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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
[ ] EXCHANGE ACT OF 1934 for the period ended December 31, 1997.
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE Act of 1934 for the transition period from ___ to ____.
Commission file number: 000-23319
AVANI INTERNATIONAL GROUP INC.
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(Name of Small Business Issuer in its charter)
Nevada 88-0367866
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(State of (I.R.S. Employer
Incorporation) I.D. Number)
#328-17 Fawcett Road, Coquitlam, B.C. (Canada) V3K 6V2
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number 604-525-2386.
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Securities registered under Section 12 (b) of the Act:
Title of each class Name of exchange on which
to be registered each class is to be registered
None None
Securities registered under Section 12(g) of the Act:
Common Stock
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(Title of Class)
Check whether issuer (1) filed all reports to be filed by Section 13 or 15(d) of
the Exchange Act during the past 12 months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes: No X.
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Check if there is no disclosure of delinquent filers in response 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 II of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for the most recent fiscal years. $473,214.
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common stock
was sold, or the average bid, and asked price of such common equity, as of a
specified date within the past 60 days.
None. A market for the Company's common stock has not been established.
The number of shares issued and outstanding of issuer's common stock $.001
par value, as of March 31, 1998 was 11,474,300.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PART I
Item 1. Description of Business.
Introduction.
Avani International Group Inc. ("Avani" or "Company") was organized under the
laws of the State of Nevada on November 29, 1995.
Since its inception, the Company has constructed a bottling facility and has
been engaged in the business of developing, manufacturing and distributing an
oxygen enriched, purified bottled water under the trade name "Avani Water".
The Company's executive offices and bottling facility are located at #328-17
Fawcett Road, Coquitlam, British Columbia (Canada) V3K 6V2, and its telephone
number is (604) 525-2386.
General.
The Company was incorporated in the State of Nevada on November 29, 1995 under
the name Rainfresh Technologies, Inc. and changed its name to Avani
International Group, Inc. on January 14, 1997. The Company has four wholly-owned
subsidiaries; Avani Marketing Corp., Avani Water Corporation, Avani
Manufacturing (China), Inc., and Marina Bottling Company Ltd. Avani Marketing
Corp. was organized under the laws of the State of Nevada on August 16, 1994.
Avani Water Corporation was organized under the laws of the Province of British
Columbia (Canada) on December 8, 1995. Marina Bottling Company Ltd. was
organized under the laws of the Province of British Columbia (Canada) on October
2, 1997. Avani Manufacturing (China), Inc. was organized under the laws of the
State of Nevada on December 1, 1997. Unless the context indicates otherwise, (i)
all references to the Company herein shall include the Company and its
wholly-owned subsidiaries and (ii) all dollar amounts are expressed in US
dollars. Any reference to Canadian dollars shall be indicated as "Cdn".
Following its incorporation, the Company commenced construction of its bottling
facility in May 1996 which was completed in August 1996. In September 1996, the
Company initiated the production, marketing and sale of its purified, oxygen
enriched water under the brand name "Avani Water". The Company utilizes a unique
technology which injects oxygen into purified water producing an oxygen
enriched, purified bottled water.
The Company sells its product in the greater Vancouver metropolitan area and
internationally to the United States, Taiwan, Korea and Singapore. The Company
provides home and business delivery of five gallon bottles in the Vancouver
metropolitan area and, to a limited extent, sells 500 ml and 1.5 liter PET
bottles directly to retail outlets in the Vancouver area. Since December 1996,
the Company has exported both PET sized bottles to Taiwan pursuant to a
distribution
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agreement with a Taiwan company. In June 1997, the Company initiated
distribution to Korea and Singapore for test marketing purposes pursuant to a
distribution agreement with a local Vancouver company. In December 1997, the
Company initiated sales to the United States for test marketing purposes. The
Company intends to expand its national and international sales to existing and
other markets, through licensing agreements, distribution agreements or joint
ventures with third parties.
In December 1995, the Company acquired the exclusive, worldwide rights to the
oxygen enrichment process from Georgia Pacific Company, a Taiwanese company, in
exchange for the issuance of 5,000,000 shares of common stock of the Company
which has been valued at $5,000 (See "Certain Transactions"). During 1995 and
1996, the Company raised approximately $3,300,000 in gross proceeds from the
private placement of its common stock at $1.00 per share. During 1997, the
Company raised approximately $1,100,000 in gross proceeds from the private
placement of its common stock at $1.00 per share. The proceeds from such
placements were used to construct the bottling facility and to provide working
capital for the Company's operations.
The Company's business is subject to various laws and regulations implemented by
the Canadian government and local regulators, which require the Company to
obtain licenses for its business and equipment, to be subject to annual
inspections, to comply with certain quality standards regarding the Company's
bottling plant and equipment, and to continuously control the quality of water
sold by the Company. In addition, certain other governments and states within
the United States require the Company to obtain certification of its bottled
water. The Company believes that it is currently in compliance with these laws
and regulations and has passed all regulatory inspections necessary for its to
sell its product in its current markets. In addition, the Company anticipates
receiving approval from other governmental and state agencies as its
geographical market expands. The Company believes that the cost of compliance
with applicable governmental laws and regulations is not material to its
business.
Bottled Water Market.
The premium bottled water market has experienced rapid growth since the early
1980's as consumers became concerned about the decline in quality of municipal
water available in their homes and offices. This market growth also has been
fueled by an overall health consciousness of the consumer seeking to eliminate
the consumption of foods and beverages containing sugars, calories and
artificial additives, trending instead to consumables with little or no sugars,
calories or additives. Premium bottled water fits squarely within this trend.
Per capita consumption of bottle water rose from 2.8 gallons in 1980 to over 11
gallons per capita in 1995 (Beverage World September 1996). The bottled water
business increased sales by approximately one billion dollars from 1991 to 1996
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totaling $3.1 billion in 1996. In 1996, the industry experienced growth of 8.4%,
the second best annual growth in the decade and the PET sized segment grew by
25% (Beverage World April 1997).
The Company considers its product to appeal to consumers of premium bottled
water products and believes that its purity as well as its oxygen enrichment
offers a distinct alternative to other premium bottled waters.
Product and Product Features.
The Company manufactures and sells its purified, oxygen enriched water in 500 ml
and 1.5 liter PET bottles and five gallon bottles under the trade name "Avani
Water".
Avani Water contains less than 2 parts per million (ppm) of total dissolved
solids (tds). The tds level of Avani water contrasts to other more recognizable
products such as Evian water with 309 ppm of tds and Perrier water with 505 ppm
of tds. Many regional spring waters fall between 45 and 600 ppm of tds. Total
dissolved solids include metals such as iron, copper and lead, and organic
substances such as herbicides and pesticides. The limited tds content of Avani
Water is achieved through a comprehensive filtration process used by the
Company. The Company believes that this filtration process together with other
aspects of its bottling process (reverse osmosis, carbon filtration and oxygen
enrichment) enables the Company to deliver a smoother, more polished water when
compared to most other bottled waters.
The Company's unique oxygenation process yields a water containing 26.4 mg/L (or
264 ppm) of dissolved oxygen which is approximately three times higher than the
oxygen content level in Evian brand water or ordinary tap water. Internal tests
performed by the Company indicate that 24 hours after opening a sealed bottle of
Avani Water, the oxygen content is reduced to approximately 240 ppm. Ordinary
water and most bottled water (unopened) contain less than 90 ppm of oxygen.
During fiscal year ending December 31, 1997, the Company expended $12,022 in
research and development costs.
Manufacturing Process.
The Company purchases its water from the local municipality which is piped to a
holding tank located on premises. From the holding tank, the water flows through
the bottling process at constant pressure. The water initially passes through a
10 micron filter to remove the larger solids and then passes through a series of
finer media filters to remove solids greater than 2 microns in size including
inorganic metals such as iron, copper and lead. The water then passes through
ozonation and carbon filtration processes. Ozonation is the strongest
disinfectant and oxidizing agent available for water treatment and is a standard
disinfectant for bottled water processing. Activated carbon filtration removes
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organic compounds such as pesticides and herbicides and associated tastes and
odors. The water next passes through a seven membrane reverse osmosis process
which removes particles greater than 0.001 micron. The water is demagnetized to
remove remaining metals and is exposed to ultraviolet light for aseptic
purposes. The water is then placed in a storage tank where high volumes of
oxygen (O2) is injected into the purified water under pressure creating an
oxygen enriched water product. Following the oxygen enrichment process, the
water is piped to the "clean room". The "clean room" is a completely enclosed
room with an over-balanced ventilation system which feeds filtered, sterile air
to the room. There, the water product is automatically bottled in pre-rinsed
bottles, capped and labeled. The bottles are directed to a case packer which
automatically loads the bottles into shipping cases for distribution.
For quality assurance purposes, the Company tests its product every two hours at
various points in the bottling process, including its finished products.
The Company purchased the plant equipment in 1996. The bottling equipment which
includes a conveyor system together with an automatic rinsing, filling, capping,
labeling and casing system, allows production of approximately 100 to 130
bottles per minute of the 500 ml bottles, 30 to 40 bottles per minute for the
1.5 liter bottles and 300 bottles per hour of the five gallon bottles. The
Company is able to produce either the 500 ml or 1.5 liter bottles simultaneously
with the 5 gallon bottles. The conversion time to one of the PET sizes from the
other requires approximately one hour. As of December 31, 1997, the plant is
operating at 30% of capacity using a one 40 hour shift. Two additional 40 hour
shifts can be added to increase production capacity.
The overall working condition of the Company's plant and equipment is good to
excellent. All of the bottling equipment will operate reliably at the maximum
capacity rated by each respective manufacturer. The Company's trucks and
forklifts are all in good working condition.
The Company is a member in good standing of the Canadian Bottled Water
Association and the International Bottled Water Association.
Sales and Distribution.
The Company sells its products through its internal sales personnel and through
independent distributors and commissioned brokers. Its product is sold in the
greater Vancouver metropolitan area and internationally to Taiwan and, on a
limited basis to the United States, Korea and Singapore. The Company provides
home and business delivery of five gallon bottles in the Vancouver metropolitan
area and, on a limited basis, sells 500 ml and 1.5 liter PET bottles directly to
retail outlets in the Vancouver area.
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The Company's sales development plan includes the increase of local and national
sales to retail outlets, the expansion of existing sales in Taiwan, Korea,
Singapore and the United States through existing and other sales channels, and a
market expansion to other international areas, including other Pacific Rim
countries.
The Company directly markets its five gallon bottles in the greater Vancouver
metropolitan area to business and residential users through its salaried and
commissioned sales staff. In addition, the Company leases water coolers to its
customers which it purchases directly from a manufacturer. Each customer
subscribes for a minimum of 2 bottles per month for a one year period, although
most customers subscribe for 3 or more bottles per month. The customer pays a
minimum charge of $11.80 per month (for two bottles), a one time bottle deposit
charge of $7.35, a one time cooler deposit charge of $73.00 and an annual cooler
lease charge of $73.00. The Company owns and operates two delivery vehicles and
employs two delivery persons to service its customers. As of December 31, 1997,
the Company has approximately 2,000 customers.
The Company also directly markets its 500 ml and 1.5 liter products to a limited
number of specialty food outlets in the Vancouver area. As of December 31, 1997,
direct sales to local retail outlets has been insignificant. In December 1997,
the Company initiated sales to three large supermarket chains in southern
California for test marketing purposes. At this time, the Company can not
predict the level of sales which it will likely experience from this market.
In an effort to further develop distribution channels of its PET products within
Canada and the United States, the Company has hired a North American sales
manager. The sales manager will be entrusted with responsibility of developing
arrangements with independent distributors and food brokers servicing large food
chains and convenience stores.
The Company also exports its 500 ml and 1.5 liter products to Taiwan pursuant to
a distribution agreement with Maxzone Enterprises Co. Ltd., an unaffiliated
Taiwanese company. Sales to the distributor commenced in December 1996 and sales
to the distributor has accounted for a significant portion of the Company's
bottled water sales through December 31, 1997. For fiscal years ended December
31, 1996 and December 31, 1997, sales to the distributor accounted for 47% and
44%, respectively, of total bottled water sales.
Sales to Taiwan have increased from approximately $26,725 for year ended
December 31, 1996 to $192,459 for the year ended December 31, 1997. The Company
believes that the development of this market will be constrained by the current
economic difficulties experienced by Taiwanese economy. The economic
difficulties include the devaluation of the Taiwan currency against other
non-Asian currencies causing imported goods to be
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more expensive, as well as a general decrease in consumer spending. As a result,
the Company can not predict the level of sales it will likely experience in the
future from Taiwan. The Company also has conducted limited discussions with its
Taiwanese distributor concerning the construction of a bottling facility in
Taiwan pursuant to which the Company would either license its technology to the
distributor in exchange for a royalty on bottled water sales. Alternatively, the
Company may contribute limited bottling equipment pursuant to a joint venture
arrangement with the distributor upon term to be determined by the parties. A
formal understanding has not been reached by the parties, however, the Company
intends to limit its capital expenditures with respect to this project. If the
Company elects to contribute limited bottling equipment to a joint venture
arrangement, the Company may be required to raise additional funds to provide
such equipment. No assurances can be given that the Company will be successful
in these endeavors.
The Company intends to expand its international product sales to other Pacific
Rim markets within the next 12 months notwithstanding the current economic
conditions in this region. This expansion will be accomplished through
agreements with independent distributors for each targeted territory. Consistent
with this plan, the Company has entered into agreements for product distribution
to Korea and Singapore. In June 1997, the Company entered into an agreement with
Beon Top Enterprises Ltd., an unaffiliated Vancouver company, to distribute
Avani Water to Korea and Singapore. In July 1997, shipments of Avani Water were
made to both Korea and Singapore for test marketing purposes. At this time, the
Company can not predict the level of sales which it likely will experience in
either of these markets.
Backlog.
The Company had no backlog for the year ended December 31 1997. There is no
seasonal impact on the Company's sales.
Facilities.
The Company's maintains it production facilities at its corporate headquarters
located at 328-17 Fawcett Road, Coquitlam, British Columbia (Canada) V3K 6V2.
The total facilities of the Company comprise 14,000 square feet, of which 11,200
square feet is dedicated to production and storage and the remainder dedicated
to its administrative offices.
Competition.
The bottled water industry is extremely competitive and populated by a
significant number of large regional, national and international companies. Well
established names in the industry, include Evian and Naya, as well as a
significant number of regional products. Many of these companies maintain
significantly greater resources (including financial, technical
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and personnel) in all aspects of business than those available to the Company.
In addition, their products have achieved enormous consumer acceptance and
loyalty. The principal competitive factors in the bottled water industry are
price, taste, packaging, name recognition and water source. However, the Company
believes that its smooth taste and its unique oxygen enrichment will enable it
to sufficiently compete in this market.
Product Liability.
The Company is engaged in a business which could expose it to possible claims
for personal injury resulting from contamination of its water. While the Company
believes that through its regular product testing it carefully inspects the
quality of its water, it may be subject to exposure due to customer or
distributor misuse or storage. The Company maintains product liability insurance
against certain types of claims in amounts which it believes to be adequate. The
Company also maintains an umbrella insurance policy that it believes to be
adequate to cover claims made above the limits of its product liability
insurance. Although no claims have been made against the Company or its
distributors to date and the Company believes its current level of insurance to
be adequate for its present business operations, there can be no assurances that
such claims will not arise in the future or this the Company's policies will be
sufficient to pay for such claims.
Proprietary Rights.
The Company has not sought patent protection for its proprietary oxygen
enrichment process, rather, it relies, to the extent it can, upon trade secrets
to protect its proprietary process.
Employees.
As of December 31, 1997, the Company has 26 employees, which includes two
officers of a subsidiary. The Company has no collective bargaining agreements
with its employees and believes its relations with its employees are good.
Item 2. Description of Property.
The Company's maintains it production facilities and its corporate headquarters
at #328-17 Fawcett Road, Coquitlam, British Columbia (Canada) V3K 6V2. The total
facilities of the Company comprise 14,000 square feet, of which 11,200 square
feet is dedicated to the production and storage facilities and the remainder is
dedicated to its administrative offices.
The Company owns its facilities subject to existing mortgages and are comprised
of seven adjoining buildings. Five of the buildings were purchased for a total
of $563,740 between April 1996 and June 30, 1996, subject to first mortgages in
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the principal amount of $311,279 as of December 31, 1997. The mortgages are
amortized over 25 years and bear interest at the rate of 8.30% per annum. A
balloon payment of $293,834 is due May 1, 2001. The sixth building was purchased
on July 1996 for $119,500 and is subject to a first mortgage in the principal
amount of $67,823 as of December 31, 1997. The first mortgage is amortized over
25 years and bears interest at the rate of 8.30% per annum. A balloon payment of
$63,877 is due July 29, 2001. The seventh building was purchased in March 1997
for $119,500 and is subject to first and second mortgages in the principal
amount of $68,301 and $62,190, respectively, as of September 30, 1997. The first
mortgage is amortized over 25 years and bears interest at the rate of 7.00% per
annum. A balloon payment of $62,911 is due March 27, 2002. The second mortgage
bears interest 8% with balloon payments of $20,730 due on January 31, 1998,
March 30, 1998 and August 30, 1998 and is collateralized by all seven buildings.
The Company believes that it will be able to refinance the described notes on or
before their respective balloon payment due dates or pay the notes as they come
due out of available cash. If the Company is unable to do so, it will be
required to raise additional funds for such purposes, although no assurance can
be given.
Item 3. Legal Proceedings.
The Company is not a party to any material legal proceedings.
Item 4. Submission of Matters to Vote of Security Holders.
None
PART II
Item 5. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.
There is no public market for the Company's equity securities. As of December
31, 1997, (i) there are no outstanding warrants or options to purchase, or
securities convertible into common stock of the Company and (ii) there are
2,194,500 shares of common stock which can be sold pursuant to Rule 144.
As of December 31, 1997, there are 117 shareholders of record of the Company's
common stock. Although there are no restrictions on the Company's ability to
declare or pay dividends, the Company has not declared or paid any dividends
since its inception.
Item 6. Management's Discussion and Analysis.
The following discusses the financial results and position of the consolidated
accounts of the Company and its wholly owned subsidiaries for the periods
indicated.
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Results of Operations
Fiscal year end 1997 compared with Fiscal year end 1996.
Revenues for fiscal 1997 were $473,214 representing an increase of $404,505 from
revenues of $68,709 for the comparable period in 1996. This increase was due to
product sales for a full 12 month period in 1997 contrasted with its initial
month of sales in 1996. Revenues in 1997 consisted of $438,636 in water and
supply sales (an increase of $381,496 from $57,140 for the prior period),
$22,862 in cooler and equipment sales (an increase of $16,153 from $6,709 for
the prior period) and $11,716 in cooler rentals (an increase of $6,856 from
$4,860 for the prior period). Of the total revenue for the 1997 period, $192,459
(or 44% of total water sales) represented sales to a Taiwan distributor. This
amount represents an increase of $165,734 from sales of $26,725 to the
distributor for the prior period. Interest income earned on investment of cash
totaled $15,784 for the period in 1997 representing a decrease of $10,374 from
$26,158 for the prior period. The decrease is a result the reduction of
available cash which was used for increased operations during the 1997 period.
Cost of sales for the 1997 period totaled $400,738 which represents an increase
of $245,455 from $155,283 for the prior period. This increase is due to costs
associated with production operations for a full 12 month period in 1997
contrasted with its initial month of operations for the prior period. Cost of
sales consisted of $316,735 in bottled water, supplies, coolers and related
equipment (an increase of $217,631 from $99,104 for the prior period) and
$84,003 in depreciation (an increase of $27,824 from $56,179 for the prior
period). Gross profit for period was $72,476 compared with a loss of ($86,574)
for the prior period. The increase was due to increased revenues from 12 months
of operations in 1997 contrasted with revenues from its initial month of
operations for the period in 1996.
General and administrative expenses which includes administrative salaries and
overhead for the period totaled $692,832 which represents an increase of
$169,858 from $522,974 for the prior period. This increase is due to costs
related to building the necessary corporate infrastructure to accommodate full
scale operations. Marketing expenses totaled $372,110 for the 1997 period,
representing an increase of $164,316 from $207,794 for the prior period. The
increase in marketing expenses is due to 12 months of operations contrasted with
less then a full year of operations for the prior period. Research and
development costs totaled $12,022 for the period. No research and development
costs were incurred in 1996. Interest expense relates to mortgage interest
incurred in connection with the Company's real estate and totaled $42,654 for
the 1997 period, representing an increase of $19,585 from $23,069 for the prior
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period. The increase is due to the acquisition of additional real estate in 1997
and interest charges for a full 12 month period on certain properties in 1997
contrasted with a shorter period for the same properties in 1996. Net loss for
the 1997 fiscal period was ($1,030,997) which represents an increase of $216,744
over ($814,253) for the prior period.
Liquidity and Capital Resources
Since its inception through December 31, 1997, the Company has raised
approximately $4,399,600 from the private placement of its common stock (net of
offering costs of $449,429). The Company has used these proceeds to fund the
construction of its manufacturing facilities and its working capital
requirements.
The Company is uncertain as to when it will achieve profitable operations. Until
such time, the Company intends to finance its ongoing operations through the
private placement of its capital stock or though debt financing. The Company has
no commitments for any such financing. No assurances can be given that the
Company will be successful in these endeavors. If the Company is unsuccessful in
these endeavors, such event will have a material adverse impact on Company.
Property, plant and equipment, net of accumulated depreciation, totaled
$1,752,806 on December 31, 1997. Property, plant and equipment, net of
accumulated depreciation, totaled $1,662,796 on December 31, 1996.
In connection with its real estate properties, as of December 31, 1997, the
Company has balloon mortgage payments of; $20,730 due on January 31, 1998, March
30, 1998 and August 30, 1998, $63,877 due on July 29, 2001, $62,911 due on March
27, 2002 and $293,834 due on May 1, 2001 (See "Item 2. Description of
Property"). The Company believes that it will be able to refinance the described
balloon payments on or before their respective dates, or pay the notes as they
come due out of available cash. If the Company is unable to do so, it will be
required to raise additional funds for such purposes, although no assurance can
be given.
Fiscal year end 1996 compared with Fiscal year end 1995.
The Company was organized on November 29, 1995 and commenced the marketing and
sale of Avani Water in September 1996.
The Company did not have revenues for the period from inception (November 29,
1995) through December 31, 1995. For the same period, the Company incurred
consulting and professional fees and salaries in the amount of $9,252.
Revenues for the year ending December 31, 1996 were $68,709 which consisted of
$57,140 in water sales, $4,860 in cooler leases and $6,709 in cooler sales. Of
the total revenue for the period, $26,725 (or 38% of total revenues) represented
sales to a Taiwan distributor. Interest income earned on investment of cash for
the period totaled $26,158.
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Cost of sales for the year ended December 31, 1996 totaled $155,283 which
consisted of $99,104 in bottled water, supplies, coolers and related equipment
and $56,179 in depreciation. Gross profit (loss) for the period was ($86,574).
General and administrative expenses for the 1996 period totaled $522,974 which
consisted of administrative salaries and overhead expenses incurred during its
development and initial operating phase and represents an increase of $513,722
from the prior period ended December 31, 1995. Marketing expenses totaled
$207,794 for the period. Loss from operations for the period was ($817,342).
Disclosure Regarding Forward Looking Statement and Cautionary Statement.
Forward Looking Statements. Certain of the statements contained in this Annual
Report on Form 10-KSB includes "forward looking statements" within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange
Act"). All statements other than statements of historical facts included in this
Form 10-KSB regarding the Company's financial position, business strategy, and
plans and objectives of management for future operations and capital
expenditures, and other matters, are forward looking statements. These forward
looking statements are based upon management's expectations of future events.
Although the Company believes the expectations reflected in such forward looking
statements are reasonable, there can be no assurances that such expectations
will prove to be correct. Additional statements concerning important factors
that could cause actual results to differ materially from the Company's
expectations ("Cautionary Statements") are disclosed below in the Cautionary
Statements section and elsewhere in this Form 10-KSB. All written and oral
forward looking statements attributable to the Company or persons acting on
behalf of the Company subsequent to the date of this Form 10-KSB are expressly
qualified in their entirety by the Cautionary Statements.
Cautionary Statements. Certain risks and uncertainties are inherent in the
Company's business. In addition to other information contained in this Form
10-KSB, the following Cautionary Statements should be considered when evaluating
the forward looking statements contained in this Form 10-KSB:
1. Lack of Profitable Operations. Since the Company's recent inception, the
Company has experienced operating losses for fiscal 1996 and 1997. Loss from
operations for fiscal 1997 approximated one million dollars. Moreover, the
Company can not predict when it will achieve profitable operations. The ability
of the Company to achieve profitable operations will be dependent upon many
factors, including the successful market development of its super oxygenated
water. Successful market development includes establishing necessary sales
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channels in the United States and other markets through distributors and food
brokers, and having funds available for product marketing and slotting fees. As
of December 31, 1997, the Company has limited sales channels in the United
States and Canada. The Company intends to raise additional funds in the
immediate future for product marketing, among other purposes. No assurances can
be given that the Company will be able to successfully develop the market for
its product.
2. Need For Additional Capital. The Company will require additional capital to
sustain its operations until such time as the Company achieves profitable
operations, and to otherwise expand its business. No assurances can be given
that the Company will be successful in raising the capital necessary for it to
sustain its operations during its operational loss period.
3. Limited Distribution Channels and Reliance On Distributor. As of December 31,
1997, the Company has limited distribution channels in the United States and
Canada. The Company presently is attempting to expand its distribution channels
in the United States and Canada. However, no assurances can be given that the
Company will be successful in this endeavor. Further, at year ended 1997, a
significant portion of its sales (44%) was made through one distributor located
in Taiwan. The loss of this distributor will have a material adverse impact upon
the operations of the Company.
Item 7. Financial Statements.
The Financial Statements that constitute Item 7 of this Annual Report on Form
10-KSB are included in Item 13 below.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
The directors and executive officers of the Company, their ages, and the
positions they hold are set forth below. The directors of the Company hold
office until the next annual meeting of stockholders of the Company and until
their successors in office are elected and qualified. All officers serve at the
discretion of the Board of Directors.
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Director/
Officer
Name Age Since Position
- ---- --- ----- --------
Peter Khean 53 1995 President, Secretary
and Chairman
Nico Huang 48 1995 Vice-President,
Treasurer and Director
- --------------------------------------------------------------------------------
Peter Khean - Mr. Khean has been President, Secretary and Chairman of the
Company since December 1995. From 1985 to December 1995, Mr. Khean has been a
business consultant providing services to individuals and business located in
the Pacific Rim countries. Mr. Khean is a Certified General Accountant in
Canada.
Nico Huang - Ms. Huang has been Vice President, Secretary and Director of the
Company since December 1995. From 1975 until December 1995, Ms. Huang has
operated a family owned health product manufacturing facility located in Taiwan.
Item 10. Executive Compensation.
The compensation for all directors and officers individually for services
rendered to the Company for the fiscal years ended December 31, 1997, 1996 and
1995, respectively, are set forth in the following table:
SUMMARY COMPENSATION
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Name and
Principal Salary Bonus Other Restr. Options
Position Year ($) ($) ($) Stock SARS LTIP Other
- -------- ---- ----- ----- ----- ----- ---- ---- -----
Peter Khean 1995 -- -- -- $450(1) -- -- --
President and 1996 -- -- -- -- -- -- --
Chairman 1997 -- -- -- -- -- -- --
Nico Huang 1995 -- -- -- $450(1) -- -- --
Vice President and 1996 -- -- -- -- -- -- --
Director 1997 -- -- -- -- -- -- --
- --------------------------------------------------------------------------------
(1). Both Peter Khean and Nico Huang received 450,000 shares of common stock of
the Company for services rendered in connection with the formation of the
Company. The fair market value of such stock awards totaled $900.00, which is
indicated above.
The Company intends to initiate the payment of a monthly salary in the amount of
$7,000 to both Mr. Khean and Ms. Huang at such time as the Company achieves
profitable operations.
Other than as indicated above, the Company does not have any other form of
compensation payable to its officers or directors, including any stock option
plans, stock appreciation rights, or long term incentive plan awards for the
periods indicated in the table.
The Company's directors received no fees for their services as a director,
however, they are reimbursed for expenses incurred by them in connection with
the Company's business.
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table will identify, as of March 31, 1998, the number and
percentage of outstanding shares of common stock of the Company owned by (i)
each person known to the Company who owns more than five percent of the
outstanding common stock, (ii) each officer and director, and (iii) and officers
and directors of the Company as a group:
Title Name and Address Amount and nature Percent
of Class of Beneficial Owner Beneficial Ownership of Class
- -------- ------------------- -------------------- --------
Common Peter Khean(1) 450,000 3.92%
Stock 328-17 Fawcett Road
Coquitlam, B.C. V3K 6V2
Common Nico Huang(2) 450,000 3.92%
Stock 328-17 Fawcett Road
Coquitlam, B.C. V3K 6V2
Common Wang Hsiu Yun(3) 1,000,000 8.72%
Stock 8F-1, 110 Hon Ko Street
Taipei, Taiwan
Common Wen Lung Hsieh 1,000,000 8.72%
Stock 7F 78 Chang An East Rd.
Section 2
Taipei, Taiwan
Common Hsieh Su-Yuan Huang(4) 466,000 4.06%
Stock 5F-2 No 348 Yung Chi Rd.
Hsing Yi District
Taipei, Taiwan
Common Hsiu-Ling Huang(4) 537,000 4.68%
Stock 5F-2 No 348 Yung Chi Rd.
Hsing Yi District
Taipei, Taiwan
Common Ying-Feng Huang(4) 487,000 4.24%
Stock 5F-2 No 348 Yung Chi Road
Hsing Yi District
Taipei, Taiwan
Common Yun Hsin Lu 850,000 7.41%
Stock 70 Lien Hai Road
Taipei, Taiwan
Common Officers and 900,000 7.84%
Stock Directors, as
a group (2 persons)
- --------------------------------------------------------------------------------
(1). Excludes 150,000 shares held by Mrs. Eunice Khean, the wife Mr. Khean. Mr.
Khean disclaims beneficial ownership of such shares.
(2). Excludes 150,000 shares held by Mr. Tomo Hwang, the husband of Mrs. Huang.
Mrs. Huang disclaims beneficial ownership of such shares.
(3). Wang Hsiu Yun is a controlling shareholder of Georgia Pacific Company (see
"Certain Relationships and Related Transactions").
(4). May be deemed members of a group.
<PAGE>
Item 12. Certain Relationships and Related Transactions.
On December 18, 1995, the Company entered into an agreement with Georgia Pacific
Company, a Taiwanese company ("Georgia Pacific"), to acquire the exclusive
worldwide rights to the technology for the oxygen enrichment process in exchange
for 5,000,000 shares of common stock of the Company. In addition, pursuant to
the agreement, the Company agreed to pay Georgia Pacific a finder's fee of 10%
in connection with the sale of its common stock to Taiwanese investors
identified by Georgia Pacific. The parties did not specify a term or duration
for this aspect of the agreement. During 1996, the Company paid Georgia Pacific
$218,800 in finder's fees. During 1997, the Company paid Georgia Pacific
$134,630 in finder's fees. In addition, during 1997, the Company paid Wang Hsiu
Yun, the controlling shareholder of Georgia Pacific, the sum of $22,962 as a
broker's fee in connection with the purchase of certain equipment.
On December 21, 1995, the Company entered into a separate agreement with Georgia
Pacific pursuant to which Georgia Pacific agreed to assist the Company in the
market and sale of its product to the Pacific Rim countries through joint
venture arrangements, licensees or distributors. The consideration payable to
Georgia Pacific was $10,000 per month during the term of the agreement which
expired on December 31, 1996. Effective May 1, 1997, a new agreement was entered
into that provided for a monthly payment of $12,000 to Georgia Pacific. During
1997, the Company paid Georgia Pacific the sum of $90,000 in connection with
this agreement. The agreement has expired and new agreement has not been entered
into by the parties. Any agreement will be subject to the negotiation by the
parties. The Company has entered into distribution agreements for Taiwan,
Singapore and Korea as a result of the efforts of Georgia Pacific.
In 1995, the Company issued 450,000 shares to Peter Khean, 450,000 shares to
Nico Huang, 150,000 to Eunice Khean and 150,000 to Tomo Hwang and the shares
were valued at $450.00, $450.00, $150.00 and $150.00, respectively. The shares
were issued in exchange for services renderedby such parties in connection with
the formation of the Company.
<PAGE>
PART IV
Item 13. Exhibits and reports on Form 8-K.
(a).(1) Exhibits
EXHIBIT INDEX
3.(i) Articles of Incorporation of the Company.*
Articles of Incorporation, as amended of Avani Marketing Corp.*
Certificate of Incorporation and Name Change and Articles of Avani
Water Corporation.* Articles of Marina Bottling Company Ltd. Articles
of Incorporation of Avani Manufacturing (China) Inc.
3.(ii) By-Laws of the Company.* By-Laws of Avani Marketing Corp.* By-Laws of
Avani Manufacturing (China) Inc.
10.(i) Mortgage in favor of International Commercial Bank of Cathay (Canada)
dated May 2, 1996.*
10.(ii) Mortgage in favor of Riversedge Holding Corp. dated
May 2, 1996.*
10.(iii) Mortgage in favor of International Commercial Bank of Cathay (Canada)
dated July 26, 1996.*
10.(iv) Mortgage in favor of Riversedge Holding Corp. dated
July 26, 1996.*
10.(v) Mortgage in favor of International Commercial Bank of Cathay (Canada)
dated March 25, 1997.*
10.(vi) Mortgage in favor of Riversedge Holding Corp. dated
March 25, 1997.*
10.(vii) Agreement dated December 15, 1995 between the Company
and Georgia Pacific Company.*
10.(viii) Agreement dated December 18, 1995 between the Company and Georgia
Pacific Company.*
10.(ix) Agreement dated December 26, 1996 between the Company and Georgia
Pacific Company.*
10.(x) Distribution Agreement dated December 14, 1996 between the Company and
Yueh Long Enterprise Co., LTD.*
10.(xi ) Distribution Agreement dated June 13, 1997 between the Company and
Beon Top Enterprises Ltd.*
10.(xii) Agreement dated April 29, 1997 by and between the Company and Georgia
Pacific Company. *
21.(i) Subsidiaries of the Registrant
* Incorporated by reference to the Company's Form 10-SB Registration Statement
filed on November 4, 1997.
(a).(2) Financial Statements
<PAGE>
INDEX TO FINANCIAL STATEMENTS
-Independent Auditors' Report of
April 11, 1998.........................................F-1
-Consolidated Balance Sheets as of December 31, 1997
(audited) and December 31, 1996 (audited)..............F-2
-Consolidated Statements of Operations for
Fiscal Years Ended December 31, 1997 (audited) and
December 31, 1996 (audited) ...........................F-3
-Consolidated Statements of Stockholder's Equity
For Years Ended December 31, 1997 (audited)
and December 31, 1996 (audited)........................F-4
-Consolidated Statements of Cash Flows for
Fiscal Years Ended December 31, 1997 (audited) and
December 31, 1996 (audited)............................F-5
-Notes to consolidated Financial Statements............F-6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Avani International Group Inc.
We have audited the accompanying consolidated balance sheets of Avani
International Group Inc. (a Nevada corporation) and Subsidiaries as of December
31, 1997 and 1996 and the related consolidated statements of operations,
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 audits.
We conducted our audits 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 audits provide 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 Avani International
Group Inc. and Subsidiaries as of December 31, 1997 and 1996 and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
COGEN SKLAR LLP
Bala Cynwyd, Pennsylvania
April 11, 1998
F-1
<PAGE>
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 120,492 $ 898,581
Accounts receivable 76,343 43,784
Goods and services tax receivable 54,105 75,414
Subscription receivable 240,000 --
Inventory 105,530 78,069
Prepaid expenses 60,716 28,630
----------- -----------
TOTAL CURRENT ASSETS 657,186 1,124,478
----------- -----------
PROPERTY, PLANT AND EQUIPMENT - NET 1,752,806 1,662,796
----------- -----------
OTHER ASSETS
Security deposits 8,541 1,720
Trademarks 4,244 4,593
License 4,800 5,000
----------- -----------
17,585 11,313
----------- -----------
TOTAL ASSETS $ 2,427,577 $ 2,798,587
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 68,924 $ 63,771
Accounts payable and accruals 54,794 130,832
Wages and benefits payable 16,086 34,944
Unearned income 19,737 8,485
Bottle and cooler deposits 66,859 27,641
----------- -----------
TOTAL CURRENT LIABILITIES 226,400 265,673
LONG-TERM DEBT - NET OF CURRENT PORTION 440,669 421,826
----------- -----------
TOTAL LIABILITIES 667,069 687,499
----------- -----------
STOCKHOLDERS' EQUITY
COMMON STOCK, $.001 par value, 25,000,000 shares authorized;
10,113,600 and 9,456,500 shares issued and outstanding 10,114 9,457
ADDITIONAL PAID-IN CAPITAL 3,465,257 2,938,443
COMMON STOCK SUBSCRIBED 240,000 --
ACCUMULATED DEFICIT (1,854,502) (823,505)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT (100,361) (13,307)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,760,508 2,111,088
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,427,577 $ 2,798,587
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-2
<PAGE>
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
REVENUE
Bottled water and supply sales $ 438,636 $ 57,140
Cooler and equipment sales 22,862 6,709
Cooler rentals 11,716 4,860
----------- -----------
473,214 68,709
----------- -----------
COST OF GOODS SOLD
Cost of goods sold (excluding depreciation) 316,735 99,104
Depreciation 84,003 56,179
----------- -----------
400,738 155,283
----------- -----------
GROSS PROFIT (LOSS) 72,476 (86,574)
----------- -----------
OPERATING EXPENSES
General and administrative 692,832 522,974
Marketing 372,110 207,794
Research and development 12,022 --
----------- -----------
1,076,964 730,768
----------- -----------
LOSS FROM OPERATIONS (1,004,488) (817,342)
----------- -----------
OTHER INCOME (EXPENSE)
Other 361 --
Interest income 15,784 26,158
Interest expense (42,654) (23,069)
----------- -----------
(26,509) 3,089
----------- -----------
NET LOSS $(1,030,997) $ (814,253)
=========== ===========
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.11) $ (.10)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES 9,631,504 7,999,921
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE>
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Foreign
Common Stock Additional Common Currency
------------------------- Paid-In Stock Accumulated Translation
Shares Amount Capital Subscribed Deficit Adjustment
---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 6,390,000 $ 6,390 $ 189,810 $ 160,000 $ (9,252) $ --
ISSUANCE OF COMMON STOCK
Cash 2,906,500 2,907 2,903,593 -- -- --
Under subscription agreement 160,000 160 159,840 (160,000)
COMMISSIONS ON SHARES ISSUED -- -- (314,800) -- -- --
NET LOSS FOR YEAR ENDED DECEMBER 31, 1996 -- -- -- -- (814,253) --
FOREIGN CURRENCY TRANSLATION ADJUSTMENT -- -- -- -- -- (13,307)
---------- ----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1996 9,456,500 9,457 2,938,443 -- (823,505) (13,307)
PURCHASE AND RETIREMENT OF COMMON STOCK (486,000) (486) (480,514) -- -- --
ISSUANCE OF COMMON STOCK 1,143,100 1,143 1,141,957 -- -- --
OFFERING COSTS FOR SHARES ISSUED -- -- (134,629) -- -- --
COMMON STOCK SUBSCRIBED -- -- -- 240,000 -- --
NET LOSS -- -- -- -- (1,030,997) --
FOREIGN CURRENCY TRANSLATION ADJUSTMENT -- -- -- -- -- (87,054)
---------- ----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1997 10,113,600 $ 10,114 $ 3,465,257 $ 240,000 $(1,854,502) $ (100,361)
========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(1,030,997) $ (814,253)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 127,159 83,889
(Increase) decrease in assets
Accounts receivable (17,831) (120,271)
Inventory (32,899) (78,772)
Prepaid expenses (32,852) (28,697)
Other assets (7,210) (1,736)
Increase (decrease) in liabilities
Accounts payable (91,940) 162,938
Unearned income and deposits 54,626 36,451
----------- -----------
Net cash used in operating activities (1,031,944) (760,451)
----------- -----------
INVESTING ACTIVITIES
Acquisition of property, plant and equipment (310,210) (1,752,251)
Investment in trademarks and patents -- (4,634)
Loan (receivable) repayment -- 30,000
----------- -----------
Net cash used in investing activities (310,210) (1,726,885)
----------- -----------
FINANCING ACTIVITIES
Proceeds from mortgages payable 115,360 529,608
Payments of mortgages payable (63,911) (39,637)
Issuance of common shares, net of offering costs 1,008,471 2,751,700
Purchase of common shares (481,000) --
----------- -----------
Net cash provided by financing activities 578,920 3,241,671
----------- -----------
EFFECT OF EXCHANGE RATES ON CASH (14,855) (1,702)
----------- -----------
NET INCREASE (DECREASE) IN CASH (778,089) 752,633
CASH - BEGINNING OF YEAR 898,581 145,948
----------- -----------
CASH - END OF YEAR $ 120,492 $ 898,581
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest $ 42,654 $ 23,095
=========== ===========
Income taxes $ -- $ --
=========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES 100,000 share stock
certificate was redeemed for $80,000
and the issuance of a 15,000 share stock certificate 15,000 --
=========== ===========
Common stock subscription 240,000 --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Formation and Nature of Business
Avani International Group Inc. (the "Company"), a Nevada corporation, formerly
Rainfresh Technologies, Inc. has constructed a bottling facility and has been
engaged in the business of developing, manufacturing and distributing an oxygen
enriched, purified bottled water under the trade name "Avani Water".
The Company changed its name from Rainfresh Technologies, Inc. to Avani
International Group Inc. on January 14, 1997. The Company has four wholly-owned
subsidiaries, Avani Marketing Corp., organized under the laws of Nevada; Avani
Water Corporation, organized under the laws of British Columbia (Canada); and
Avani Manufacturing (China), organized under the laws of Nevada. Marina Bottling
Company, Ltd., organized under the laws of British Columbia (Canada), was
inactive during 1997.
A technology, which injects oxygen into purified water is utilized by the
Company to produce an oxygen enriched, purified bottled water. The exclusive
worldwide rights to the oxygen enrichment process were acquired from a Taiwanese
company, in December 1995 for the issuance of common stock. The product is sold
in the greater Vancouver metropolitan area and internationally primarily in
Taiwan. International sales for the years ended December 31, 1997 and 1996 were
$214,488 and $26,725.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
all wholly-owned subsidiaries. All significant intercompany transactions have
been eliminated in consolidation.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect 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.
Foreign Currency Translation
Assets and liabilities of the foreign subsidiaries have been translated using
the exchange rate at the balance sheet date. The average exchange rate for the
period has been used to translate revenues and expenses. Translation adjustments
are reported separately and accumulated in a separate component of equity
(foreign currency translation adjustment).
Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable, other
liabilities and deposits approximates fair value as of December 31, 1997 because
of their short maturities.
The carrying value of the fixed rate long-term debt approximates fair value
since the interest rate associated with the long-term debt approximates the
current market interest rate.
Accounts Receivable and Bad Debts
The Company considers accounts receivable to be fully collectible; accordingly,
no allowance for doubtful accounts is required. If amounts become uncollectible,
they will be charged to operations when that determination is made. Bad debts
have not been material.
Inventory
Inventory is stated at the lower of cost (determined by the first-in, first-out
method) or market. Inventory is comprised of small bottles, packaging
containers, supplies for resale and water coolers.
F-6
<PAGE>
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property, Plant and Equipment
The cost of property, plant and equipment is depreciated over the estimated
useful lives of the related assets. Depreciation is computed using accelerated
methods. Five liter bottles are amortized over their estimated useful lives.
Revenue Recognition
Revenue on sales of bottled water and coolers is recognized upon delivery.
Leases of water coolers and filters are accounted for under the operating method
and, accordingly, rental income is reported over the terms of the leases.
Income Taxes
The Company accounts for its income taxes under SFAS No. 109, "Accounting for
Income Taxes", which requires recognition of deferred tax liabilities and assets
for the estimated future tax effects of events that have been recognized in the
financial statements or income tax returns. Under this method, deferred tax
liabilities and assets are determined based on differences between the financial
accounting and income tax bases of assets and liabilities, and the use of
carryforwards, if any, using enacted tax rates in effect for the years in which
the differences and carryforwards are expected to reverse and be utilized.
Loss Per Share
Effective year ended December 31, 1997, the company adopted SFAS No. 128,
"Earnings Per Share" (EPS). This statement establishes standards for computing
and presenting EPS, replacing the presentation of currently required primary EPS
with a presentation of Basic EPS. For entities with complex capital structures,
the statement requires the dual presentation of both Basic EPS and Diluted EPS
on the face of the statement of operations. Under this new standard, Basic EPS
is computed based on weighted average shares outstanding and excludes any
potential dilution; Diluted EPS reflects potential dilution from the exercise or
conversion of securities into common stock or from other contracts to issue
common stock and is similar to the currently required fully diluted EPS. SFAS
128 was effective for financial statements issued for periods ending after
December 15, 1997 and requires restatement of the prior years' earnings per
share.
Prior year amounts for net loss per common share were recomputed in accordance
with SFAS No. 128; however, such recomputed amounts were unchanged from those
previously reported.
Basic earnings (loss) per share include the weighted average number of shares
outstanding during the year. Diluted earnings (loss) per share include the
weighted average number of shares outstanding and dilutive potential common
shares, such as warrants and options. Since there are no dilutive potential
common shares, basic and diluted earnings (loss) per share are the same.
Recoverability of Long Lived Assets
Effective January 1, 1996, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
The Statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. The Company is not aware of any events or circumstances which
indicate the existence of an impairment which would be material to the Company's
annual financial statements.
Accounting for Stock-Based Compensation
Compensation costs attributable to stock option and similar plans are recognized
based on any difference between the quoted market price of the stock on the date
of the grant over the amount the employee is required to pay to acquire the
stock (the intrinsic value method under Accounting Principles Board Opinion 25).
Such amount, if any, is accrued over the related vesting period, as appropriate.
F-7
<PAGE>
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounting for Stock-Based Compensation (Continued)
Effective January 1, 1996, the Company implemented SFAS No. 123, "Accounting for
Stock-Based Compensation." The Statement encourages employers to account for
stock compensation awards based on their fair value on their date of grant.
Entities may choose not to apply the new accounting method but instead, disclose
in the notes to the financial statements the pro forma effects on net income and
earnings per share as if the new method had been applied. The Company has
adopted the disclosure-only approach of the Standard.
Recently Issued Accounting Pronouncements
During June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". This statement establishes standards for reporting and display of
comprehensive income and its components. The reporting and display requirements
of SFAS No. 130 are effective for fiscal years beginning after December 15,
1997. The Company presently intends to comply with this statement for its year
ended December 31, 1998.
During June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information". This statement establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and related disclosures about products
and services, geographic areas and major customers. The reporting and disclosure
requirements of SFAS No. 131 are effective for periods beginning after December
15, 1997. The Company presently intends to comply with this statement for its
year ended December 31, 1998.
NOTE 2 - CONCENTRATION OF CREDIT RISK INVOLVING CASH
The Company maintains its cash balances in a bank located in Canada. These
balances are not insured.
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is comprised of the following:
December 31,
--------------------------
1997 1996
---------- ----------
Land $ 151,795 $ 136,230
Building 868,103 815,204
Plant equipment 824,542 698,679
Office furniture and equipment 88,178 74,800
Vehicles 20,638 21,773
---------- ----------
1,953,256 1,746,686
Less: Accumulated depreciation 200,450 83,890
---------- ----------
Property, Plant and Equipment - Net $1,752,806 $1,662,796
========== ==========
F-8
<PAGE>
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 4 - LONG TERM DEBT
<TABLE>
<CAPTION>
Following is a summary of long-term debt: December 31,
----------------------
1997 1996
-------- --------
<S> <C> <C>
Mortgage payable due in monthly installments of $2,487 including interest at
8.3%, balloon payment of $293,834 due May 1, 2001, secured by land
and building with a net book value of $516,015 $311,279 $332,885
Second mortgage payable, interest only, interest 10% per annum, principal
payments due $36,450 on December 31, 1996 and June 30, 1997, secured
by land and building with a net book value of $516,015 -- 36,450
Mortgage payable due in monthly installments of $541 including interest at 8.3%,
balloon payment of $63,877 due July 29, 2001, secured by land
and building with a net book value of $109,528 67,823 72,522
Second mortgage payable, interest only, interest at 8% per annum, principal
payments due $21,870 on June 30, 1997 and $21,690 on January 31,
1998, secured by land and building with a net book value of $109,528 -- 43,740
Mortgage payable due in monthly installments of $484 including interest at 7%,
balloon payment of $62,911 due March 27, 2002, secured by land
and building with a net book value of $111,064 68,301 --
Second mortgage payable, interest only, interest at 8% per annum, principal
payments $20,730 due January 31, 1998, March 30, 1998 and August 30,
1998, secured by land and building with a net book value of $736,607 62,190 --
-------- --------
509,593 485,597
Less: Current portion 68,924 63,771
-------- --------
$440,669 $421,826
======== ========
</TABLE>
The minimum annual repayment requirements on long-term debt as of December 31,
1997 are as follows:
YEARS ENDING
DECEMBER 31, AMOUNT
------------ ------
1998 $ 68,924
1999 7,290
2000 7,891
2001 362,220
2002 63,268
--------
$509,593
========
F-9
<PAGE>
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 5 - INCOME TAXES
There is no income tax benefit for operating losses for years ended December 31,
1997 and 1996 due to the following:
Current tax benefit - the operating losses cannot be carried back to
earlier years.
Deferred tax benefit - the deferred tax assets were offset by a
valuation allowance. Management believes that a valuation allowance is
considered necessary since it is more likely than not that the deferred
tax asset will not be realized through future taxable income.
The components of the net deferred tax assets (liabilities) are as follows:
1997 1996
--------- ---------
Property, plant and equipment $(185,300) $ (29,700)
Net operating loss carryforwards 719,000 355,400
Valuation allowance (533,700) (325,700)
--------- ---------
$ -- $ --
========= =========
Avani International Group Inc. and Avani Marketing Corp. file a consolidated
corporate income tax return in the United States and Avani Water Corporation
files a corporate income tax return in Canada.
The use of net operating loss carryforwards for United States income tax
purposes is limited when there has been a substantial change in ownership (as
defined) during a three year period. Because of the recent and contemplated
changes in common stock, such a change may occur in the future. In this event,
the use of net operating losses each year would be restricted to the value of
the Company on the date of such change multiplied by the federal long-term rate
("annual limitation"); unused annual limitations may then be carried forward
without this limitation.
At December 31, 1997, the Company had net operating loss carryforwards of
approximately $572,000 for U.S. income tax purposes, which if not used will
expire during the years 2010 through 2012. At December 31, 1997, the Company had
net operating loss carryforwards of approximately $1,225,000 for Canadian income
tax purposes, which if not used will expire during the years 2002 through 2004.
NOTE 6 - COMMON STOCK
During 1997, the company raised $1,143,100 from a private placement through the
issuance of 1,143,100 shares of common stock. Offering costs related to the
private placement amounted to $134,629. The Company redeemed and retired 486,000
shares of common stock for $481,000. In addition, the Company received
subscriptions for 240,000 shares of common stock at $1.00 per share, and the
proceeds of $240,000 were received in January 1998.
During 1996, the Company raised $2,906,500 from a private placement through the
issuance of 2,906,500 shares of common stock. Offering costs related to the
private placement amounted to $314,800. In addition, proceeds of $160,000 were
received in January 1996 for subscriptions received in 1995 for 160,000 shares
of common stock at $1.00 per share.
F-10
<PAGE>
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 7 - RELATED PARTY TRANSACTIONS
In December 1995, the Company entered into two agreements with the Taiwanese
company from which the worldwide rights were acquired. The Company agreed to pay
a 10% finder's fee in connection with the sale of the Company's common stock to
Taiwanese investors. During the year ended December 31, 1997 finders fees
incurred amounted to $134,629, of which $20,000 was payable at December 31,
1997. During the year ended December 31, 1996, finders fees paid to the
Taiwanese company amounted to $218,800.
In addition, the Company entered into a marketing agreement for a term of one
year, expiring December 31, 1996, at $10,000 per month. Consulting fees incurred
for the year ended December 31, 1996 amounted to $120,000, of which $30,000 was
payable at December 31, 1996. In May 1997 another marketing agreement was
entered into for a term of eight months at $12,000 per month. Consulting fees
incurred for the year ended December 31, 1997 amounted to $90,000, net of a
$6,000 credit.
In addition, during 1997, the Company paid $22,962 to the controlling
shareholder of the Taiwanese company as a broker's fee in connection with the
purchase of certain equipment.
NOTE 8 - LEASES
For the years ended December 31, 1997 and 1996 total rental expenses under
leases amounted to $46,147 and $19,155. At December 31, 1997, the Company was
obligated under various noncancelable operating lease arrangements for vehicles
as follows:
YEARS ENDING LEASE
DECEMBER 31, OBLIGATIONS
------------ -----------
1998 $46,819
1999 38,055
2000 5,221
2001 1,211
-------
$91,306
=======
NOTE 9 - MAJOR CUSTOMERS AND SUPPLIER
The Company sells a substantial portion of its product to one customer. During
the years ended December 31, 1997 and 1996, sales to this customer aggregated
$192,459 and $26,725. At December 31, 1997 and 1996, amounts due from this
customer included in trade accounts receivable were $9,453 and $26,506. If this
customer was lost, it is unlikely that the Company would be able to replace the
lost revenue in the near term.
During the years ended December 31, 1997 and 1996, the Company purchased
approximately 34% and 54% of its materials from one supplier. At December 31,
1997 and 1996 amounts due to that supplier were $-0- and $60,869. If the
supplier ceased doing business with the Company, management believes that other
sources of materials are available.
F-11
<PAGE>
(b). Reports on Form 8-K.
None
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Avani International Group, Inc.
/s/ Peter Khean May 13, 1998
- --------------------------- ----------------
Peter Khean Date
Chairman and
Principal Financial Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ Peter Khean May 13, 1998
- --------------------------- ----------------
Peter Khean
Director
/s/ Nico Huang May 13, 1998
- --------------------------- ---------------
Nico Huang
Director
<PAGE>
EXHIBIT 3(i) Articles of Marina Bottling Company Ltd.
PROVINCE OF BRITISH COLUMBIA
"COMPANY ACT"
ARTICLES
- of -
MARINA BOTTLING COMPANY LTD
PART I - INTERPRETATION
1.1 In these Articles, unless the context otherwise requires:
(a) "Board of Directors" or "Board" means the Directors of the Company for
the time being;
(b) "The Act" means the Company Act of the Province of British Columbia
from time to time in force and all amendments thereto and includes all
regulations and amendments thereto made pursuant to that Act;
(c) "directors" means the Directors of the Company for the time being;
(d) "month" means calendar month;
(e) "ordinary resolution" has the meaning assigned thereto by The Act;
(f) "register" means the register of members to be kept pursuant to The
Act;
(g) "registered address" of a member shall be his address as recorded in
the register;
(h) "registered address" of a Director means his address as recorded in
the Company's register of Directors to be kept pursuant to The Act;
(i) "seal" means the common seal of the Company, if the Company has one;
(j) "special resolution" has the meaning assigned thereto by The Act;
(k) "Registrar" means the Registrar of Companies for the Province of
British Columbia appointed pursuant to The Act;
<PAGE>
(l) "registrar" means the registrar of the Company's shares appointed
pursuant to Part 4 of these Articles;
(m) "Securities Act" means the Securities Act of the province of British
Columbia from time to time in force and all amendments thereto and
includes all regulations and amendments thereto made pursuant to the
Act.
1.2 Expressions referring to writing shall be construed as including references
to printing, lithography, typewriting, photography and other modes of
representing or reproducing words in a visible form.
1.3 Words importing the singular include the plural and vice versa; and words
importing a male person include a female person and a corporation.
1.4 The definitions in The Act shall with the necessary changes and so far as
applicable apply to these Articles.
1.5 The regulations contained in Table A in the First Schedule to The Act shall
not apply to the Company.
1.6 The Rules of Construction contained in the Interpretation Act shall apply,
mutatis mutandis, to the interpretation of these Articles.
PART 2 - SHARES AND SHARE CERTIFICATES
2.1 Every member is entitled, without charge, to one certificate representing
the share or shares of each class held by him or upon paying a sum not
exceeding the amount permitted by The Act, as the Directors may from time
to time determine, or several certificates each for one or more of those
shares; provided that, in respect of a share or shares held jointly by
several persons, the Company shall not be bound to issue more than one
certificate, and delivery of a certificate for a share to one of several
joint holders or to his duly authorized agent shall be sufficient delivery
to all; and provided further that the Company shall not be bound to issue
certificates representing redeemable shares, if the shares are to be
redeemed within one month of the date on which they were allotted. Any
share certificate may be sent through the post by registered prepaid mail
to the member entitled thereto at his registered address, and the Company
shall not be liable for any loss occasioned to the member as a result of
any share certificate sent being lost in the post or stolen.
<PAGE>
2.2 If a share certificate:
(a) is worn out or defaced, the Directors may, upon production to them of
that certificate and upon other terms if any, as they may think fit,
order the certificate to be canceled and may issue a new certificate
in lieu thereof;
(b) is lost, stolen, or destroyed, then upon proof thereof to the
satisfaction of the Directors and upon such indemnity, if any, as the
directors deem adequate being given, a new share certificate in place
thereof shall be issued to the person entitled to the lost, stolen or
destroyed certificate; or
(c) represents more than one share and the registered owner thereof
surrenders it to the Company with a written request that the Company
issue registered in his name two or more certificates each
representing a specified number of shares and in the aggregate
representing the same number of shares as the certificate surrendered,
the Company shall cancel the certificate surrendered and issue in
place thereof certificates in accordance with the request.
A sum, if any, not exceeding that permitted by The Act, as the Directors may
from time to time fix, shall be paid to the company for each certificate issued
under this Article.
2.3 Except as required by law or statute or these Articles, no person shall be
recognized by the Company as holding any share upon any trust, and the
Company shall not be bound by or compelled in any way to recognize (even
when having notice) any equitable, contingent, future or partial interest
in any share or any interest in any fractional part of a share or (except
only as by law or statute or these Articles provided or as ordered by a
court of competent jurisdiction) any other rights in respect of any share
except an absolute right to the entirety in the registered holder.
2.4 Every share certificate shall be signed manually by at least one Officer or
Director of the Company, or by or on behalf of a registrar, branch
registrar, transfer agent or branch transfer agent of the Company and any
additional signatures may be printed or otherwise mechanically reproduced
and a certificate signed in either of those fashions shall be as valid as
if signed manually, notwithstanding that any person whose signature is
printed or mechanically reproduced on a share certificate has ceased to
hold the office that he is stated on the certificate to hold at the date of
the issue of a share certificate.
2
<PAGE>
2.5 Save as provided by The Act, the Company shall not give financial
assistance by means of a loan, guarantee, the provision of security or
otherwise for the purpose of or in connection with the purchase of or
subscription by any person for shares or debt obligations issued by the
Company or an affiliate of the Company or upon the security, in whole or in
part, of a pledge or other charge upon the shares or debt obligations
issued by the Company or an affiliate of the Company.
2.6 Every share certificate issued by the Company shall be in a form as the
Directors approve and shall comply with The Act.
2.7 The certificates for shares registered in the name of two or more persons
shall be delivered to the person first named on the register.
2.8 The Company may issue warrants and options for the purchase of shares on
terms and conditions and for consideration as the Directors may determine;
and the Company may pay a commission to any person in consideration of his
purchasing or procuring the purchase of a warrant or option.
PART 3 - ISSUE OF SHARES
3.1 Subject to The Act and to any direction to the contrary contained in a
resolution passed at a general meeting authorizing any increase of capital,
the issue of shares shall be under the control of the Directors who may,
subject to the rights of the holders of the shares of the Company for the
time being issued, allot or otherwise dispose of, and grant options on,
shares authorized but not yet issued at times and to persons, including
Directors, and in a manner and upon terms and conditions, and at a price or
for a consideration, as the Directors, in their absolute discretion, may
determine.
3.2 The Directors on behalf of the company may pay a commission or allow a
discount to any person in consideration of his subscribing or agreeing to
subscribe, whether absolutely or conditionally, for any shares with a par
value in the Company, or procuring or agreeing to procure subscriptions,
whether absolutely or conditionally, for any shares provided that the rate
of the commission or discount shall not in the aggregate exceed 25% of the
subscription price of the shares, or an amount equivalent to the
percentage. The Company may also pay brokerage as may be lawful.
3.3 No share may be issued until it is fully paid by the receipt by the Company
of the full consideration therefor in ash, property or past services
actually performed for the Company. a document evidencing indebtedness of
the person to whom the shares
3
<PAGE>
are allotted is not property for the purposes of this Article. The value of
property and services for the purposes of this Article shall be the value
determined by the Directors by resolution to be, in all circumstances of
the transaction, the fair market value thereof.
PART 4 - REGISTERS
4.1 The Company shall keep or cause to be kept a register of members, a
register of transfers and a register of allotments within British Columbia,
all as required by The Act, and may combine one or more of such registers.
If the Company's capital shall consist of more than one class of shares, a
separate register of members, register of transfers and register of
allotments may be kept in respect of each class of shares. The Directors on
behalf of the Company may appoint a trust company to keep the register of
members, register of transfers and register of allotments or, if there is
more than one class of shares, the Directors may appoint a trust company,
which need not be the same trust company, to keep the register of members,
the register of transfers and the register of allotments for each class of
share. The Directors on behalf of the Company may also appoint one or more
trust companies, including the trust company which keeps the said registers
of its shares or such class thereof, as the case may be, and the same or
another trust company or companies as registrar for its shares or such
class thereof, as the case may be. The Directors may terminate the
appointment of any trust company at any time and may appoint another trust
company in its place.
4.2 Unless prohibited by The Act, the Company may keep or cause to be kept one
or more branch registers of members at a place or places as the Directors
may from time to time determine.
4.3 The Company shall not at any time close its register of members save and
except as permitted by The Act.
4.4 The Company shall keep or cause to be kept within the Province of British
Columbia in accordance with The Act a register of its debentures and a
register of debentureholders, which registers may be combined, and, subject
to the provisions of The Act, may keep or cause to be kept one or more
branch registers of its debentureholders at a place or places as the
Directors may from time to time determine and the Directors may by
resolution, regulation or otherwise, make provisions as they think fit
respecting the keeping of branch registers.
4
<PAGE>
PART 5 - TRANSFER AND TRANSMISSION OF SHARES
5.1 Subject to the provisions of the Memorandum and of these Articles that may
be applicable, any member may transfer any of his shares by instrument in
writing executed by or on behalf of the member and delivered to the Company
or its transfer agent. The instrument of transfer of any share of the
Company shall be in the form, if any, on the back of the Company's share
certificates or in any other form as the Directors may from time to time
approve. Except to the extent that The Act may otherwise provide, the
transferor shall be deemed to remain the holder of the shares until the
name of the transferee is entered in the register of members or a branch
register of members in respect thereof. If the Directors require, each
instrument of transfer shall be in respect of only one class of share.
5.2 The signature of the registered owner of any shares, or of his duly
authorized attorney, upon an authorized instrument of transfer shall
constitute a complete and sufficient authority to the Company, its
Directors, Officers and agents to register, in the name of the transferee
as named in the instrument of transfer, the number of shares specified or,
if no number is specified, all the shares of the registered owner
represented by share certificates deposited with the instrument of
transfer. If no transferee is named in the instrument of transfer, the
instrument of transfer shall constitute a complete and sufficient authority
to the Company, its Directors, Officers and agents to register, in the name
of the person in whose behalf any certificate for the shares to be
transferred is deposited with the Company for the purpose of having the
transfer registered, the number of shares specified in the instrument of
transfer or, if no number is specified, all the shares represented by all
share certificates deposited with the instrument of transfer.
5.3 Neither the Company nor any Director, Officer or client shall be bound to
enquire into the title of the person noted in the form of transfer as
transferee, or, if no person is named therein as transferee, of the person
on whose behalf the certificate is deposited with the company for the
purpose of having the transfer registered or be liable to any claim by such
registered owner or by any intermediate owner or holder of the certificate
or of any of the shares represented thereby or any interest therein for
registering the transfer, and the transfer, when registered, shall confer
upon he person in whose name the shares have been registered a valid title
to the shares.
5.4 Every instrument of transfer shall be executed by the transferor and left
at the registered office of the Company or at the office of its transfer
agent or registrar for registration together with the share certificate for
the shares to be transferred and other evidence as the Directors or the
transfer agent or registrar may require to prove the title of the
transferor or his right to transfer the shares and the right of the
transferee to have
5
<PAGE>
the transfer registered. All instruments of transfer where the transfer is
registered shall be retained by the Company or its transfer agent or
registrar and any instrument of transfer, where the transfer is not
registered, shall be returned to the person depositing the same together
with the share certificate which accompanied the same when tendered for
registration.
5.5 There shall be paid to the Company in respect of the registration of any
transfer a sum, if any, as the Directors may from time to time determine,
not exceeding that permitted by the Act.
5.6 In the case of the death of a member, the survivor or survivors where the
deceased was a joint registered holder, and the legal personal
representative of the deceased where he was the sole holder, shall be the
only persons recognized by the Company as having any title to his interest
in the shares. Before recognizing any legal personal representative the
Directors may require him to deliver to the Company the original or a
court-certified copy of a Grant of Probate or Letters of Administration in
British Columbia or other evidence and documents as the Directors consider
appropriate in order to establish the right of the personal
5.7 Upon the death or bankruptcy of a member, his personal representative or
trustee in bankruptcy, although not a member, shall have the same rights,
privileges and obligations that attach to the shares formerly held by the
deceased or bankrupt member if the documents required by The Act and these
Articles shall have been deposited with the Company. This Article does not
apply on the death of a member with respect to shares registered in his
name and the name of another person in joint tenancy.
5.8 Any person becoming entitled to a share in consequence of the death or
bankruptcy of a member shall, upon documents and evidence being produced to
the Company as The Act and these Articles require or who becomes entitled
to a share as a result of an order of a Court of competent jurisdiction or
a Statute, has the right either to be registered as a member in his
representative capacity in respect of the share, or, if he is a personal
representative, instead of being registered himself, to make a transfer of
the share as the deceased or bankrupt person could have made; but the
directors shall, as regards a transfer by a personal representative or
trustee in bankruptcy, have the same right, if any, to decline or suspend
registration of a transferee as they would have in the case of a transfer
of a share by the deceased or bankrupt person before the death or
bankruptcy.
6
<PAGE>
PART 6 - ALTERATION OF CAPITAL
6.1 The Company may be either special or ordinary resolution filed with the
Registrar amend its Memorandum to increase the share capital of the Company
by:
(a) creating shares with par value or shares without par value, or both;
(b) increasing the number of shares with par value or shares without par
value, or both;
(c) increasing the par value of a class of shares with par value, if no
shares of that class are issued.
6.2 The Company may by special resolution alter its Memorandum to subdivide,
consolidate, change from shares with par value to shares without par value,
or from shares without par value to shares with par value, or change the
designation of, all or any of its shares but only to the extent, in the
manner and with the consent of members holding a class of shares which is
the subject of or affected by the alteration, as The Act provides.
6.3 The Company may alter its Memorandum or these Articles:
(a) by special resolution, to create, define and attach special rights or
restrictions to any shares, and
(b) by special resolution and by otherwise complying with any applicable
provision of its Memorandum or these Articles, to vary or abrogate any
special rights and restrictions attached to any shares and in each
case by filing a certified copy of the resolution with the Registrar
but no right or special right attached to any issued shares shall be
prejudiced or interfered with unless all members holding shares of
each class whose right or special right is prejudiced or interfered
with consent thereto in writing, or unless a resolution consenting is
passed at a separate class meeting of the holders of the shares of
each class by a majority of three-fourths, or such greater majority as
may be specified by the special rights attached to the class of
shares, of the issued shares of the class.
6.4 Notwithstanding any consent in writing or resolution, no alteration shall
be valid as to any part of the issued shares of any class unless the
holders of all of the issued shares of the class either all consent in
writing or consent by a resolution passed by the votes of members holding
three-fourths of the shares.
6.5 Except as otherwise provided by conditions imposed at the time of creation
of any new shares or by these Articles, any
7
<PAGE>
addition to the authorized capital resulting from the creation of new
shares shall be subject to the provisions of these Articles.
6.6 If the Company is or becomes a reporting company, no resolution to create,
vary or abrogate any special right or conversion attaching to any class of
shares shall be submitted to any meeting of members unless, if required by
The Act, the Office of the Superintendent of Brokers for British Columbia
shall have consented to the resolution.
PART 7 - PURCHASE AND REDEMPTION OF SHARES
7.1 Subject to the special rights and restrictions attached to any class of
shares, the Company may, by a resolution of the Directors and in compliance
with The Act, purchase any of its shares at the price and upon the terms
specified in such resolution or redeem any class of its shares in
accordance with the special rights and restrictions attaching thereto. No
purchase or redemption shall be made if the Company is insolvent at the
time of the proposed purchase or redemption or if the proposed purchase or
redemption would render the Company insolvent. Unless the shares are to be
purchased through a stock exchange or from a bona fide employee or bona
fide former employee, of the Company of an affiliate, or from his personal
dissenting members pursuant to the requirements of The Act, the Company
shall make its offer to purchase pro rata to every member who holds shares
of the class or kind, as the case may be, to be purchased.
7.2 If the Company proposes at its option to redeem some but not all of the
shares of any class, the Directors may, subject to the special rights and
restrictions attached to the class of shares, decide the manner in which
the shares to be redeemed shall be selected.
7.3 Subject to the provisions of The Act, any shares purchased or redeemed by
the Company may be sold or issued by it, but, while such shares are held by
the Company, it shall not exercise any vote in respect of, or pay any
dividend on those shares.
PART 8 - BORROWING POWERS
8.1 The Directors may from time to time on behalf of the Company:
(a) borrow money in a manner and amount, on any security, from any source
and upon any terms and conditions;
8
<PAGE>
(b) issue bonds, debentures, and other debt obligations either outright or
as security for any liability or obligation of the Company or any
other person; and
(c) mortgage, charge, whether by way of specific or floating charge, or
give other security on the undertaking, or on the whole or any part of
the property and assets, of the Company (both present and future).
8.2 Any bonds, debentures or other debt obligations of the Company may be
issued at a discount, premium or otherwise, and with any special privileges
as to redemption, surrender, drawing, allotment of or conversion into or
exchange for shares or other securities, attending any voting at general
meetings of the Company, appointment of Directors or otherwise and may by
their terms be assignable free from any equities between the Company and
the person to whom they were issued or any subsequent holder thereof, all
as the Directors may determine.
8.3 Every bond, debenture or other debt obligation of the Company shall be
signed manually by at least one Director or Officer of the Company or by or
on behalf of a trustee, registrar, branch registrar, transfer agent or
branch transfer agent for the bond, debenture or other debt obligation
appointed by the Company or under any instrument under which the bond,
debenture or other debt obligation is issued and any additional signatures
may be printed or otherwise mechanically reproduced thereon and a bond,
debenture or other debt obligation signed in that manner is as valid as if
signed manually notwithstanding that any person whose signature is so
printed or mechanically reproduced shall have ceased to hold the office
that he is stated on the bond, debenture or other debt obligation to hold
at the date of the issue thereof.
8.4 If the Company is or becomes a reporting company, the Company shall keep or
cause to be kept a register of its indebtedness to every Director or
Officer of the Company or an associate of any of them in accordance with
the provisions of The Act.
PART 9 - GENERAL MEETING
9.1 Subject to Article 9.2 and to The Act, the first annual general meeting
shall be held within 15 months from the date of incorporation and the
following annual general meetings shall be held once in every calendar year
at a time, not being more than 13 months after the holding of the last
preceding annual general meeting, and at a place as the Directors shall
appoint. In default of the meeting being held, the meeting shall be called
by any two members in the same manner as nearly as possible as that in
which
9
<PAGE>
meetings are to be called by the Directors.
9.2 If the Company is not a reporting company and if all members entitled to
attend and vote at the annual general meeting or the Company consent in
writing each year to the business required to be transacted at the annual
general meeting, that business shall be as valid as if transacted at an
annual general meeting duly convened and held and, it is not necessary for
the Company to hold an annual general meeting that year.
9.3 The Directors may, whenever they think fit, convene a general meeting. A
general meeting, if requisitioned in accordance with The Act, shall be
convened by the Directors or, if not convened by the Directors, may be
convened by the requisitionists as provided in The Act.
9.4 Not less than 21 days' notice of any general meeting specifying the time
and place of meeting and in case of special business, the general nature of
that business shall be given in the manner mentioned in Article 22, or in
such other manner, if any, as may be prescribed by ordinary resolution
whether previous notice has been given or not, to any person as may by law
or under these Articles or other regulations of the Company entitled to
receive the notice from the Company. But the accidental omission to give
notice of any meeting to, or the non-receipt of any notice, by any person
shall not invalidate any proceedings at that meeting.
9.5 Persons entitled to notice of a general meeting may waive or reduce the
period of notice convening the meeting, by unanimous consent in writing,
and may give such waiver before, during or after the meeting.
PART 10 - PROCEEDINGS AT GENERAL MEETINGS
10.1 Subject to Article 10.2, a quorum shall be one member or one proxyholder,
representing members holding not less than one-twentieth of the issued
shares entitled to be voted at that meeting. If there is only one member
of the Company, the quorum is one person present and being, or
representing by proxy, such member.
10.2 If within one-half hour from the time appointed for a meeting a quorum is
not present, the meeting, if convened by requisition of the members, shall
be dissolved. In any other case it shall stand adjourned to the same day
in the next week at a time and place determined by the Board of Directors.
If at the adjourned meeting a quorum is not present within one-half hour
from the time appointed, the members present shall be a quorum.
10.3 The Chairman of the Board, if any, or in his absence, the
10
<PAGE>
President of the Company, or their appointee, if approved by the
shareholders, shall be entitled to preside as Chairman at every general
meeting of the Company.
10.4 If at any meeting neither the Chairman of the Board, if any, nor the
President is present within fifteen minutes after the time appointed for
holding the meeting or is willing to act as Chairman, the Directors
present shall choose someone to be Chairman. If no Director be present or
if all the directors present decline to take the chair or shall fail to
choose, the members present shall choose one of their number to be
Chairman.
10.5 The Chairman of the meeting may, with the consent of any meeting at which
a quorum is present and shall if so directed by the meeting, adjourn the
meeting from time to time and from place to place, but no business shall
be transacted at any adjourned meeting other than the business left
unfinished at the meeting from which the adjournment took place. When a
meeting is adjourned for 30 days or more, seven days' notice of the
adjourned meeting shall be given, otherwise notice is not required.
10.6 Subject to the provisions of The Act, every question submitted to a
general meeting shall be decided on a show of hands unless a poll is,
before or on the declaration of the result of the show of hands, directed
by the Chairman or demanded by a member entitled to vote who is present in
person or by proxy, and the Chairman shall declare to the meeting the
decision on every question in accordance with the result of the show of
hands or the poll, and the decision shall be entered in the book of
proceedings of the Company. A declaration by the Chairman that a
resolution has been carried or carried unanimously or by a particular
majority, or lost or not carried by a particular majority, and an entry to
that effect in the book containing the minutes of the proceedings of the
Company shall be conclusive evidence of the fact without proof of the
number or proportion of the votes recorded in favor of or against the
resolution.
10.7 No resolution proposed at a meeting need be seconded and the Chairman of
any meeting (provided he is entitled to vote) shall be entitled to move or
second a resolution, without the necessity of relinquishing the chair.
10.8 In case of an equality of votes at a general meeting, the Chairman shall
not, either on a show of hands or on a poll, have a casting or a second
vote in addition to the vote or votes to which he may be entitled as a
member.
10.9 No poll may be demanded on the election of a Chairman. A poll demanded on
a question of adjournment shall be taken forthwith. A poll demanded on any
other question shall be taken as soon as, in
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the opinion of the Chairman, is reasonably convenient, but in no event
later than seven days after the meeting and at a time and place and in a
manner as the Chairman of the meeting directs. the result of the poll
shall be deemed to be the resolution of and passed at the meeting at
which the poll was demanded. Any business other than that upon which the
poll has been demanded may be proceeded with pending the taking of the
poll. A demand for a poll may be withdrawn. In any dispute as to the
admission or rejection of a vote, the decision of the Chairman made in
good faith shall be final an conclusive.
10.10 A member entitled to more than one vote need not, if he votes, use all
his votes or cast all the votes he uses in the same way.
10.11 The demand of a poll shall not prevent the continuance of a meeting for
the transaction of any business other than the question on which a poll
has been demanded.
10.12 Every ballot cast upon a poll, and every proxy appointing a proxyholder
who cast a ballot upon a poll, shall be retained by the Secretary for at
least three months and be subject to inspection as The Act may provide.
PART 11 - VOTES OF MEMBERS
11.1 Subject to any special voting rights or restrictions attached to any
class of shares and the restrictions on joint registered holders of
shares, on a show of hands every member who is present in person and
entitled to vote shall have one vote and on a poll every member shall
have one vote for each share of which he is the registered holder and may
exercise his vote either in person or by proxy.
11.2 Any person who is not registered as a member but is entitled to vote at
any general meeting in respect of a share, may vote the share in the same
manner as if he were a member; but, unless the Directors have previously
admitted his right to vote at that meeting in respect of the share, he
shall satisfy the Directors of his right to vote the share before the
time for holding the meeting, or adjourned meeting, as the case may be,
at which he proposes to vote.
11.3 Any corporation, not being a subsidiary of the Company which is a member
of the Company, may by resolution of its Directors or other governing
body authorize any person as it thinks fit to act as its representative
at any general meeting or class meeting. The person authorized shall be
entitled to exercise in respect of and at the meeting the same powers on
behalf of the corporation which he represents as that corporation could
exercise if it were an
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individual member of the Company personally present, including, without
limitation, the right, unless restricted by the resolution, to appoint a
proxyholder to represent the corporation, and shall be counted for the
purpose of forming a quorum if present at the meeting. Evidence of the
appointment of any representative may be sent to the Company by written
instrument, telegram, telex or any method of transmitting legibly
recorded messages. Notwithstanding the foregoing, a corporation being a
member may appoint a proxyholder.
11.4 In the case of joint registered holders of a share, the vote of the
senior who exercises a vote, whether in person or by proxyholder, shall
be accepted to the exclusion of the votes of the other joint registered
holders; and for this purpose seniority shall be determined by the order
in which the names stand in the register of members. Several legal
personal representatives of a deceased member whose shares are registered
in his sole name shall for the purpose of this Article be deemed joint
registered holders.
11.5 A member, in respect of whom an order has been made by any court having
jurisdiction, may vote, whether on a show of hands or on a poll, by his
committee, curator bonis, or other person in the nature of a committee or
curator bonis appointed by that court, and his committee, curator bonis,
or other person may appoint a proxyholder.
11.6 A member holding more than one share in respect of which he is entitled
to vote shall be entitled to appoint one or more (but not more than five)
proxyholders to attend, act and vote for him on the same occasion. If a
member should appoint more than one proxyholder for the same occasion, he
shall specify the number of shares each proxyholder shall be entitled to
vote. A member may also appoint one or more alternate proxyholders to act
in the place and stead of an absent proxyholder.
11.7 A proxy shall be in writing under the hand of the appointor or of his
attorney duly authorized in writing, or, if the appointor is a
corporation, either under the seal of the corporation or under the hand
of a duly authorized officer or attorney. A proxyholder need not be a
member of the Company if:
(a) the Company is at the time a reporting company; or
(b) the member appointing the proxyholder is a corporation; or
(c) the Company shall have at the time only one member; or
(d) the persons present in person or by proxy and entitled to vote at
the meeting by resolution permit the proxyholder
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to attend and vote; for the purpose of the resolution, the
proxyholder shall be counted in the quorum but shall not be
entitled to vote;
and in all other cases, a proxyholder must be a member.
11.8 Unless the directors otherwise determine, the instrument appointing a
proxyholder and the power of attorney or other authority, if any, under
which it is signed or a notarially certified copy shall be deposited at a
place specified for that purpose in the notice convening the meeting not
less than forty-eight hours before the time for holding the meeting at
which the proxyholder proposes to vote, or shall be deposited with the
Chairman of the meeting prior to the commencement of the meeting.
11.9 Unless The Act or any other statute or law which is applicable to the
Company or to any class of its shares requires any other form of proxy, a
proxy, whether for a specified meeting or otherwise, shall be in the form
following, but may also be in any other form that the Directors or the
chairman of the meeting shall approve:
(Name of Company)
The Undersigned, being member of the above named Company, here by
appoints or failing him as proxyholder for the undersigned to
attend, act and vote for and on behalf of the undersigned at the
general meeting of the Company to be held on the day of and at any
adjournment thereof.
Signed this day of 19 .
(Signature of Member).
11.10 A vote given in accordance with the terms of a proxy is valid
notwithstanding the previous death or incapacity of the member giving the
proxy or the revocation of the proxy or of the authority under which the
form of proxy was executed or the transfer of the share in respect of
which the proxy is given, provided that no notification in writing of the
death, incapacity, revocation or transfer shall have been received at the
registered office of the Company or by the chairman of the meeting or
adjourned meeting for which the proxy was given before the vote is taken.
11.11 Every proxy may be revoked by an instrument in writing:
(a) executed by the member giving the same or by his attorney
authorized in writing or, where the member is a corporation, by
its duly authorized officer or attorney of the corporation; and
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(b) delivered either at the registered office of the Company at any
time up to and including the last business day preceding the day
of the meeting, or any adjournment at which the proxy is to be
used, or to the chairman of the meeting on the day of the meeting
or any adjournment before any vote in respect of which the proxy
is to be used shall have been taken;
or in any other manner provided by law.
11.12 If and for as long as the Company shall be a reporting company and before
permitting a registrant to vote on a resolution or motion proposed at a
meeting of the Company, the chairman of the meeting may require the
registrant (or his proxyholder, as the case may be) to produce evidence
in writing acceptable to the chairman (in the form of a statutory
declaration or otherwise) that the registrant:
(a) is the beneficial owner or the share; or
(b) has complied with The Act vis-a-vis the beneficial owner of the
share.
11.13 The provision of this part shall be applicable mutatis mutandis to class
meetings.
PART 12 - DIRECTORS
12.1 The subscribers of the Memorandum of the Company are the first Directors.
The Directors to succeed the first Directors may be appointed in writing
by a majority of the subscribers to the memorandum or at a meeting of the
subscribers, or if not appointed, they shall be elected by the members
entitled to vote on the election of Directors and the number of directors
shall be the same as the number of Directors appointed or elected. The
number of Directors, excluding additional directors, may be fixed or
changed from time to time by ordinary resolution, whether previous notice
has been given or not, but the number of Directors shall never be less
than one or, if the Company is or becomes a reporting company, less than
three.
12.2 The remuneration of the Directors as such may from time to time be
determined by the Directors of, if the Directors shall decide, by the
members. The remuneration may be in addition to any salary or other
remuneration may be in addition to any salary or other renumeration paid
to any Officer or employee of the Company as such who is also a Director.
The Directors shall be repaid reasonable travelling, hotel and other
expenses as they incur in and about the business of the Company and if
any Director shall perform
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any professional or other services for the Company that in the opinion of
the directors are outside the ordinary duties of a director or shall
otherwise be specially occupied in or about the Company's business, he
may be paid a remuneration to be fixed by the Board, or, at the option of
the Director, by the Company in general meeting, and the remuneration may
be either in addition to, or in substitution of any other remuneration
that he may be entitled to receive. The Directors on behalf of the
Company, unless otherwise determined by ordinary resolution, may pay a
gratuity or pension or allowance on retirement to any Director who has
held any salaried office or place of profit with the Company or to his
spouse or dependents and may make contributions to any fund and pay
premiums for the purchase or provision of any gratuity, pension or
allowance.
12.3 A Director shall not be required to hold a share in the capital of the
Company as qualification for his office but shall be qualified as
required by The Act, to become or act as a Director.
PART 13 - ELECTION AND REMOVAL OF DIRECTORS
13.1 At each annual general meeting of the Company all Directors shall retire
and the members entitled to vote shall elect a Board of Directors
consisting of the number of Directors for the time being fixed pursuant
to these Articles. If the Company is, or becomes, a company that is not a
reporting company and the business to be transacted at any annual general
meeting is consented to in writing by the members who are entitled to
attend and vote at this annual general meeting shall be deemed for the
purpose of this Part to have been held on the written consent becoming
effective.
13.2 A retiring Director shall be eligible for re-election.
13.3 Where the Company fails to hold an annual general meeting in accordance
with The Act, the Directors then in office shall be deemed to have been
elected or appointed as Directors on the last day on which the annual
general meeting could have been held pursuant to these Articles and they
may hold office until other Directors are appointed or elected or until
the day on which the next annual general meeting is held.
13.4 If, at any general meeting at which an election of Directors ought to
take place, the places of the retiring Directors are not filled up, those
of the retiring Directors as may be requested by the newly elected
Directors shall, if willing, continue in office until further new
Directors are elected at a general meeting specially convened for that
purpose or at the annual general meeting in the next or some subsequent
year, unless it is determined to reduce the number of Directors.
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13.5 Any casual vacancy occurring in the Board of Directors may be filled by
the remaining Directors or Director.
13.6 Between successive annual general meetings the Directors shall have power
to appoint one or more additional Directors, but not more than one-third
of the number of Directors elected or appointed at the last annual
general meeting at which Directors were elected. Any director appointed
shall hold office only until the next following annual general meeting of
the Company, but shall be eligible for election at the meeting and so
long as he is an additional Director the number of directors shall be
increased accordingly.
13.7 Any Director may be instrument in writing delivered to the Company
appoint any person to be his alternate to act in his place at meetings of
the Directors at which he is not present unless the Directors shall have
reasonably disapproved the appointment of the person as an alternate
Director and shall have given notice to that effect to the Director
appointing the alternate Director within a reasonable time after delivery
of the instrument to the Company. Every alternate shall be entitled to
notice of meetings of the Directors and to attend and vote as a Director
at a meeting at which the person appointing him is not personally
present, and, if he is a Director, to have a separate vote on behalf of
the Director he is representing in addition to his own vote. A director
may at any time by instrument, telegram, telex or any method of
transmitting legibly recorded messages delivered to the Company revoke
the appointment of an alternate appointed by him. The remuneration
payable to an alternate shall be payable out of the remuneration of the
Director appointing him.
13.8 The office of Director shall be vacated if the Director;
(a) resigns his office by notice in writing delivered to the
registered office of the Company; or
(b) ceases to be qualified to act as a Director pursuant to The Act.
13.9 The Company may by special resolution remove any Director before the
expiration of his period of office, and may by an ordinary resolution
appoint another person in his stead.
PART 14 - POWERS AND DUTIES OF DIRECTORS
14.1 The Directors shall manage, or supervise the management of, the affairs
and business of the Company and shall have the authority of exercise all
powers of the Company as are not, by The Act or by the Memorandum or
these Articles, required to be exercised
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by the Company in general meeting.
14.2 The Directors may from time to time by power of attorney or other
instrument under the seal, appoint any person to be the attorney of the
Company for purposes, and with powers, authorities and discretions (not
exceeding those vested in or exercisable by the directors under these
Articles and excepting the powers of the Directors relating to the
constitution of the Board and of any of its committees and the
appointment or removal of Officers and the power to declare dividends)
and for a period, with renumeration and subject to conditions as the
Directors may think fit, and any appointment may be made in favor of any
of the directors or any of the members of the Company or in favor of any
corporation, or of any of the members, Directors, nominees or managers of
any corporation, firm or joint venture and any power of attorney may
contain provisions for the protection or convenience of persons dealing
with the attorney as the Directors may think fit. Any attorney may be
authorized by the Directors to sub-delegate all or any of the powers,
authorities and discretions for the time being vested in him.
PART 15 - DISCLOSURE OF INTEREST OF DIRECTORS
15.1 A Director who is, in any way, directly or indirectly interested in an
existing or proposed contract or transaction with the Company or who
holds any office or possesses any property, directly or indirectly, where
a duty or interest might be created to conflict with his duty or interest
as a Director, shall declare the nature and extent of his interest in the
contract or transaction or of the conflict or potential conflict with his
duty and interest as a Director in accordance with the provisions of The
Act.
15.2 A Director shall not vote in respect of the approval of any contract or
transaction with the Company in which he is interested and if he shall do
so his vote shall not be counted, but he shall be counted in the quorum
present at the meeting at which the vote is taken. This Article and
Article 15.1 shall not apply in circumstances where a Director is, under
the provisions of The Act, deemed not to be interested in a proposed
contract or transaction.
15.3 A Director may hold any office or place of profit with the Company (other
than the office of auditor of the Company) in conjunction with his office
of Director for a period and on terms (as to remuneration or otherwise)
as the Directors may determine and no Director or intended Director shall
be disqualified by his office from contracting with the Company either
with regard to his tenure of any other office or place of profit or as
vendor, purchaser or otherwise, and, subject to compliance with the
provisions of The Act, no contract or transaction entered into by or on
behalf of the
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Company in which a Director is in any way interested shall be liable to
be voided by reason thereof.
15.4 Subject to compliance with the provisions of The Act, a Director or his
firm may act in a professional capacity for the Company (except as
auditor of the Company) and he or his firm shall be entitled to
remuneration for professional services as if he were not a Director.
15.5 A Director may be or become a Director or other Officer or employee of,
or otherwise interested in, any corporation or firm in which the Company
may be interested as a shareholder or otherwise, and, subject to
compliance with the provisions of The Act, the Director shall not be
accountable to the Company for any remuneration of other benefits
received by him as Director, Officer or employee of, or from his interest
in, such other corporation or firm, unless the Company in general meeting
otherwise directs.
PART 16 - PROCEEDINGS OF DIRECTORS
16.1 The Chairman, of the Board, if any, or in his absence, the President,
shall preside as chairman at every meeting or the Directors, or if there
is no Chairman of the board or neither the Chairman of the board nor the
President is present within fifteen minutes of the time appointed for
holding the meeting or is willing to act as chairman, or, if the Chairman
of the Board, if any, and the President have advised the Secretary that
they will not be present at the meeting, the Directors present shall
choose one of their number to be chairman of the meeting.
16.2 The Directors may meet together for the dispatch of business, adjourn and
otherwise regulate their meetings, as they think fit. Questions arising
at any meeting shall be decided by a majority of votes. In case of an
equality of votes the chairman shall not have a second or casting vote.
Meetings of the Board held at regular intervals may be held at a place,
at a time and upon notice (if any) as the Board may by resolution from
time to time determine.
16.3 A Director may participate in a meeting of the Board or of any committee
of the Directors by means of conference telephones or other communication
facilities by means of which all Directors participating in a meeting in
accordance with this Article shall be deemed to be present at the
meeting, to have agreed, shall be counted in the quorum and be entitled
to speak and vote.
16.4 A Director may at any time, and the Secretary upon the written request of
a Director, shall call a meeting of the directors. Notice specifying the
time and place of the meeting
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shall be mailed, postage prepaid, addressed to each of the Directors at
his registered address at least 48 hours before the time fixed for the
meeting or a lesser period as may be reasonably under the circumstances,
or the notice may be give to each Director either personally or by
leaving it at his usual business or residential address or by telephone,
telegram, telex or other method of transmitting visually recorded
messages, at least 48 hours before the time or the lesser period as may
be reasonable under the circumstances. It shall not be necessary to give
to any director notice of a meeting of directors immediately following a
general meeting at which the director has been elected or notice of a
meeting of Directors at which the Director shall have been appointed.
Accidental omission to give notice of a meeting of Directors to, or the
non-receipt of notice by, any Director shall not invalidate the
proceedings at that meeting.
16.5 Any Director of the Company may file with the Secretary a document
executed by him waiving notice of any past, present or future meeting or
meetings of the directors being, or required to have been, sent to him
and may at any time withdraw the waiver with respect to future meetings.
After filing the waiver with respect to future meetings and until the
waiver is withdrawn no notice need be given to the Director and, unless
the director otherwise requires in writing to the Secretary, to his
alternate Director of any meeting of Directors and all meetings of the
directors held shall be deemed to be property called or constituted even
though notice was given to the director or alternate Director.
16.6 The quorum necessary for the transaction of the business of the Directors
may be fixed by the Directors and if not fixed shall be two Directors or,
if the number of Directors is fixed at one, shall be one Director.
16.7 The continuing Directors may act notwithstanding any vacancy in their
body, but, if and so long as their number is reduced below the number
fixed pursuant to these Articles as the necessary quorum of directors,
the continuing Directors may act for the purpose of increasing the number
of directors to that number, or of summoning a general meeting of the
Company, but for no other purpose.
16.8 Subject to the provisions of The Act, all acts done by any meeting of the
directors or of a committee of Directors, or by any person acting as a
Director, shall, notwithstanding that it be afterwards discovered that
there was some defect in the qualifications, election or appointment of
any Directors or of the members of a committee or persons acting as
aforesaid, or that they or any of them were disqualified, be as valid as
if every person had been duly elected or appointed and was qualified to
be a Director.
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16.9 A resolution consented to in writing, whether by document, telegram,
telex or any method of transmitting legibly recorded messages or other
means, by all of the directors shall be as valid and effectual as if it
had been passed at a meeting of the directors duly called and held. A
resolution shall be dated and may be in two or more counterparts which
together shall be deemed to constitute one resolution in writing. The
resolution shall be filed with the minutes of the proceedings of the
directors and shall be effective on the date stated on the resolution or
on the latest date stated on any counterpart.
PART 17 - EXECUTIVE AND OTHER COMMITTEES
17.1 The Directors may by resolution appoint an Executive Committee to consist
of a member or members of their body as they think fit, which committee
shall have, and may exercise during the intervals between the meetings of
the Board, all the powers vested in the Board except the power to fill
vacancies in the Board, the power to change the membership of, or fill
vacancies in, the Committee or any other committees of the Board and any
other powers as may be specified in the resolution. The Committee shall
keep regular minutes of its transactions and shall cause them to be
recorded in books kept for that purpose, and shall report the same to the
Board of Directors at times as the Board of Directors may from time to
time require. The board shall have the power at any time to revoke or
override the authority given to or acts done by the Committee except as
to acts done before such revocation or overriding and to terminate the
appointment or change the membership of the Committee and to fill
vacancies in it. The Committee may make rules for the conduct of its
business and may appoint assistants as it may deem necessary. A majority
of the members of the Committee shall constitute a quorum.
17.2 The Directors may by resolution appoint one or more committees consisting
of a member or members of their body as they think fit and may delegate
to any committee between meetings of the board those powers of the board
(except the power to fill vacancies in the board and the power to change
the membership of or fill vacancies in any committee of the board and the
power to appoint or remove Officers appointed by the Board) subject to
conditions as may be prescribed in the resolution, and all committees
appointed shall keep regular minutes of their transactions and shall
cause them to be recorded in books kept for that purpose, and shall
report to the Board of Directors as the Board of Directors may from time
to time require. The directors shall also have a power at any time to
revoke or override any authority given to or acts to be done by any
committees except as to acts done before such revocation or overriding
and to terminate the appointment or change the membership of a committee
and to fill vacancies in it. Committees may make
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rules for the conduct of their business and may appoint assistants as
they deem necessary. A majority of the members of a committee shall
constitute a quorum.
17.3 The Executive Committee and any other committees may meet and adjourn as
it thinks proper. Questions arising at any meeting shall be determined by
a majority of votes of the members of the committee present, and in case
of an equality of votes, the chairman shall not have a second or casting
vote. A resolution approved in writing by all the members of the
Executive Committee or any other committee shall be as valid and
effective as if it had been passed at a meeting of the Committee duly
called and constituted. A resolution shall be dated and may be in two or
more counterparts which together shall be deemed to constitute one
resolution in writing. The resolution shall be filed with the minutes of
the proceedings of the committee and shall be effective on the date
stated on the resolution or on the latest date stated in any counterpart.
PART 18 - OFFICERS
18.1 The Directors shall, from time to time, appoint a President and a
Secretary and any other officers as the Directors shall determine and the
directors may, at any time, terminate any appointment. No officer shall
be appointee unless he is qualified in accordance with the provisions of
The Act.
18.2 One person may hold more than one of the offices except that the offices
of President and Secretary must be held by different persons unless the
Company has only one member. Any person appointed as the chairman of the
Board, the President or the Managing Director shall be a director. the
other officers need not be Directors. The remuneration of the officers of
the Company as such and the terms and conditions of their tenure of
office or employment shall from time to time be determined by the
Directors; the remuneration may be by way of salary, fees, wages,
commission or participation in profits or any other means or all of these
modes and an officer may in addition to the remuneration be entitled to
receive after he ceases to hold the office or leaves the employment of
the Company a pension or gratuity. The Directors may decide what
functions and duties each officer shall perform and may entrust to and
confer upon him any of the powers exercisable by them upon terms and
conditions and with restrictions as they think fit and may from time to
time revoke, withdraw, alter or vary all or any of the functions, duties
and powers. The Secretary shall, inter alia, perform the functions of the
Secretary specified in the Act.
18.3 Every officer of the Company who holds any office or possesses any
property, whether directly or indirectly, where duties
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or interest might be created in conflict with his duties or interests as
an officer of the Company shall, in writing, disclose to the President
the fact and nature and extent of the conflicts.
PART 19 - INDEMNITY AND PROTECTION
OF DIRECTORS, OFFICERS AND EMPLOYEES
19.1 Subject to the provisions of The Act, the Directors shall cause the
Company to indemnify a Director or former director of the Company and the
Directors may cause the Company to indemnify a director or former
director of a corporation of which the Company is or was a shareholder
and the heirs and personal representatives of any former director against
all costs, charges and expenses, including an amount paid to settle an
action or satisfy a judgment, actually and reasonably incurred by him or
them including an amount paid to settle an action or satisfy a judgment
in a civil, criminal or administrative action or proceeding to which he
is or they are made a party by reason of this being or having been a
Director including any action brought by the Company. Each Director of
the Company on being elected or appointee shall be deemed to have
contracted with the Company on the terms of this indemnity.
19.2 Subject to the provisions of The Act, the Directors may cause the Company
to indemnify any officer, employee or agent of the Company to indemnify
any officer, employee or agent of the Company or of a corporation of
which the Company is or was a shareholder (notwithstanding that he is
also a director) and his heirs and personal representatives against all
costs, charges and expenses whatsoever incurred by him or them and
resulting form his acting as an officer, employee or agent of the Company
or the corporation. In addition, the Company shall indemnify the
Secretary or an assistant Secretary of the Company (if he shall not be a
full time employee of the Company and notwithstanding that he is also a
Director) and his respective heirs and legal representatives against all
costs, charges and expenses whatsoever incurred by him or them an arising
out of the functions assigned to the Secretary by The Act or these
Articles.
19.3 The failure of a Director or officer of the Company to comply with the
provisions of The Act or of the Memorandum or these Articles shall not
invalidate any indemnity to which he is entitled under this Part.
19.4 The Directors may cause the Company to purchase and maintain insurance
for the benefit of any person who is or was serving as a Director,
officer, employee or agent of the Company or as a director, officer,
employee or agent of any corporation of which the Company is or was a
shareholder and his heirs or personal representatives against any
liability incurred by him as a Director,
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officer, employee or agent.
PART 20 - DIVIDENDS AND RESERVE
20.1 The Directors may from time to time declare and authorize payment of
dividends as they may deem advisable and need not give notice to any
member. No dividend shall be paid otherwise than out of funds or assets
properly available for the payment of dividends and a declaration by the
Directors as to the amount of the funds or assets available for dividends
shall be conclusive. The Company may pay any such dividend wholly or in
part by the distribution of specific assets and in particular by paid up
shares, bonds, debentures or other securities of the Company or any other
corporation or in any one or more ways as may be authorized by the
Company or the directors and where any difficulty arises with regard to a
distribution the Directors may settle the difficulty as they think
expedient, and in particular may fix the value for distribution of the
specific assets or any part, and may determine that cash payments in
substitution for all or any part of the specific assets to which any
members are entitled shall be made to any members on the basis of the
value fixed in order to adjust the rights of all parties and may vest any
specific assets in trustees for the persons entitled to the dividend as
may seem expedient to the Directors.
20.2 Any dividend declared on shares of any class by the Directors may be made
payable on a date as is fixed by the Directors.
20.3 Subject to the rights of members holding shares with special rights as to
dividends, all dividends on shares of any class shall be declared and
paid according to the number of shares held.
20.4 The Directors may, before declaring any dividend, set aside out of the
funds properly available for the payment of dividends a sum as they think
proper as a reserve which shall, at the discretion of the directors, be
applicable for meeting contingencies, or for equalizing dividends, or for
any other purpose to which the funds of the Company may be properly
applied, and pending the application may, at the like discretion, either
be employed in the business of the Company or be invested in investments
as the Directors may from time to time think fit. The Directors may also,
without placing the same in reserve, carry forward such funds, which they
think prudent not to distribute.
20.5 If several persons are registered as joint holders of any share, any one
of them may give an effective receipt for any dividend, bonus or other
money payable in respect of the share.
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20.6 No dividend shall bear interest against the Company. Where the dividend
to which a member is entitled includes a fraction of a cent, such
fraction shall be disregarded in making payment and the payment shall be
deemed to be payment in full.
20.7 Any dividend, bonus or other money payable in cash in respect of shares
may be paid by cheque or money order sent through the post directed to
the registered address of the holder, or in the case of joint holders, to
the registered address of that one of the joint holders who is first
named on the register, or to a person and to an address as the holder or
joint holders may direct in writing. Every cheque or money order shall be
made payable to the order of the person to whom it is sent. The mailing
of the cheque or money order shall, to the extent of the sum represented
thereby (plus the amount of any tax required by law to be deducted),
discharge all liability for the dividend, unless the cheque or money
order shall not be paid on presentation or the amount of tax deducted
shall not be paid to the appropriate taxing authority.
20.8 Notwithstanding anything contained in these Articles, the Directors may
from time to time capitalize any undistributed surplus on hand of the
Company and may from time to time issue as fully paid and non-assessable
any unissued shares, or any bonds, debentures or debt obligations of the
Company as a dividend representing all or any part of the undistributed
surplus on hand.
PART 21 - DOCUMENTS, RECORDS AND REPORTS
21.1 The Company shall keep at its records office or at any other place as The
Act may permit, the documents, copies, registers, minutes, and records
which the Company is required by The Act to keep at its records office or
any other place, as the case may be.
21.2 The Company shall cause to be kept proper books of account and accounting
records in respect of all financial and other transactions of the Company
in order to record the financial affairs and condition of the Company and
to comply with The Act.
21.3 Unless the Directors determine otherwise, or unless otherwise determined
by an ordinary resolution, no member of the Company shall be entitled to
inspect the accounting records of the Company.
21.4 The Directors shall from time to time at the expense of the Company cause
to be prepared and laid before the Company in general meeting the
financial statements and reports as are required by The Act.
21.5 Every member shall be entitled to be furnished, once,
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gratis, on demand, with a copy of the latest annual financial statements
of the Company and, if so required by The Act, a copy of each annual
financial statement and interim financial statement shall be mailed to
each member.
PART 22 - NOTICES
22.1 A notice, statement or report may be given or delivered by the Company to
any member either by delivery to him personally or by sending it by mail
to him to his address as recorded in the register of members. Where a
notice, statement or report is sent by mail, service or delivery of the
notice, statement or report shall be deemed to be effected by properly
addressing, prepaying and mailing the notice, statement or report and to
have been given on the day, Saturdays, Sundays and holidays excepted,
following the date of mailing. A certificate signed by the secretary or
other officer of the Company or of any other corporation acting in that
behalf for the Company that the letter or envelope containing the notice,
statement or report was addressed, prepaid and mailed shall be conclusive
evidence of mailing.
22.2 A notice, statement or report may be given or delivered by the Company to
the joint holders of a share by giving the notice to the joint holder
first named in the register of members in respect of the share.
22.3 A notice, statement or report may be given or delivered by the Company to
the persons entitled to a share in consequence of the death, bankruptcy
or incapacity of a member by sending it through the mail prepaid
addressed to them by name or by the title of representatives of the
deceased or incapacitated person or trustee of the bankrupt, or by any
like description, at the address (if any) supplied to the Company for the
purpose by the persons claiming to be entitled, or (until the address has
been supplied) by giving the notice in a manner in which the same might
have been given if the death, bankruptcy or incapacity had not occurred.
22.4 Notice of every general meeting or meeting of members holding a class of
shares shall be given to every member.
PART 23 - RECORD DATES
23.1 The Directors may fix in advance a date, which shall not be more than the
maximum number of days permitted by The Act preceding the date of any
meeting of members or any class or of the payment of any dividend or of
the proposed taking of any other proper action requiring the
determination of the members entitled to notice of, or to attend and vote
at, any meeting and any
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adjournment, or entitled to receive payment of any dividend or for any
other proper purpose and, in such case, notwithstanding anything
elsewhere contained in these Articles, only members of record on the date
fixed shall be deemed to be members for the purposes aforesaid.
23.2 Where no record date is fixed for the determination of members, the date
on which the notice is mailed or on which the resolution declaring the
dividend is adopted, as the case may be, shall be the record date for
such determination.
PART 24 - SEAL
24.1 The Directors may provide a seal for the Company and shall provide for
the safe custody of the seal which shall not be affixed to any instrument
except in the presence of a Director or a person or persons as the
Directors may from time to time by resolution appoint and the Director,
or person or persons in whose presence the seal is so affixed to an
instrument shall sign such instrument. For the purpose of certifying
under seal true copies of any document or resolution the seal may be
affixed in the presence of any Director or Officer.
24.2 To enable the seal of the Company to be affixed to any bonds, debentures,
share certificates, or other securities of the Company on which
facsimiles of any of the signatures of the directors or officers of the
Company are, in accordance with The Act and these Articles printed or
otherwise mechanically reproduced, there may be delivered to the firm or
company employed to engrave, lithograph or print the bonds, debentures,
share certificates or other securities one or more unmounted dies
reproducing the Company's seal and the Chairman of the Board, the
President, the Managing Director or a Vice-president and the Secretary,
Treasurer, Secretary-Treasurer, an Assistant Secretary, an Assistant
Treasurer, or an Assistant Secretary-Treasurer may by a document
authorize the firm or Company to cause the Company's seal to be affixed
to the bonds, debentures, share certificates or other securities by the
use of the dies. Bonds, debentures, share certificates or other
securities to which the Company's seal has been affixed shall for all
purposes be deemed to be under and to bear the Company's seal lawfully
affixed.
24.3 The Company may have for use in any other province, state, territory or
country an official seal which shall have on its face the name of the
Province, State, Territory or Country where it is to be used.
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PART 25 - DEATH OF SOLE DIRECTOR AND MEMBER
25.1 In the event that the Company has only one member (exclusive of the
Company, if the Company shall be the owner of issued shares of the
Company), and if the member is the only Director of the Company, then he
may from time to time file at the records office of the Company a notice
in writing designating one or more persons to act as Directors in the
event of his death. The notice shall be accompanied by the written
consent of the designated persons to act and to be Directors of the
Company. Upon the death of the Director (and provided that at the date of
the death no other person is a member of the Company and no other person
is a Director of the Company), each person designated as a Director as
aforesaid shall be deemed to have been duly elected as a Director of the
Company as of the date of death of such deceased director; provided,
however, that the election or appointment of a person designated as
aforesaid shall be invalid and of no effect in the event of his
rescinding his consent to be or to act as a Director or in the event of
his being disqualified from being or acting as a Director.
25.2 In the event that a sole Director fails to appoint a successor pursuant
to Article 25.1 (or having designated a person pursuant to Article 25.1,
the person fails or refuses to act as a Director or is otherwise
disqualified from acting as or being a Director), and in the event of the
death of the Director at a time when he is still the sole member of the
Company (exclusive of the Company, if the Company shall be the owner of
issued shares of the Company):
(a) A general meeting of the Company may be convened by:
i) the solicitor or auditor for the Company; or
ii) any person entitled as at the intended date of the meeting
to apply for Letters Probate of the last Will of the
deceased member (if he died testate); or
iii) the person first entitled as at the intended date of the
meeting to apply for Letters of Administration of the
estate of the deceased member (whether or not he in fact
died intestate);
(b) Notice of such meeting shall be given no less than twenty-one days
before the intended date of the meeting to:
i) all persons named as beneficiaries in the last will (if
any) of the deceased member (whether or not letters probate
have been granted in respect of such Will);
ii) all persons who would be entitled to share in the
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estate of the deceased member if he had died intestate
(whether or not he in fact died intestate);
iii) the parent or guardian of any person referred to in i) or
ii) above who is an infant as at the intended date of the
meeting; and
iv) if any of the persons referred to in i) or ii) above shall
be a class of persons whose identity cannot be readily
ascertained, then to a solicitor acting on behalf of the
class;
(c) At the general meeting, the persons named in (b) above who are
personally present at the meeting shall be entitled, upon
unanimous vote, to determine the number of Directors of the
Company and to elect Directors of the Company;
(d) The persons elected Directors of the Company pursuant to this
Article 25.2 shall have authority to manage the business of the
Company; but, while the persons are Directors of the Company, they
shall not suffer nor permit any of the following until at least
one hundred and twenty days following the transmission of the
shares of the deceased member to his lawful representative (having
Letters probate or Letters of Administration in British Columbia)
without first obtaining an Order of the Supreme Court of British
Columbia approving the same:
i) the sale, allotment or issuance by the Company of any
issued or unissued shares;
ii) the issuance by the Company of any bonds, debentures,
warrants or options to purchase shares;
iii) any agreement by the Company to allot or issue shares,
debentures, warrants or options to purchase shares (whether
issued or unissued);
iv) the purchase or redemption by the Company of any of its
shares or any agreement by the Company to purchase or
redempt any of its shares;
v) the alteration of the Company's Memorandum or Articles; or
vi) the sale by the Company of the whole or a substantial part
of its business or undertaking.
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25.3 The provisions of Articles 25.1 and 25.2 shall apply mutatis mutandis in
the event of there being more than one Director and member and in the
event of the death of all members and Directors without other provision
having been made for the appointment of successor Directors.
25.4 The accidental omission to give notice to a person specified in Article
25.2(b) shall not invalidate the election of Directors pursuant to
Article 25.2(c).
PART 26 - PROHIBITIONS
26.1 If the Company is not a reporting company, no shares or debt obligations
issued by the Company shall be offered for sale to the public, except
under the provisions pursuant to the Securities Act and regulations.
26.2 No shares shall be transferred without the previous consent of the
Directors expressed by a resolution of the Board and the Directors shall
not be required to give any reason for refusing to consent to any
proposed transfer.
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Exhibit 3.(i) Articles of Incorporation of Avani Manufacturing (China) Inc.
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Articles of Incorporation
(Pursuant to NRS 78)
STATE OF NEVADA
SEAL
STATE OF NEVADA
Secretary of State
- --------------------------------------------------------------------------------
1. NAME OF CORPORATION: Avani Manufacturing (China) Inc.
2. RESIDENT AGENT:
Name of Residing Agent: The Corporation Trust Company of Nevada.
Street Address: One East First Street, Reno, Nevada, 89501.
3. SHARES:
Number of shares with par value: 100,000 Par Value: .001
4. GOVERNING BOARD: Shall be styled as Directors.
The FIRST BOARD OF DIRECTORS shall consist of one (1) members and the
names and addresses are as follows:
Tomo Huang 328-17 Fawcett Road, Coquitlam, BC (Canada) V3K 6V2
5. PURPOSE: The purpose of the corporation shall be:
-----------------------------------------------------------------.
OTHER MATTER: This form includes minimal statutory requirements to
incorporate under NRS 78. You may attach additional information
pursuant to NRD 78.037 or any other information deemed appropriate. If
additional information is contradictory to this form, it cannot be
filed and will be returned to you for correction. Number of pages
attached _________.
7. SIGNATURES OF INCORPORATORS: The names and
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addresses of each of the incorporators signing the articles:
(signature must be notarized) (Attach additional pages if there are
more than two incorporators)
Jack C. Caskey
--------------------------------
Name
520 Pike St., Seattle, WA 98101
--------------------------------
Address
/s/
--------------------------------
Signature
State of Washington County of King
This instrument was acknowledged before me on 11/26,97 by Scot Ferraro as
incorporator of Avani Manufacturing (China) Inc.
/s/ STAMP
--------------------------------
Notary Public Signature
Dawn McPherson
Scot Ferraro
--------------------------------
Name
520 Pike St., Seattle, WA 98101
--------------------------------
Address
/s/
--------------------------------
Signature
State of Washington County of King
This instrument was acknowledged before me on 11/26,97 by Jack C. Caskey
incorporator of Avani Manufacturing (China) Inc.
/s/ STAMP
--------------------------------
Notary Public Signature
Dawn McPherson
8. CERTIFICATE OF ACCEPTANCE OF APPOINTMENT OF RESIDENT AGENT
The Corporation Trust Company of Nevada hereby accept appointment as
Resident Agent for the above named corporation.
The Corporation Trust Company of Nevada
33
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/s/ 11/26/97
-------------------------------- Date
Jack Caskey
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EXHIBIT 3.(ii) By-Laws of Avani Manufacturing (China) Inc.
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AVANI MANUFACTURING (CHINA) INC.
* * * * * *
B Y - L A W S
* * * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be in Reno, Nevada.
Section 2. The corporation may also have offices at such other places both
within and without the State of Nevada as the board of directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS.
Section 1. All annual meetings of the stockholders or special meetings of
the stockholders, may be held at such time and place within or without the State
of Nevada as shall be stated in the notice of meeting, or in a duly executed
waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held at such time and
such date as determined by the Board of directors, if not a legal holiday, and
if a legal holiday, then on the next secular day following, at which they shall
elect by a plurality vote a board of directors, and transact such other business
as may be properly brought before the meeting.
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Section 3. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 4. Notices of meetings shall be in writing and signed by the
president or a vice president, or the secretary, or an assistant secretary, or
by such other person or persons as the directors shall designate. Such notice
shall state the purpose or purposes for which the meeting is called and the time
when and the place where it is to be held. A copy of such notice shall be either
delivered personally to or shall be mailed, postage prepaid, to each stockholder
of record entitled to vote at such meeting not less than ten nor more than sixty
days before such meeting. If mailed, it shall be directed to a stockholder at
his address as it appears upon the records of the corporation and upon such
mailing of any such notice, the service thereof shall be complete, and the time
of the notice shall begin to run from the date upon which such notice is
deposited in the mail for transmission to such stockholder. Personal delivery of
any such notice to any officer of a corporation or association, or to any member
of a partnership shall constitute delivery of such notice to such corporation,
association or partnership. In the event of the transfer of stock after delivery
or mailing of the notice of and prior to the holding of the meeting it shall not
be necessary to delivery or mail notice of the meeting of the transferee.
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Section 5. Business transacted at any special meeting of the stockholders
shall be limited to the purposes stated in the notice.
Section 6. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the articles of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 7. When a quorum is present or represented at any meeting, the
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of the
statutes or of the articles of incorporation a different vote is required in
which case such express provision shall govern and control the decision of such
question.
Section 8. Except as hereinafter provided, every stockholder of record of
the corporation shall be entitled at each meeting of stockholders to one vote
for each share of stock standing in his name on the books of the corporation. At
all elections of directors each holder of stock possessing voting power shall be
entitled to as many votes as shall equal the number of his shares of stock
multiplied by the number of directors to be elected, and he may cast all of such
votes for a single director or may distribute them among the number to be voted
for or any two or more of them, as he may see fit.
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Section 9. At any meeting of the stockholders, any stockholder may be
represented and vote by a proxy or proxies appointed by an instrument in
writing. In the event that any such instrument in writing shall designate two or
more persons to act as proxies, a majority of such persons present at the
meeting, or, if only one shall be present, then that one shall have an may
exercise all of the powers conferred by such written instrument upon all of the
persons so designated unless the instrument shall otherwise provide. No such
proxy shall be valid after the expiration of six months from the date of its
execution, unless coupled with an interest, or unless the person executing it
specifies therein the length of time for which it is to continue in force, which
in no case shall exceed seven years from the date of its execution. Subject to
the above, any proxy duly executed is not revoked and continues in full force
and effect until an instrument revoking it or a duly executed proxy bearing a
later date is filed with the secretary of the corporation.
Section 10. Any action, which may be taken by the vote of the stockholders
at a meeting, may be taken without a meeting if authorized by the written
consent of stockholders holding at least a majority of the voting power, unless
the provisions of the statutes or of the articles of incorporation require a
greater proportion of voting power to authorize such action in which case such
greater proportion of written consents shall be required.
ARTICLE III
DIRECTORS
Section 1. The number of directors shall be neither more than eight nor
less than one. The number of directors is to be fixed by a vote of the
shareholders. The directors shall be elected at the annual meeting of the
stockholders, and except as provided in Section 2 of this article, each director
elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
Section 2. Vacancies, including those caused by an increase in the number
of directors, may be filled by a majority of the remaining directors though less
than a quorum. When one or more directors shall give notice of his or their
resignation to the board, effective at a future date, the board shall have power
to fill such vacancy or vacancies to take effect when such resignation or
resignations shall become effective, each director so appointed to hold office
during the remainder of the term of office of the resigning director or
directors.
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Section 3. The business of the corporation shall be managed by its board
of directors which may exercise all such powers of the corporation and do all
such lawful acts and things as are not by statute or by the articles of
incorporation or by these bylaws directed or required to be exercised or done by
the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Nevada.
Section 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the even such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held without
notice at such time and place as shall from time to time be determined by the
board.
Section 7. Special meetings of the board of directors may be called by the
president or secretary on the written requires of two directors. Written notice
of special meetings of the board of directors shall be given to each director at
least one days before the date of the meeting.
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Section 8. A majority of the board of directors, at a meeting duly
assembled, shall be necessary to constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the board of directors, except as
may be otherwise specifically provided by statute or by the articles of
incorporation. Any action required or permitted to be taken at a meeting of the
directors may be taken without a meeting if a consent in writing, setting forth
the action so taken, shall be signed by all of the directors entitled to vote
with respect to the subject matter thereof.
COMMITTEES OF DIRECTORS
Section 9. The board of directors may, by resolution passed by a majority
of the whole board, designate one or more committees, each committee to consist
of one or more of the directors of the corporation, which, to the extent
provided in the resolution, shall have and may exercise the powers of the board
of directors in the management of the business and affairs of the corporation,
and may have power to authorize the seal of the corporation to be affixed to all
papers on which the corporation desires to place a seal. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the board of directors.
Section 10. The committees shall keep regular minutes of their proceedings
and report the same to the board when required.
COMPENSATION OF DIRECTORS
Section 11. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
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ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be in writing and
delivered personally or mailed to the directors or stockholders at their
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by facsimile telecommunication.
Section 2. Whenever all parties entitled to vote at any meeting, whether
of directors or stockholders, consent, either by a writing on the records of the
meeting or filed with the secretary, or by presence at such meeting and oral
consent entered on the minutes, or by taking part in the deliberations at such
meeting without objection, the doings of such meeting shall be as valid as if
had at a meeting regularly called and noticed, and at such meeting any business
may be transacted which is not excepted from the written consent or to the
consideration of which no objection for want of notice is made at the time, and
if any meeting be irregular for want of notice or of such consent, provided a
quorum was present at such meeting, the proceedings of said meeting may be
ratified and approved and rendered likewise valid and the irregularity or defect
therein waived by a writing signed by all parties having the right to vote at
such meetings; and such consent or approval of stockholders may be by proxy or
attorney, but all such proxies and powers of attorney must be in writing.
Section 3. Whenever any notice whatever is required to be given under the
provisions of the statutes, of the articles of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of
directors and shall be a president, a vice president, a secretary and a
treasurer. Any person may hold two or more offices.
Section 2. The board of directors at its first meeting after each annual
meeting of stockholders shall choose a president, a vice president, a secretary
and a treasurer, none of whom need be a member of the board.
Section 3. The board of directors may appoint additional vice presidents,
and assistant secretaries and assistant treasurers and such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the board
of directors may be removed at any time by the affirmative vote of a majority of
the board of directors. Any vacancy occurring in any office of the corporation
by death, resignation, removal or otherwise shall be filled by the board of
directors.
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THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation, and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts requiring
a seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the corporation.
THE VICE PRESIDENT
Section 8. The vice president shall, in the absence or disability of the
president, perform the duties and exercise the powers of the president and shall
perform such other duties as the board of directors may from time to time
prescribe.
THE SECRETARY
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors, and
shall perform such other duties as may be prescribed by the board of directors
or president, under whose supervision he shall be. He shall keep in safe custody
the seal of the corporation and, when authorized by the board of directors,
affix the same to any instrument requiring it and, when so affixed, it shall be
attested by his signature or by the signature of the treasurer or an assistant
secretary.
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THE TREASURER
Section 10. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 11. He shall disburse the funds of the corporation as may be
ordered by the board of directors taking proper vouchers for such disbursements,
and shall render to the president and the board of directors, at the regular
meetings of the board, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 12. If required by the board of directors, he shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every stockholder shall be entitled to have a certificate,
signed by the president or a vice president and the treasurer or an assistant
treasurer, or the secretary or an assistant secretary of the corporation,
certifying the number of shares owned by him in the corporation. If the
corporation is authorized to issue shares of more than one class or more than
one series of any class, there shall be set forth upon the face or back of the
certificate, or the certificate shall have a statement that the corporation will
furnish to any stockholders upon request and without charge, a full or summary
statement of the designations, preferences and relative, participating, optional
or other special rights of the various classes of stock or series thereof and
the qualifications, limitations or restrictions of such rights, and, if the
corporation shall be authorized to issue only special stock, such certificate
shall set forth in full or summarize the rights of the holders of such stock.
Section 2. Whenever any certificate is countersigned or otherwise
authenticated by a transfer agent or transfer clerk, and by a registrar, then a
facsimile of the signatures of the officers or agents of the corporation may be
printed or lithographed upon such certificate in lieu of the actual signatures.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall have been used on, any such certificate or
certificates shall cease to be such officer or officers of the corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the corporation, such certificate or
certificates may nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates, or whose facsimile signature or signatures shall have been used
thereon, had not ceased to be an officer or officers of such corporation.
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LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the board of directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate alleged
to have been lost or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for share duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
CLOSING OF TRANSFER BOOKS
Section 5. The directors may prescribe a period not exceeding sixty days
prior to any meeting of the stockholders during which no transfer of stock on
the books of the corporation may be made, or may fix a day not more than sixty
days prior to the holding of any such meeting as the day as of which
stockholders entitled to notice of and to vote at such meeting shall be
determined; and only stockholders of record on such day shall be entitled to
notice or to vote at such meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Nevada.
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ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the articles of incorporation, if any, may be declared by the
board of directors at any regular or special meeting pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital stock, subject to
the provisions of the articles of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserves in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by resolution
of the board of directors.
SEAL
Section 5. The corporation seal shall have inscribed thereon the name of
the corporation, the year of its incorporation and the words "Corporate Seal,
Nevada."
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered or repealed at any regular meeting
of the stockholders or of the board of directors or at any special meeting of
the stockholders or of the board of directors if notice of such alternation or
repeal be contained in the notice of such special meeting.
I, the undersigned, being the Secretary of AVANI MANUFACTURING (CHINA)
INC. DOES HEREBY CERTIFY the foregoing to be the by-laws of said corporation, as
adopted at a meeting of the Directors held on December 8, 1997 in Vancouver,
British Columbia.
/s/
- -------------------------
Secretary
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Exhibit 21 (i) Subsidiaries of Registrant
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SUBSIDIARIES
Avani Water Company
Avani Marketing Company
Avani Manufacturing (China), Inc.
Marina Bottling Company Ltd.
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