<PAGE>
ENDLESS YOUTH PRODUCTS INC - 10SB12G/A - AMENDED REGISTRATION STATEMENT
DATE FILED : 1/6/00
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 2 TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
ENDLESS YOUTH PRODUCTS, INC.
-----------------------------------------------------------------------------
[Name of Small Business Issuer in its Charter]
NEVADA 93-215736
- -------------------------------------- ------------------------------
[State or other jurisdiction of [I.R.S. Employee
incorporation or organization] Identification No.]
3395 Jones Blvd., # 208, Las Vegas, NV 89146
- -------------------------------------------- -------------------------------
[Address of principal executive offices] [Zip Code]
Issuer's telephone number: (702) 248-1005
----------------
Securities to be registered under Section 12(b) of the Act:
TITLE OF EACH CLASS TO BE NAME OF EACH EXCHANGE ON
SO REGISTERED WHICH EACH CLASS IS TO BE
REGISTERED
- ------------------------------- -----------------------------
- ------------------------------- -----------------------------
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.001 PER SHARE
-----------------------------------------------------------------
[Title of class]
----------------------------------------------------------------
[Title of class]
POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
<PAGE>
INFORMATION REQUIRED IN REGISTRATION STATEMENT -- ALTERNATIVE 3
ALL REFERENCES TO SHARES AND PER-SHARE AMOUNTS IN THIS REGISTRATION FORM HAVE
BEEN ADJUSTED TO REFLECT A ONE-FOR-FIVE REVERSE STOCK SPLIT OF THE COMPANY'S
COMMON STOCK IN MAY 1998.
ITEM 1. DESCRIPTION OF BUSINESS.
FORWARD-LOOKING STATEMENTS
This registration statement on Form 10-SB contains forward-looking
statements that involve risks and uncertainties. The actual results of Endless
Youth Products, Inc. (the "COMPANY") may differ materially from those discussed
in such forward-looking statements. Such statements include, without limitation,
the Company's expectations and estimates as to introduction of new products and
expansion into markets; future financial performance, including growth in net
sales and earnings; the effect on sales of political or economic conditions in
the Company's markets; the Company's estimate of restructuring activities, costs
and benefits; cash flows from operations; information system upgrades; the
Company's plan to address the Year 2000 issue, the costs associated therewith
and the results of Year 2000 non-compliance by the Company or one or more of its
customers, suppliers or other strategic business partners; capital expenditures;
or the availability of funds from future securities sales. Readers are urged to
consider that statements which use the terms "believes," "does not believe," "no
reason to believe," "expects," "plans," "intends," "estimates," "anticipated,"
"anticipates" and similar expressions, as they relate to the Company or the
Company's management, are intended to identify forward-looking statements. Such
statements reflect the current views of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions. In
addition to factors that may be described in the Company's filings with the
Securities and Exchange Commission (the "COMMISSION"), including this filing,
the following factors, among others, could cause the Company's actual results to
differ materially from those expressed in any forward-looking statements made by
the Company: (i) difficulties or delays in developing and introducing new
products or failure of customers to accept new product offerings; (ii) changes
in consumer preferences, including reduced consumer demand for the Company's
vitamins and other current products; (iii) difficulties or delays in the
Company's continued expansion into certain markets and development of new
markets; (iv) effects of and changes in political and/or economic conditions,
including inflation and monetary conditions; (v) actions by competitors,
including business combinations, technological breakthroughs, new product
offerings and marketing and promotional successes; or (vi) combinations among
significant customers or the loss, insolvency or failure to pay its debts by a
significant customer or customers.
GENERAL
The Company engages in the business of developing and, through
third-party contractors, marketing and distributing dietary supplements and
personal care products with a focus on the product demands of an aging
population. The Company's initial product is the Endless Youth Longevity
System, a combination package of vitamins and supplements formulated in
separate "AM" and "PM" tablets. The System has been sold pursuant to a
Company produced thirty-minute infomercial program through a marketing
agreement with Vendor Services, Inc., a subsidiary of Guthy-Renker Corp. The
Company has completed production of a 30-minute infomercial for its first
skin care product, "Le Solution Derma System," a skin care device that
delivers specially formulated products to the skin.
2
<PAGE>
The Company develops both its nutritional supplement and skin care
products under the direction of the Company's chief executive officer, and
utilizes the services of consultants as well as the personnel of independent
private label manufacturing companies throughout the US. These companies
provide both development and marketing assistance in connection with each
product. For a given product, the Company may choose to use either existing
products or to have developed proprietary products, in which case the Company
and its consultants work with the manufacturer to develop a proprietary formula
for the product. This system of using private label manufacturers is
well-accepted in the supplement industry as a method to build broad product
lines without the large overhead of laboratories and manufacturing plants.
The Company's first skin-care product, Le Solution Derma System, was
conceived by the Company's chief executive officer. The Company contracted
with independent industrial design and electrical engineering firms to design
the product and to produce prototypes. On January 21, 1999, the Company
entered into a funding agreement with Infomercial Development Systems, a
television production group, to produce an infomercial program for Le
Solution Derma System. The infomercial program has been fully funded by
Infomercial Development Systems, which will receive a percentage of sales
revenues derived from the infomercial program. Infomercial Development
Systems is the sole owner of the produced infomercial program. There are no
circumstances, other than the payment of this percentage based on sales
revenue, by which the Company is required to reimburse Infomercial
Development Systems for any expenses that it incurred with respect to the
production of the infomercial for the Le Solution Derma System, if such
infomercial program is not a success.
In connection with distribution of the Longevity System, the Company
has entered into an agreement with Vendor Services, Inc., a vitamin distribution
company that sells infomercial marketed products. Vendor Services provides
marketing and distribution services to the Company in connection with the
showing of the Company's vitamin infomercial program. Under the Company's
control and risk of investment, Vendor Services works with the Company's
chosen manufacturer to secure product for any program. Vendor Services
chooses the media on which the infomercial will run and then fulfills all
orders. The Company has provided full insurance on its product and Vendor
Services has been a named additional insured. Through May 31, 1999, for these
services Vendor Services was paid 91 percent of the net sales from the
program. Pursuant to an agreement dated June 28, 1999 and effective as of
June 1, 1999, Vendor Services has paid a lump-sum licensing fee for the
continued rights to the Longevity System and the infomercial program
subsequent to June 1, 1999. On September 24, 1999, the Company entered into
an Agreement with Vendor Services that amended the deadline for Vendor
Services to commence the testing of a sequel infomercial to replace the
original infomercial for the Longevity System. The lump-sum licensing fee was
payable to the Company for a period ending on August 1, 2000, the date on
which Vendor Services was required to commence the testing of such sequel
program or it is understood that Vendor Services will lose the right to
produce or broadcast any program. If Vendor Services elects to produce the
sequel infomercial, Vendor Services is required to pay the Company an ongoing
licensing fee of three percent of gross sales proceeds. Vendor Services owns
less than one percent of the outstanding shares of common stock of the
Company and has no rights to any additional share issuances under the terms
of the licensing arrangement.
Additionally, the Company had entered into an agreement with
Schulberg Media Works, the producer of its infomercial program. It was
contemplated that based on the gross revenues, Schulberg Media Works would
have received seven percent of such revenues if the Company purchased its own
media and fulfilled all orders without the use of a third-party distribution
company. This agreement was dependent on certain levels being achieved by the
infomercial produced by Schulberg Media Works and the fact that the Company
would not use outside organizations to perform various services. The Company
subsequently chose to work with Vendor Services and agreed to limit payments
to Schulberg Media Works; the Company provided that it would pay Schulberg
Media Works with a percentage of net revenues from the broadcast of the
infomercial program retained by the Company after payments to Vendor Services
as represented by 1.75 percent of gross revenues. This agreement with
Schulberg Media Works does not apply to the June 28 Agreement with Vendor
Services and was limited to only the original program produced by Schulberg
Media Works. With the implementation of the June 28 Agreement, which provided
for the payment of a lump-sum licensing fee to the Company, no further
amounts are payable to Schulberg Media Works and Schulberg has no interest in
any sequel program. Schulberg Media Works owns less than one percent of the
total outstanding shares of common stock of the Company and there are to be no
additional shares issued under any agreement with Schulberg Media Works.
3
<PAGE>
With the change in its arrangement with Vendor Services from
ongoing monthly payments to the lump sum licensing fee, pursuant to the June 28
Agreement, the Company has focused its resources on developing its web site,
www.endlessyouth.com. The Company expects to derive substantially all of its
revenues from its web site in the foreseeable future.
With respect to the personal care and skin care industry segment, the
Company operates in a market with many different products, which include an
extensive array of glamorous, exciting and innovative cosmetics and skin care.
The Company's vision is to provide excitement and innovation through unique,
high quality products at affordable prices.
The address of the Company's executive offices is: 3395 South Jones
Boulevard, #208, Las Vegas, NV 89146; Telephone: (702) 248-1005. The Company was
incorporated in Nevada in July 1996. On June 29, 1999, the Company's
shareholders authorized the Company's Chief Executive Officer, at his
discretion, to change the name of the Company to EndlessYouth.Com, Inc.
DISTRIBUTION
The Company's initial vitamin and nutritional supplement product, the
Endless Youth Longevity System, is distributed through a nationally broadcast
infomercial program. Sales are made direct to the customers, who call a
toll-free telephone number that accompanies the broadcast program. Endless
Youth's infomercial is broadcast pursuant to an agreement with the Vendor
Services, Inc., a subsidiary of Guthy-Renker Corp. Vendor Services is
responsible for providing and paying for all media, inventory, fulfillment,
customer service and other activities on behalf of the Company with respect to
the marketing of the Endless Youth Longevity System. Vendor Services received a
fixed percentage of sales receipts for providing of these services. As discussed
elsewhere in this Form 10-SB, the Company has agreed to accept a final fixed
payment from Vendor Services for all future sales pursuant to the infomercial.
Building upon the brand name recognition being created by national
broadcasts of its vitamin program, the Company has entered into a funding
agreement with Infomercial Development Systems, a television production group.
An infomercial program has been developed to directly market the Company's next
product in the skin care market segment, Le Solution Derma System, through a
distribution channel similar to that being used to market the Endless Youth
Longevity System. The infomercial program has been fully funded by Infomercial
Development Systems, which will receive a percentage of sales revenues derived
from the infomercial program. There are no circumstances, other than the payment
of this percentage based on sales revenue, by which the Company is required to
reimburse Infomercial Development Systems for any expenses that it incurred with
respect to the production of the infomercial for the Le Solution Derma System,
if such infomercial program is not a success. Infomercial Development Systems is
the sole owner of the produced infomercial program. Le Solution is an innovative
electronic device developed by Endless Youth to provide skin improvement. In
addition to the infomercial program, the Company plans to develop other direct
marketing channels and retail distribution for the Le Solution Derma System,
both domestic and international.
4
<PAGE>
INTERNET COMMERCE
Pursuant to the broadcasts of the Endless Youth Longevity System
infomercial, the Company realized substantial traffic to its Web site,
www.endlessyouth.com. The Company is now in the process of redeveloping its site
into a subject-specific, demographically-targeted Web site focused on the needs
of an aging baby boomer market segment.
The Company will stress its e-commerce activities with the sale of its
proprietary "Endless Youth" brand products. The vitamin and nutritional
supplement product line will be expanded. All products will be sold under the
Endless Youth trade name.
Complementing the sale of product, www.endlessyouth.com will provide
news, features, interviews and regular columnists on specific health topics. The
Company believes that original content and highly regarded interactive
communities coupled with ongoing direct response broadcast marketing activities
will allow the Company to attract and retain its targeted market. The Company
believes that www.endlessyouth.com will be a valuable media property for
advertisers and retailers who are increasingly allocating marketing resources to
target consumers online.
The new endlessyouth.com site, presently under development, should be
fully operational in the second quarter of the calendar year 2000. Development
is presently being undertaken with third-party web designers and technical
software providers. Certain portions of the content of the site, including news,
will be provided by third-party licensees. Many content-rich sites utilize such
organizations to provide daily news data, which is automatically downloaded to
the licensee and then placed on the home page of the site. The site will be
aimed at aging baby-boomers, and will focus on both health and skincare
products. The Company believes that this consumer base is a coveted market
segment.
GROWTH IN INTERNET USAGE. The Internet is fast becoming one of the most
important mediums for global communication and business. The growth in
Internet users is driven by numerous factors, including:
- increased public awareness of the Internet;
- the growing base of personal computers and improved Internet
access;
- increased quantity and quality of Web content; and
- growing selection and acceptance of electronic commerce.
The Internet provides a unique opportunity for content providers to
reach a broad base of readers on a real-time basis with a diverse body of
information. Unlike traditional media, the Internet permits dissemination of
content without geographic limits, print production costs or broadcast capacity
constraints.
GROWTH IN ONLINE ADVERTISING. The Internet is an attractive medium for
advertisers because it allows more flexibility, interactivity and measurement
capabilities than traditional media, including print, television and radio, and
provides users with immediate access to information about advertisers and their
products. For example, the Internet allows advertisers to change messages
frequently in response to market developments or current events.
5
<PAGE>
THE COMPANY'S INTERNET STRATEGY:
The Company's Internet strategy includes the following elements:
- Expand direct response marketing programs for branded Endless
Youth products. Such marketing avenues include 30-minute
infomercial programs, 30- and 60-second short form television
commercials, and radio spots. All marketing shall focus on
direct sale of Endless Youth products as well as drive visits
to www.endlessyouth.com.
- Expand the Company's revenue base in advertising and
electronic commerce.
- Expand content and communities with regular introduction of
new editorial categories that will draw and retain new users
and advertisers.
- Develop extensive distribution and affiliate relationships
with numerous partners, including major portals as well as
more focused non-competitive sites.
- Grow the Company's brand recognition through advertising and
syndication of its content.
6
<PAGE>
BUSINESS STRATEGY
The Company's business strategy is to:
- Strengthen and broaden core brands through marketing and
advertising, product development and manufacturing;
- Develop and introduce technologically advanced, innovative
products that set new trends;
- Expand the Company's presence in all markets in which it
competes and enter new markets where the Company identifies
opportunities for growth;
- Continue to reduce costs and improve operating efficiencies,
customer service and product quality and carefully managing
working capital; and
- Continue to expand market share and product lines through
possible strategic acquisitions, joint ventures and licensing
arrangements.
The Company believes that its Internet marketing strategy has limited
risks because the monetary outlay will not be substantial. The costs required
are for personnel that work in the area of Internet marketing between sites---
placement of the Company's site high on the portal lists for the Company's
specific category plus development of part of an extensive affiliate network.
Through such a network, the Endless Youth banner or similar advertising material
could be placed for free on a very large number of consumer sites; then, if
there is a "click-through" by a user of a site where the advertising is placed
and such person then buys a product, the original site would be provided with a
percentage of sales. The entire process will be automated by software and little
manpower will be needed to determine such revenue sharing. Mr. Wallach will be
entitled to a licensing fee for the use of the Endless Youth trade name of 3
percent of all net sales from the site. Vendor Services, licensee for the
Longevity System as described above, will be entitled to no fees because the
Longevity System will not be offered for sale on the Internet site.
As more and more products are developed for the Endless Youth product
line, development costs and production charges should be lessened per item. The
Company is working with two private label manufacturers to produce its skin care
line and two for the production of the nutritional vitamin line. Through
negotiations with two groups in each business, the Company is able to reduce
manufacturing, packaging, and shipping costs. Once the Internet site is
operational, additional employees will need to be hired to oversee the Internet
commerce activities of the Company, including content updating, marketing,
accounting, and customer services--an employee will be required to coordinate
all activities with manufacturers and with fulfillment third-party
7
<PAGE>
organizations. Growth in employees will be solely dependent on sales. The
Company does not plan to hire additional employees until the business is in full
operation. It is planned that at least one employee will be hired within the
next 120 days to assist the chief executive officer in coordination.
CONTRACTS WITH SUPPLIERS AND MANUFACTURERS
The Company has established relationships with several suppliers and
manufacturers of its products. While the Company anticipates that it will enter
into contracts with some of these manufacturers and suppliers, there is a risk
that any of the Company's suppliers or manufacturers could discontinue selling
their products to the Company for any reason. Although the Company believes that
it could establish alternate sources for most of its products, any delay in
locating and establishing relationships with other sources could result in
product shortages and back orders for the products, with resulting loss of
revenues to the Company. The Company relies on the Vendor Services, Inc. a
subsidiary of Guthy-Renker Corp., to market and distribute its Endless Youth
Longevity System pursuant to the infomercial broadcasts. Vendor Services is also
responsible for the manufacturing, packaging and shipping of product. Any
disruption of these activities by Vendor Services will cause delays in the
marketing of this product. However, pursuant to its June 28, 1999 agreement with
Vendor Services, the Company has already received a final payment for all past
and future sales and services made under the agreement.
On September 24, 1999, the Company entered into an Agreement with
Vendor Services that amended and clarified the June 28, 1999 Agreement with
respect to a possible settlement agreement between Vendor Services and Sun
Ten Laboratories, a manufacturer of Endless Youth branded product. Vendor
Services and Sun Ten had reached a tentative agreement between themselves in
an amount equal to $1,405,000. The Agreement details the amount to be
received by the Company if such tentative agreement between Vendor Services
and Sun Ten is finalized. The Company would receive $409,000 minus a
percentage (maximum 30 percent of such fees) of legal fees incurred by Vendor
Services, which is limited by the June 28, 1999 to ten percent of the
proceeds from Sun Ten. Furthermore, the September 24, 1999 agreement amended
the deadline for Vendor Services to commence the testing of a sequel
infomercial to replace the original infomercial for the Longevity System.
The lump-sum licensing fee, pursuant to the June 28, 1999 agreement as amended
by the September 24, 1999 agreement, was payable to the Company for a period
ending on August 1, 2000, the date on which Vendor Services was required to
commence the testing of such sequel program or it is understood that Vendor
Services will lose the right to produce or broadcast any program. If Vendor
Services elects to produce the sequel infomercial, Vendor Services is required
to pay the Company an ongoing licensing fee of three percent of gross sales
proceeds.
There can be no assurance that another company will not replicate one
or more of the Company's products. In addition, certain manufactures may retain
ownership of certain product formulations and manufacturing processes relating
to the Company's products. If the Company's relationship with these
manufacturers were impaired, there can be no assurance that the product
formulations and manufacturing process owned by these manufacturers could be
replicated by the Company or another manufacturer, or that these manufacturers
would not assert that such replication infringed upon its proprietary rights.
Accordingly, the Company's sales and earnings could be adversely affected if its
relationship with these manufacturers were impaired.
LICENSES, TRADEMARKS AND PATENTS
The Company does not own the rights to the Endless Youth trademark.
These rights are licensed from Neal K. Wallach, the Chairman and Chief Executive
Officer of the Company and a principal stockholder. See "Item 7 -- Certain
Relationships and Related Transactions." Mr. Wallach has registered the Endless
Youth trademark with the U.S. Patent and Trademark Office. The Company has an
application pending for the Le Solution Derma System trademark.
The Company regards these trademarks and other proprietary rights as
valuable assets and believes they have significant value in the marketing of its
products. The Company vigorously protects its trademarks against infringement.
The Company is in the process of filing a patent application with
respect to the Le Solution Derma System device.
PRODUCT LIABILITY
Although the Company does not engage in the actual manufacture of any
of the products that it markets and distributes, as a marketer of dietary
supplements and skin care products that are ingested by consumers or applied
8
<PAGE>
to their bodies, the Company may be subjected to various product liability
claims, including among other things that its products contain contaminants or
include inadequate instructions as to use or inadequate warnings concerning side
effects and interactions with other substances. Although the Company has
obtained product liability insurance that it believes is suitable for its
present needs, there can be no assurance that such insurance will continue to be
available at commercially reasonable rates, that the Company will not be subject
to claims in the future, that its insurance coverage will be adequate or that
widespread claims and the resultant adverse publicity could adversely affect the
Company.
ABSENCE OF CLINICAL STUDIES AND SCIENTIFIC REVIEW; FAILURE TO CONSUME AS
SUGGESTED
In general, the Company's products consist of dietary supplements and
personal care products about which the Company makes no therapeutic claims and
that the Company believes do not require approvals from the Food and Drug
Administration (the "FDA") or other regulatory agencies prior to sale. The
Company does not make any claim with respect to is products and its products are
not intended to diagnose, treat, cure or prevent any disease. Accordingly, the
Company does not intend to conduct clinical studies of its products or otherwise
subject them to scientific review. In addition, the Company's products consist
of herbs, vitamins, minerals and other ingredients that the Company regards as
safe when taken as suggested by the Company. However, because the Company will
be dependent upon consumers' perception of the safety and quality of its
products as well as similar products distributed by other companies, the Company
could possibly be adversely affected in the event any of the Company's products
or any similar products distributed by other companies should prove or be
asserted to be harmful to consumers. In addition, adverse effects resulting from
consumers' failure to consume the Company's products as suggested by the Company
or other misuse or abuse of the Company's products or any similar products
distributed by other companies, could have a material adverse impact on the
Company.
The Company believes the nutritional supplement market is affected by
national media attention regarding the consumption of nutritional supplements.
There can be no assurance that future scientific research or publicity will be
favorable to the nutritional supplement market or any particular product, or
consistent with earlier favorable research or publicity. Future research reports
or publicity that are perceived as less favorable or that question such earlier
research or publicity could have a material adverse effect on the Company.
Because of the Company's dependence upon consumer perceptions, adverse
publicity, whether or not accurate, associated with illness or other adverse
effects resulting from the consumption of the Company's products or any similar
products distributed by other companies could have a material adverse effect on
the Company. Such adverse publicity could arise even if the adverse effects
associated with such products resulted from consumers' failure to consume such
products appropriately.
COMPETITION
The dietary supplement and skin care markets are highly competitive. It
is not possible to estimate accurately the number of competitors, since the
industry is fragmented with many public as well as privately held companies.
Brand recognition, together with product quality, performance and price and the
extent to which consumers are educated on product benefits, have a marked
influence on consumers' choices among competing products and brands.
Advertising, promotion, merchandising and packaging, and the timing of new
product introductions and line extensions, also have a significant impact on
buying decisions, and the structure and quality of the sales force affect
product reception, in-store position, permanent display space and inventory
levels in retail outlets. The Company competes in its product categories
9
<PAGE>
against many companies that have substantially greater resources than the
Company.
The market for Internet content is relatively new, rapidly changing and
intensely competitive. Traditional media companies, such as television
broadcasters, magazine publishers and radio stations, are constantly refining
their content and strategies to increase their audiences and advertising and
sponsorship revenues. Additionally, the number of Web sites competing for the
attention and spending of users, advertisers and sponsors has increased, and the
Company expects it to continue to increase, particularly because there are so
few barriers to entry on the Internet.
There is not to the Company's knowledge a single Internet site
dedicated to the niche market for aging baby boomers for health and skin care.
Such sites as mothernature, onhealth, drKoop, womenfirst, webMD, healthwell,
healthshop, thirdage, etc. are general in their approach. Eve.com and clinique
are the major consumer skin care sites, which cater to a younger target market
than will endlessyouth.com. Outside the Internet there are many vitamin
companies. These include all of the major distributors, such as One-A-Day, Twin
Lab, GNC, Nature's Herb's, Solray, and Ginsana.
GOVERNMENT REGULATION
The Company is subject to regulation by the Federal Trade Commission
("FTC") and the FDA in the United States, as well as the Consumer Product Safety
Commission, the U.S. Department of Agriculture and the Environmental Protection
Agency, and by various agencies of the states and localities and foreign
countries in which the Company's products may be sold. Compliance with federal,
state, local and foreign laws and regulations pertaining to discharge of
materials into the environment, or otherwise relating to the protection of the
environment, has not had, and is not anticipated to have, a material effect upon
the capital expenditures, earnings or competitive position of the Company. State
and local regulations in the United States that are designed to protect
consumers or the environment have an increasing influence on product claims,
contents and packaging.
In particular, the FDA, pursuant to the Federal Food, Drug, and
Cosmetic Act ("FDCA") regulates the production, packaging, labeling and
distribution of dietary supplements, including vitamins, minerals and herbs. In
addition, the FTC has jurisdiction to regulate advertising of dietary
supplements, while the U.S. Postal Service regulates advertising claims with
respect to such products sold by mail order.
The FDCA has been amended several times with respect to dietary
supplements, most recently by the Dietary Supplement Health and Education Act of
1994 ("DSHEA") and the Nutrition Labeling and Education Act of 1990 ("NLEA").
DSHEA, enacted on October 15, 1994, introduced a new statutory framework
governing the composition and labeling of dietary supplements. With respect to
composition, DSHEA creates a new class of "dietary supplements," dietary
ingredients consisting of vitamins, minerals, herbs, amino acids and other
dietary substances for human use to supplement the diet, as well as
concentrates, metabolites, extracts or combinations of such dietary ingredients.
Generally, under DSHEA, dietary ingredients that were on the market before
October 15, 1994 may be sold without FDA pre-approval and without notifying the
FDA. On the other hand, a new dietary ingredient (one not on the market before
October 15, 1994) requires proof that it has been used as an article of food
without being chemically altered, or evidence of a history of use or other
evidence of safety establishing that it is reasonably
10
<PAGE>
expected to be safe. The FDA must be supplied with such evidence at least 75
days before the initial use of a new dietary ingredient. There can be no
assurance that the FDA will accept the evidence of safety for any new dietary
ingredients that the Company may decide to use, and the FDA's refusal to accept
such evidence could result in regulation of such dietary ingredients as food
additives requiring FDA pre-approval prior to marketing.
As for labeling, DSHEA permits "statements of nutritional support" for
dietary supplements without FDA pre-approval. Such statements may describe how
particular dietary ingredients affect the structure, function or general
well-being of the body, or the mechanism of action by which a dietary ingredient
may affect body structure, function or well-being (but may not state that a
dietary supplement will diagnose, mitigate, treat, cure or prevent a disease). A
company making a statement of nutritional support must possess substantiating
evidence for the statement, disclose on the label that the FDA has not reviewed
that statement and that the product is not intended for use for a disease, and
notify the FDA of the statement within 30 days after its initial use. However,
there can be no assurance that the FDA will not determine that a given statement
of nutritional support that the Company makes is not adequately substantiated as
required by DSHEA, or is a drug claim rather than an acceptable nutritional
support statement requiring the Company's submission and the FDA's approval of a
new drug application ("NDA"). Either determination could entail costly and
time-consuming clinical studies and in either situation the Company may have to
delete or modify the statement or claim involved. In addition, DSHEA allows the
dissemination of "third party literature," publications such as reprints of
scientific articles linking particular dietary ingredients with health benefits.
Third party literature may be used in connection with the sale of dietary
supplements to consumers at retail or by mail order. Such a publication may be
so distributed if, among other things, it is not false or misleading, no
particular manufacturer or brand of dietary supplement is mentioned, and a
balanced view of available scientific information on the subject matter is
presented. There can be no assurance, however, that all pieces of third party
literature that may be disseminated in connection with the Company's products
will be determined by the FDA to satisfy each of these requirements, and any
such failure could subject the product involved to regulation as a new drug.
Management anticipates that the FDA may promulgate good manufacturing
practice ("GMP") regulations authorized by DSHEA, which are specific to dietary
supplements. GMP regulations would require supplements to be prepared, packaged
and held in compliance with such rules, and may require similar quality control
provisions contained in the GMP regulations for drugs. The Company currently
uses manufacturers that produce its vitamins and nutritional supplement products
pursuant to the applicable food GMP rules. There can be no assurance that, if
the FDA adopts GMP regulations specific to dietary supplements, such
manufacturers will be able to comply with such GMP rules upon promulgation or
without incurring material expense to do so.
The FDA has finalized regulations to implement certain labeling
provisions of DSHEA. In addition, further DSHEA labeling regulations are
expected to be proposed by the FDA once the agency receives the final report of
the expert Commission on Dietary Supplement Labels, established by DSHEA to
provide recommendations on labeling claims for supplements. The Commission on
Dietary Supplements issued its final report in November 1997. It is uncertain
when the FDA will propose further regulations based on this report. The Company
cannot determine what effect such regulations, when promulgated, will have on
its business in the future. There can be no assurance that such regulations will
not require expanded or different labeling for the Company's vitamins and
nutritional products or, among other things, require the recall, reformulation
or discontinuance of certain products, additional record
11
<PAGE>
keeping, warnings, notification procedures and expanded documentation of the
properties of certain products and scientific substantiation regarding
ingredients, product claims, safety or efficacy.
The FDA has broad authority to enforce the provisions of the FDCA
applicable to dietary supplements, including the power to seize adulterated or
misbranded products or unapproved new drugs, to request their recall from the
market, to enjoin their further manufacture or sale, to publicize information
about a hazardous product, to issue warning letters and to institute criminal
proceedings. Although the regulation of dietary supplements is less restrictive
than that imposed upon drugs and food additives, there can be no assurance that
dietary supplements will continue to be subject to the less restrictive
statutory scheme and regulations currently in effect. Further, there can be no
assurance that, if more stringent statutes are enacted or regulations are
promulgated, the Company will be able to comply with such statutes and
regulations without incurring material expense to do so.
The FTC, which exercises jurisdiction over the advertising of dietary
supplements, has in the past several years instituted enforcement actions
against several dietary supplement companies for false and misleading
advertising of certain products. These enforcement actions have resulted in
consent decrees and the payment of fines by the companies involved. In addition,
the FTC has increased its scrutiny of infomercials. Further, the U.S. Postal
Service has issued cease and desist orders against certain mail order
advertising claims made by dietary supplement manufacturers.
The Company may be subject to additional laws or regulations
administered by the FDA or other federal, state or foreign regulatory
authorities, the repeal of laws or regulations that considers favorable, such as
DSHEA, or more stringent interpretations of current laws or regulations, from
time to time in the future. The Company is unable to predict the nature of such
future laws, regulations, interpretations or applications, nor can it predict
what effect additional governmental regulations or administrative orders, when
and if promulgated, would have on its business in the future. These regulations
could, however, require the reformulation of certain products to meet new
standards, the recall or discontinuance of certain products not able to be
reformulated, imposition of additional record keeping requirements, expanded
documentation of the properties of certain products, expanded or different
labeling, or scientific substantiation. Any or all of such requirements could
have a material adverse effect on the Company's results of operations and
financial condition.
The Company is not aware that Vendor Services is involved in any
litigation with respect to its infomercials. No regulatory authority has
requested the Company to alter any of its infomercials or other advertisements
with respect to any of its products.
RESEARCH AND DEVELOPMENT
The Company has incurred and research and development expenditures in
connection with the development of its Endless Youth Longevity System and its Le
Solution Derma System products. The Company estimates that in the fiscal years
ended June 30, 1997 and 1998, it expended $25,000 and $125,000 respectively on
research and development activities.
EMPLOYEES
As of June 30, 1999, the Company had one full-time employee. Employees
are not represented by any collective bargaining organizations.
12
<PAGE>
DEPENDENCE ON KEY PERSONNEL
The Company's continued success will largely depend on the efforts and
abilities of its Chief Executive Officer, Neal K. Wallach. The Company's
operations could be adversely affected if, for any reason, Mr. Wallach did not
remain with the Company.
YEAR 2000
The Company has identified and contacted and continues to identify and
contact key suppliers, both inventory and non-inventory (including Vendor
Services and its current vitamin manufacturer). The fact that the Company has
been paid a licensing fee in advance from Vendor Services effectively eliminates
its Year 2000 risks with respect to its infomercial. The parties from whom the
Company has received responses to date generally have indicated that their
systems are or will be Year 2000 compliant. The Company does not expect that
incremental out-of-pocket costs of its Year 2000 program (which do not include
costs incurred in connection with the Company's comprehensive business process
enhancement program) will be material.
The Company has not and does not intend to develop a contingency plan.
The Company has already been paid a fixed licensing fee for all sales
subsequent to June 1, 1999 of the Longevity System. This fixed payment was
unconditional and not dependent on future sales. Vendor Services has assured
the Company that its fulfillment and accounting systems are Year 2000
compliant. The Company's auditors and other third party contractors have
provided similar assurances. The Company has not used any independent
verification or validation processes to confirm those assurances.
13
<PAGE>
To date, the Company has incurred no costs relating to Year 2000
issues. The Internet development aspects of its business will not be impacted
because of the development stage of this business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION.
Management's discussion and analysis should be read in conjunction with
the Company's financial statements and the notes thereto set forth in this Form
10-KSB commencing on page 26.
Endless Youth Products, Inc., (the "Company") engages in the business
of developing, marketing and distributing proprietary vitamins, nutritional,
skin care, personal care, and other anti-aging products under the "Endless
Youth" trade name. The following discussion is based on the audited financial
statements for years ending June 30, 1998 and 1999. The financial statements
have been prepared in conformity with generally accepted accounting principals.
Recent Developments
Through May 31, 1999, the Company had engaged Vendor Services, Inc.
with respect to the marketing and distribution of its Longevity System,
pursuant to the broadcast of its infomercial program. For its services Vendor
Services was paid 91 percent of the net sales from the infomercial program.
Pursuant to an agreement dated June 28, 1999 and effective as of June 1,
1999, Vendor Services has paid the Company a lump-sum licensing fee in the
amount of $340,000 for the continued rights to the Longevity System and the
infomercial program subsequent to June 1, 1999. In connection with additional
programs, Vendor Services has been provided with first rights to develop and
produce such programs for a continued licensing fee. On September 24, 1999,
the Company entered into an Agreement with Vendor Services that amended and
clarified the June 28, 1999 Agreement with respect to a possible settlement
agreement between Vendor Services and Sun Ten Laboratories, a manufacturer of
Endless Youth branded product. Vendor Services and Sun Ten had reached a
tentative agreement between themselves in an amount equal to $1,405,000. The
Agreement details the amount to be received by the Company, if such tentative
agreement between Vendor Services and Sun Ten is finalized. The Company would
receive $409,000 minus a percentage (maximum 30 percent of such fees) of
legal fees incurred by Vendor Services which is limited by the June 28, 1999
to ten percent of the proceeds from Sun Ten.
The Company chose to amend the Agreements with Vendor Services to
reflect the changing nature of the business of the Company reflected in the
Company taking the role as licensor of product, rather than developer of
infomercial programs, and as the developer of the Company's Internet site. It is
not anticipated that the lump-sum payment made by Vendor Services, rather than
the continuation of the ongoing arrangement where Vendor Services retained 91
percent of net sales, will have a material impact on future net operating
results. Unless Vendor Services produces a sequel infomercial program for the
Longevity System by August 1, 2000, no further revenue will be generated from
Vendor Services; if a sequel program is developed, then the Company will be
entitled to 3 percent of net sales revenue from the sequel program. The Company
is developing a replacement product for the Longevity System to be available on
its Internet site. Therefore, no future revenue is anticipated from the sales of
the Longevity System, unless pursuant a sequel infomercial is developed by
Vendor Services. The Company anticipates that its future revenue sources shall
be from the licensing of the Endless Youth brand name on third-party products,
from the licensing of content that it is preparing with respect to the
development of its Internet site, from fees paid to the Company for advertising
and promotional placement on the Internet site, and from product sales on the
Company's Internet site or through affiliations with other Internet sites.
As a result of its various agreements, the Company received from the
broadcast of its infomercial for its Longevity System, prior to the lump-sum
payment discussed above, 9 percent of the net sales revenues. Out of this
amount, amounts equal to 3 percent and 2 percent of net sales revenues,
respectively, were paid as license fees to the Company's chief executive officer
and to Schulberg Media Works. The remaining 4 percent was retained by the
Company.
On July 7, 1999, the Company entered into an agreement with Sun Ten
Laboratories, one of the manufacturers of the Company's Longevity System
product. Under this Agreement, Sun Ten Laboratories agreed to pay the Company a
lump-sum payment of $130,000 in connection with a general release and settlement
of any future claims that the Company may have with respect to Sun Ten
Laboratories' production of certain previously manufactured quantities of
product for the Company. Revenue for the quarter ended September 30, 1999
included this amount as other income of $130,000.
It is anticipated that the development of the new Internet site for
the Company will cost approximately $50,000 which will be funded from
present working capital of the Company. In connection with this development
the Company is working closely with the web site developers and contract
editors with respect to content. The Company is working with private label
manufacturers in the development of its skin care and vitamin product line.
There are no development costs associated with such private label product
items for these products are existing items carried in the inventory of these
companies; these companies will, also, provide Endless Youth product
labeling. Very small minimum orders will be placed in order to control costs
and determine the best selling items on the site. All these inventory costs
will be paid from the existing working capital of the Company and are
estimated to be $25,000. As the site becomes further developed, the Company
will add a full-time Internet marketing individual and part-time employees to
update content and provide customer related services; such expenses will not
surpass $10,000 per month and will be dependent upon sales revenue and
customer traffic. The Company is, also, in initial conversations with various
other Internet health sites with respect to forming mutually advantageous
marketing relationships with these sites. The Company does not plan in the
near future any substantial advertising or promotion campaigns that will
require substantial funding, rather the Company will focus on Internet
marketing for placement of its site with portals and through marketing
affiliations with other Internet sites. Until the site and product mix are
fully developed, the Company will only seek to work with other Internet sites
to maximize brand awareness. Following many months of such relationship
marketing, if the Company feels that other advertising and promotion is
required, the Company will secure additional funding from outside sources
which may include further shareholder investment or funding from new
investment groups.
Results of Operations
Gross Profit and Net Sales. Net sales for the year ended June 30, 1999
increased by $4,821,739 compared to the year ended June 30, 1998. Gross Profit
increased by $363,942 for the same period. Gross Profit and Net sales increased
as a result of the nationwide rollout of the Company's "Endless Youth"
infomercial in January of 1999. The Company had an agreement with Vendor
Services Inc., in which it paid Vendor Services Inc., 91% of net sales for all
costs associated with the production, distribution and marketing of the "Endless
Youth" vitamin products through infomercial sales. This agreement was amended by
mutual consent in June of 1999. No revenues were generated by the Company's web
site during the fiscal year.
Cost of Sales. Cost of sales for the year ended June 30, 1999 increased
$4,457,797. The increase in cost of sales can be attributed to the increase in
net sales discussed above and an increase in media spending and airtime of the
infomercials. Cost of sales as a percentage of net sales during the year ended
June 30, 1999 was 90% compared to 33% during the year ended June 30, 1998. The
percentage increase is attributed to the Company's agreement with Vendor
Services Inc.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $479,577 in the year ended June 30, 1999
compared to the year ended June 30, 1998. This increase was primarily due to
increased sales activity, expense related to product development, marketing, and
royalties. The Company's management continues to pursue cost reduction measures
consistent with the level of business wherever opportunities can be identified.
Liquidity and Capital Resources
Although the Company has a negative working capital and equity, it
believes it has sufficient resources to fund the Company's operations and
capital requirements for the 2000 fiscal year. Deferred revenue, the Company's
largest liability, will be recognized as income over the next six months and
will not require any future services from the company. Despite the
14
<PAGE>
Company's negative cash flows from operations over the past two fiscal years it
does not anticipate the need for alternative sources of liquidity. The Company
expects positive cash flow during fiscal 2000 primarily due to licensing fees
and minimal monthly expenses.
Prepaid advertising was $121,758 and $0 at June 30, 1998 and June 30,
1999, respectively. The decrease in 1999 resulted from the amortization of the
remaining infomercial costs.
Year 2000 Compliance
The year 2000 issue results from computer programs that do not
differentiate between the year 1900 and the year 2000 because they were using
two digits rather than four to define the applicable year; accordingly computer
systems that have time-sensitive calculations may not properly recognize the
year 2000. The Company has conducted an initial review of its computer system to
identify whether the system is year 2000 compliant. The computer equipment and
software currently used by the Company is year 2000 compliant.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company's executive headquarters are located at 3395 South Jones
Boulevard, # 208, Las Vegas, Nevada 89146 and are leased on a month-to-month
basis. The Company believes its facilities are adequate to provide its needs.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following information with respect to the outstanding shares of the
Company's common stock beneficially owned by (i) each director of the Company,
(ii) the chief executive officer, (iii) all beneficial owners of more than five
percent of common stock known to the Company and (iv) the directors and
executive officers as a group, is furnished as of September 30, 1999, except as
otherwise indicated.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS (1)
<S> <C> <C>
Neal K. Wallach 2,034,963 (2) 61.8%
6767 W. Tropicana Blvd., #206
Las Vegas, NV 89103
EYP International LLC 1,135,000 35.0%
6767 W. Tropicana Blvd., #206
Las Vegas, NV 89103
James Hembree
4620 Jupiter Drive
Salt Lake City, UT 84124 1,525,000 (3) 44.4%
Gene Scher (4)
November Lazar Scher, Inc.
3575 Cahuenga Blvd., W., #330
Los Angeles, CA 90068 189,334 (4) 5.7%
Carl B. Wallach, M.D
32 Chelsea Drive
Randolph, NJ 07869 50,000 (5) 1.5%
All Officers and Directors as a Group
(four persons) 2,474,963 (2), (3), (5), (6) 70.4%
</TABLE>
- ----------------------
(1) Unless otherwise indicated below, each director, executive officer
and five percent shareholder has sole voting and investment power with respect
to all shares beneficially owned.
(2) Includes 1,135,000 shares owned by EYP International LLC, a Nevada
limited liability company ("EYP INTERNATIONAL"), of which Mr. Wallach
beneficially owns 54.0 percent of the equity interest; includes warrants to
purchase 49,500 shares, all of which are currently exercisable; excludes options
to purchase 360,000 shares of Common Stock granted to Mr. Wallach under the
Company's 1996 Stock Option Plan, none of which are presently exercisable or
exercisable within 60 days.
15
<PAGE>
(3) Includes 1,135,000 shares owned by EYP International, of which Mr.
Hembree beneficially owns 3.0 percent of the equity interest; includes options
to purchase 50,000 shares of common stock granted to Mr. Hembree under the
Company's 1996 Stock Option Plan, all of which are presently exercisable;
includes presently exercisable warrants to purchase 140,500 shares; includes
presently exercisable warrants to purchase 3,000 shares owned by Joyce Hembree,
Mr. Hembree's wife. Mr. Hembree disclaims beneficial ownership of the warrants
owned by his wife.
(4) Mr. Scher was removed as a director on June 1, 1999. The number of
shares indicated is based on the number of shares originally issued by the
Company to Mr. Scher and his affiliates; the Company has no information
concerning whether any such shares were subsequently sold or additional shares
were purchased in the public market.
(5) Includes shares held by November Lazar Scher, Inc. and affiliates
thereof, all of which are affiliates of Mr. Scher; includes options to purchase
30,000 shares of common stock granted to Mr. Scher under the Company's 1996
Stock Option Plan, all of which are presently exercisable.
(6) Includes options to purchase 40,000 shares of common stock granted
to Mr. Wallach under the Company's 1996 Stock Option Plan, all of which options
are presently exercisable.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
DIRECTORS AND OFFICERS
Set forth below are the names and other relevant information regarding
the executive officers and directors of the Company as of September 30, 1999.
<TABLE>
<CAPTION>
COMMENCEMENT YEAR
NAME AGE POSITION OF TERM OF OFFICE
- ------------------------- --- ------------------------- -----------------
<S> <C> <C> <C>
Neal K. Wallach 47 Chairman, Chief Executive 1996
Officer and a Director
James Hembree 70 Director 1997
Carl B. Wallach, M.D. 43 Director 1997
</TABLE>
Neal K. Wallach is Chairman, Chief Executive Officer and a director of
the Company. He is responsible for developing the corporate direction and
implementation of business strategies, including product development,
compensation plans, financial planning, inventory management and forecasting.
Mr. Wallach also oversees the company's marketing strategies along with the
development of promotional campaigns. Since the formation of the Company in July
1996, Mr. Wallach has been employed full time by the Company. Mr. Wallach has
more than 20 years of professional and international management consulting
experience with an emphasis on national distribution networks. Mr. Wallach has
held positions with several major national law firms. From 1985 to 1988 he was
General Counsel for Nygard International a large multinational manufacturer in
Winnipeg. From 1988 to 1992 he served as Executive Vice-President of Camp
Beverly Hills, Inc. a national retailer, where he developed and oversaw its
international franchise store network. The development of this network required
Mr. Wallach to oversee all aspects of start-up, marketing, and operations of the
franchise program. Significant hands-on experience was achieved in cost and
quality control, organizational development, and productivity. From 1992 to June
1996 he was a Managing Director of Madison-Waverly Associates, an international
management consulting organization of which he was the sole owner. Mr. Wallach
discontinued Madison-Waverly's business to devote his full time to the Company.
Mr. Wallach is a member in good standing of the State Bar of California and
holds a Bachelor of Arts degree (International Studies) from Tufts University
and a Juris Doctor degree from the University of Virginia School of Law.
James Hembree is retired from over 35 years at Dow Chemical, where he
was President and CEO of Dow Chemical Canada; former director of Dow Chemical
Canada; Dowell-Sclumberger Canada; and several other public companies. Mr.
Hembree retired from Dow in February 1986.
16
<PAGE>
Dr. Carl Wallach, is an internal medicine physician specializing in
gastroenterology, with a private practice in New Jersey. Dr. Wallach has been in
private medical practice in New Jersey for over five years.
BOARD OF DIRECTORS
All directors serve for a term of one year and until their successors
are duly elected. All officers serve at the discretion of the Board of
Directors. None of the Company's directors is a director of any company with
class of securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended, or of any company registered under the Investment
Company Act of 1940, as amended. There are no family relationships among any
members of the Board of Directors or the executive officers or significant
employees of the Company except that Carl Wallach, M.D., a director, is the
brother of Neal K. Wallach, the Chairman, Chief Executive Officer and a director
of the Company.
Gene Scher was a director of the Company until June 1, 1999. The
Company stopped doing business with Mr. Scher's company in Spring 1999 because
such services were no longer needed by the Company. Since the Company no longer
had a business relationship with Mr. Scher's organization, there was no need for
Mr. Scher to sit on the Board of the Company, and accordingly, he was removed
from the board of directors.
ITEM 6. EXECUTIVE COMPENSATION.
EMPLOYMENT CONTRACT
In July 1996 the Company entered into an employment agreement with Neal
K. Wallach. The agreement was amended in June 1999 to among other things
increase his annual base compensation from $96,000 to $120,000 per annum. The
term of Mr. Wallach's employment agreement is five years. The agreement is
automatically extended for consecutive periods of one year each unless either
the Company or Mr. Wallach elects not to renew the agreement by delivering
written notice thereof to the other party not less than 30 days prior to the
expiration of the current term. Mr. Wallach receives a salary of $120,000 per
year. Mr. Wallach will receive a bonus based on a formula tied into the
Company's net operating income and is eligible to receive additional bonuses
from time to time at the sole discretion of the Board of Directors. The
employment agreement is terminable by the Company at any time with cause. In
connection with entering into the employment agreement, Mr. Wallach was granted
200,000 options at an exercise price of $1.50 per share. The grant was made
under the Company's 1996 Stock Option Plan. These options vest at the rate of
40,000 options per year of employment completed. In March 1998 Mr. Wallach was
granted 200,000 additional options at $0.625 per share and in December 1998 was
granted an additional 200,000 options at $0.75 per share. These two option
grants also vest at the rate of 40,000 options per year.
1996 STOCK OPTION PLAN
In July 1996 the Company adopted the 1996 Stock Option Plan to provide
for the grant of incentive and non-qualified stock options to selected
employees, officers and directors. The Plan was amended as of June 2, 1999 to
increase the number of shares available thereunder. The Plan currently allows
for the issuance of options to purchase up to 1,250,000 shares of common stock.
The vesting schedule of the Plan allows for the exercise of a portion of the
options granted beginning after one year with full exercisability of all options
granted not more then ten years after the date of grant. As of June 30, 1999,
options to purchase 240,000 shares of common stock had been
17
<PAGE>
exercised, and options to purchase 480,000 shares of common stock were
outstanding at an average exercise price of $1.11 per share. Of that amount,
120,000 options are or will become exercisable within 60 days. As of June 30,
1999, 405,000 shares of common stock were available for future grants under the
Plan.
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation paid or distributed
during the fiscal years ended June 30, 1997, 1998 and 1999 for services rendered
by the Chief Executive Officer of the Company:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION ALL OTHER
NAME AND PRINCIPAL ------------------------- AWARDS OF COMMON UNDERLYING
POSITION YEAR SALARY (1) BONUSES STOCK OPTIONS COMPENSATION (2)
------------------ ---- ------------ --------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Neal K. Wallach,
Chairman and Chief
Executive Officer 1997 $96,000 -0- 200,000 $11,500
1998 $96,000 -0- 200,000 $11,500
1999 $120,000 -0- 200,000 $17,500
</TABLE>
- ---------------
(1) Includes stock received in lieu of salary.
(2) Represents car allowance and medical insurance premiums paid
by the Company.
No other annual compensation, stock appreciation rights, long-term
restricted stock awards, or long-term incentive plan payouts were awarded to,
earned by or paid to the named executive officer during any of the Company's
last three fiscal years.
OPTION GRANTS TABLE
The following table sets forth certain information concerning grants of
options to the named executive officer during the fiscal year ended June 30,
1999:
<TABLE>
<CAPTION>
NUMBER OF SHARES % OF TOTAL
OF COMMON STOCK OPTIONS GRANTED
UNDERLYING TO EMPLOYEES EXERCISE EXPIRATION
NAME OPTIONS GRANTED EACH FISCAL YEAR PRICE DATE
- --------------------- ---------------- ---------------- -------- ----------
<S> <C> <C> <C> <C>
Neal K. Wallach 200,000 (1) 89.0% $0.75 December 31, 2008
</TABLE>
- -------------
(1) Such options vest at the rate of 40,000 per year.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION TABLE
The following table sets forth certain information concerning options
exercised and outstanding as of the end of the fiscal year ended June 30, 1999:
<TABLE>
<CAPTION>
NO. OF SHARES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE AT FY-END (#) AT FY-END ($)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------- ------------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Neal K. Wallach $160,000 $0(1) 0 / 360,000 $0 / $15,000 (2)
</TABLE>
- ---------------
(1) Based on the closing bid price of the Company's common stock on the
date of grant, which in each case was less than the exercise price of such
options.
18
<PAGE>
(2) Based on the closing bid price of the Company's common stock on
June 30, 1999 of $0.75 per share.
From time to time, Mr. Wallach has chosen to exercise his options, when
permitted, without consideration of Bid price at the moment because of his
belief with respect to the true value of the shares of the Company, regardless
of the market price.
DIRECTOR COMPENSATION
Directors are not paid any cash compensation for serving on the board.
Directors who are not officers or employees of the Company are eligible to
receive grants of non-qualified options under the Company's 1996 Stock Option
Plan.
During the fiscal year ended June 30, 1999, James Hembree, a director
of the Company, was granted 20,000 non-qualified options under the Company's
1996 Stock Option Plan. See "Item 7 -- Certain Relationships and Related
Transactions." No other non-employee director received options during such
fiscal year.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On June 30, 1996, Neal K. Wallach entered into a license agreement with
the Company pursuant to which he licensed to the Company the rights to the
trademarks "Endless Youth," "Power Certified," "Anti-Aging Formulations" and
"Life is SupHerb." The term of the license is five years, and will be extended
for an additional five years unless the Company or Mr. Wallach notifies the
other of its intent not to extend the term. Mr. Wallach receives a royalty equal
to three percent of the Company's gross sales, with a guaranteed annual minimum
of $50,000. Mr. Wallach is also entitled to receive 40 percent of the gross
revenues of any sublicense by the Company. Since 1996, under the provisions of
the License Agreement, Mr. Wallach has received consideration valued at
approximately $180,000, including shares of restricted stock of the Company. The
Company is required to pay all costs and expenses of maintaining current and
effective registrations for the trademarks.
In April 1997 the Company entered into a consulting agreement with
James Hembree. Mr. Hembree is a director of the Company. At the time he entered
into the agreement, Mr. Hembree purchased 25,000 shares of common stock for
$2.00 per share, and was granted warrants to purchase an additional 25,000
shares at $3.50 per share. These warrants expire on August 4, 2002. In
consideration of serving as a director, Mr. Hembree was granted the following
incentive stock options under the Company's 1996 Stock Option Plan, all of which
expire on March 27, 2003: 10,000 options at $2.00 per share; 5,000 options at
$3.00 per share; 10,000 options at $3.75 per share; and 5,000 options at $4.50
per share. To date, none of such options have been exercised. Mr. Hembree's
wife, Joyce Hembree, was also retained as a consultant and was granted warrants
to purchase 3,000 shares of common stock at $2.00 per share. These warrants
expires on August 4, 2002. The Consulting Agreement was amended as of June 18,
1999. Pursuant to such amendment, in exchange for expanding his consulting
services Mr. Hembree received warrants to purchase 64,000 shares at the exercise
price of $0.625 per share and warrants to purchase 24,000 shares at an exercise
price of $0.9375 per share.
19
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES.
COMMON STOCK
The Company is authorized to issue 10,000,000 shares of Common Stock. A
total of 3,242,374 shares of Common Stock have been issued. This amount does not
include 480,000 shares of common stock issuable upon exercise of options and
402,367 shares subject to outstanding warrants. Accordingly, there are 5,875,259
authorized shares of Common Stock which are not issued or reserved for issuance.
These shares may be issued at the discretion of the Board of Directors of the
Company in accordance with the Nevada General Corporation Law (the "NEVADA
LAW"). Unless otherwise required by Nevada law, as in the case of certain
extraordinary actions, stockholder approval will not be required for the
issuance of additional shares of Common Stock.
The holders of Common Stock are entitled to cast one vote for each
share held at all stockholder meetings for all purposes, including the election
of directors, and to share equally on a per share basis in such dividends as may
be declared by the Board of Directors out of funds legally available therefor.
Upon liquidation or dissolution, each outstanding share of Common Stock will be
entitled to share equally in the assets of the Company legally available for
distribution to stockholders, after the payment of all debts and other
liabilities. No holder of Common Stock has a preemptive or preferential right to
purchase or subscribe for any unissued or additional authorized stock or any
securities of the Company convertible into shares of its Common Stock.
The Common Stock does not have cumulative voting rights, which means
that the holders of more than 50 percent of the Common Stock voting for the
election of directors can elect 100 percent of the directors of the Company if
they choose to do so. The By-Laws of the Company require that a majority of the
issued and outstanding shares of the Company be represented to constitute a
quorum and transact business at a stockholders' meeting.
PREFERRED STOCK
The Board of Director has the authority, without further action by the
shareholders, to issue up to 1,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversions rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms and the number of shares
constituting any series or the designation of such shares, without further vote
or actions by stockholders. The Board has not designated any shares of Preferred
Stock. Therefore, the full 1,000,000 shares of Preferred Stock are available for
issuance in series. The issuance of Preferred Stock could adverse affect the
voting power of holders of Common Stock and the likelihood that such holders
would receive dividends and dividend payments and payments upon liquidation
could have the effect of delaying, deferring or preventing a change of control
in the Company. The Company has no present plan to issue any shares of Preferred
Stock.
TRANSFER AGENT
The Transfer Agent and Registrar for the Common Stock is U.S. Stock Transfer
Company.
ANTI-TAKEOVER PROVISIONS
The Company is subject to Sections 78.411-.444 of the Nevada Law, an
anti-takeover law, which may discourage certain types of transactions involving
an actual or potential change in control of the Company, including transactions
in which the stockholders might otherwise receive a premium for their shares
over the current prices, and may limit the ability of the
20
<PAGE>
stockholders to approve a transaction that they may deem to be in their best
interests.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The Company's common stock trades on the OTC Bulletin Board of the
National Association of Securities Dealers, Inc. The following is the high and
low bid price for the common stock for each quarter within the last two fiscal
years and the subsequent interim quarters.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH BID LOW BID
<S> <C> <C>
March 31, 1997 1.50 1.25
June 30, 1997 1.50 1.25
September 30, 1997 1.25 1.00
December 31, 1997 .90 .60
March 31, 1998 .625 .25
June 30, 1998 1.25 .50
September 31, 1998 1.25 .50
December 31, 1998 .625 .425
March 31, 1999 2.25 1.00
June 30, 1999 .75 .50
</TABLE>
As of June 9, 1999 there were 47 holders of record of the Company's
common stock.
DIVIDEND POLICY
The Company has never paid dividends on its common stock. The Company
currently intends to retain all future earnings to fund operations and the
expansion of its business. The determination of payment of dividends in the
future will be within the discretion of the Company's Board of Directors and
will depend on the earnings, capital requirements and operating and financial
condition of the Company, among other factors.
ITEM 2. LEGAL PROCEEDINGS.
The Company is not a party to any currently pending legal proceedings
or governmental authority proceedings, and the Company is aware of no
contemplated proceedings.
The Company has not been materially affected by nor has it incurred any
significant cost related to compliance with federal, state or local
environmental laws, and does not anticipate any such material effect.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
21
<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
NOTE: SOME OF THE TRANSACTIONS SET FORTH BELOW MAY QUALIFY FOR OTHER
REGISTRATION EXEMPTIONS UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT")
IN ADDITION TO THE EXEMPTIONS SPECIFICALLY MENTIONED.
With respect to grants of options for employees, the intrinsic value
thereof was determined based on the closing bid price of the Company's common
stock on the OTC Bulletin Board (the "market price") within a period of time
immediately prior to the grant. Except as noted below, with respect to grants of
warrants to non-employees, the fair value of the options was based on
negotiations at arm's length with the warrant holder, and in no case involved an
exercise price below the market price on the date of grant.
On July 24, 1996, the Company issued 1,135,000 shares of common stock
to EYP and 90,000 shares to Neal K. Wallach, in connection with the initial
incorporation and organization of the Company. The purchase price was cash in
the amount of $0.005 per share. The shares were issued under Section 4(2) of the
Securities Act.
On July 31, 1996, the Company issued 200,000 stock options to Neal K.
Wallach under its 1996 Stock Option Plan. Such options vest at the rate of
40,000 per year, and had an excessive price of $1.50 per share. Such options
were issued pursuant to Rule 701 under the Securities Act.
On January 13, 1997, the Company issued an aggregate of 470,667 shares
of common stock to approximately 30 purchasers. Two of the purchasers,
representing 98,925 shares, received stock in consideration for services
previously rendered to the Company in the production of its infomercial also,
valued at $1.50 per share. The purchasers of the remaining 371,742 shares paid a
cash consideration of $1.50 per share, for aggregate proceeds to the Company of
$557,613. All of these shares were issued under Rule 504 under the Securities
Act. No underwriter or sales agent was used.
On March 14, 1997, the Company issued 168,000 shares at $1.50 per share
to an investor, for aggregate proceeds to the Company of $252,000 in cash. The
shares were issued under Rule 504 under the Securities Act.
On April 18, 1997, the Company issued an aggregate of 27,920 shares of
common stock to eight persons who had previously rendered services to the
Company. Such shares were valued at $1.50 per share. These sales were made under
Rule 504 under the Securities Act. In addition, warrants to purchase an
aggregate of 7,200 shares of common stock at exercise prices ranging from $1.50
to $2.50 per share were issued to five persons who had previously rendered
services to the Company. These warrants were issued under Section 4(2) of the
Securities Act and Rule 506 thereunder.
On August 12, 1997, the Company issued an aggregate of 27,158 shares of
common stock to six persons in consideration of services previously rendered to
the Company in connection with the production of its infomercial. The shares
were valued at $1.50 per share. The shares were issued under Rule 504 under the
Securities Act.
On August 20, 1997, James Hembree, a director of the Company, purchased
25,000 shares at $2.00 per share, for a total consideration of $50,000. Such
shares were issued under Rule 504 under the Securities Act. Also on that date,
Mr. Hembree was issued warrants to purchase 25,000 shares at an exercise price
of $3.50 per share. The warrants were issued under Rule 701 under the
22
<PAGE>
Securities Act. See "Item 7 -- Certain Relationships and Related
Transactions."
On September 30, 1997, a single purchaser was issued warrants to
purchase 7,000 shares of common stock at $2.50 per share. These warrants were
issued in consideration of services provided to the Company. The warrants were
issued under Section 4(2) of the Securities Act.
On December 17, 1997, the Company issued warrants to purchase an
aggregate of 22,000 shares with an exercise price of $0.625 per share to three
persons, including James Hembree, a director of the Company. Such warrants were
issued for services previously provided to the Company. The warrants were issued
under Section 4(2) of the Securities Act. See "Item 7 -- Certain Relationships
and Related Transactions."
On December 22, 1997, the Company issued to James Hembree, a director
of the Company, 10,000 shares of its common stock in connection with his
consulting agreement. Such shares were issued under Rule 504 under the
Securities Act. See "Item 7 -- Certain Relationship and Related Transactions."
On December 27, 1997, as consideration for a loan made by James Hembree
and two other persons to the Company, the Company issued warrants to purchase an
aggregate 38,500 shares of common stock at an exercise price of $0.625 per
share. Such warrants were issued under Section 4(2) of the Securities Act.
On March 5, 1998, the Company issued 13,333 shares of its common stock
to a company domiciled in Vancouver, British Columbia that had provided services
to the Company pursuant to a written agreement. Such shares were issued under
Rule 903 of Regulation S under the Securities Act, in reliance on a
certification that such company was not a US Person for purposes of Regulation S
and agreed not to dispose of such shares in the United States except in
compliance with Regulation S. The shares are legended to such effect.
On March 27, 1998, the Company issued an aggregate of 188,000 shares of
common stock to eleven persons who had previously provided services to the
Company in connection with the production of its infomercial. 10,000 of these
shares were issued to Neal K. Wallach in lieu of salary. The shares were valued
at $1.25 per share, which was fair market price at the time. Such shares were
issued under Rule 504 under the Securities Act. In addition, the Company issued
an aggregate of 7,500 shares to two other persons who had provided services to
the Company in connection with the production of its infomercial. These shares
were issued under Section 4(2) under the Securities Act and also valued at $1.25
per share. Also on that date, the Company issued warrants to purchase an
aggregate of 105,500 shares of common stock at exercise prices ranging from
$0.625 to $3.75 per share. These included 30,000 warrants issued to Gene Scher,
a director of the Company. Such warrants were issued under Section 4(2) under
the Securities Act. Also on that date, the Company issued: (i) stock options to
Neal K. Wallach, vesting at a rate of 40,000 per year, having an exercise price
of $0.625 per share, and (ii) 30,000 options to James Hembree, vesting
immediately, at exercise prices ranging from $2.00 to $4.00 per share. All of
such options were issued pursuant to Rule 701 under the Securities Act.
On June 29, 1998, the Company issued an aggregate of 25,000 shares of
common stock to two persons who provided consulting services to the company. In
addition, the Company issued 12,000 shares to a person who had previously loaned
$5,000 to the Company, and who agreed to convert such loan into shares of the
Company's common stock and to purchase for cash an additional $4,000 worth of
common stock for cash. Also on that date, the Company issued 110,266
23
<PAGE>
shares of common stock to Neal K. Wallach, as repayment of a loan by Mr. Wallach
to the Company of $42,500 plus interest, and in lieu of a further $40,200 owed
as compensation under Mr. Wallach's employment contract with the Company for
services rendered through May 30, 1998. All such shares were issued under Rule
504 under the Securities Act and were valued at $1.00 per share.
On July 7, 1998, in lieu of paying certain royalties to a person who
had provided services to the Company, the Company issued to such person 80,000
shares of its common stock, which were valued at $1.25 per share. Such shares
were issued under Rule 504 under the Securities Act.
On October 6, 1998, the Company issued an aggregate of 114,000 shares
of its common stock to three persons who had provided services in connection
with its infomercial to the Company, which it valued at $0.75 per share. Such
shares were issued under Rule 504 under the Securities Act. Also on that date,
the Company issued warrants to purchase an aggregate of 55,000 shares of common
stock to two persons who had provided services to the Company. The exercise
prices ranged from $0.75 to $1.75 per share. Such warrants were issued under
Section 4(2) under the Securities Act.
On December 22, 1998, the Company issued an aggregate of 155,200 shares
of common stock to various persons who had provided services to the Company in
connection with its infomercial. In addition, the Company issued 360,197 shares
to Neal K. Wallach, in lieu of $199,800 in compensation owed for a portion of
the period July 1, 1996 through December 31, 1998 and for $34,328 in unpaid
licensing fees. All of such shares were issued under Rule 504 under the
Securities Act and were valued at $0.65 per share. In addition, the Company
issued 26,666 shares of common stock to a Company domiciled in Vancouver,
British Columbia that rendered services to the Company. Such shares were issued
under Rule 903 of Regulation S under the Securities Act, in reliance on a
certification that such company was not a US Person for purposes of Regulation S
and agreed not to dispose of such shares in the United States except in
compliance with Regulation S. The shares are legended to such effect. Also, the
Company issued a warrant to purchase 7,500 shares of common stock at an exercise
price of $0.625 per share in connection with services rendered to the Company.
Such shares were issued under Section 4(2) under the Securities Act. Also on
that date, the Company issued 30,000 options to each of Gene Scher and Carl
Wallach, vesting immediately, at exercise prices ranging from $0.75 to $2.00 per
share. Such options were issued pursuant to Rule 701 under the Securities Act.
On December 31, 1998, the Company issued 200,000 stock options to Neal
K. Wallach, vesting 40,000 per year, at an exercise price of $0.75 per share.
Such options were issued pursuant to Rule 701 under the Securities Act.
On January 27, 1999, the Company issued 16,500 shares of its common
stock in connection with the exercise of a warrant by a company domiciled in
Vancouver, British Columbia. Such shares were issued under Rule 903 of
Regulation S under the Securities Act, in reliance on a certification that such
company was not a US Person for purposes of Regulation S and agreed not to
dispose of such shares in the United States except in compliance with Regulation
S. The shares are legended to such effect.
On June 2, 1999 the Company's Board of Directors authorized the
issuance of an aggregate of 39,367 shares of common stock to five persons who
had previously rendered various services to the Company. Such shares were issued
under Rule 504 under the Securities Act. Also on that date, Neal K. Wallach was
issued 40,000 shares in lieu of salary through May 30, 1999. Such shares were
issued under Rule 701 under of the Securities Act. All of such shares
24
<PAGE>
were valued at $1.25 per share. Also on that date, the Company issued warrants
to purchase an aggregate of 46,667 shares at exercise prices ranging from $1.50
to $1.75 per share to two persons who had provided services to the Company. Such
warrants were issued under Section Rule 701 under the Securities Act. Also on
that date, the Company issued 10,000 options to each of James Hembree and Carl
Wallach at an exercise price $1.50 per share. Such options vest immediately and
expire on June 1, 2004. Such options were issued pursuant to Rule 701 under the
Securities Act.
On June 18, 1999 the Company's Board of Directors authorized the
issuance of 7,000 shares to The Investor Relations Company Limited in connection
with consulting services to be provided to the Company. The number of shares are
determined pursuant to the contract as equalling $7,500 worth of stock based on
its average bid price for the previous 30-day period. Such shares were issued
under Rule 701 under the Securities Act. Also on that date, Neal K. Wallach was
issued 240,000 shares on account of previous option exercises under the 1996
Stock Option Plan. Such shares were also issued under Rule 701 under the
Securities Act. Also on that date, in connection with the modification of his
consulting agreement (see "Item 7 -- Certain Relationships and Related
Transactions"), the Company issued to James Hembree warrants to purchase 64,000
shares at an exercise price of $0.625 per share and warrants to purchase 24,000
shares at an exercise price of $0.9375 per share. All of such warrants expire on
June 18, 2001, and were issued pursuant to Rule 701 under the Securities Act.
Also on that date, James Hembree was awarded an additional 10,000 nonqualified
options under the 1996 Stock Option Plan. Such options have an exercise price of
$1.50, vest immediately, and expire on June 1, 2004. Such options were issued
pursuant to Rule 701 under the Securities Act.
On June 20, 1999, James Hembree exercised 64,000 options at $0.625 per
share for an aggregate exercise price of $40,000. Such shares were issued
pursuant to Rule 701 under the Securities Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation provide that no director or
officer shall have any personal liability to the Company or its stockholders for
damages for breach of fiduciary duty as a director or officer, except that
liability will not be eliminated or limited for a director or officer for (i)
acts or omissions which involve intentional misconduct, fraud or a knowing
violation of law, or (ii) the payment of distributions in violation of Section
78.300 of the Nevada Law.
The Company maintains director and officer liability insurance. There
are no pending claims for indemnification, nor is the Company aware of any
pending or threatened claims which would result in a claim for indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to director, officers and controlling persons of the
Company under the foreign provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
25
<PAGE>
PART F/S
FINANCIAL STATEMENTS
Beckman Kirkland & Whitney
Certified Public Accountants
5210 Lewis Road, Suite 14
Agoura Hills, CA 91301
November 3, 1999
Board of Directors and Shareholders
Endless Youth Products, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheets of Endless Youth Products, Inc.,
as of June 30, 1999 and 1998, and the related statements of operations, retained
deficit, and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Endless Youth Products, Inc.,
as of June 30, 1999 and 1998, and the results of its operations and cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
Beckman Kirkland & Whitney
26
<PAGE>
ENDLESS YOUTH PRODUCTS
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
1999 1998
------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 355,434 $ 471
Prepaid advertising (Notes 1 & 2) 0 121,758
------------- --------------
TOTAL CURRENT ASSETS 355,434 122,229
Property and Equipment
net of accumulated depreciation (Notes 1 & 3) 8,510 13,448
------------- --------------
TOTAL ASSETS $ 363,944 $ 135,677
============= ==============
LIABILITIES AND SHAREHOLDERS'
(DEFICIT) EQUITY
CURRENT LIABILITIES
Accounts payable $ 236,528 $ 204,305
Deferred Revenue (Note 5) 283,333 0
Advances from shareholders (Note 6) 75,388 97,113
------------- --------------
TOTAL LIABILITIES 595,249 301,418
SHAREHOLDERS' DEFICIT
Common stock, $.001 par value.
Authorized 4,000,000 shares; issued
and outstanding 3,295,708 and
2,016,178 at June 30, 1999 and
June 30, 1998, respectively (Note 7) 3,295 2,017
Additional paid-in capital 1,541,280 952,881
Retained deficit (1,775,880) (1,120,639)
------------- --------------
Total shareholders' Deficit (231,305) (165,741)
------------- --------------
TOTAL LIABILITIES AND
SHAREHOLDER'S DEFICIT EQUITY $ 363,944 $ 135,677
============= ==============
</TABLE>
See accompanying notes to financial statements
27
<PAGE>
ENDLESS YOUTH PRODUCTS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the years ended June 30,
1999 1998
--------------- --------------
<S> <C> <C>
Gross Receipts $ 6,578,259 $ 225,896
Less: Returns and allowances 1,544,701 14,077
--------------- --------------
Net Sales 5,033,558 211,819
Cost of Sales 4,527,856 70,059
--------------- --------------
Gross Profit 505,702 141,760
Selling, General and Administrative
Expenses 1,160,943 681,366
--------------- --------------
Income (Loss) from Operations (655,241) (539,606)
Other Income and (Expenses)
Interest Income 0 340
Interest Expense 0 (8,392)
--------------- --------------
Income (Loss) before income taxes (655,241) (547,658)
Provision for income taxes - (Note 4) 0 0
--------------- --------------
Net income (Loss) $ (655,241) $ (547,658)
=============== ==============
Loss per share amounts:
Basic:
Net income (loss) $ (0.28) $ (0.28)
Diluted:
Net income (loss) $ (0.25) $ (0.28)
Weighted average common and
common equivalent shares:
Basic 2,328,944 1,953,833
=============== ==============
Diluted 2,656,949 1,980,108
=============== ==============
</TABLE>
See accompanying notes to financial statements
28
<PAGE>
ENDLESS YOUTH PRODUCTS
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For the years ended June 30,
1999 1998
------------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $ (655,241) $ (547,658)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation & Amortization 4,939 3,267
Decrease in inventory 0 35,903
Decrease in prepaid advertising 121,758 147,339
Increase in deferred revenue 283,333 0
Increase in accounts payable 32,221 76,647
------------ -----------
NET CASH USED IN OPERATING ACTIVITIES (212,990) (284,502)
------------ -----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment 0 (10,090)
------------ -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 0 (10,090)
------------ -----------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 589,678 169,612
Advances from (Repayments to) shareholders (21,725) 83,600
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 567,953 253,212
------------ -----------
NET CHANGE IN CASH 354,963 (41,380)
CASH AT BEGINNING OF YEAR 471 41,851
------------ -----------
CASH AT END OF YEAR $ 355,434 $ 471
============ ===========
Interest expense paid during the period was: $ 0 $ 8,392
</TABLE>
See accompanying notes to financial statements
29
<PAGE>
ENDLESS YOUTH PRODUCTS
STATEMENTS OF SHAREHOLDERS EQUITY
<TABLE>
<CAPTION>
ADDITIONAL ACCUMU- NET
COMMON STOCK PAID IN LATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
--------------- ------------- ------------------ ------------------- -----------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1997 1,891,587 $1,892 $ 783,394 $ (572,981) $ 212,305
Stock issued for services 79,591 80 109,532 109,612
Stock issued for cash 45,000 45 59,955 60,000
Net loss (547,658) (547,658)
--------------- ------------- ------------------ ------------------- -----------------
Balance at June 30, 1998 2,016,178 $2,017 $ 952,881 $ (1,120,639) $(165,741)
--------------- ------------- ------------------ ------------------- -----------------
Stock issued for services 1,045,763 1,045 421,207 422,252
Stock issued for cash 233,767 233 167,192 167,425
Net loss (655,241) (655,241)
--------------- ------------- ------------------ ------------------- -----------------
Balance at June 30, 1999 3,295,708 $3,295 $ 1,541,280 $ (1,775,880) $(231,305)
=============== ============= ================== =================== =================
</TABLE>
See accompanying notes to financial statements
30
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Endless Youth Products, Inc., (the Company) incorporated July of 1996
in the State of Nevada. The Company engages in the business of developing,
marketing and distributing proprietary vitamins, nutritional, skin care,
personal care, and other anti-aging products under the "Endless Youth" trade
name. The Company was in the development stage through June 30, 1998. The year
ending June 30, 1999 is the first year during which it is considered an
operating company.
Cash Equivalents
The Company considers all highly liquid certificates of deposit with an
original maturity of three months or less to be cash equivalents.
Depreciation and Amortization
Depreciation of property and equipment is computed using the
straight-line method based on estimated useful lives ranging as follows:
<TABLE>
<S> <C>
Furniture and Fixtures 7 years
Computer Equipment 5 years
</TABLE>
Prepaid Advertising Cost
Production costs related to the Company's direct response advertising
programs are capitalized and amortized based on the ratio that current period
revenues bear to the total of current and estimated future period revenues for
that direct-response-advertising cost pool.
Revenue Recognition
Revenue from product sales is recognized upon shipment. Test market
sales experience as well as research conducted by outside consultants provides
the Company with a reasonable basis for estimating future returns.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
Provisions (benefits) for federal and state income taxes are calculated
on reported financial statement income (loss) based on current tax law and also
include the cumulative effect of any changes in tax rates from those used
previously in determining deferred tax assets and liabilities. Such provisions
(benefits) differ from the amounts currently payable because certain items of
income and expense, known as temporary differences, are recognized in different
tax periods for financial reporting purposes than for income tax purposes.
31
<PAGE>
Earnings (Loss) Per Share
The Company adopted Statement of Financial Accounting Standards No.
128, "Earnings per Share" (SFAS 128). This statement requires the company to
report basic and diluted earnings (loss) per share. Basic earnings per share is
computed by dividing net income (loss) available to common stockholders by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share include the effect of the additional common shares that would
have been outstanding if dilutive stock options had been exercised.
The following table summarized the calculation of basic and diluted
earnings per share for the years ended June 30:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Numerator:
Basic and diluted earnings per share - net loss $ (655,241) $ (547,658)
Denominator:
Basic earnings per share - weighted average number
of common shares outstanding during the year 2,328,944 1,953,833
Incremental common shares attributable to
assumed exercise of options and warrants 328,005 26,275
Denominator for diluted earnings per share 2,656,949 1,980,108
Basic earnings per share $ (.28) $ (.28)
Diluted earnings per share $ (.25) $ (.28)
</TABLE>
Stock Based Compensation
The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees". Compensation cost for stock options
and warrants is measured at the excess of the quoted market price of the
Company's stock at the date of grant over the amount the employee or outside
consultant must pay to acquire the stock. Restricted stock is recorded as
compensation cost over the requisite vesting periods based on the market value
on the date of grant. Compensation cost for shares issued under performance
share plans is recorded based upon the current market value of the Company's
stock at the time the warrants are granted.
NOTE 2 - PREPAID ADVERTISING COST
Prepaid advertising cost consists of infomercial production costs,
which are capitalized and amortized based on current and estimated future
revenues. At June 30, 1999 the remainder of these direct responses advertising
costs have been fully amortized. Amortization expense was $121,758 and $147,339
for the years ended June 30, 1999 and June 30, 1998, respectively.
32
<PAGE>
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment consist of the following at June 30:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Furniture and Fixtures $ 2,986 $ 2,986
Computer Equipment 15,072 15,072
less accumulated depreciation (9,548) (4,610)
-------- --------
$ 8,510 $ 13,448
======== ========
</TABLE>
Depreciation expense charged to operations was $4,938 and $3,266 for
years ended June 30, 1999 and 1998.
NOTE 4 - INCOME TAXES
There is no current or deferred income tax expense for the years ended
June 30, 1999 and June 30, 1998. The Company incurred net operating losses of
$655,241 and $547,658 for the years ended June 30, 1999 and June 30, 1998,
respectively. As of June 30, 1999, the Company has net operating loss
carryforwards of $1,614,414. These losses will expire between 2012 and 2014 if
not utilized.
SFAS 109 requires that the future tax benefit of net operating loss
carryforwards be recorded as an asset using current tax rates to the extent that
management assesses the utilization of such carryforwards to be more likely then
not. The Company has recorded a deferred tax asset of $548,900 with a valuation
allowance of $548,900.
The following reconciles the federal statutory income tax rate to the effective
rate of the provision for income taxes.
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Federal Statutory rate 34 % 34 %
Valuation allowance adjustment (34)% (34)%
------ ----
Effective rate 0 % 0 %
====== ====
</TABLE>
NOTE 5 - DEFERRED REVENUE
In June 1999 the Company entered into an agreement in which the Company
received a license fee in exchange for certain rights and privileges relating to
the Endless Youth product line. The company will recognize revenue relating to
this agreement over six months.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company has a license agreement with one of its officers that is
also a director and shareholder. Under the terms of the agreement, the Company
retains the sole right to market goods and services under the Endless Youth
trade name throughout the world. The licensor extended such worldwide rights to
the company following the initial domestic-only grant of these rights. The
Company is to pay the licensor a royalty of 3% of gross sales with a minimum
royalty of $50,000 per year. The licensor is to receive 40% of any revenues
generated from any sublicense or similar granting of rights agreements
The Company had advances from various shareholders of $75,388 and
$97,113 as of June 30, 1999 and June 30, 1998, respectively. In July of 1998,
$62,113 of advances was converted to 110,266 shares of stock, based on the
market value of stock at the time of conversion.
NOTE 7 - SHAREHOLDERS' EQUITY
33
<PAGE>
During the year ended June 30, 1999 and 1998 the Company issued
1,045,763 and 79,591 shares of common stock respectively, in exchange for
services rendered. The cost of the services has been charged to operations, and,
additional paid in capital has been increased by $421,207 and $109,532 for the
years ended June 30, 1999 and 1998 respectively, representing the excess fair
market value of the services over the par value of the common stock.
The Company has two stock option plans that provide for the granting of
either incentive stock options or non-qualified stock options to key employees
and non-employees.
During the year-ended June 30, 1998, the Company granted 200,000
incentive stock options to employees which vest at 40,000 options per year.
During the year ended June 30, 1999, an additional 200,000 incentive stock
options were granted which vest at 40,000 per year. As of June 30,1999, 360,000
incentive stock options were outstanding with an exercise price of between $.625
and $1.50 per share and will expire between July 2001 and March 2008.
During the year ended June 30, 1998 the Company granted 30,000 non qualified
options with immediate vesting, and during the year ended June 30,1999, 90,000
non-qualified options with immediate vesting were granted. As of June 30, 1999,
120,000 non-qualified options were outstanding with an exercise price between
$.75 and $4.50 per share and will expire between December 2001 and June 2004.
The Company issued warrants to purchase 250,501 and 198,000 shares of
common stock to outside consultants during the years ended June 30, 1999 and
June 30, 1998, respectively. The exercise price of the warrants range from $.625
to $3.50 per share and expire between April 2000 and December 2004.
Changes in the status of options are summarized as follows for fiscal
years ended June 30:
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Outstanding at beginnings of year 350,000 160,000
Granted 290,000 230,000
Exercised (160,000) (40,000)
Expired 0 0
-------- --------
Outstanding at end of year 480,000 350,000
======== ========
Price range of options:
Outstanding at end of year $.625-$4.50 $.625-$4.50
</TABLE>
Changes in the status of warrants are summarized as follows for fiscal years
ended June 30:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Outstanding at beginnings of year 205,200 7,200
Granted 250,501 198,000
Exercised (69,834) 0
Expired (2,000) 0
-------- --------
Outstanding at end of year 383,867 205,200
======== ========
</TABLE>
NOTE 7 - SHAREHOLDERS' EQUITY (continued)
The Company applies APB 25 in accounting for its stock options and
warrants. The option price equals or exceeds the fair market value of the common
shares on the date of the grant and, accordingly, no compensation cost has been
recognized under the provisions of APB 25 for stock options. Under SFAS 123,
compensation cost is measured at the grant date based on the value of the award
and is recognized over the service (or vesting) period. Had
34
<PAGE>
compensation cost for Company's stock option and warrant agreements been
determined under SFAS 123, based on the fair market value at the grant dates,
the Company's pro forma net earnings and net earnings per share would have
been reflected as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Net earnings
As reported ($655,241) ($547,658)
Pro forma ($685,787) ($556,364)
Net earnings per share
As reported ($.28) ($.28)
Pro forma ($.29) ($.28)
</TABLE>
The fair value of each option and warrant is estimated on the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions used for those options and warrants granted during
years ended June 30, 1999 and 1998, respectively: dividend yield of 0%, expected
volatility of 58%, risk-free interest rates of 5%, and expected lives ranging
from 1 to 10 years.
NOTE 8 - CONCENTRATION OF CASH
The Company held approximately $255,434 in excess of federal insurance
limits on accounts of financial institutions on June 30, 1999
NOTE 9 - YEAR 2000 COMPLIANCE
The Company primarily uses licensed software products in its operations
with a significant portion of processes and transactions centralized in one
particular software package. Management plans to upgrade to the most current
version of this and other software packages which, among other things, are Year
2000 compliant. Cost of the project is not expected to have a material effect on
the Company's financial statements.
PART III
ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements filed as part of the registration
statement: see financial statements beginning on page 26.
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
3.1* Articles of Incorporation, as amended.
3.2* Bylaws.
10.1* License Agreement dated as of June 30, 1996 between the
Company and Neal K. Wallach.
10.2* Letter Agreement dated as of March 17, 1998 between Vendor
Services and Neal K. Wallach, as amended by a First Amendment
dated as of December 28, 1998, and a Second Amendment dated
March 19, 1999.
</TABLE>
35
<PAGE>
<TABLE>
<S> <C>
10.3* Agreement dated December 1, 1997 between the Company and
Schulberg Media Works, Inc. and letter agreement amending such
agreement dated March 11, 1998.
10.4* Agreement dated January 21, 1999 between the Company and
Infomercial Development Services, Inc.
10.5* Amended and Restated Employment Agreement dated as of June 2,
1999 between Neal K. Wallach and the Company.
10.6* 1996 Stock Option Plan.
10.7* Amendment No. 1 to Stock Option Plan.
10.8* Amendment No. 2 to Stock Option Plan.
10.9* Consulting Agreement dated August 4, 1997 between the Company
and James Hembree.
10.10* Amendment No. 1 to Hembree Consulting Agreement.
10.11* Consulting Agreement dated June 25, 1999 between the Company
and The Investor Relations Company Limited.
10.12* Stock Warrant Agreement dated June 14, 1999 between the
Company and The Investor Relations Company Limited.
10.13* Letter, dated January 27, 1999, from Company to Brian Kelly,
regarding financing for Le Solution Derma System.
10.14* Agreement, dated October 1, 1997, between the Company and
Leonard Sands.
10.15* Amendment, dated September 24, 1999, to Agreement between the
Company and Vendor Services, Inc.
10.16 General Mutual Release and Settlement Agreement, dated
July 7, 1999, between the Company and Sun Ten Laboratories.
11.1* Statement re: calculation of per-share earnings.
23.1* Consent of Beckman Kirkland & Whitney.
27.1* Financial Data Schedule.
*Previously filed as an exhibit to this Form 10-SB.
</TABLE>
36
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this Amendment No.2 to Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
ENDLESS YOUTH PRODUCTS, INC.
[REGISTRANT]
Date: January 6, 2000 By: /s/ Neal K. Wallach
-----------------------------------
Neal K. Wallach, Chairman and
Chief Executive Officer
37
<PAGE>
Exhibit 10.16
GENERAL MUTUAL RELEASE AND SETTLEMENT AGREEMENT
I. PARTIES
This General Mutual Release and Settlement Agreement ("Agreement") is
entered into on the dates set forth below next to the signatures below by and
between ENDLESS YOUTH PRODUCTS, INC., a Nevada Corporation ("ENDLESS YOUTH"),
and SUN TEN LABORATORIES, INC., a California corporation ("SUN TEN"), each
referred to individually as "Party" and jointly as "Parties".
II. RECITALS
2.1 ENDLESS YOUTH is the owner of nutritional supplement products
called "ENDLESS YOUTH AM" and "ENDLESS YOUTH PM" ("Products").
2.2 In or about 1997 ENDLESS YOUTH contracted wth SUN TEN for the
manufacture of certain packets of capsules of the Products.
2.3 In the spring of 1998, as a result of a contract wtih ENDLESS
YOUTH, VENDOR SERVICES, INC. contracted with SUN TEN for the production of
tablets of the Products, from which ENDLESS YOUTH expected to receive income.
2.4 In December 1997, STEPHEN PAUL, an employee of SUN TEN, appeared,
without compensation from SUN TEN, for the purpose of appearing at a
production of a broadcast program made for the purpose of marketing the
Products.
2.5 Some of the tablets manufactured for VENDOR SERVICES, INC.,
specifically the ENDLESS YOUTH AM, disintegrated after a period of shelf
life. These Products could not be distributed, were quarantined and are held
by VENDOR SERVICES, INC.
2.6 ENDLESS YOUTH lost money as a result of this manufacturing process,
the exact
1
<PAGE>
amount of which is unknown.
2.7 ENDLESS YOUTH has brought to the attention of, and claimed damages
from SUN TEN of a problem regarding the contents shown on the label of the
Products.
2.8 ENDLESS YOUTH has brought to the attention of, and claimed damages
from SUN TEN, of a possible claim for damages as a result of claims regarding
the ingredients of the Products as set forth in the broadcast program for
marketing ("Infomercial") in which Stephen Paul appeared.
2.9 The parties desire to settle all of their claims arising from the
direct contractual relationship that SUN TEN had with ENDLESS YOUTH, or
claims of ENDLESS YOUTH which arise or are related to and through the
contract for manufacture of the Products for VENDOR SERVICES, INC.
NOW, THEREFORE, to settle all claims related to the contractual
relationship of SUN TEN LABORATORIES, INC. with ENDLESS YOUTH PRODUCTS, INC.,
or the financial claims or losses of ENDLESS YOUTH related to SUN TEN's
contract with VENDOR SERVICES, INC. for the manufacture of the Products, or
labeling or claims regarding ingredients of the Products, the parties agree
as follows.
III. RELEASE
3.1 GENERAL RELEASE. ENDLESS YOUTH and SUN TEN, for themselves and for
their respective successors, assigns, representatives, agents, attorneys,
employees, shareholders, directors and officers, and each of them, do hereby
absolutely, fully and forever, release, relieve, waive, relinquish and
discharge each other and their successors, assigns, representatives, agents,
attorneys,
2
<PAGE>
and each of them, of and from any and all manner of action or actions, cause
or causes of action, suits, debts, deficiencies, liabilities, demands,
obligations, costs, expenses, sums of money, controversies, damages, accounts,
reckonings and liens of every kind or nature whatsoever, whether known or
unknown, suspected or unsuspected, which relate to, or arise out of any
matter, fact or transaction which occurred at any time between these parties,
prior to the date of this Agreement, whether or not the right to sue thereon
is accrued, known or suspected.
3.2 BAR OF ACTION. Upon execution by all parties to this Agreement,
this Agreement shall be effective as a full and final accord and satisfaction
and settlement of, and as a bar to each and every manner of action or
actions, cause or causes of action, suits, debts, deficiencies, liabilities,
demands, obligations, costs, expenses, sums of money, controversies, damages,
accounts, reckonings and liens of every kind or nature, which any party has
or has had against any other party to hereto. It is the specific intent of
the parties that this will fully and finally absolutely and forever settle
any and all claims, disputes and differences which do now exist or heretofore
have existed between the parties to this agreement related in any way to the
matters set forth in the Recitals listed above, and that these mutual
releases herein given shall be and will remain in effect for all time as full
and complete General Mutual Releases notwithstanding the discovery of any
additional facts which are related to those claims or potential claims set
forth in the Recitals above.
3.3 TERMS OF SETTLEMENT. SUN TEN shall pay to ENDLESS YOUTH the sum of
ONE HUNDRED THIRTY THOUSAND and 00/100 Dollars ($130,000.00) which shall be
due and payable immediately upon execution of this Agreement and shall be
paid by wire transfer to the account of ENDLESS YOUTH PRODUCTS, INC. as
instructed by NEAL WALLACH, its President, and delivered to JOSEPH E. MUDD,
attorney for SUN TEN.
3.4 COMPROMISE. The parties agree that this is a compromise
settlement. Neither SUN
3
<PAGE>
TEN nor its employees, agents, shareholders, directors or assigns, by means
of this Agreement, intend to make any specific admissions or representations
concerning their liability, or the amount of damages which may or may not
have been suffered by ENDLESS YOUTH.
3.5 CONFIDENTIALITY. It is understood and agreed by the parties to
this Agreement that the contents and existence of this Agreement shall be
considered confidential and shall not be discussed with or disclosed to any
third person or entity by either party, except with the prior written consent
and approval of the other party, or upon the order of a court of competent
jurisdiction. Violation of this provision compelling confidentiality shall
render the party disclosing the contents or existence of this Agreement
liable for consequential damages suffered by the other party on account of
such disclosure.
3.6 NATURE OF PAYMENT TO BE MADE. Payment to be made by SUN TEN is
agreed to represent a compromise and may be deemed by ENDLESS YOUTH as
licensing amounts which it would have received from third parties on or
before July 7, 1999.
IV. MISCELLANEOUS
4.1 INDEPENDENT INVESTIGATION. In entering into this Agreement, each
party hereto acknowledges that he/she has conducted his/her own independent
investigation, has consulted with legal counsel of his/her own choice, and
has not relied on any statement, representation, promise, inducement or
agreement not expressly contained within this Agreement.
4.2 ATTORNEYS' FEES. In the event that it becomes necessary for any
party to take any action to enforce the provisions of this Agreement, all
fees incurred with respect thereto, including reasonable attorneys' fees,
shall be recoverable by the prevailing party.
4
<PAGE>
DATED: July 7th, 1999 SUN TEN LABORATORIES, INC., a
------------------------------- California corporation
By: /s/ [Illegible]
---------------------------------
Its VP
DATED: July 7, 1999 ENDLESS YOUTH PRODUCTS, INC., a
------------------------------- Nevada corporation
By: /s/ Neal K. Wallach
---------------------------------
Its President
5
