Acqua Group Plans Stock Offering : Capital: The distributor of water purification systems hopes to raise $4.35 million for expansion and to repay some debts.
Acqua Group Inc., a Van Nuys company that markets and distributes water purification and cooling systems, plans to raise $4.35 million with an initial public offering, according to documents filed with the Securities and Exchange Commission.
Acqua Group plans to sell about 870,000 shares to the public for about $5 per share and use the money to expand its operations and repay some debt.
The company sells its systems--which resemble the water bubblers found in many offices--mostly to hospitals, hotels and other businesses.
But Acqua has been selling the coolers only since September, 1988. And the company has only recently started to show a profit.
Acqua earned $222,877 on sales of $1.79 million in the five months that ended June 30. But it lost $338,519 on sales of $1.55 million in the year that ended Jan. 31, 1990, and it lost $59,954 on sales of $29,085 the previous year. Acqua says it sold or rented 1,370 of its coolers to about 500 customers in the five months that ended June 30.
Acqua doesn’t have special rights to any water purifying or cooling technology. Instead, it says it can sell its products to businesses that already have bottled-water dispensers by showing that water purifiers--which take contaminants out of tap water--are cheaper and more convenient.
The company says its combination purifier and cooler systems don’t require customers to periodically replace the five-gallon water bottles that sit on top of bottled-water bubblers.
Acqua says it will use the largest chunk of the stock offering’s proceeds to finance a program allowing more customers to rent coolers. Acqua says it will also establish nine new sales offices, retire $580,000 in debt, expand its marketing, training and recruiting, and contribute about $204,000 to working capital.
But the company’s prospectus, filed Aug. 7 with the SEC, makes it clear that Acqua faces several challenges.
Acqua says it has plenty of well-established competitors, including bottled-water companies such as Arrowhead, Poland Spring and Sparkletts, and water-purification companies such as Culligan and Rainsoft.
Moreover, only one of its top officers claims any experience during the past five years in the water purification and cooling business before joining Acqua or the partnership that preceded the company in July.
One vice president performed “research and development work on a bottle-less water cooler system” for five months and then was “responsible for sales and research and development for bottle-less water coolers” at another company for three months before joining Acqua in December, 1988, the prospectus says.
For possible buyers of the stock there’s another important caveat in the prospectus. Acqua’s underwriter and its planned market maker for its stock, Stuart-James Co., could have its securities license revoked because of fraud charges by the SEC. The company denied the charges.
A market maker is a securities dealer that maintains an orderly market for lesser-known stocks by buying and selling them.
In April, 1989, the SEC accused Stuart-James, a large Denver penny-stock company, of manipulating markets and charging markups of up to 200% on the first day of trading of two new stocks.
The SEC also claims Stuart-James allowed employees to engage in practices such as refusing to sell customers’ stock unless another customer would buy it, and refusing to sell stock under initial public offerings unless the customer agreed to buy more of the stock after it started trading.
