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Friday, August 25, 2000

Ailing isle water
firm seeking financing

Hawaiian Natural Water says
more money is needed to
'sustain operations'

By Tim Ruel

Hawaiian Natural Water Co. has told the Securities & Exchange Commission that it must find additional financing or risk going out of business.

In its quarterly filing with the SEC this week, the company said it lost nearly $2 million in the first six months of this year, and is seeking up to $1.5 million in extra capital to improve its operations.

The Pearl City-based water bottler and distributor has lost a total of $8.4 million in cash since going public in May 1997, Chief Financial Officer Willard Irwin said yesterday. Moreover, the 45-employee company does not expect sales to grow enough this year to produce a profit, according to the SEC filing. "The company must obtain additional financing in order to sustain operations," Hawaiian Natural told the SEC.

But Irwin said that if the company does not find extra funds, it still has other options. "It would just take us longer to climb out." The company is not considering bankruptcy, he stressed.

Hawaiian Natural, founded in 1994, now needs extra funding to improve financial liquidity and buy new manufacturing parts, such as a faster bottle maker that could double the speed of production, Irwin said. "Our biggest problem right now is we can't produce as much as our customers are asking," he said, noting sales have jumped by double-digit percentages every year since 1995.

Increasing capacity and boosting sales would defray the high fixed cost of equipment, and would help make the company profitable, Irwin said.

He compared Hawaiian Natural to Internet retailer Inc. "They haven't made a buck yet either," Irwin said. "But they know where they're headed."

In the second quarter, the company widened its loss to nearly $1.5 million, or 22 cents a share, from $308,791, or 8 cents a share, in the same period last year. Its loss in the first half increased to $1.98 million, or 31 cents a share, from last year's loss of $725,339, or 18 cents a share. Net sales, however, were substantially higher for both periods.

The company is also embroiled in a dispute with another local water company that has hurt earnings. The owners of Aloha Water Co., who sold their Waipahu company to Hawaiian Natural in March, said they have taken Aloha Water back after Hawaiian Natural did not make monthly interest payments on a $500,000 promissory note to the owners.

Aloha Water's owners are also trying to keep the 750,000 shares of Hawaiian Natural, 11 percent of the company, that were part of the merger agreement.

Both companies are talking with attorneys, and could not comment on the matter.

Hawaiian Natural said last week that it had adjusted its second-quarter accounts to post a $903,000 reserve because of the dispute with Aloha.

Hawaiian Natural gathers water from a spring under the slopes of Mauna Loa on the Big Island, and sells it under the Hawaiian Springs brand. Hawaiian Natural's stock, traded over the counter, closed today unchanged at 25 cents. It has fallen 87.5 percent from a 52-week high of $2 in March. The company lost its listing on the Nasdaq SmallCap Market in October because its share price failed to rise above the $1 minimum. The firm had initially offered its stock at $5 a share.

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