U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
Mark One)
[x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Fiscal Year Ended: July 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from To
Commission file number 0-21961
Voyager Group USA-Brazil, Ltd.
(Name of Small Business Issuer in its charter)
Nevada 76-0487709
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
6354 Corte Del Abeto, Suite F, Carlsbad, California 92009
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (760)-603-0999
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 Par Value
(Title of class)
Convertible Preferred Series AA 1996, $0.001 Par Value
(Title of class)
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Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing required for the past 90 days. Yes X No
Total pages: 31
Exhibit Index Page: 33
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $ 2,344,302
As of November 3, 1998, there were 7,125,010 (1 vote per share) common and
401 (10,000 votes per share) preferred shares for a total 11,155,010 shares of
the Registrant's voting stock, par value $0.001, issued and outstanding. The
aggregate market value of the Registrant's voting stock held by non-affiliates
of the Registrant was approximately $3,777,505 computed at the average bid and
asked price as of November 3, 1998.
(ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS)
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date: November 3, 1998 7,125,010
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) Into
which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act").
None
Transitional Small Business Disclosure Format (check one): Yes ; NO X
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TABLE OF CONTENTS
Item Number and Caption Page
PART I
Item 1. Description of Business............................................ 4
Item 2. Description of Property............................................22
Item 3. Legal Proceedings..................................................22
Item 4. Submission of Matters to a Vote of Security Holders................22
PART II
Item 5. Market for Common Equity and Related Stockholder Matters...........22
Item 6. Management's Discussion and Analysis or Plan of Operations.........25
Item 7. Financial Statements...............................................28
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure...............................................28
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act..................28
Item 10. Executive Compensation.............................................29
Item 11. Security Ownership of Certain Beneficial Owners and Management.....29
Item 12. Certain Relationships and Related Transactions.....................30
Item 13. Exhibits and Reports on form 8-K...................................31
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PART I
Item 1. Description of Business.
(a) Business Development.
The Company was first incorporated in the State of Nevada on June 12, 1990
as EEE-Hunter Associates, Inc. On July 27, 1995 the Company changed its domicile
to the State of Texas with a plan of reorganization and revival, to merge into a
Texas Corporation, EEE-Energy Consultants, Inc. Neither company had any
operating activity. On July 2, 1996 the Company changed domicile to Nevada.
On July 17, 1996 the Company entered into an agreement and plan of
reorganization to acquire Voyager Group, Inc. (a Delaware Corporation). In a
tax-free corporate reorganization the Company issued 360 shares of restricted
convertible preferred stock series AA 1996, par value $0.001, (convertible into
3,600,000 restricted common shares) in exchange for 100% of the issued and
outstanding capital stock of Voyager Group, Inc. As a result of the acquisition,
Voyager Group, Inc., became a wholly owned subsidiary of the Company. At the
same time, the Company sold 56 restricted Convertible Preferred Shares Series AA
(convertible to 560,000 restricted common shares par value $0.001) to a Mr. Joe
Brazil (not affiliated tot he Company or related to any officer, or director)
and Mr. Michael Johnson, for $150,010 ($2,678.75 for each preferred share) under
Reg. D- Rule 506 of the Securities and Exchange Act of 1933. Mr. Galus Villard
in accordance with the merger agreement returned 15,000,000 restricted common
shares to the Company on July 31, 1996. Mr. James Ronald Parker received in July
1996, 15 restricted convertible preferred shares series AA 1996 (convertible to
150,000 restricted common shares) and 300,000 shares of restricted common stock
as a finders fee in connection with said merger and as payment for promotional
activities.
The above stated transaction has been accounted for as a reverse
purchase. Income and expense have been presented since the inception of the
Delaware Company.
The consolidated financial statements include the accounts of the Issuer,
and its wholly-owned subsidiary, The Voyager Group, Inc. All significant
intercompany accounts and transactions have been eliminated.
Also on July, 17, 1996 the Company changed the name of the Company to
Voyager Group- U.S.A.-Brazil, Ltd.
(b) Business of Issuer.
The Company's independent distributors distribute dietary supplements and
personal care products
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through a multi-level marketing network. The Company has grown in the level of
distributor sponsorship from one thousand distributors in 1995 to over 33,000
distributors. The Company has little or no control over the level of sponsorship
of new distributors and cannot predict the timing or degree of fluctuations.
The independent distributors introduce the products and business
opportunity to others through word of mouth or various forms of advertising, who
in turn, introduce it to even more prospective customer/distributors. This
networking has resulted in the number of distributors increasing each month.
There can be no assurance that the number and productivity of the Company's
distributors will be sustained at current levels or increased in the future.
There is no cost or investment to become an independent distributor.
The Company's distributors are not required to inventory products because the
Company ships directly to the distributor's customers. The results each new
distributor can achieve is based upon their own individual efforts, desire and
determination. Each independent distributor receives income on product sales to
their customers, as well as product sales to additional independent
distributors, who then become part of their sales organization. The independent
distributors receive monthly residual income from commissions on subsequent
product orders placed by those in their sales organization.
The Company has limited control over who becomes a distributor.
(1) Distribution System
The foundation of the Company's sales philosophy and distribution
system is network marketing. Products are sold exclusively to or through
independent distributors who are not employees of the Company.
Network marketing is an effective vehicle to distribute the Company's
products because (i) a consumer can be educated about a product in person by a
distributor, which is more direct than the use of television and print
advertisements; (ii) direct sales allow for actual product sampling by a
potential consumer; (iii) the impact of distributor and consumer testimonials is
enhanced; and (iv) as compared to other distribution methods, distributors can
give customers higher levels of service and attention among other things,
educating consumers on product benefits and following up on sales to ensure
proper product usage and customer satisfaction, and to encourage repeat
purchases. Under the Company's network marketing system, most independent
distributors purchase products either for personal consumption or resale. Direct
selling as a distribution channel has been enhanced in the past decade due to
advancements in communications, including telecommunication, and the
proliferation of the use of videos and fax machines, direct selling companies
can now produce high quality videos for use in product education, demonstrations
and sponsoring sessions that project a desired image for the Company and the
product line. Management believes that high quality sales aids play an important
role in the success of distributor efforts. For this reason the Company will in
the next 36 months, engage in the production of video and audio cassettes, for
the purposes of affecting a more efficient and comprehensive sales tool.
Management is committed to fully utilizing current and future technological
advances that continue to enhance the effectiveness of direct selling.
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The Company's network marketing program differs from many other network
marketing programs in several respects. First, the compensation plan allows the
Company distributors to develop a seamless network of down line distributors.
Second, the Company order and fulfillment systems eliminate the need for
distributors to carry significant levels of inventory. Third, the compensation
plan is financially rewarding and can result in commissions to distributors
aggregating up to 60% of a product's price. Commissions have averaged 51% of
revenue from commission able sales over the past 2 years.
The Company's revenue is directly dependent upon the efforts of
distributors. Growth in sales volume requires an increase in the productivity of
distributors and /or growth in the total number of distributors. Because the
distributors have contracted directly with the Company, the Company has no
control over who becomes a distributor and little or no control over the levels
of sponsorship new distributors will be sustained at current levels or increased
in the near term. Loss of a distributor, together with a group of distributors
or such distributor's down line network, or the loss of a significant number of
distributors for any reason, could adversely affect the Company's results of
operations.
(2) Sponsoring
The Company relies solely on distributors to sponsor new distributors.
While the Company provides an optional starter kit, product samples, brochures,
magazines and other sales material, distributors are primarily responsible for
educating new distributors in their down line with respect to products, the
compensation plan, and how to build a successful distributorship. The sponsoring
of new distributors creates multiple levels in the network marketing structure.
Persons whom a distributor sponsors are referred to as "down line" or
"sponsored" distributors. If down line distributors also sponsor, they create
additional levels in the structure , but their down line distributors remain
part of the same down line network as their original sponsoring distributor.
Sponsoring activities are not required of distributors, however,
because of the financial incentives provided to those who succeed in building a
distributor network, the Company believes that most of its distributors attempt,
with varying degree of effort and success to sponsor additional distributors.
Generally, distributors invite friends family members and acquaintances to sales
meetings where company products are presented and where the compensation plan is
explained. People are often attracted into becoming distributors after having
used company products and become regular customers. Once a person becomes a
distributor, he or she is able to purchase products directly from the Company at
preferred prices or resale to consumers or for personal consumption. The
distributor is also entitled to sponsor other distributors in order to build a
network of distributors and product users.
(3) Compensation Plan
Management believes that one of the Company's key competitive
advantages is the compensation plan. The compensation plan is seamlessly
integrated across all markets in which
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company products are sold. This seamless integration means that the Company's
distributor base has total reach and that the knowledge and experience resident
in current distributors can be used to build distributor leadership in new
markets. The compensation plan allows an individual the opportunity to develop a
business, the success of which is based upon that individual's level of
commitment, time spent, personal skills, contacts and motivation. For many, a
distributorship is a very small business, in which products may be purchased
primarily for personal consumption and for resale to relatively few customers.
For others, a distributorship becomes a full time occupation. Distributor
incentives, based upon knowledge of network marketing distributor compensation
plans, the Company believes that the compensation plan is among the most
financially rewarding plans offered to distributors by network marketing
companies. There are two fundamental ways in which distributors can earn money:
(I) through retail markups; and (ii) through a series of commissions on product
sales within the distributor's down line.
Each product carries a specified commission value. Commissions are
based on total personal and group sales volume per month. Commission value is
essentially based upon a product's cost, net of sales tax. As a distributor's
retail business expands and as he or she successfully sponsors other
distributors into the business who in turn expand their own business, he or she
may qualify to receive a higher percentage of commissions.
(4) Distributor Support
The Company is committed to providing a high level of support services
to the needs of its distributors in each market. The Company meets the needs and
builds the loyalty of its distributors with personalized distributor services. A
support staff that assists distributors as they build networks of down line
distributors. Because many distributors have only a limited number of hours each
week to concentrate on their business, management believes that maximizing a
distributor's efforts through effective support of each distributor will
continue to be important to the success of the Company.
Through training meetings, annual conventions, distributor focus
groups, regular telephone conference calls and personal contacts with
distributors, the Company seeks to understand and satisfy the needs of each
distributor. The Company provides walk-in, telephonic and computerized
fulfillment and tracking services that result in user-friendly, and timely
product distribution. In addition, the Company is committed to evaluating new
ideas in technology and services, such as automatic product reordering, that the
Company can provide to distributors. The Company currently utilizes,
teleconferencing, fax services, and internet. Online internet access including
distributor sign- up, tracking shipments, ordering abilities and group and
personal sales volume inquiries is anticipated to be provided to distributors in
the future.
(5) Rules Affecting Distributors
Company distributor agreement, policies and procedures and compensation
plan outline the scope of permissible distributor marketing activities. The
Company's distributor rules and guidelines are designed to provide distributors
with maximum flexibility and opportunity within the bounds of
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governmental regulations regarding network marketing. Distributors are
independent contractors and are thus prohibited from representing themselves as
agents or employees of the Company. Distributors are obligated to present the
company products and business opportunity ethically and professionally.
Distributors agree that the presentation of the Company's business opportunity
must be consistent with, and limited to the product claims and representations
made in literature distributed by the Company. No medical claims may be made
regarding the products, nor may distributors prescribe any particular product as
suitable for any specific ailment.
Distributors must represent that the receipt of commission is based on
substantial efforts. Exhibiting commission checks or statements about commission
checks is prohibited. Sales aids such as videotapes, promotional clothing, pens,
stationary and other miscellaneous items must be produced by or pre-approved by
the Company.
Distributors may not use any form of media advertising not approved by
the Company to promote products. Products may be promoted by personal contact or
by literature produced by or approved by the Company. Generic business
opportunity advertisements without using either the company name may be placed
in accordance with certain guidelines in certain markets. Distributors may not
use trademarks or other intellectual property of the Company without consent.
Products may not be sold, and the business opportunity may not be
promoted, in traditional retail environments such as food markets, pharmacies
and drugstores. Distributors who own or are employed by a service related
business such as a doctor's office, hair salon, or health club, may make
products available to regular customers as long as products are not displayed
visibly to the general public in such a way as to attract the general public
into the establishment to purchase products.
General, distributors can receive commission bonuses if, on a monthly
basis (I) the distributor achieves a qualifying personal volume, (ii) the
distributor sells and/or consumes at least 51% of personal sales volume, and
(iii) the distributor is not in default of any material policies or procedures.
The Company reviews alleged reports of distributor misbehavior. If the
Company determines that a distributor has violated any of the distributor
policies or procedures, it may either terminate the distributor's rights
completely or impose sanctions such as warnings, probation, suspension of
privileges of a distributorship, fines or penalties, withholding commissions
until specified conditions are satisfied, or other appropriate injunctive
relief. Distributors terminations based on violation of the companies policies
and procedures have aggregated less than 0.50% of the Company's distributor
force since inception. Distributors may voluntarily terminate their
distributorship at any time.
(6) Payment
Distributors generally pay for products prior to shipment. The Company
carries no account receivable from distributors. Distributors pay for products
in one of several ways: cash, money order, check or credit card.
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(7) Certain Business Consideration and Risk Factors
There are certain significant risks facing the Company, many of which
are substantial in nature. Stockholders and prospective stockholders in the
company should consider carefully the following risks and information in
conjunction with the other information contained herein. The statements in this
section are historical facts or are forward-looking statements. Reliance on
forward- looking statements involve certain risks and uncertainties. Actual
results and outcomes may differ materially from those discussed in this section.
Factors that might cause such differences include, but are not limited to, the
risks and factors discussed below.
Reliance upon independent distributors of the Company, the Company
distributes its products exclusively through independent distributors who have
become distributors of the Company. Consequently, distributors can voluntarily
terminate being a distributor at any time with the Company. The Company's
revenue is directly dependent upon the efforts of these independent
distributors, and any growth in future sales volume will require an increase in
the productivity of these distributors and /or growth in the total number of
distributors. As is typical in the direct selling industry, there is turnover in
distributors from year to year, which requires the sponsoring and training of
new distributors by existing distributors to maintain or increase distributor
force and motivate new and existing distributors. The size of the distribution
force can also be particularly impacted by general economic business and a
number of intangible factors such as public perception of the Company's products
and product ingredients. The Company has limited control over who becomes a
distributor. In addition, because distributors are independent contractors the
Company is not in a position to provide the same level of direction, motivation
and oversight as it would with respect to its own employees.
Potential negative impact of a distributor action can negatively impact
the Company and its products. For example, the publicity resulting from
distributor activities such as inappropriate earnings claims and product
representations by distributors can make the sponsoring and retaining of
distributors more difficult, thereby negatively impacting sales. Furthermore,
the Company's business and results of operations could be adversely affected if
the Company terminates a significant number of distributors or certain
distributors who play a key role in the Company's distributor system. There can
be no assurance that these or other distributor actions will not have a material
adverse effect on the Company or results of operations.
(8) Control by Stockholders: Convertible Preferred Stock Series AA 1996.
The capitalization of the Company was structured in such a manner as to
minimize the possibility of a change in control of the Company without consent
of the Preferred stockholders. Consequently, the shares of convertible preferred
series AA 1996 enjoy ten thousand to one voting privileges over the common stock
until the outstanding of preferred stock constitute less than 10% of the total
outstanding shares of common stock. As of April 7, 1998, the preferred
stockholders. i.e. management and certain affiliates and non-affiliates
shareholders collectively own 100% of the outstanding shares of the preferred
stock, representing approximately 36% of the combined voting power of the
outstanding shares of common stock. Accordingly, as of such date, the preferred
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stockholders and certain affiliates and non-affiliates shareholders, acting
fully or partially in concert are able to control the election of the Board of
Directors of the Company and thus the direction and future operations of the
Company without supporting vote of any other of the companies common
shareholders, including decisions regarding acquisitions and other business
opportunities, the declaration of dividends and the issuance of addition shares
of preferred and other securities.
(9) Reliance and Concentration of Outside Manufactures
All the Company's products are currently produced by manufactures
unaffiliated with the Company. The Company's profit margins and its ability to
deliver its existing products on a timely basis are dependent upon the ability
of the Company's outside manufactures to continue to supply products in a timely
and cost efficient manner. Furthermore, the Company's ability to enter new
markets and sustain satisfactory levels of sales in each market depends in part
upon the ability of suitable outside manufactures to reformulate existing
products, if necessary to comply with local regulations or market environments,
for introduction into such markets. Finally, the development of additional new
products in the future will likewise be dependent in part on the services of
suitable outside manufacturers.
The Company currently acquires products or ingredients from suppliers
that are considered by the Company to be the superior suppliers of such
ingredients. The Company believes that, in the event it is unable to purchase
any products or ingredients from its current suppliers, the Company could
produce such products or replace such products or substitute ingredients without
great difficulty or prohibitive increases in the cost of goods sold. However,
there can be no assurance that the loss of such a supplier would not have a
material adverse effect on the Company's business and results of operations.
The Company currently relies on one unaffiliated manufacturer to
produce approximately 80% of its products, the Company's agreement with the
primary supplier of the Company's products is limited to a non-disclosure
agreement. The Company believes that in the event that the Company's
relationship with the key manufacturer is terminated, the Company will be able
to find suitable replacement manufacturers. However, there can be no assurance
that the loss of the manufacturer would not have a material adverse effect on
the Company's business and results of operations.
(11) Principle products.
Many of Voyager's products are produced from what it considers to be
non-artificial herbs, botanicals, and nutrients, and are formulated by Voyager
with the goal of producing specific sets of effects. Voyager is of the opinion
that the formulas for its products are proprietary and cannot be duplicated
without the master recipes which are secured in safekeeping. Voyager attempts to
protect its products and formulas with, among other things,
"nondisclosure/noncompete" agreements with its manufacturers and employees, and
with copyright protection.
Current products including:
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A. VITAL 90.
Vital 90 is a proprietary formula of dietary vitamins in a base of aloe
vera, distilled water, vegetable glycerine, natural flavors, and grapefruit seed
extract as a natural preservative.
Product Composition
One serving (1/2 Ounce provides) U.S. R.D.A. (Has not been
established for this nutrient) Vitamin A 10,000 IU, Vitamin D 400
IU, Vitamin E 60 IU, Vitamin K 30 mcg, Vitamin C 300 mg, Vitamin
B-1 3.0 mg, Vitamin B-2 3.4 mg, vitamin B-3 40 mg, Vitamin B-6
4mg, Vitamin B-12 30 mcg, Folio Acid 400 mcg, Biotin 100 mcg,
Panlothenic Acid 20 mg, Choline 50 mg, Myoinisitol 50 mg.
Ionic Trace Mineral Complex:
Aluminum, Antimoney, Barium, Beryllium, Sixmuth, Boron, Bromine,
Cadmium, Cerium, Cesium, Chromium, Cobalt, Copper, Dysprosium,
Erbium, Europium, Fluorine, Gadolinium, Gallium, Germanium, Gold,
Hafnium, Holmium, Indium, Iodine, Iridium, Iron, Lanthanum,
Lithium, Lutetium, Manganese, Molybdenum, Neodymium, Nickel,
Niobium, Osmium, Palladium, Platinum, Praeseodymium, Rheniumi,
Rhodium, Ruthenium, Sarmarium, Scandium, Selenium, silicon,
Silver, Strontium, Tantalum, Tellurium, Terbium, Thallium,
Thorium, Thulium, Tin, Titanium, Tungsten, Vanadium, Ytterbium,
Yttrium, Zinc, Zirconium.
B. VITAL MINERALS.
Vital Minerals is a proprietary formula of dietary minerals in a base
of aloe vera, distilled water, vegetable glycerine, citric acid, gum,
carageenan, potassium sorbate, grapefruit seed extract as a natural
preservative, and natural flavor (pina coloda taste).
Product Composition
Calcium 500mg, Magnesium 250mg, Potassium 99mg, Zinc 15mg, Boron
1mg, Selenium 70mcg.
Ionic Trace mineral Complex:
Aluminum, Antimony, Barium, Beryllium, Bismuth, Boron, Bromine,
Cadmium, Cerium, Cesium, Chromium, Cobalt, Copper, Dysprosium,
Erbium, Europium, Fluorine, Gadolinium, Gallium, Germanium, Gold,
Hafnium, Holmioum, Indium, Iodine, Iridium, Iron, Lanthanum,
Lithium, Lutetium, Manganese, Molybdenum, Neodymium, Nickel,
Niobium, Osmium, Palladium, Platinum, Praeseodymium, Rhenium,
Rhodium, Rubidium, Ruthenium, Samarium, Scandium, Selenium,
Silicon, Silver, Strontium, Tantalum, Tellurium, Terbium,
Thallium, Thorium, Thulium, Tin, Titanium, Tungsten, Vanadium,
Ytterbium, Zinc, Zirconium.
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C. CHITO CAPS (Chitosan).
CHITO CAPS is a proprietary formula of dietary fiber in a base of ascorbic
acid (vitamin C) and citric acid.
Product Composition
Capsule: 395mg net weight: Contains: Chitosan, Chromulin, Inulin,
Manganese, Chromium as Arginate/Chelidamate
D. Real D.H.E.A.
Real D.H.E.A. is a proprietary blend of dehydroepiandrosterone.
Product Composition
Dehydroepiandrosterone (DHEA) 1000mg Each 12 inch strip provides
approximately 3mg. Og active ingredients: Pregnenolone 500mg
Oleic Acid, Linseed Oil (a natural source of essential acids
including GLA), Methyl Nicotinate, SD alcohol derived from
naturally grown sources. Natural Fragrance
E. COLLOIDAL CAT'S CLAW
Colloidal Cat's Claw is a proprietary formula of Uncaria Tomentosa in a
base of distilled water, natural vegetable glycerine, grapefruit seed extract,
natural flavors, and potassium sorbate as a preservative.
Product Composition
500mg. Uncaria Tomentosa
F. LIQUID-PYC (Proanthocyanidins)
Liquid-PYC is a proprietary formula of an antioxidant product in a base
of distilled water, natural vegetable glycerine, grapefruit seed extract,
natural flavors, and potassium sorbate as a preservative.
Product Composition:
Proanthocyanidins(Pine Bark and Grape Seed) 50mg Green Tea,
Curcuminiod, Ginkgo Biloba, Orange Peel, Peppermint, Ligusticum,
and Astragalus.
G. P.Y.C. PLUS
Is proprietary product of the issuer.
Product Composition:
Each Two Capsules Contain Curuminoid 200 mg, Aloe Vera 100mg,
Proanthocyanidin (Grape Seed & Pine Bark) 50mg, Astragalus 50mg,
Suma 50mg, Deodorized Garlic 50mg, Maitake 50mg, Dioscorea 25mg,
Vitamin C (Ascorbic Acid) 60mg=100%RDA, Vitamin A (Beta
Carotene)5,000 I.U.
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=100 R.D.A., Vitamin E (D-Alpha Tocopherol) 30 I.U.=100% R.D.A In
a base of: Sage Leaf, Ginger Root, Red Clover, Burdock Root,
Parsley Leaf, Peppermint Leaf, and Chamonile.
H. SLENDER YOU. (Liquid)
Slender You is a proprietary blend of green tea, kola nut, yerba matte, uva
ursi, siberian ginseng, L-carnitine, white willow bark, ginger, bladder wrack,
Fo-Ti, hawthorn berry, saw palmetto, ginkgo biloba, L-methione, choline, and
inositol in a Base of distilled water, aloe vera, natural vegetable glycerine,
colloidal minerals, grapefruit seed extract, natural flavors, and potassium
sorbate as a preservative.
Product Composition:
Half Ounce Serving Provides: Chromulin, (Inulin, Manganese, and
Chromium as Arginate/Chelidamate) 1000mg, CitriMax(Hydroxycitric
Acid-HCA) 300mg.
I. COLLOIDAL SILVER
Colloidal Silver is a proprietary formula anti-microbial.
Product Composition:
3-5 ppm Silver(Electro-Sonic colloidal process= 300 billion
particles per milliliter) Measured in nanometers, not microns.
J. HERBAL SENSATIONS SHAMPOO
Herbal Sensations Shampoo is a proprietary formula hair care product
which in our opinion helps cleans hair with out animal by products,
laureth, and sulfates.
Product Composition:
Infusion of: Cransbill, Nettle, Comfrey, Horsetail, Burdock,
Chapparel, Rosemary, Sage, Quassia, Walnut, Buckthorn, Yarrow,
Hops, Lindenflower, Arnica, Marshmallow, Kelp, Sodium C 12-14
Olefin Sulphonate, Coconut, Vegetable Protein, Betaine, Sodium
Chloride, Citric Acid, Cinnamate, Trace Minerals, Methyl Choiro
Isothiazolinone (Biocide Freshness Enhancer), Panthenol, Natural
Fragrance.
K. HERBAL CONDITIONER
Herbal Conditioner is a proprietary formula hair care product.
Product Composition:
Purified Water, PEG 40, Safflower Oil, Olive Oil, Vegetable
Protein, Panthenol, Methyl Paraben, Propyl Paraben, Extract of :
Cransbill, Nettle, Comfrey, Horsetail, Burdock, Chapparel,
Rosemary, Chamomile, Quassia, Walnut, Buckthorn, Yarrow, Hops,
Lindenflower, Arnica, Marshmallow, and Kelp, Trace Minerals,
Cinnamate, Natural Fragance.
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L. SUPER SOY.
A issuer formula proprietor.
Product Composition:
500 mg. Soy from soy sprouts
M. VITAL ESSENCE
Is a Proprietary product of the issuer.
Product Composition:
Natural Progesterone 500mg, Each 12' strip provides approximately
2mg of active ingredients. Rose Essence, Oleic Acid, Linseed Oil,
(a natural source of fatty acids including GLA), SD alcohol
derived from naturally grown sources, Natural Fragrance.
N. OPTIMAL ENZYMES:
Is a proprietary product of the issuer:
Product Composition:
Each capsule is 46mg net weight Contains blend: Magnesium,
Glycinate, Papain, Bromelain, Amylase, Protease, Invertase,
Lipase, Maltase, Cellulase, Lactase, Pectinase,
Fructooigosaccharides, (FOS), Yellow Dock Root, Beet Root, Fennel
Seed, Ginger Root, Burdock Root and Cayenne.
O. VITAL BIOTIC.
Is a proprietary product of the issuer.
Product Composition:
Each capsule is 495mg net weight Contains Blend: Lactobacillus
Acidophilus, DDSI Acidophilus Bifidus, L-Salivarius, L-Brevis,
L-Plantarum, L- Bulgaricus, L-Lactis, L-Casie, and
Fructooligosaccharides (FOS) in an base of SBO's-(Soil born micro
organisms.)
P. ULTRA PHASE 5 TM
Is a proprietary product of the issuer for use as a dietary supplement.
Product Composition:
Ingredients: a proprietary blend of Green Tea Extract, Choline
Bitartrate, Inulin, L-Pyroglutamate, Niacin, DMAE Bitartrate,
L-Phenylalanine, Potassium Aspartate, N-Acetyl-L-Carnitine, Ginko
Biloba, Magnesium Glycinate. PATENT PENDING
Q. DOLO RX TM
Is a proprietary product of the issuer for use as a topical cream for
muscle and joint pain relief.
Product Composition:
Deionized Water, Denatured Alcohol, TMEA Trioleate,
Phenoxyethanol, Isopropyl Palmitate, Carbomer, Allantoin,
Panthenol, C11-15 Pareth-9,
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Menthol, Methyl Salicylate, Amino Methyl Propanol, Methyparaben,
Propylparaben, Diazolidinyl Urea. PATENT PENDING
During fiscal1998, the Company developed a new line of patent applied
products, the "Body Lite System". The Body Lite system includes three
nutritional supplements which, when combined with eating right and low impact
exercises, will help aide in weight management and pain relief. The three
components to the Body Lite system are:
1. BODYLITE VITALIZER, a proprietary blend of natural and organic
amino acids, herbs, and vitamins designed to give a long
lasting lift and effective appetite control throughout the
day. Vitalizer is scientifically assembled to help increase
the production of neurotransmitters which signal to the brain
a feeling of satisfaction and reduces the urge to over eat as
well as the urge for sweets and fats.
2. BODYLITE STABILIZER, a proprietary blend of natural and
organic ingredients designed to provide energy and blood sugar
stabilization.
3 BODYLITE 3-2-1, a novel shake that mixes with water and
combines three parts protein, two parts complex carbohydrates
and one part sugar. This balance provides a timely and
balanced conversion into glouse, which helps prevent blood
sugar spikes and inadvertent, unnecessary excess insulin
release. This also helps prevent rapid blood sugar decrease
during the metabolism process and provides appetite control
for several hours.
As a company selling branded consumer products nationwide, Voyager
believes that establishing trade and service marks and copyrights for brand
names and associated advertising and labeling materials is important in
maintaining company and product identification and integrity. Accordingly,
Voyager is engaged on a continuing basis in developing brand names and such
associated materials for its new products, securing trade and service mark
protection for such brand names and copyright protection for such associated
materials, policing its existing marks, and enforcing its legal rights in cases
of potential infringement by third parties of its legally protected marks and
copyrights.
(12) Competitive business conditions and the names of principal suppliers.
Competition in the nutritional supplement industry is vigorous,
characterized by a relatively large number of companies (estimated at
approximately 200), most of which have relatively small sales. Industry sources
estimate that there are less than 20 companies in the industry that have annual
sales of $50 million or more. Based on its current sales, Voyager believes that
it is within the approximately top one-third of the approximately 200
nutritional supplement companies, based on sales. However, since many of the
companies in this industry are privately-held, little reliable financial data is
available. Many of the companies have established reputations for successfully
developing and marketing nutritional supplement products, with a variety of
well-established marketing outlets.
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Many of such companies have greater financial, managerial, and technical
resources than Voyager. Principal competitors include American Cyanamid,
Smith-Kline-Beecham, American Home Products, Rexall Sundown, Inc., and Nature's
Sunshine Products, although not all of these companies produce natural
supplements. Included in that group of competitors are Herbal Life
International, Sun Rider Corporation, and Shakley. Many of these companies rely
exclusively on retail sales as opposed to multi-level marketing or network
marketing.
The Company competes by emphasizing the value and premium quality of
the Company's products and the convenience of the Company's distribution system.
There can be no assurance that the Company's business and results of operations
will not be affected materially by market conditions and competition in the
future.
(13) Sources and availability of raw materials and principal suppliers.
The majority of Voyager's products are manufactured by a single
domestic non-affiliated, manufacturer pursuant to specifications and proprietary
recipes of the issuer. Prior to selecting a manufacturer to produce its
products, Voyager reviews the manufacturer's raw material sources, quality
assurance procedures, and reliability to assure that the proposed manufacturer
meets Voyager's criteria. The companies that manufacture for Voyager are
required to meet strict manufacturing standards, and Voyager believes that it
benefits from such regulation in the overall quality of the products
manufactured by such regulated entities for Voyager. To date, Voyager has relied
exclusively on domestic manufacturers in order to facilitate Voyager's quality
assurance monitoring function. The manufacturers are not in any way affiliated
to the issuer or the issuer affiliated in any way to the manufacturers or
manufacturers' affiliates. The issuer has contacted other domestic manufacturers
and in the opinion of management, if the current manufacturers were to have a
natural or domestic problem (ie. labor) the flow of proprietary recipes and
products to distributors would not be significantly interrupted.
Voyager places purchase orders with its suppliers for individual
product manufacturing lots for delivery of packaged and labeled product to
Voyager's warehouse in Carlsbad, California, for distribution. Voyager has no
long-term manufacturing agreements with its current suppliers, but purchases
manufactured lots pursuant to individual purchase orders. Voyager maintains
minimal inventory quantities and to date has not experienced any significant
shortages of manufactured products for delivery. All ingredients in Voyager's
products are generally available from a number of alternative sources, although
the ingredients, such as those based on agricultural products, are subject to
seasonable availability to a limited degree.
(14) Dependence on one or a few customers.
No customer accounts for more than 10% of sales. Voyager is a supplier
and formulator of vitamins and nutritional supplements which are designed and
formulated to address the dietary needs of the general public.
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(15) Patents, trademarks, licenses, franchises, concessions, royalty agreement
or labor contracts, including duration.
As a company selling branded consumer products nationwide, Voyager believes
that establishing trade and service marks and copyrights for brand names and
associated advertising and labeling materials is important in maintaining
company and product identification and integrity. Accordingly, Voyager is
engaged on a continuing basis in developing brand names and such associated
materials for its products, securing trade and service mark protection for such
brand names and copyright protection for such associated material, policing its
existing marks, and enforcing its legal rights in cases of potential
infringement by third parties of its legally protected marks and copyrights.
William Clapham, the President of the Company, provided the Company with
the marketing distribution plans (uni-level and matrix network compensation
program, commission payout structure, operations, and automated monthly ordering
system), and proprietary formulas for dietary supplements (complex liquid
essential vitamins, minerals, essential fatty acids, amino acid complex,
suspension base of vegetable glycerine, purified water and aloe, liquid herbal
extracts antioxidant formulas, encapsulated antioxidant formula), weight
management formula, and natural hair care product formula. In exchange for the
use of the formulas and marketing plans Mr. Clapham receives minimum royalties
of $20,000 per year with provisions for royalties of $6,000 per month when sales
volume is greater than $2,000,000 per year and $10,000 per month when sales
volume is greater than $6,000,000 per year.
(16) Need for any government approval of principal products or services.
The Company's products currently do not require government approval.
However, the processing, formulation, packaging, labeling and advertising of
Voyager's products are subject to regulation by one or more federal agencies
including the FDA, the Federal Trade Commission, the Consumer Products Safety
Commission, the Department of Agriculture, the Postal Service, and the
Environmental Protection Agency. Voyager's activities are also subject to
regulation by various agencies of the states and localities in which Voyager's
products are sold. The FDA has been the main agency regulating the types of
products sold by nutritional supplement firms such as Voyager, but much of that
authority stemmed from the FDA'S treatment of dietary supplements as food
additives and drugs. The FDA's jurisdiction in this regard has been somewhat
eroded and its role has been reduced to mainly policing the activities of makers
of dietary supplements by the enactment of the Dietary Supplement Health and
Education Act of 1994 ("DSHEA") in October 1994, as discussed below. The DSHEA
amends and modifies the application of certain provisions of the FDA Act as they
relate to dietary supplements. The DSHEA established an Office of Dietary
Supplements at the National Institutes of Health in order to coordinate and
conduct scientific research into the health benefits of dietary supplements and
also established a presidential commission to study and make recommendations on
the regulation of label claims and statements for dietary supplements. The FDA
is required to promulgate regulations that are consistent with the DSHEA and the
recommendations of the commission.
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Before enactment of the DSHEA, the FDA had adopted regulations
concerning the labeling of dietary supplements, including the making of health
claims. These regulations required nutrition labeling on all dietary supplements
and prohibited the making of any health claim on a dietary supplement unless the
supplement was consumed as a food, its components were demonstrated to be safe,
and the health claim was supported by significant scientific agreement and
approved by the FDA. Part of the enactment of the DSHEA curbed the FDA's adopted
regulations, and the FDA agreed that it would not seek to enact further
regulations until after the end of 1996.
During the years preceding passage of the DSHEA, members of Congress
were under intense pressure from various sources, including the dietary
supplement industry, to reduce the regulatory burdens on dietary supplements
imposed or threatened by the FDA through its broad interpretation and
application of the FDA Act and its regulatory authority. Recognizing the
importance of improving the health of United States citizens and the role of
dietary supplements in promoting such improvement, Congress enacted the DSHEA to
allow consumers to have wider access to dietary supplements that are not unsafe,
toxic, unsanitary, or adulterated and to increase the access of consumers to
truthful information about such products. Passage of the DSHEA impacted the
FDA's ability to issue and implement any regulations with respect to dietary
supplements through its exemption of such products from being considered "food
additives" or, in most circumstances, "drugs." Although the DSHEA is generally
viewed as a positive development for companies that sell dietary supplements
such as vitamins, minerals, herbs, botanicals, amino acids, and similar
substances, the legislation imposed significant requirements that must be
adhered to in order for a product to qualify for the safe harbors established by
DSHEA.
The DSHEA broadly defines a dietary supplement to include any product
intended to supplement the diet that bears or contains a vitamin, mineral, herb
or other botanical, an amino acid, a dietary substance for use by man to
supplement the diet by increasing the total dietary intake, or concentrate,
metabolic constituent, extract, or combination of any such ingredient, provided
that such product is either intended for ingestion in tablet, capsule, powder,
softgel, gelcap, or liquid droplet form or, if not intended to be ingested in
such form, is not represented for use as a conventional food or as a sole item
of a meal or the diet and, in any case, is not represented for use as a
conventional food or as a sole item of a meal or the diet and is labeled as a
dietary supplement. The definition also includes highly technical provisions
dealing with a dietary supplement that contains an ingredient that also has been
approved by the FDA as a drug. The practical effect of such an expansive
definition is to ensure that the new protections and requirements of the DSHEA
will apply to a wide class of products.
One important provision of the DSHEA exempts the dietary ingredients in
dietary supplements from being treated as "food additives." Any substance that
is added to a food product that is not "generally recognized as safe" by experts
whose opinion is based on published scientific literature is subject to being
regulated as a food additive by the FDA. Under the FDA Act, a substance that is
a food additive may not be added to food products unless explicitly permitted by
the FDA by issuance of a regulation. In petitioning the FDA for such a
regulation, a process that often takes five years or more, a petitioner might be
required to spend several hundreds of thousands of dollars or more to test a
product and participate in any ensuing proceedings. Prior to enactment of the
DSHEA, dietary
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supplement ingredients were often alleged to have "food additive" status and,
unless approved by the FDA, were treated as illegal foods by such agency,
although many contended that this represented overreaching on the part of the
FDA in light of its permitted powers. This clearly posed a substantial negative
impact on the industry's business and operations because of the risk that the
FDA could choose to treat any product offered by any company as containing food
additives. The DSHEA removed this potential problem and any ambiguity related
thereto by exempting dietary ingredients in dietary supplements from being
treated as food additives.
(17) Effect of existing or probable governmental regulation on the business.
Although dietary supplements are now exempted from treatment as food
additives by the FDA, the DSHEA imposed significant new safety standards
regulating dietary supplements to prevent the sale of dietary supplements that
are unsafe, toxic, unsanitary, or adulterated. These standards are summarized
below.
First, the DSHEA provides that a dietary supplement will be deemed to be an
adulterated food if it presents a significant or unreasonable risk of illness or
injury when used in accordance with its labeling or, if no conditions of use are
suggested or recommended in the labeling, under ordinary conditions of use.
Generally, the FDA Act prohibits the introduction or delivery of adulterated
food into interstate commerce so a dietary supplement that is deemed adulterated
may not be sold or distributed through interstate commerce. The FDA has the
burden of proof in establishing that a dietary supplement is adulterated under
such a standard, thereby reducing the FDA's role from one of preapproval of
dietary supplements to that of policing those substances that present a
significant or unreasonable risk of illness or injury.
Second, the DSHEA imposes additional requirements that must be adhered to
for those dietary supplements containing a "new" dietary ingredient which, under
the DSHEA, is an ingredient that was not marketed in the United States before
October 15, 1994. A dietary supplement that contains such a new dietary
ingredient will be deemed to be adulterated unless either (a) all ingredients
contained in the dietary supplement have been present in the food supply as an
article used for food in a form in which the food has not been chemically
altered, or (b) there is a history of use or other evidence of safety
establishing that the new dietary ingredient, when used under the conditions
recommended or suggested in the labeling, will reasonably be expected to be
safe. In order to qualify for the safe harbor under the second condition, a
manufacturer/distributor of the new dietary ingredient or supplement must
provide, at least 75 days before introducing or delivering for introduction such
substance into interstate commerce, information to the FDA that forms the basis
on which the manufacturer/distributor has concluded that a dietary supplement
containing the new dietary ingredient will reasonable be expected to be safe.
Finally, the DSHEA provided non-delegable authority to the Secretary of the
Department of Health and Human Services to declare a dietary supplement as
posing an imminent hazard to public health or safety. Following such
declaration, it is immediately illegal to market such a product, although the
Secretary must thereafter promptly hold a formal hearing in order to determine
whether
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to affirm or withdraw the declaration.
The effect of these new safety standards is that, although the authority of
the FDA to regulate dietary supplements has been limited, it and the Secretary
of the Department of Health and Human Services have been granted substantial new
policing authority to stop the distribution of a dietary supplement if
government personnel believe they can show that the product is not safe. Voyager
is not able to predict with certainty the impact of the new regulatory scheme on
its activities.
The DSHEA increases the ability of sellers of dietary supplements to
provide information about their products. The intent of Congress in promoting
such information is to empower consumers to make more informed choices about
preventive health care programs based on available scientific data about the
health benefits of diet supplements. Prior to the enactment of the DSHEA, the
FDA asserted that any publication used in connection with the sale of a dietary
supplement could be regulated by the FDA as "labeling." Further, if the
publication in question contained information claiming or suggesting that an
ingredient present in a dietary supplement might be used in the cure,
mitigation, treatment, or prevention of any disease, such supplement would be
subject to regulation under the FDA Act as a drug. Under the DSHEA, however, a
publication, including an article, a book or chapter in a book, or an official
abstract of a peer reviewed scientific publication that appears in an article
and was prepared by the authors or the editors of a publication, is not defined
as a labeling and may be used in connection with the sale of a dietary
supplement to consumers if such publication is reprinted and it (i) is not false
or misleading; (ii) does not promote a particular manufacture or brand of a
dietary supplement; (iii) is displayed or presented with other items on the same
subject matter so as to present a balanced view of the available scientific
information; (iv) is physically separate from dietary supplements if displayed
in an establishment where such products are sold; and (v) does not have appended
to it any information by sticker or any other method. The United States has the
burden of proof to establish that a publication is false or misleading if a
proceeding is established to prevent a publication. The DSHEA specifically
provides that it does not restrict a retailer or wholesaler of dietary
supplements in any way whatsoever from selling books or other publications as a
part of its business. These provisions of the DSHEA may indirectly affect
Voyager because they will make it easier for retailers and wholesalers that sell
Voyager's products to display and sell publications that are related to
Voyager's business and discuss the benefits of dietary supplements such as the
ones that Voyager manufactures and distributes.
FDA regulations published prior to the enactment of the DSHEA and pursuant
to the Nutrition Labeling and Education Act ("NLEA") prohibit the use of any
health claim in the labeling of any food products, including brochures, unless
the claim of such labeling is first approved by the FDA by regulation. The DSHEA
carves out an exception to this regulation that allows companies that
manufacture and distribute dietary supplements to make any of the following four
types of statements with regard to nutritional support on labeling without FDA
approval: (1) a statement that claims a benefit related to a classical nutrient
deficiency disease and discloses the prevalence of such disease in the United
States; (2) a statement that describes the role of a nutrient or dietary
ingredient intended to affect structure or function in humans: (3) a statement
that characterizes the documented mechanism by which a nutrient or dietary
ingredient acts to maintain or function; or (4) a statement
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that "describes general well-being" from consumption of a nutrient or dietary
ingredient. In addition to making sure that a statement meets one of the four
criteria, a manufacturer of the dietary supplement must have substantiation that
such statement is truthful and not misleading, must not claim to diagnose,
mitigate, treat, cure, or prevent a specific disease or class of diseases, and
must contain the following disclaimer, prominently displayed in boldface type:
"This statement has not been evaluated by the Food and Drug Administration. This
product is not intended to diagnose, treat, cure, or prevent any disease."
Additionally, the manufacturer must notify the Secretary of Health and Human
Services no later than 30 days after the first marketing of the dietary
supplement to which such statement relates.
In addition to the above statements that are allowed to be made by
manufacturers, a dietary supplement must be properly labeled. To be properly
labeled, a dietary supplement must list the name and quantity of each ingredient
and the total weight of a proprietary blend, be identified as a "dietary
supplement," and identify the part of a plant from which any herb or botanical
ingredient is derived. In addition, there are special rules for branding a
supplement if there is an official compendium covering the dietary supplement.
The DSHEA did not limit the FDA's ability to regulate manufacturing but
authorized the FDA to prescribe good manufacturing practice regulations for
dietary supplements which are to be modeled after current good manufacturing
practice regulations for food. Voyager cannot predict the impact that such
regulations could have on those suppliers that manufacture its products.
However, since most of these manufacturers also produce a number of products
that are already subject to manufacturing standards of the FDA, it is not likely
that any new regulations regarding manufacture of dietary supplements would
adversely affect Voyager or its suppliers.
In summary, Voyager can not determine or predict the final effects that
DSHEA will ultimately have on the regulatory scheme of dietary supplements.
Further, Voyager can not predict what recommendations will be made by the
presidential commission established to study this subject and make
recommendations. Although the DSHEA seems to be generally beneficial to
manufacturers of dietary supplements because it limits the FDA's authority to
regulate supplements as drugs or food additives, there is no real indication of
its ultimate effect. The FDA has recently proposed regulations that are intended
to become effective January 1, 1997, for the purpose of implementing the DSHEA.
There is no way to predict what form the final regulations will take or what
effect such regulations will have on the business activities of Voyager.
(18) Estimate the amount spent during each of the two fiscal years on research
and development.
For the years ended July 31, 1998 and 1997 there was no money allocated to
research and development. Royalty agreements provided that the research and
development expenses are to be paid by the royalty holder.
(19) Cost and effects of compliance with environmental laws.
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None.
(20) Number of employees.
As of October 31, 1998 the Company had a total of 10 employees engaged in
the general management and administration.
Item 2. Description of Property.
The Company at this time has no properties. The Company occupies certain
sales offices under a noncancellable lease. The lease is for thirty-six months
expiring August 31, 1999. It is expected that in the normal course of business,
leases that expire will be renewed or replaced by leases on other properties.
The current lease requires minimum rental payments of $30,384.00 per year. The
obligations of the lessee under the lease are guaranteed by William Clapham, the
president of the Company.
Item 3. Legal Proceedings.
On May 13, 1997, James R. Parker (Plaintiff) filed a Complaint for
Damages against various individuals and the Voyager Group, Inc. in Superior
Court of the State of California in and for the County of Sacramento (Case No.
97AS02458). The complaint alleges that the Voyager Group, Inc. and its
directors, officers, agents and shareholders among others, promised to pay the
Plaintiff approximately 781,250 shares of the Voyager Group. The complaint
seeks, among other things, damages from the defendants in the aggregate amount
of $2,900,000, plus attorney fees and interest. During November 1997, the
Company successfully negotiated to settle all claims by issuing 300,000 shares
of restricted common stock to Mr. Parker. The amount of the settlement and any
liabilities or other costs that may be incurred in connection with this matter
have been provided for in the financial statements.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the quarter ended
July 31, 1998.
PART II
Item 5. Market for Common Equity and Related Shareholder Matters.
The stock is traded over-the-counter on the NASDAQ Bulletin Board with the
trading symbol "VYGP". The following high and low bid information was provided
by PC Financial Network. The quotations provided reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions.
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1997 HIGH BID LOW BID
First Quarter (10/31/96) ................... $ 3.625 $ 1.000
Second Quarter (01/31/97) .................. $ 2.125 $ 1.125
Third Quarter (04/30/97) ................... $ 2.875 $ 2.000
Fourth Quarter (07/31/97) .................. $ 3.000 $ 1.750
1998
First Quarter (10/31/97) ................... $ 2.250 $ 1.375
Second Quarter (01/31/98) .................. $ 1.625 $ 0.563
Third Quarter (04/30/98) ................... $ 2.625 $ 0.438
Fourth Quarter (07/31/98) .................. $ 4.250 $ 0.938
The number of shareholders of record of the Company's common stock as
of November 3, 1998 was approximately 200. The number of shareholders of record
of the Company's preferred stock as of November 3, 1998 was 4.
The Company has not paid any cash dividends to date and does not
anticipate paying dividends in the foreseeable future. It is the present
intention of management to utilize all available funds for the development of
the Company's business.
Recent Sales of Unregistered Securities.
The Company over the past three years has sold 3,509,000 shares of
common stock and 431 shares of cumulative preferred stock.
On December 19, 1995 the Company completed an offering under Regulation
D - Rule 504, and/or Uniform Limited Offering Exemption whereby the Company
through its officers, directors and employees without the use of an underwriter
sold 28,000 common shares for $2,800. The shares were sold only to accredited
and/or sophisticated investors. Each investor was required to supply the issuer
with information sufficient to enable the issuer to justify a reasonable belief
that the investor did in fact come within the description of accredited and/or
sophisticated. Following are the names of the investors: C.J, Krickbaum, Howard
M. Overson, Melagro Holdings, Inc., Corporation owned by Howard H. Oveson,
Gilbert E. Romero, Jenifer Romero, Karin Bourdos, Pete Bourdos, John Licko,
Pauline Licko.
On July 3, 1996 the Company sold 15,000,000 restricted common shares to
one individual, Mr. Gaius Villard - a US person, for $15,000. The Company relied
on the exemption provided under Regulation D Rule 506 exemption for limited
offers and sales without regard to dollar amount of offering. The issuer
furnished Mr. Villard with the following information: a copy of the issuer's
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business plan, the type of restricted securities offered, and all financial
information about the issuer. Mr. Villard is an accredited investor. The
restricted common stock was returned to the Company treasure on July 31, 1996
under Section 78.283 of the Nevada Sate Corporate Laws.
July 15, 1996 the Company through its officers, directors and employees
without the use of an underwriter sold 2,022,000 common shares for $14,154 to
accredited investors under provisions of Regulation D-Rule 504. Each investor
was provided with an offering memorandum dated July 7, 1996 and a subscription
agreement. Following are the names of the investors: Dean Dulhan, Miles
Desharrnis, Larry Grant, Lorenda Mayers, Bob Maning, David Saad, Kelly Lohn,
Peter B. Lefeavx, Ronald Kiraly, Walter Meranze, Robt Smith, Mark Haab, Victor
Hagar, K. Nelson, Murray Mullin, Chas Gild, Donald hale, R.P. Spooner, Geo
Turner, Bobby Young, Yancey Tender, Olive Wright, Herbert Wyler, J.E. Brackett,
Edward Kent, Charlotte Shepard, Conrad Green, Scott Griffin, Colleen Mosca, John
Nail, Paul King, K. Funkhouser, Winn Gance, Peter Kosinski, Auth Sonia, Carol
Trott, Mary Trufant, william Dodge, Paul Sonburg, A.W. Leiman, Henry Alexander,
Frances Amos, Foster Yancey, Elmer Mann, Frank and Wendy Burtnett.
On July 17, 1996 the Company entered into an agreement and plan of
reorganization to acquire Voyager Group, Inc. (a Delaware Corporation). In a
tax-free corporate reorganization the Company issued 360 shares of restricted
convertible preferred stock series AA 1996, par value $0.001, (convertible into
3,600,000 restricted common shares) in exchange for 100% of the issued and
outstanding capital stock of Voyager Group, Inc. As a result of the acquisition,
Voyager Group, Inc., became a wholly owned subsidiary of the Company. At the
same time, the Company sold 56 restricted Convertible Preferred Shares Series AA
(convertible to 560,000 restricted common shares par value $0.001 ) to a Mr. Joe
Brazil (not affiliated to Company or related to any officer, or director) and
Mr. Michael Johnson, for $150,010 ($2,678.75 dollars for each preferred share)
under Reg. D- Rule 506 of the Securities and Exchange Act of 1933. Mr. James
Ronald Parker received in July 1996, 15 restricted convertible preferred shares
series AA 1996 (convertible to 150,000 restricted common shares) and in
November, 1997 received 300,000 common shares at $0.21 per share as a finders
fee in connection with said merger and as payment for promotional activities.
The issuer furnished Mr Brazil, Mr. Johnson and Mr. Parker with a copy of the
issuer's business plan, the type of restricted securities offered, and all
financial information about the issuer Mr Brazil, Mr. Johnson and Mr. Parker are
accredited investors.
October 11, 1996 the Company entered into a agreement with Celebrity
Foods, Inc., also known as Robert Eubanks, to assist in promotion and
advertising of company products and the expansion of the Company's independent
distributor network, to be performed over a thirty six month period from October
11,1996 to October 11, 1999. On October 27, 1996 the Company issued 150,000
restricted common shares under Regulation D Rule 506 of the Securities and
Exchange Commission Act of 1933 to Celebrity Foods also known as Robert Eubanks.
Mr. Eubanks is an accredited investor.
On November 11, 1996 the Company completed a 250,000 units* offering,
on a best efforts basis at $1.00 per unit to Credit Suisse Bank. The unit
offering memorandum was pursuant to Reg.
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D-504. Total proceeds of the sale of 250,000 units was $250,000 dollars with
offering expenses of $5,000 dollars. The Reg. 504 unit offering by the Company
provided funding to improve product shipment, product labeling and operating
capital.
*Units- consist of 250,000 common shares and 750,000 warrants. Warrants
are exercisable for a period of 24 months, upon completion of the offering, or
upon the Company's successful registration of the common shares underlying the
warrants under the Securities Act of 1933, as amended and applicable by State
statutes. Warrants are detachable upon completion of the offering with an
exercise price of $.01 per warrant. Warrants may be redeemed by the Company, any
time upon 20 day's prior written notice to the warrant holder at a price of
$0.005 per warrant.
On April 1, 1997 the Company entered into an agreement with Dr. Morris
Mann to assume the position of director of product development to enhance the
integrity and quality of the Company's product lines, the intellectual property
of the Company and the Company image. On April 11, the Company issued 200,000
restricted common shares under Regulation D Rule 506 of the Securities and
Exchange Act of 1933, to Dr. Morris Mann. Dr. Mann is an accredited investor.
During February and April 1998, pursuant to a top up provision of the agreement
an additional 300,000 and 125,000 shares, respectively, were issued to to Dr.
Mann (WestRim Holdings).
During December 1997, the company issued 434,000 shares to three
employees. The shares were offered at market value.
Item 6. Management's Discussion and Analysis or Plan of Operation.
General
The following discusses the financial position and results of operations of
the Company and its consolidated subsidiary, The Voyager Group Inc., which have
been combined and accounted for as a reverse purchase.
Customers with repeat business accounted for a majority of the revenues
generated. Although the Company has provided products for its customers with
repeat business, there is no assurance that such customers will maintain or
increase the level of volume of business of the Company.
Results of Operations - The following table set forth, for the years ended July
31, 1998 and 1997, certain items from the Company's Condensed consolidated
Statements of Income expressed as a percentage of net sales.
25
<PAGE>
1998 1997
------ -----
Sales, Net 100.0% 100.0%
Cost of Sales 30.3 30.1
------------------ ------------------
Gross Margin 69.7 69.9
Operating Expenses 90.9 89.3
------------------ ------------------
Operating Income (Loss) (21.2) (19.4)
Interest Income, Net 0.3 0.1
------------------ ------------------
Income (Loss) Before Income (20.9) (19.3)
Taxes
Income Taxes
Deferred Tax (Benefit) (3.4) (3.2)
------------------ ------------------
Net Income (Loss) (17.5) (16.1)
================== ==================
Net Sales
Net sales for Fiscal 1998 were less than Fiscal 1997 by $1,623,061 or
59.1%. This decrease was due to a broad restructuring of the Company's sales and
compensation plan, a repricing strategy that lowered prices to distributors
approximately 30%, re-formulation of certain existing products, and research and
development of the new Body Lite System and DoloRx products. The result of
which, management believes, will have a favorable increase in sales next year
and fuel continual growth into the future.
Cost of Sales
Cost of sales for Fiscal 1998 decreased $484,202 or 59.5% compared to
Fiscal 1997. As a percentage of sales, cost of sales remained relatively
constant increasing from 30.1% to 30.3%.
Operating Expenses
Operating expenses during Fiscal 1998 decreased $1,412,891 or 60.1%
compared to Fiscal 1997 from $3,543,047 to $2,130,156.
26
<PAGE>
Liquidity and Capital Resources
The Company requires working capital principally to fund its current
operations. Generally the Company has adequate funds for its activities. There
are no formal commitments from banks or other lending sources for lines of
credit or similar short-term borrowing. It is anticipated that the current
operations will expand and the funds generated will exceed the Company's working
capital requirements for the next year.
The decrease in liquidity during the year was primarily from cash used by
operations. The Company generates and uses cash flows through three activities:
operating, investing, and financing. During 1998, operating activities used cash
of $446,000 as compared to net cash used of $58,000 for 1997.
Cash flows used in investing activities is primarily due to the
acquisition of $1,000 of computer equipment and office furniture for 1998.
Financing activities provided $28,000 for 1998. The increase in cash
flow from financing activities was primarily from the exercise of warrants for
common stock and sales of restricted common stock to employees.
Management believes that the Company's current cash and funds available
will be sufficient to meet capital requirements and short term and long term
working capital needs in the fiscal year ending July 31, 1999 and beyond, unless
a significant acquisition or expansion is undertaken. The Company is constantly
searching for potential acquisitions and/or expansion opportunities. However,
there are no arrangements or ongoing negotiations for any acquisition or
expansion.
Inflation and Regulation
The Company's operations have not been, and in the near term are not
expected to be, materially affected by inflation or changing prices. The Company
encounters competition from a variety of firms selling dietary supplements in
its market area. Many of these firms have long standing customer relationships
and are well-staffed and well financed. The Company believes that competition in
the dietary supplement industry is based on competitive pricing, although the
ability, reputation and support of a multi-level marketing network is also
significant. The Company does not believe that any recently enacted or presently
pending proposed legislation will have a material adverse effect on its results
of operations.
Factors That May Affect Future Results
Management's Discussion and Analysis and other parts of this registration
statement contain information based on management's beliefs and forward-looking
statements that involve a number of risks, uncertainties, and assumptions. There
can be no assurance that actual results will not differ materially for the
forward-looking statements as a result of various factors, including but not
limited
27
<PAGE>
to the following:
The markets for many of the Company's offerings are characterized by
rapidly changing technology, evolving industry standards, and frequent new
product introductions. The Company's operating results will depend to a
significant extent on its ability to design, develop, or otherwise obtain and
introduce new products, services, systems, and solutions and to reduce the costs
of these offerings. The success of these and other new offerings is dependent on
many factors, including proper identification of customer needs, cost, timely
completion and introduction, differentiation from offerings of the Company's
competitors, and market acceptance. The ability to successfully introduce new
products and services could have an impact on future results of operations.
Item 7. Financial Statements
The financial statements of the Company and supplementary data are
included immediately following the signature page to this report. See Item 13
for a list of the financial statements and financial statement schedules
included.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
There are not and have not been any disagreements between the Company and
its accountants on any matter of accounting principles, practices or financial
statements disclosure.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
Directors and Executive Officers.
(1) (2) (3)
NAME and AGE POSITION TERM OF OFFICE
William Clapham 40 Director/President July 21, 1996 to Present
Thaisa Branco 30 Director/Vice Pres. July 21, 1996 to Present
Michael Johnson 33 Director July 21, 1996 to Present
Thaisa Branco is the wife of William Clapham
Business Experience
William H. Clapham, Director/President, is 40 years of age and co-founded The
Voyager Group, Inc.,
28
<PAGE>
with his wife, Thaisa Branco, in January of 1995 and has served as its President
from that time until present. During the past five years Mr. Clapham has spent
one year in business school and has been a private consultant in the marketing
and product development in the nutritional supplement industry. Mr. Clapham has
created several product brands and marketing strategies with distribution
including direct sales. Mr. Clapham has also developed private label nutritional
and personal care products for both domestic and international distribution. Mr.
Clapham earned a Bachelor of Science Degree from Northeastern University College
of Business in Boston, Mass.
Thaisa Branco, Director/Vice President/Secretary/Treasurer, is 30 years of age
and co-founded The Voyager Group, Inc. with her husband, William Clapham, and
has served as Vice President of operations from inception to the present. Ms.
Branco earned her Bachelor of Science Degree in Business Administration from UNA
(Brazil) and holds a Masters Degree in Marketing and Strategic Planning in
Brazil. In 1994, Ms. Branco earned a Post Graduate Degree in Business
Administration from Harvard University in Cambridge, Mass.
Michael Johnson, Director, is 33 years of age and has been a director since July
17, 1996 to the present. Mr. Johnson received a certificate of graduation from
Berkshire School and has attended Lake Forest College, Lake Forest, Chicago,
University of Utah, Salt Lake City, Utah, New York Institute of Finance, N.Y.,
N.Y. and New York University, N.Y., N.Y. From 1987 to 1989 Mr. Johnson was
employed by Mel Schnel and Company, N.Y., N.Y. as a clerk, New York-Comex
Commodities. During 1989 to 1990 Mr. Johnson was employed by New Mercantile
Exchange, N.Y., N.Y. as a commodity futures trader, arbitrage futures contracts
and energy markets: oil, gas, etc. For the past five years Mr. Johnson has been
self-employed buying and selling contracts.
Item 10. Executive Compensation.
Annual Compensation
(a) (b) (c) (e)
Name Other
and Annual
Principal Salary Compensation
Position Year $ $
- --------------------------------------------------------------------------------
William Clapham, President 1996 $ - $ 25,000
1997 $ 58,600 $ 72,000
1998 $135,600 $ 72,000
Item 11. Security Ownership of Certain Beneficial Owners and Management.
(a) Security ownership of certain beneficial owners.
The following table sets forth the number and percentage of the Company's
common shares owned
29
<PAGE>
of record and beneficially by each person owning more than 5% of such common
shares at July 31, 1998.
(1) (2) (3) (4)
Title of Class Name and Amount and Percent of Class
Address of Nature of
Beneficial Beneficial
Owner Owner
- --------------------------------------------------------------------------------
Preferred Series AA 1996 Thaisa Branco 360 89.33%
816 Okra Ct. (Convertible to (32.27% if
Carlsbad, CA 3,600,000 shares converted)
92009 Common)
Common Stock Dr. Morris Mann 625,000 5.60%
(WestRim Holdings)
California
The following table set forth the number and percentage as of the date of
this filing, the shares beneficially owned by all directors and nominees:
(1) (2) (3) (4)
Title of Class Name and Amount and Percent of Class
Address of Nature of
Beneficial Beneficial
Owner Owner
Preferred Series AA 1996 Thaisa Branco ---see above--- There have been no
common shares issued to any of the directors of the Company.
Item 12. Certain Relationships and Related Transactions.
William Clapham, the President of the Company, provided the Company with
the marketing distribution plans (uni-level and matrix network compensation
program, commission payout structure, operations, and automated monthly ordering
system), and proprietary formulas for dietary supplements (complex liquid
essential vitamins, minerals, essential fatty acids, amino acid complex,
suspension base of vegetable glycerine, purified water and aloe, liquid herbal
extracts antioxidant formulas, encapsulated antioxidant formula), weight
management formula, and natural hair care product formula. In exchange for the
use of the formulas and marketing plans Mr. Clapham receives minimum royalties
of $20,000 per year with provisions for royalties of $6,000 per month when sales
volume is greater than $2,000,000 per year and $10,000 per month when sales
volume is greater than $6,000,000 per year. Also, See Item 9 and Item 11 above.
30
<PAGE>
Item 13. Exhibits and Reports on Form 8-K.
(a) The following documents are filed as part of this report.
1. Financial Statements ............................................. PAGE
Independent Auditor's Report ......................................... F-1
Consolidated Balance Sheet,
July 31, 1998 and 1997 ............................................... F-2
Consolidated Statements of Income,
For the Years Ended July 31, 1998 and 1997 .......................... F-4
Consolidated Statements of Cash Flows,
For the Years Ended July 31, 1998 and 1997 .......................... F-5
Consolidated Statements of Changes in Stockholders' Equity,
For the Years Ended July 31, 1998 and 1997 ........................... F-7
Notes to Consolidated Financial Statements ........................... F-8
2. Financial Statement Schedules
The following financial statement schedules required by Regulation S-X
are included herein.
All Schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
3. Exhibits
The following exhibits are included as part of this report:
Exhibit
Number Exhibit
2.1 Articles of Articles of Incorporation and By-Laws of EEE-Energy
Consultants, Inc. (Formerly EEE-Hunter Associates, Inc.) (1)
23.1 Consent of Robison, Hill & Co.(1)
27.1 Financial Data Schedule
31
<PAGE>
(1) Incorporated by reference to the Registrant's registration statement on
Form 10-SB/A Amendment #2 filed on November 20, 1997.
(b) No reports on Form 8-K were filed.
(c) The exhibits listed in Item 14(a)(3) are incorporated by reference.
(d) No financial statement schedules required by this paragraph are
required to be filed as a part of this form.
32
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Voyager Group USA-Brazil, Ltd.
DATE: November 13, 1998
By /s/
William Clapham, President
(Principal Financial and
Accounting Officer)
33
<PAGE>
Independent Auditor's Report
To the Stockholders
of Voyager Group USA-Brazil, Ltd. and Subsidiaries
We have audited the consolidated balance sheet of Voyager Group
USA-Brazil, Ltd. and Subsidiaries as of July 31, 1998 and 1997, and the related
consolidated statements of income, stockholders' equity, 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 consolidated financial statements referred to above
present fairly, in all material respects the financial position of Voyager Group
USA-Brazil, Ltd., and Subsidiaries as of July 31, 1998 and 1997 and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
Respectfully submitted
/s/ Robison, Hill & Co.
----------------------------
Certified Public Accountants
Salt Lake City, Utah
November 5, 1998
F-1
<PAGE>
VOYAGER GROUP USA-BRAZIL, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
July 31,
----------------------------
1998 1997
--------- ---------
ASSETS
Current Assets:
Cash ................................... $ -- $ 419,332
Inventory .............................. 173,130 165,212
Prepaid Expenses ....................... 800 56,318
Accounts Receivable .................... 28,872 16,789
--------- ---------
Total Current Assets ................ 202,802 657,651
--------- ---------
Fixed Assets, at Cost:
Furniture and Equipment ................ 140,135 138,760
Leasehold Improvements ................. 6,741 6,741
Less - Accumulated
Depreciation ....................... (62,443) (44,925)
--------- ---------
84,433 100,576
--------- ---------
Other Assets:
Deferred Tax Benefit ................... 172,301 96,867
Intangible Assets, Net ................. -- 1,449
Deposits ............................... 10,327 5,252
--------- ---------
Total Other Assets .................. 182,628 103,568
--------- ---------
Total Assets ........................ $ 469,863 $ 861,795
========= =========
F-2
<PAGE>
VOYAGER GROUP USA-BRAZIL, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
July 31,
--------------------------
1998 1997
--------- ---------
LIABILITIES AND STOCKHOLDERS
EQUITY
Current Liabilities:
Accounts Payable ........................... $ 31,782 $ 130,675
Accrued Liabilities ........................ 204,189 46,267
Accrued Commissions ........................ 48,451 146,027
Shareholder Loans ......................... 4,500 --
--------- ---------
Total Current Liabilities ............... 288,922 322,969
--------- ---------
Stockholders' Equity
Preferred Stock, $.001 par
value; 5,000,000 shares
authorized; 421 shares issued
and outstanding .......................... 1 1
Premium on Preferred Stock ................. 155,331 155,331
Common Stock to be Issued .................. -- 300
Common Stock; $.001 par value;
50,000,000 shares authorized;
5,837,010 and 3,578,010 shares
issued and outstanding July 31,
1998 and 1997, respectively .............. 5,837 3,578
Additional Paid-in Capital ................. 971,902 920,461
Retained Earnings (Deficit) ................ (952,130) (540,845)
--------- ---------
Total Stockholders' Equity .............. 180,941 538,826
--------- ---------
Total Liabilities, and
Stockholders' Equity .................. $ 469,863 $ 861,795
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
VOYAGER GROUP USA-BRAZIL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Year Ended
July 31,
----------------------------
1998 1997
----------- -----------
Sales, net of allowances
of $22,902 and $51,653 ....................... $ 2,344,302 $ 3,967,363
Cost of Sales ................................ 711,271 1,195,473
----------- -----------
Gross Margin ............................ 1,633,031 2,771,890
Selling & Marketing .......................... 1,607,917 2,563,413
Research & Development ....................... 2,919 --
General & Administrative ..................... 519,320 979,634
----------- -----------
Net Income (Loss) from
Operations ............................... (497,125) (771,157)
Other Income (Expense)
Interest ................................... 7,500 7,404
----------- -----------
Income (Loss) Before Income
Taxes ...................................... (489,625) (763,753)
Income Tax Benefit (Expense) ................. 78,340 124,013
----------- -----------
Net Income (Loss) ............................ $ (411,285) $ (639,740)
=========== ===========
Earnings (Loss) Per Common Share:
Basic & Diluted ............................ $ (0.09) $ (0.19)
=========== ===========
Weighted Average Shares Outstanding:
Basic & Diluted ............................ 4,638,884 3,285,205
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
VOYAGER GROUP USA-BRAZIL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
For the Year Ended
July 31,
------------------------
1998 1997
----------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) .............................. $(411,285) $(639,740)
Adjustments to Reconcile Net
Income (Loss) to Net Cash
Used in Operating Activities:
Depreciation and Amortization ................ 18,967 31,400
Common Stock in exchange for Services ........ 30,060 638,385
Changes in Assets and
Liabilities-
Increase in Accounts Receivable .......... (12,083) (16,789)
Increase in Prepaid Expenses ............. 55,518 (55,007)
Increase in Inventory .................... (7,918) (160,886)
Increase in Other Assets ................. (80,509) (96,521)
Increase in Accounts Payable ............. (98,893) 100,029
Increase in Accrued Liabilities .......... 157,922 8,985
Increase in Accrued Commissions .......... (97,576) 132,592
--------- ---------
Net Cash Provided by Operating
Activities ................................ (445,797) (57,552)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase Furniture and Equipment ............... (1,375) (90,903)
--------- ---------
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
VOYAGER GROUP USA-BRAZIL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Increase (Decrease) in Cash and Cash Equivalents
For the Year Ended
July 31,
------------------------
1998 1997
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred Stock .................................. $ -- $ --
Proceeds from Issuance of
Common Stock .................................... 23,340 245,000
Proceeds from Shareholder Loans .................. 4,500 --
--------- ---------
Net Cash Provided by
Financing Activities ......................... 27,840 245,000
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS ........ (419,332) 96,545
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR ............................... 419,332 322,787
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR ........ $ -- $ 419,332
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash Paid During the Year For:
Interest ...................................... $ 34 $ --
Income Taxes .................................. $ 800 $ 38,276
On April 11, 1997 the Company issued 200,000 shares of common stock in
exchange for product development services. During February and April 1998,
pursuant to a top up provision of the agreement an additional 300,000 and
125,000 shares, respectively, were issued to Dr. Mann (WestRim Holdings).
On May 13, 1997, James R. Parker (Plaintiff) filed a Complaint for Damages
against the Voyager Group, Inc. in Superior Court of the State of California.
During November, 1997 the Parties to the Complaint reached a settlement
agreement whereby the Company will issue 300,000 shares of common stock in full
payment of all claims under the Complaint. Subsequent to July 31, 1997 the
300,000 shares of common stock have been issued.
During December 1997, the company issued 434,000 shares to three employees.
The shares were offered at approximate market value.
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
VOYAGER GROUP USA-BRAZIL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Additional
Preferred Stock Stock To Common Stock Paid-in Retained
---------------------------------- ---------------------
Shares Amount Premium Be Issued Shares Amount Capital Earnings
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance August 1, 1996 ...... 431 $ 1 $ 155,331 $ -- 2,978,010 $ 2,978 $ 37,976 $ 98,895
Shares Issued in Exchange for
Services October 27, 1996 -- -- -- -- 150,000 150 149,850 --
Issuance of Common Stock
Reg D Offering for Cash
November 11, 1996 ....... -- -- -- -- 250,000 250 244,750 --
Shares Issued in Exchange for
Services April 11, 1997 .. -- -- -- -- 200,000 200 424,800 --
Shares to be Issued for
Settlement
Effective August 1, 1996 . -- -- -- 300 -- -- 63,085 --
Net Loss Year Ended
July 31, 1997 ............ -- -- -- -- -- -- -- (639,740)
--------- --------- --------- --------- --------- --------- --------- ---------
Balance July 31, 1997 ....... 431 1 155,331 300 3,578,010 3,578 920,461 (540,845)
Shares Issued for Settlement -- -- -- (300) 300,000 300 -- --
Shares Issued to Employees
December, 1997 ........... -- -- -- -- 434,000 434 42,966 --
Shares Issued per Top up
February & April 1998 .... -- -- -- -- 425,000 425 (425) --
Warrant Exercises
April 1998 ............... -- -- -- -- 1,000,000 1,000 9,000 --
Conversion of Preferred
Stock July 1998 .......... (10) -- -- -- 100,000 100 (100) --
Net Loss Year Ended
July 31, 1998 ............ -- -- -- -- -- -- -- (411,285)
--------- --------- --------- --------- --------- --------- --------- ---------
Balance July 31, 1998 ....... 421 $ 1 $ 155,331 $ -- 5,837,010 $ 5,837 $ 971,902 $(952,130)
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
VOYAGER GROUP USA-BRAZIL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998, AND 1997
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company was first incorporated in the State of Nevada on June 12,
1990 as EEE-Hunter Associates, Inc. On July 27, 1995 the Company changed its
domicile to the State of Texas and merged into a Texas Corporation EEE-Energy
Consultants, Inc. Neither company had any operating activity. On July 2, 1996
the Company changed domicile to Nevada and on July 17, 1996 changed the name of
the Company to Voyager Group USA-Brazil, Ltd.
Also on July 17, 1996 the Company entered into an agreement with
Voyager Group, Inc. (a Delaware Corporation) whereby the Company acquired 100%
of the issued and outstanding stock of Voyager Group, Inc. in a tax-free
corporate reorganization in exchange for the issuance of 360 shares of preferred
series AA 1996 stock (convertible into 3,600,000 common shares). Mr. James
Ronald Parker received 15 restricted convertible preferred shares and 300,000
common shares as a finders fee in connection with the merger and as fees for
promotional activities. This transaction has been accounted for as a reverse
purchase. Income and expense have been presented since the inception of the
Delaware Company.
Principles of Consolidation
The consolidated financial statements include the accounts of Voyager
Group USA-Brazil, Ltd. and its wholly-owned subsidiary, The Voyager Group, Inc.
All significant intercompany accounts and transactions have been eliminated.
Nature of Business
The Company's independent distributors distribute dietary supplements
and personal care products through a multi-level marketing network. The products
are formulated to appeal to the general public and address overall health
considerations.
Inventories
Inventories consist of dietary and personal care products and related
materials and are stated at the lower of cost (first-in, first-out method) or
market, or net realizable value.
Revenue Recognition
The Company recognizes revenue from product sales at the time of
shipment.
F-8
<PAGE>
VOYAGER GROUP USA-BRAZIL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998, AND 1997
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Income Taxes
The Company accounts for income taxes under the provisions of SFAS No.
109, "Accounting for Income Taxes." SFAS No. 109 requires recognition of
deferred income tax assets and liabilities for the expected future income tax
consequences, based on enacted tax laws, of temporary differences between the
financial reporting and tax bases of assets and liabilities.
Depreciation
Depreciation is provided at rates based on estimated useful service
lives (five to seven years for office furniture and fixtures), using accelerated
methods.
Maintenance and repairs are charged to operations; betterments are
capitalized. The cost of property sold or otherwise disposed of and the
accumulated depreciation thereon are eliminated from the property and related
accumulated depreciation accounts, and any resulting gain or loss is credited or
charged to income.
Amortization
Organization costs are amortized over a sixty month period. Intangible
assets are amortized over useful life.
Cash Equivalents
For the purpose of reporting cash flows, the Company considers all
highly liquid debt instruments purchased with maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
Earnings (Loss) Per Share
In 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share" (EPS). SFAS No. 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share. The
application of SFAS No. 128 had no effect of the earnings per share for the nine
months ended September 30, 1996 as previously reported.
F-9
<PAGE>
VOYAGER GROUP USA-BRAZIL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998, AND 1997
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
The effect of outstanding common stock equivalents, including warrants
and convertible preferred stock are antidilutive for the years ended July 31,
1998 and 1997 and are thus not considered.
The reconciliations of the numerators and denominators of the basic
earnings per share computations are as follows:
1998 1997
----------- -----------
NUMERATOR
Net Loss ..................................... (411,285) (639,740)
Net Loss To Common Stockholders .............. $ (411,285) $ (639,740)
=========== ===========
DENOMINATOR
Weighted Average Number of Common Shares
4,638,884 3,282,205
=========== ===========
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements. The Company maintains the majority of its cash
balances with one financial institution, in the form of demand deposits.
The Company performs ongoing credit evaluations of its customers'
financial condition and generally does not require collateral. The Company
maintains reserves for estimated credit losses. Its accounts receivable balances
are primarily domestic. No customer accounts for more than 10% of sales.
F-10
<PAGE>
VOYAGER GROUP USA-BRAZIL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998, AND 1997
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued SFAS
No., 121, "Accounting for the Impairment of Long-lived Assets". SFAS No. 121
addresses the accounting for (i) impairment of long-lived assets, certain
identified intangibles and goodwill related to assets to be held and used, and
(ii) long-lived assets and certain identifiable intangibles to be disposed of.
SFAS No. 121 required that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. If the sum of the expected future cash flows from the
use of the asset and its eventual disposition (undiscounted and without interest
charges) is less than the carrying amount of the asset, an impairment loss is
recognized. Management does not expect that the adoption of SFAS No. 121 will
have a material impact on the Company's consolidated financial statements.
Pervasiveness 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 and
disclosure of contingent 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.
Reclassifications
Certain reclassifications have been made in the 1997 financial
statements to conform with the 1998 presentation.
F-11
<PAGE>
VOYAGER GROUP USA-BRAZIL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998, AND 1997
(Continued)
NOTE 2 - PREFERRED STOCK
On July 17, 1996 the Company created convertible Preferred shares
Series AA 1996, authorizing the issuance of 1,000 shares of convertible
preferred stock to be sold, with a par value of $.001. The preferred stock are
convertible at a ratio of 10,000 shares of common stock per preferred share
converted. In the event of any voluntary or involuntary liquidation, the holders
of the preferred stock are entitled to an amount equal to the net book value of
the corporation plus all unpaid dividends. The preferred stock is entitled to
vote 10,000 votes per preferred share.
NOTE 3 - RELATED PARTY TRANSACTIONS
William Clapham, the President of the Company, provided the Company with
the marketing distribution plans (uni-level and matrix network compensation
program, commission payout structure, operations, and automated monthly ordering
system), and proprietary formulas for dietary supplements (complex liquid
essential vitamins, minerals, essential fatty acids, amino acid complex,
suspension base of vegetable glycerine, purified water and aloe, liquid herbal
extracts antioxidant formulas, encapsulated antioxidant formula), weight
management formula, and natural hair care product formula. In exchange for the
use of the formulas and marketing plans Mr. Clapham receives minimum royalties
of $20,000 per year with provisions for royalties of $6,000 per month when sales
volume is greater than $2,000,000 per year and $10,000 per month when sales
volume is greater than $6,000,000 per year.
NOTE 4 - RENT EXPENSE
The Company occupies certain sales offices under a noncancellable
lease. The lease is for thirty-six months expiring August 31, 1999. The current
lease requires minimum rental payments of $30,384 per year. The obligations of
the lessee under the lease are guaranteed by William Clapham, the President of
the Company.
NOTE 5 - ADVERTISING AND PROMOTION
On October 11, 1997 the Company entered into an agreement with
Celebrity Foods, Inc., also known as Robert Eubanks, to assist in promotion and
advertising of Company products and the expansion of the Company's independent
distributor network. The contract calls for Celebrity Foods, Inc., among other
things, to produce (1) a maximum of one audio tape for each existing Voyager
product and any new product introduced by the Company during the three years of
the contract, (2) Celebrity (Bob Eubanks) will make personal appearances at
Company functions (not to exceed two
F-12
<PAGE>
VOYAGER GROUP USA-BRAZIL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998, AND 1997
(Continued)
NOTE 5 - ADVERTISING AND PROMOTION (Continued)
per year), (3) Bob Eubanks will be available to host Company conference calls
not to exceed four per year, and (4) Celebrity will do no fewer than four radio
and television interviews per month. On October 27, 1997 the Company issued
150,000 restricted common shares. The value of the services were recorded at $1
per share (the approximate closing price of the common stock on the date the
agreement was signed).
NOTE 6 - PRIVATE PLACEMENT OF COMMON STOCK
On November 11, 1996 the Company completed a Regulation D section 504
private placement whereby the Company issued 250,000 common shares for $245,000
(net of $5,000 expense of sale). Each share included detachable warrants to
purchase three common shares at $.01 per share for 24 months callable at $.005.
On April 1, 1997 the Company entered into a five year agreement with
Dr. Morris Mann to assume the position of director of product development to
enhance the integrity and quality of the Company's product lines, the
intellectual property of the Company and the Company image. On April 11, the
Company issued 200,000 restricted common shares to Dr. Morris Mann in payment
for his services. The value of the services were recorded at $2.125 per share
(the approximate closing price of the common stock on the date the agreement was
signed). During February and April 1998, pursuant to a top up provision of the
agreement an additional 300,000 and 125,000 shares, respectively, were issued to
Dr. Mann (WestRim Holdings).
During December 1997, the company issued 434,000 shares to three
employees. The shares were offered at approximate market value.
NOTE 7 - INCOME TAXES
The Company is subject to corporate and state income taxes. Deferred
taxes are determined based on the estimated future tax effects of differences
between the financial reporting and tax basis of assets and liabilities given
the provisions of the enacted tax laws. The net deferred tax asset at July 31,
1998 of $269,034 is comprised of the tax benefit of the net operating loss
carryforward and the difference between financial accounting and tax
depreciation.
F-13
<PAGE>
VOYAGER GROUP USA-BRAZIL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998, AND 1997
(Continued)
NOTE 7 - INCOME TAXES (Continued)
The components of the income tax (benefit) provision are as follows:
July 31,
-------------------------------
1998 1997
---------- ---------
Current
Federal ........................... $ -- $ --
State ............................. 800 --
Deferred
Federal ........................... (48,371) (114,500)
State ............................. (30,769) (9,513)
Total ......................... $ (78,340) $(124,013)
========= =========
A reconciliation between the Company's effective tax rate and the statutory
federal income tax rate on the income (loss) from continuing operations is as
follows:
1998 1997
-------------- --------------
Statutory federal income tax rate ........ (15.00) % (34.00) %
State income taxes ....................... (8.84) % (8.00) %
Other .................................... 7.84 % 26.00 %
-------------- --------------
Effective income tax rate ................ (16.00) % (16.00) %
============== ==============
NOTE 8 - LEGAL PROCEEDINGS
On May 13, 1997 James R. Parker (Plaintiff) filed a Complaint for
Damages against various individuals and the Voyager Group, Inc. in Superior
Court of the State of California in and for the County of Sacramento (Case No.
97AS02458). The complaint alleges that the Voyager Group, Inc. and its
directors, officers, agents and shareholders among others, promised to pay the
Plaintiff approximately 781,250 shares of the Voyager Group. The complaint
seeks, among other things, damages from the defendants in the aggregate amount
of $2,900,000, plus attorney fees and interest. During November 1998, the
Company successfully negotiated to settle all claims by issuing 300,000 shares
of common stock to Mr. Parker. The amount of the settlement and any liability or
other costs that may be incurred in connection with this matter have been
provided for in the financial statements.
F-14
<PAGE>
VOYAGER GROUP USA-BRAZIL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998, AND 1997
(Continued)
NOTE 9 - SELECTED FINANCIAL DATA (unaudited)
The following tables set forth certain unaudited quarterly financial
information:
<TABLE>
<CAPTION>
Quarters Ended
--------------------------------------------------------
July 31, April 30, January 31, October 31,
1997 1997 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income statement data:
Net sales ............... $ 954,583 $ 928,829 $ 1,063,311 $ 1,020,640
Gross profit ............ 666,967 648,973 782,328 673,622
Income (loss) from
operations ............ 41,346 (395,842) (39,855) (376,806)
Other income ............ 3,573 3,831 -- --
----------- ----------- ----------- -----------
Income (loss) before tax 44,919 (392,011) (39,855) (376,806)
Income tax (provision)
benefit .............. (5,375) 62,722 6,377 60,289
----------- ----------- ----------- -----------
Net income (loss) ..... $ 39,544 $ (329,289) $ (33,478) $ (316,517)
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Quarters Ended
--------------------------------------------------------
July 31, April 30, January 31, October 31,
1997 1997 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income statement data:
Net sales ............... $ 486,076 $ 454,076 $ 632,669 $ 872,302
Gross profit ............ 312,851 318,498 441,510 608,474
Income (loss) from
operations ............ 163,978 (149,257) (102,099) 18,225
Other expense ........... (987) 1,345 2,880 3,419
----------- ----------- ----------- -----------
Income (loss) before tax 162,991 (147,912) (99,219) (21,644)
Income tax (provision)
benefit .............. (46,184) 50,238 33,000 7,000
----------- ----------- ----------- -----------
Net income (loss) ..... $ 116,807 $ (97,674) $ (66,219) $ 14,644
=========== =========== =========== ===========
</TABLE>
F-15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET OF VOYAGER GROUP USA-BRAZIL, lTD. AS OF JULY 31, 1998 AND THE
RELATED STATEMENTS OF OPERATIONS AND CASH FLOWS FOR THE YEAR THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JUL-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 29
<ALLOWANCES> 0
<INVENTORY> 173
<CURRENT-ASSETS> 203
<PP&E> 147
<DEPRECIATION> 62
<TOTAL-ASSETS> 470
<CURRENT-LIABILITIES> 289
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> 175
<TOTAL-LIABILITY-AND-EQUITY> 470
<SALES> 2344
<TOTAL-REVENUES> 2344
<CGS> 711
<TOTAL-COSTS> 711
<OTHER-EXPENSES> 2130
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (490)
<INCOME-TAX> (78)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (411)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
