price of $4.00 per share. In February 2000, the Company
reduced the exercise price of the options held by all active employees to
$2.00 per share, which has not resulted in any further compensation charges to
income through June 30, 2001.

    Stock options granted to non-employees are accounted for in accordance
with Statement of Financial Accounting Standards No. 123 (SFAS 123)
"Accounting for Stock-Based Compensation," which requires that these
transactions be accounted for based upon the fair value of consideration
received or the fair value of the equity instruments issued, whichever is more
reliably determinable.

11. PRODUCT LINE SALES INFORMATION

     For the three-month periods ended June 30, 2000 and 2001, the Company had
the following sales by product line:

<Table>
<Caption>

                                                   2000     %        2001     %
                                               ----------- ---    ---------- ---
                   <S>                             <C>     <C>        <C>    <C>
                PET products                   $   733,757  63    $  673,651  87
                Home & office delivery             361,063  30        71,722   9
                XEN herbal beverage products        78,601   7        33,308   4
                                               ----------- ---    ----------
                                               $ 1,173,421 100    $  778,681 100
                                               =========== ===    ========== ===

</Table>

    For the six-month periods ended June 30, 2000 and 2001, the Company had
the following sales by product line:

<Table>
<Caption>
                                                   2000     %         2001     %
                                               ----------- ---    -----------
                   <S>                             <C>     <C>        <C>     <C>
                PET products                   $ 1,526,531  69    $ 1,383,794  87
                Home & office delivery             444,033  20        150,543   9
                XEN herbal beverage products       227,549  11         65,063   4
                                               ----------- ---    -----------
                                               $ 2,198,113 100    $ 1,599,400 100
                                               =========== ===    =========== ===

</Table>

      In the six-month period ended June 30, 2001, 97% of Pet products sales
were made in Hawaii, and 99% of XEN sales were made in the U.S. Mainland.  In
the three-month period ended June 30, 2000, 99% of Pet product sales were made
in Hawaii, and 69% of XEN sales were made in Mainland, 19% were made in
Hawaii, and 2% were made in Guam.  All home and office delivery sales are made
in Hawaii.


12. EQUITY TRANSACTIONS

    a.  Series A Convertible Preferred Stock

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

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

    In August 1999, the investor converted six shares of Series A preferred
into an aggregate of 11,429 shares of common stock. In September 1999, the
Company entered into a standstill agreement with the investor, pursuant to
which the investor agreed not to convert any additional shares of Series A
preferred and granted the Company an option to redeem the outstanding shares.
This standstill agreement was extended continuously until November 2, 2000.
Pursuant to this standstill arrangement, the Company redeemed an aggregate of
(i) 925 shares of Series A preferred stock for an aggregate of $808,750 in
1999, (ii) 100 shares for an aggregate of $100,000 during the first quarter of
2000, (iii) 79 shares for an aggregate of $79,000 during
the second quarter of 2000, and (iv) the remaining 140 shares for an aggregate
of $140,000 in October 2000. There are currently no Series A preferred shares
outstanding.

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

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

    b.  Series B Convertible Mandatorily Redeemable Preferred Stock

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

    The market price of the common stock was less than $1.50 on the first
anniversary date, and the investor delivered to the Company a notice of
redemption with respect to all of the outstanding Series B preferred stock.
The Company recorded the $50,000 redemption premium as a preferred stock
dividend. The stock was redeemed in full during the quarter ended June 30,
2001.

    c.  Issuance of Stock to Amcon

    In February 2001, the Company issued 750,000 shares of common stock to
Amcon at a purchase price of $.40 per share for an aggregate purchase price of
$300,000. These shares will participate in the Merger consideration (see
Note 8).  In June 2001, the Company issued to Amcon a $500,000 convertible
promissory note, convertible at any time at Amcon's election, into an
aggregate of 1,250,000 shares of common stock at a conversion price of $.40
per share.  If this note is converted prior to the Merger, the shares issued
upon conversion will participate in the Merger consideration.

13. SUBSEQUENT EVENTS

    In July and August 2001, the Company took delivery of a new blow molding
machine and certain related equipment for installation at the Company's
bottling facility. The total value of this new equipment is estimated at
$2,000,000. The Company expects this new equipment to significantly enhance
the efficiency of its bottling operations. The equipment was acquired by Amcon
in its own name. Upon installation, the Company expects to lease this
equipment from Amcon, on terms to be agreed upon.  This lease is expected to
be accounted for as an operating lease.

    In August 2001, the Company commenced construction of an addition to its
existing bottling facility to house this new equipment. The Company
anticipates this addition to be completed in October 2001, at an estimated
cost of $150,000,and the equipment to be fully operational by November 2001.
The Company anticipates Amcon will lend the Company the funds needed for the
facility addition, as well as certain additional working capital, in an amount
yet to be agreed upon.




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

GENERAL

     THE FOLLOWING DISCUSSION MAY BE DEEMED TO CONTAIN CERTAIN
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995, AS INDICATED BY THE USE OF TERMS SUCH AS
"MAY," "WILL," "EXPECT," "BELIEVE," "ESTIMATE," "ANTICIPATE," "INTEND" OR
OTHER SIMILAR TERMS OR THE NEGATIVE OF SUCH TERMS. FORWARD-LOOKING STATEMENTS
CONTAINED HEREIN MAY INCLUDE, WITHOUT LIMITATION, STATEMENTS CONCERNING:
ANTICIPATED CHANGES IN REVENUE, COST OF MATERIALS, EXPENSE ITEMS, INCOME OR
LOSS, EARNINGS OR LOSS PER SHARE, CAPITAL EXPENDITURES, CAPITAL STRUCTURE AND
OTHER FINANCIAL ITEMS; PLANS OR OBJECTIVES OF THE COMPANY WITH RESPECT TO THE
COMPANY'S GROWTH STRATEGY, INTRODUCTION OF NEW PRODUCTS, AND PROPOSED
ACQUISITIONS OF ASSETS OR BUSINESSES; POSSIBLE ACTIONS BY CUSTOMERS,
SUPPLIERS, COMPETITORS OR REGULATORY AUTHORITIES; AND ASSUMPTIONS UNDERLYING
THE FOREGOING. THESE FORWARD-LOOKING STATEMENTS ARE BASED UPON THE COMPANY'S
CURRENT EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES,
INCLUDING WITHOUT LIMITATION: THE PROSPECT FOR CONTINUING LOSSES AND THE
COMPANY'S POSSIBLE INABILITY TO CONTINUE AS A GOING CONCERN BASED UPON ITS
EXISTING CAPITAL RESOURCES; THE COMPANY'S NEED FOR ADDITIONAL CAPITAL AND THE
POSSIBLE UNAVAILABILITY OF SUCH CAPITAL ON ACCEPTABLE TERMS AND CONDITIONS;
POSSIBLE ADVERSE CONDITIONS, INCLUDING VOLATILITY, IN THE MARKET FOR THE
COMPANY'S SECURITIES AND THE POSSIBLE ADVERSE IMPACT OF SUCH CONDITIONS ON
THE COMPANY'S ABILITY TO RAISE ADDITIONAL CAPITAL AS NEEDED; POSSIBLE ADVERSE
CHANGES IN THE MARKET FOR THE COMPANY'S PRODUCTS, INCLUDING AS A RESULT OF
ADVERSE ECONOMIC CONDITIONS, SUCH AS THOSE CURRENTLY AFFECTING CERTAIN
FOREIGN TARGET MARKETS; POSSIBLE ADVERSE EFFECTS OF CHANGES IN CURRENCY
EXCHANGE RATES; POSSIBLE ADVERSE CHANGES IN THE COMPANY'S DISTRIBUTOR
NETWORK; POSSIBLE ADVERSE DEVELOPMENTS IN THE EXECUTION OF THE COMPANY'S
EXISTING BUSINESS STRATEGY OR IN THE IMPLEMENTATION OF CHANGES THERETO;
POSSIBLE ADVERSE CHANGES IN THE COMPANY'S COST OF MATERIALS OR SOURCES OF
SUPPLY; POSSIBLE ADVERSE DEVELOPMENTS IN THE COMPANY'S ABILITY TO ATTRACT AND
RETAIN KEY PERSONNEL; POSSIBLE ADVERSE DEVELOPMENTS IN GOVERNMENTAL
REGULATION IN THE U.S. OR ABROAD; AND POSSIBLE ADVERSE DEVELOPMENTS IN THE
COMPETITIVE ENVIRONMENT FOR THE COMPANY'S PRODUCT. MANY OF THESE RISKS AND
UNCERTAINTIES ARE BEYOND THE ABILITY OF THE COMPANY TO PREDICT OR CONTROL.
SHOULD ANY UNANTICIPATED CHANGES OCCUR IN THE COMPANY'S BUSINESS, OR SHOULD
MANAGEMENT'S OPERATING ASSUMPTIONS PROVE INCORRECT, THE COMPANY'S ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY THESE
FORWARD-LOOKING STATEMENTS.

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
FINANCIAL STATEMENTS INCLUDED HEREWITH AND THE NOTES THERETO.

RESULTS OF OPERATIONS


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

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

    The completion of the Merger has been delayed on several occasions at the
request of Amcon.  The Company currently anticipates completion of the Merger
by December 31, 2001.  The Merger Agreement is terminable under certain
circumstances, and there can be no assurance that the Merger will be
completed. Pending completion of the Merger, Amcon has made certain interim
financing available to the Company, including an aggregate of $1,250,000 in
convertible loans secured by a lien on substantially all of the assets of the
Company.  The Company does not currently have any source of funds to repay
these loans prior to completion of the Merger.  If the Merger Agreement is
terminated for any reason, it is likely that the Company will not be able to
continue as a going concern.


     THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED
JUNE 30, 2000

     Net Sales. Net Sales decreased 34% to approximately $779,000 for the
three months ended June 30, 2001 (the "2001 Quarter") from approximately
$1,173,000 for the three months ended June 30, 2000 (the "2000 Quarter").
$674,000 (87%)of net sales for the 2001 Quarter were derived from sales of
PET products. The remaining $105,000 in net sales were comprised of $72,000
(9%) in home and office delivery sales and $33,000 (4%) in East Meets West
XEN-TM- ("XEN") herbal beverage sales. Sales in the 2000 Quarter included an
aggregate of $280,000 in home and office delivery sales by Aloha Water
Company, Inc. ("Aloha"), a home and office delivery business acquired in March
2000. This acquisition was subsequently rescinded in December 2000 (see Note 7
to Financial Statements). The absence of Aloha sales in 2001 accounted for
approximately 71% of the decrease in total Company sales for the 2001 Quarter
compared to the 2000 Quarter. The balance of the decrease in total sales is
primarily attributable to a $50,000 decrease XEN sales and a $60,000 decrease
in PET sales. Case sales of PET products in the 2001 Quarter were
approximately 116,000 compared to approximately 131,000 in the 2000 Quarter,
and XEN case sales were approximately 1,900 in the 2001 Quarter compared to
4,400 in the 2000 Quarter.  The decrease in PET case sales is attributable to
periodic production equipment breakdowns during the 2001 Quarter, and its
ongoing working capital constraints on raw materials, which have resulted in a
backlog of unfilled sales orders, and in certain instances, lost sales. Due to
the Company's limited working capital resources, marketing and promotion of
XEN products was significantly curtailed in the 2001 Quarter.  In July 2001,
the Company terminated its XEN sales representative.  Geographic sales of PET
products remained constant in both the 2001 Quarter and the 2000 Quarter, with
Hawaii sales and International sales accounting for 99% and 1% of PET sales,
respectively, in both quarters.  99% of XEN sales were made in the U.S.
Mainland and 1% were made in Hawaii in the 2001 Quarter, compared to 69% in
the U.S. Mainland, 19% in Hawaii, and 2% in Guam in the 2000 Quarter.

     Cost of Sales. The Company's aggregate cost of sales decreased 34% to
approximately $632,000 in the 2001 Quarter from approximately $956,000 in the
2000 Quarter.  Cost of sales in the 2000 Quarter included $83,000 in cost of
sales of Aloha. Due to the rescission of the Aloha acquisition in December
2000, there were no Aloha cost of sales in the 2001 Quarter.  The absence of
Aloha cost of sales in 2001 represented 26% of the decrease in total cost of
sales during the 2001 Quarter. Cost of sales also decreased in the 2001
Quarter for PET, XEN and home and office delivery product sales as a result of
a reduction in case sales in each of these product lines during the 2001
Quarter.  Also contributing to the decreased PET cost of sales in the 2001
Quarter was an approximately 15% decrease in PET per case costs in the 2001
Quarter compared to the 2000 Quarter, primarily attributable to reduced
packaging costs as a result of a switch to a lower cost carton and reduced
inventory variances.

     Selling and Marketing. Selling and marketing expenses decreased 62% to
$114,000 in the 2001 Quarter from approximately $296,000 in the 2000 Quarter.
The majority of this decrease is attributable to $57,000 of expenses
associated with the 2000 launch of the XEN product line, and $84,000 of Aloha
expenses, which did not recur in the 2001 Quarter. In addition, there was an
approximately $41,000 reduction in PET expenses (primarily in package
development and licensing fees and royalties, resulting from reduced case
sales in the 2001 Quarter compared to the 2000 Quarter), and a $15,000
reduction in corporate salaries, partially offset by a $15,000 increase in
expenses related to home and office delivery sales.

     General and Administrative. General and administrative expenses decreased
34% to approximately $285,000 in the 2001 Quarter from approximately $429,000
in the 2000 Quarter. This decrease resulted from $94,000 of expenses related
to Aloha in the 2000 Quarter, which did not recur in the 2001 Quarter, and a
reduction in corporate overhead expenses of approximately $52,000 (primarily
due to an approximate $93,000 reduction in salaries, office rents, outside
services, and professional fees, partially offset by $24,000 of customs duties
incurred upon receipt of the new production equipment (see Note 13 to
Financial Statements), and an approximately $15,000 increase in travel
expenses primarily related to the Company's relocation of its accounting and
administrative office from Pearl City (Oahu) to Keaau (Big Island) in January
2001.

     Other (Expense). Net Other (Expense) was approximately $(32,000) in the
2001 Quarter compared to approximately $(960,000) in the 2000 Quarter. Other
(Expense) in the 2000 Quarter included a $(903,094) provision for impairment
of purchase price in excess of book value due to the foreclosure on the Aloha
note (see Note 7 to the Financial Statements), which did not recur in the 2001
Quarter, and decreased interest expense in the 2001 Quarter. Coupon interest
expenses on the outstanding notes during the 2001 Quarter and the 2000 Quarter
were relatively the same, however the Company incurred approximately $23,000
of imputed interest expense (based upon the average cost of capital in
comparison to the coupon interest rate of the note)in the 2000 Quarter related
to the Aloha note (see Note 7 to the Financial Statements).

     Net Loss and Net Loss Per Share. Due to the foregoing, the Company
incurred a net loss of $(284,560), or $(0.04) per share, in the 2001 Quarter
compared to a net loss of $(1,467,413), or $(0.22) per share, in the 2000
Quarter. Weighted Average Shares Outstanding were 7,935,982 in the 2001
Quarter compared to 6,800,471 in the 2000 Quarter.

      SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30,
2000

      Net Sales. Net sales decreased 27% to approximately $1,599,000 for the
six months ended June 30, 2001 (the "2001 First Half") from approximately
$2,198,000 for the six months ended June 30, 2000 (the "2000 First Half").
$1,384,000 (87%) of net sales for the 2001 First Half were derived from sales
of PET products compared to $1,526,000 (69%) of net sales for the 2000 First
Half. The remaining $215,000 in net sales in the 2001 First Half were
comprised of $150,000 (9%) in home and office delivery sales and 65,000 (4%)
in XEN sales compared to $446,000 (20%) in home and office delivery sales (of
which Aloha accounted for $280,000 (47%) of the decrease in total sales) and
$226,000 (10%) in XEN sales in the 2000 First Half. Sales in Hawaii accounted
for 97% of PET sales in the 2001 First Half compared to 99% of PET sales in
the 2000 First Half. International sales in the 2001 First Half were 2% of PET
sales in the 2001 First Half compared to 1% in the 2000 First Half; and
Mainland sales were 1% of PET sales in the 2001 First Half, compared to no
Mainland PET sales in the 2000 First Half.  XEN sales decreased $162,000 (71%)
during the 2001 First Half compared to the 2000 First Half, while XEN case
sales decreased 62%, from 14,000 in the 2000 First Half to 5,000 in the 2001
First Half. PET case sales in the 2001 First Half sales decreased
approximately 23,000 (9%) in the 2001 First Half to 234,000 from 257,000 in
the 2000 First Half.  Substantially all of the XEN sales in the 2001 First
Half were made in California and Vancouver, B.C.; in the 2000 First Half 50%
of XEN sales were made in Hawaii and 50% were made in California. Due to
capital constraints, the Company allocated limited resources to the marketing
and promotion of XEN products in the 2001 First Half. As a result, sales in
the 2001 First Half were substantially less than in the 2000 First Half.

     Cost of Sales. The Company's aggregate cost of sales decreased 22% to
approximately $1,366,000 in the 2001 First Half from approximately $1,756,000
in the 2000 First Half. Cost of sales in the 2000 Quarter included $83,000 in
costs of sales by Aloha. Due to the rescission of the Aloha acquisition in
December 2000, there were no Aloha cost of sales incurred in the 2001 First
Half.  Home and office cost of sales in the 2001 First Half decreased an
aggregate of $89,000 compared to the 2000 First Half.  XEN cost of sales
decreased $112,000 in the 2001 First Half compared to the 2000 First Half,
primarily due to a 9,000 case reduction in sales in the 2001 First Half
compared to the 2000 First Half.  PET product cost of sales decreased $189,000
in the 2001 First Half compared to the 2000 First Half, primarily due to (i) a
23,000 reduction in case sales in the 2001 First Half compared to the 2000
First Half, and (ii) an overall reduction in per case costs primarily
attributable to reduced packaging costs as a result of a switch to a lower
cost carton, and reduced inventory variances.

      Selling and Marketing. Selling and marketing expenses decreased 51% to
approximately $233,000 in the 2001 First Half from approximately $522,000 in
the 2000 First Half. This decrease occurred in all business segments in the
2001 First Half as compared with the 2000 First Half, with PET related
expenses decreasing 43%, XEN related expenses decreasing 67%, home and office
related expenses decreasing 64% (36% of this decrease is related to Aloha
expenses in the 2000 First Half), and corporate expenses decreasing 36%.
Significant decreases occurred in salaries, and consulting and travel related
expenses.

     General and Administrative. General and administrative expenses decreased
41% to approximately $567,000 in the 2001 First Half from approximately
$922,000 in the 2000 First Half. This decrease occurred predominantly in
corporate related expenses (a $118,000 decrease), in PET related expenses (a
$27,000 decrease) and in XEN related expenses (a $29,000 decrease). In the
2000 First Half a $100,000 bonus was paid to the Company's Chief Executive
Officer, which was subsequently rescinded in December, 2000.  There was no
bonus paid in the 2001 First Half.  Further expense reductions in the 2001
First Half included salaries ($43,000), professional fees ($53,000), and
office rent ($35,000), partially offset by an increase in travel expenses
associated with moving the accounting and administrative office from Pearl
City (on the island of Oahu) to the plant location in Keaau (on the island of
Hawaii), and one time expenses incurred in the 2001 First Half for brokers
fees associated with sub-letting a portion of the Pearl City office, and
customs duties on the new production equipment (see Note 13 to Financial
Statements).  The decrease in professional fees in the 2001 First Half
resulted from a decrease in financing and acquisition transactions during the
2001 First Half.

     Other (Expenses). Other (Expenses) decreased to approximately ($66,000)
in the 2001 First Half from approximately ($981,000) in the 2000 First Half.
This decrease is primarily due to a provision for impairment of purchase
price in excess of book value due to the foreclosure on the Aloha Stock (see
Note 7 to the Financial Statements) which was recorded in the 2000 First Half,
partially offset by an increase in interest expense associated with the Amcon
notes.

     Net Loss and Net Loss Per Share. Due to the foregoing, the Company
incurred a net loss of $(632,163), or $(0.08) per share, in the 2001 First
Half compared to a net loss of $(1,982,958), or $(0.31) per share, in the 2000
First Half. Weighted Average Shares Outstanding were 7,807,526 in the 2001
First Half compared to 6,339,583 in the 2000 First Half.


LIQUIDITY AND CAPITAL RESOURCES

    Cash and cash equivalents were approximately $6,000 at June 2001, compared
to approximately $15,000 at December 31, 2000. In February 2001, Amcon
invested $300,000 in the Company through the purchase of 750,000 shares of
Common Stock at a purchase price of $.40 per share.  In June 2001, Amcon
loaned the Company $500,000 in exchange for a $500,000 convertible promissory
note, convertible at any time at the election of Amcon into common stock at a
conversion price of $.40 per share. Offsetting these proceeds were losses from
operating activities of ($688,000), purchase of property and equipment
($7,000), repayment of notes and capital leases ($161,000), and redemption of
the Company's Series B preferred stock ($150,000). The Company is currently
substantially dependent upon funding from Amcon to sustain its operations. If
Amcon fails to make additional financing available or if the Merger is not
completed for any reason, the Company will likely not be able to continue as a
going concern. The Company is currently negotiating for additional funding
from Amcon for working capital and for plant additions, in amounts yet to be
determined, pending completion of the Merger.  There can be no assurance that
Amcon will provide this additional funding.

    The Company has issued three promissory notes to Amcon (the "Amcon Notes")
in the aggregate principal amount of $1,250,000, secured by substantially all
of the assets of the Company.  The due date of the Amcon Notes is currently
September 30, 2001. The Company anticipates that the due dates of these notes
will be further extended to the expected completion date of the Merger. The
Company does not currently have any source of funds to repay these loans prior
to completion of the Merger. The Company also has outstanding a promissory
note to the vendor of its existing blow molding machine. The aggregate
principal amount currently outstanding under the equipment note is $330,000,
due in two equal installments of $165,000 (plus interest) on September 30,
2001 and 2002.

   The Company has ordered new blow molding and related equipment with an
aggregate purchase price of approximately $2,000,000 for installation at the
Company's bottling facility. A substantial portion of this equipment arrived
at the plant in July 2001.  This equipment, which is expected to be
operational by November 2001, should enable the Company to reduce its
production costs of finished bottles in an amount sufficient to enable the
Company to reach break-even in its PET operations. This equipment has been
acquired by Amcon in its own name. Upon installation, this equipment will be
leased from Amcon on terms to be agreed upon. This lease will be accounted for
as an operating lease. The Company does not anticipate any significant
additional capital expenditures prior to the anticipated completion date of
the Merger.

SEASONALITY

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

CURRENCY FLUCTUATIONS

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

RECENT ACCOUNTING PRONOUNCEMENTS

     The Company adopted Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133")
effective January 1, 2001.  Under the provisions of SFAS 133, we are required
to recognize all derivatives as either assets or liabilities in the balance
sheet and measure these instruments at fair value.  The adoption of SFAS 133
did not have a material effect on our Company's financial statements.

     In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS 141").  This Statement addresses financial accounting and reporting for
business combinations and supersedes APB Opinion No. 16, "Business
Combinations," and FASB Statement No. 38, "Accounting for Preacquisition
Contingencies of Purchased Enterprises."  All business combinations in the
scope of this Statement are to be accounted for using one method, the purchase
method.  The Company will adopt SFAS 141 for all business combinations
initiated after June 30, 2001.

       Also in June 2001, the FASB issued Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142").  SFAS
142 addresses financial accounting and reporting for acquired goodwill and
other intangible assets and supersedes APB Opinion No. 17, "Intangible
Assets."  This pronouncement addresses, among other things, how goodwill and
other intangible assets should be accounted for after they have been initially
recognized in the financial statements.  Goodwill would no longer be amortized
but would be assessed at least annually for impairment using a fair value
methodology.  The Company will adopt this statement for all goodwill and other
intangible assets acquired after June 30, 2001 and for all existing goodwill
and other intangible assets beginning January 1, 2002.  The Company does not
anticipate that the adoption of SFAS 142 will have a significant effect on the
Company's financial position or the results of  operations.


                         PART II:  OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

   (c) In the second quarter of 2001, the Company issued a secured convertible
promissory note to Amcon Distributing Company, convertible at any time at
Amcon's election, into an aggregate of 1,250,000 shares of common stock at a
conversion price of $.40 per share.

    The Company also granted to its non-employee directors as director's fees
non-qualified stock options to purchase an aggregate of 900 shares of common
stock. All of the foregoing transactions were exempt from registration under
the Securities Act of 1933, as amended, pursuant to section 4(2) thereof.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.

ITEM 6.  EXHIBITS

   (a) Exhibits

Exhibit Number                       Description


        2.1                Fourth Amended and Restated Agreement and Plan of
                           Merger among Amcon Distributing Company ("Amcon"),
                           Amcon Merger Sub and the Registrant dated June 21,
                           2001

       10.1                Third Amended and Restated 10% Secured Convertible
                           Note due September 30, 2001(issued to Amcon) in the
                           original principal amount of $350,000

       10.2                Third Amended and Restated 10% Secured Convertible
                           Note due September 30,(issued to Amcon) in the
                           original principal amount of $400,000

       10.3                10% Secured Convertible Note due September 30, 2001
                           (issued to Amcon) in the original principal amount
                           of $500,000







SIGNATURES

     In 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.

                      HAWAIIAN NATURAL WATER COMPANY, INC.
                                  (Registrant)


August 14, 2001          By: /s/ MARCUS BENDER
                             ----------------------
                             Marcus Bender
                             President & Chief Executive Officer


August 14, 2001           By: /s/ WILLARD D. IRWIN
                             -----------------------
                             Willard D. Irwin
                             Chief Financial Officer




EXHIBIT INDEX




Exhibit Number             Description


2.1                    Fourth Amended and Restated Agreement and Plan of
                       Merger among Amcon Distributing Company ("Amcon"),
                       Amcon Merger Sub and the Registrant dated June 21, 2001


10.1                   Third Amended and Restated 10% Secured Convertible Note
                       due September 30, 2001 (issued to Amcon) in the
                       original principal amount of $350,000

10.2                   Third Amended and Restated 10% Secured Convertible Note
                       due September 30, 2001 (issued to Amcon) in the
                       original principal amount of $400,000

10.3                   10% Secured Convertible Note due September 30, 2001
                       (issued to Amcon) in the original principal amount of
                       $500,000