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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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Form 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or 12 (g) of the Securities Act of 1934
AVANI INTERNATIONAL GROUP INC.
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(Name of Small Business Issuer in its charter)
Nevada 88-0367866
- ------- ------------
(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 telephone number 604-525-2386.
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Securities to be 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 to be registered under Section 12(g) of the Act:
Common Stock
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(Title of Class)
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Part I
Item 1. Description of Business.
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Introduction.
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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 two
wholly-owned subsidiaries, Avani Marketing Corp. and Avani Water Corporation.
Avani Marketing Corp. was organized under the laws of 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. 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 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
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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 $2,900,000 in gross proceeds from the
private placement of its common stock at $1.00 per share. For the nine months
ended September 30, 1997, the Company raised an additional $193,100 in gross
process 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.
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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 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).
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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, 1996, the Company did not expend any
amounts in research and development costs.
Manufacturing Process.
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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 organic compounds such as pesticides and herbicides and
associated tastes and odors. The water next passes through a seven
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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 September
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.
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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.
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.
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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 September 30, 1997, the Company has approximately 1,700
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
September 30, 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 September 30, 1997. For fiscal year
ended December 31, 1996 and for the nine month period ended September 30,
1997, sales to the distributor accounted for 47% and 48%, respectively, of
total bottled water sales.
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Sales to Taiwan have increased from approximately $26,725 for year ended
December 31, 1996 to $170,498 for the nine month ended September 30, 1997. The
Company believes that the development of this market will be constrained by
the current economic difficulties experienced by the Taiwanese economy. The
economic difficulties include the devaluation of the Taiwan currency against
other non-Asian currencies causing imported goods to be 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.
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Backlog.
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The Company had no backlog for the year ended December 31 1996. There is no
seasonal impact on the Company's sales.
Facilities.
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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.
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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 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.
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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.
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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.
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Employees.
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As of September 30, 1997, the Company has 30 employees, which includes two
officers. The Company has no collective bargaining agreements with its
employees and believes its relations with its employees are good.
Item 2. Management's Discussion and Analysis.
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The following discusses the financial results and position of the consolidated
accounts of the Company and its wholly owned subsidiaries for the periods
indicated.
Results of Operations
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.
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).
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Nine Months ended September 30, 1997 and Nine Months ended September 30, 1996.
Revenues for the nine month period ended September 30, 1997 were $379,968
representing an increase of $374,902 over revenues of $5,066 for the comparable
period in 1996. This increase was due to product sales for a full nine month
period in 1997 contrasted with its initial month of sales in 1996, in addition
to the cost related to the continuing development of the Company's sales
channels in 1997. Revenues for this period in 1997 consisted of $352,628 in
water and supply sales (an increase of $350,264 over $2,364 for the prior
period), $9,465 in cooler and equipment sales (an increase of $7,278 over $2,187
for the prior period) and $17,875 in cooler rentals (an increase of $17,360 over
$515 for the prior period). Of the total revenue for the 1997 period, $170,498
(or 45% of total water sales) represented sales to a Taiwan distributor. The
Company did not have sales to the distributor for the comparable 1996 period.
Interest income earned on investment of cash totaled $13,656 for the period in
1997 representing a decrease of $5,063 over $18,719 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 $356,969 which represents an increase
of $309,436 over $47,533 for the prior period. This increase is due to costs
associated with production operations for a nine month period in 1997 contrasted
with its initial month of operations for the prior period. Cost of sales
consisted of $235,552 in bottled water, supplies, coolers and related equipment
(an increase of $208,386 over $27,166 for the prior period) and $121,417 in
depreciation (an increase of $101,050 over $20,367 for the prior period). Gross
profit for the nine month period was $22,999 compared with a loss of ($42,467)
for the prior period. The increase was due to increased revenues from nine
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 nine month period ended September 30, 1997 totaled $531,258
which represents an increase of $251,173 over $280,085 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
$274,491 for the 1997 period, representing an increase of $146,388 over $128,103
for the prior period. The increase in marketing expenses is due to increases in
advertising and other expenses related to building its customer base. Interest
expense relates to mortgage interest incurred in connection with the Company's
real estate and totaled $34,690 for the 1997 period, representing an increase of
$21,866 over $12,824 for the prior period. The increase is due to the
acquisition of additional real estate in 1997 and interest charges for a full
nine month period on certain properties in 1997 contrasted with a shorter period
for the same properties in 1996. Loss from operations for the nine month period
was ($813,741) which represents an increase of $368,981 over ($444,760) for the
prior period.
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Liquidity and Capital Resources
Since its inception through September 30, 1997, the Company has raised
approximately $3,133,800from the private placement of its common stock (net of
offering costs of $314,800). 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 it 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
$1,662,796 on December 31, 1996. Property, plant and equipment, net of
accumulated depreciation, totaled $1,807,144 on September 30, 1997.
In connection with its real estate properties, the Company has balloon
mortgage payments of; $21,600 due on March 30, 1998 and on August 30, 1998,
$67,944 due on July 29, 2001, $66,917 due on March 27, 2002 and $309,992 due
on May 2, 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.
Certain of the statements contained in this Form 10-SB 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.
Certain risks and uncertainties are inherent in the Company's business. These
risks include the fact the Company has a limited operating history and to date
has relied upon one distributor and one geographical market for a significant
portion of its revenues.
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Item 3. Description of Property.
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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 the principal amount of $326,842 as of September 30, 1997. The
mortgages are amortized over 25 years and bear interest at the rate of 8.30%
per annum. A balloon payment of $309,992 is due May 2, 2001. The sixth
building was purchased on July 1996 for $119,500 and is subject to a first
mortgage in the principal amount of $71,215 as of September 30, 1997. The
first mortgage is amortized over 25 years and bears interest at the rate of
8.30% per annum. A balloon payment of $67,944 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 $71,748 and $43,200,
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 $66,917 is due March 27, 2002. The second mortgage bears interest 8% with
balloon payments of $21,600 due on 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.
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Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table will identify, as of June 30, 1997, 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 4.7%
Stock 328-17 Fawcett Road
Coquitlam, B.C. V3K 6V2
Common Nico Huang(2) 450,000 4.7%
Stock 328-17 Fawcett Road
Coquitlam, B.C. V3K 6V2
Common World Equities Group(3) 1,500,000 15.5%
Stock 9th Floor, No. 36 Lane 30
Hsin Hwa Road
Taipei, Taiwan
Common National Investment(4) 10.4%
Stock Foundation Inc. 1,000,000
70 Lien Hai Road
Kaohsiung, Taiwan
Common Wang Hsiu Yun(5) 2,500,000 25.9%
Stock 8F-1, 110 Hon Ko Street
Taipei, Taiwan
Common Officers and 900,000 9.3%
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). World Equities Group is owned by Su Meichun, who is also a controlling
shareholder of Georgia Pacific Company (see "Certain Relationships and Related
Transactions").
(4). National Investment Foundation Inc. is owned by Chu Meiying, who is also
a controlling shareholder of Georgia Pacific Company (see "Certain
Relationships and Related Transactions").
(5). Wang Hsiu Yun is a controlling shareholder of Georgia Pacific Company
(see "Certain Relationships and Related Transactions").
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Item 5. Directors, Executive Officers, Promoters and Control Persons.
-------------------------------------------------------------
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.
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 6. Executive Compensation.
-----------------------
The compensation for all directors and officers individually for services
rendered to the Company for the fiscal year ended December 31, 1996 and 1995,
respectively:
SUMMARY COMPENSATION
Annual Compensation Long Term Compensation
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Awards Payouts
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Name and
Principal Salary Bonus Other Restr. Options
Position Year ($) ($) ($) Stock SARS LTIP Other
- -------- ---- ----- ----- ----- ----- ---- ---- -----
Peter Khean 1995 -- -- -- $450(1) -- -- --
President and 1996 -- -- -- -- -- -- --
Chairman
Nico Huang 1995 -- -- -- $450(1) -- -- --
Vice President and 1996 -- -- -- -- -- -- --
Director
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(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.
Item 7. 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.
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
$96,000 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.
15
<PAGE>
The controlling shareholders of Georgia Pacific are Chu Meiying, Su
Meichum and Wang Hsiu Yun, each of which, directly or indirectly, own
respectively 1,000,000, 2,500,000 and 1,500,000 shares of common stock of the
Company. 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.
Item 8. Description of Securities.
--------------------------
Common Stock
The Certificate of Incorporation of the Company authorizes the issuance of
25,000,000 shares of common stock, $.001 par value, and as of September 30,
1997, 9,648,600 shares are issued and outstanding.
The common stock carries no pre-emptive, conversion or subscription rights and
is not redeemable. In addition, each share of common stock is entitled to one
vote on all matters submitted to a vote of stockholders. On matters submitted
to a shareholder vote, a majority vote of shareholders is required to be
actionable. Cumulative voting in the election of directors is denied. All
shares of common stock are entitled to participate equally in dividends and
rank equally upon liquidation. All shares of common stock when issued are
fully paid and non-assessable by the Company. There are no restrictions on
repurchases of common stock by the Company relating to dividend or sinking
fund installment arrearage.
Preferred Stock
- ---------------
The Certificate of Incorporation of the Company does not authorize the
issuance of preferred stock. Any amendment of the Certificate of Incorporation
to authorize the issuance of the preferred stock will require the majority
vote of the shareholders.
16
<PAGE>
Part II
Item 1. 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. The Company
intends to establish a public market for its common stock in the United States
following the registration of its securities pursuant to this Form 10-SB. As
of September 30, 1997, (i) there are no outstanding warrants or options to
purchase, or securities convertible into common stock of the Company and (ii)
there are 9,226,500 shares of common stock which can be sold pursuant to Rule
144.
As of September 30, 1997, there are 114 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 2. Legal Proceedings.
------------------
The Company is not a party to any material legal proceedings.
Item 3. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
-----------------------------------------------------------------------
None.
Item 4. Recent Sales of Unregistered Securities.
----------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DATE NAME SHARES CONSIDERATION
- ---- ---- ------ -------------
12/18/95 Georgia Pacific 5,000,000 License agreement
Company
12/21/95 Tomo Hwang 150,000 Services
12/21/95 Eunice Khean 150,000 Services
12/21/95 Nico Huang 450,000 Services
12/21/95 Peter Khean 450,000 Services
1/29/96 Chang-Sen (Jackson) 100,000 $1.00 per share
Chang
1/29/96 Hsi-Yin (Rosa) Wang 90,000 $1.00 per share
1/29/96 Chih- Hao (Howard) 80,000 $1.00 per share
Chang
1/29/96 Chun-Ting (Danny) Chang 80,000 $1.00 per share
3/8/96 Liang Mei-Chu 10,000 $1.00 per share
3/8/96 Huang Chen-Yuan 10,000 $1.00 per share
3/8/96 Hsu Hui-Mei 7,500 $1.00 per share
3/8/96 Chen Cheng- Hung 7,500 $1.00 per share
4/21/96 Lin Lin Ma Ho 1,000 $1.00 pre share
4/21/96 Chun Hsien Ho 1,000 $1.00 per share
4/21/96 I Chun Ho 1,000 $1.00 per share
4/21/96 Jin Maun Ho 1,000 $1.00 per share
4/30/96 Huang, Ke-Wei 20,000 $1.00 per share
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DATE NAME SHARES CONSIDERATION
- ---- ---- ------ -------------
4/30/96 Liu Pai-Wei 5,000 $1.00 per share
4/30/96 Hsieh Kuo-Tai 5,000 $1.00 per share
4/30/96 Wang Gen-Shuh 5,000 $1.00 per share
4/30/96 Huang, Hsieh 100,000 $1.00 per share
Su- Yuan
4/29/96 Chueh, Yung- Huang 5,000 $1.00 per share
4/29/96 Huang, Hsiu- Ling 5,000 $1.00 per share
4/29/96 Chueh, Yen- Jung 5,000 $1.00 per share
4/29/96 Huang, Ying- Feng 5,000 $1.00 per share
5/27/96 Tsai, Chang-Hai 100,000 $1.00 per share
5/27/96 Tsai I-Chen 100,000 $1.00 per share
5/27/96 Cheng, Wen Shun 100,000 $1.00 per share
5/27/96 Cheng Chen Su-Ju 300,000 $1.00 per share
5/27/96 Chang Li-Chen 14,000 $1.00 per share
5/27/96 Szu- Wei Fu 2,000 $1.00 per share
5/27/96 Szu-Wen Fu 2,000 $1.00 per share
5/27/96 Kuo-Chi Fu 1,000 $1.00 per share
5/27/96 Kung-Lung Chao 1,000 $1.00 per share
7/4/96 George Yao 200,000 $1.00 per share
7/4/96 Tiffany Cheng 100,000 $1.00 per share
7/4/96 John Yao 100,000 $1.00 per share
7/4/96 Nancy Yao 100,000 $1.00 per share
8/8/96 Tiffany Cheng 200,000 $1.00 per share
8/8/96 George Yao 100,000 $1.00 per share
8/23/96 Li-Cheng Wang Yuan 1,000 $1.00 per share
8/23/96 Cathrine Chung 1,000 $1.00 per share
8/23/96 Juliana Ting 400 $1.00 per share
8/23/96 Hsieh, Shun- Yi (Jeff) 1,000 $1.00 per share
8/23/96 Hsieh, Shun-Ting (Tina) 300 $1.00 per share
8/23/97 Hsieh, Shun-Chich 100 $1.00 per share
(Jack)
8/23/96 Hsieh, Shun-Ta 5,000 $1.00 per share
( Johnson )
8/23/96 Hsieh, Yong-Song 100 $1.00 per share
(James)
8/23/96 Chuang -Hsieh, 1,000 $1.00 per share
Chiu- Mei ( Joy )
8/23/96 Yeh Chin-Tu (Michael) 100 $1.00 per share
8/23/96 Yin, Shaun 100 $1.00 per share
8/23/96 Feng, Chun-Hsien 100 $1.00 per share
(Steven)
8/23/96 Hung, Chien-Hsun- 100 $1.00 per share
8/23/96 Hung, Jong-Jen (Eric) 100 $1.00 per share
8/23/96 Wu, Chao-Ying 100 $1.00 per share
8/23/96 Chen, Li-Hsuh 400 $1.00 per share
8/23/96 Barham, Christopher 100 $1.00 per share
8/23/96 Juan, Peng- Hsu 3,000 $1.00 per share
(Joseph)
8/23/96 Lee, Pei-Yi (Peggy) 3,000 $1.00 per share
8/23/96 Chung, Chien-Huang 100 $1.00 per share
(Max)
8/23/96 Cheng, Shin-Chang 100 $1.00 per share
(Wesley)
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DATE NAME SHARES CONSIDERATION
- ---- ---- ------ -------------
8/23/96 Cheng, Shih-Fen 100 $1.00 per share
(Virginia)
8/23/96 Chong, Wai-Yi (Cannis) 100 $1.00 per share
8/23/96 Chen, Su- Ju 1,000 $1.00 per share
( Catherine )
8/23/96 Chiang, Yeuh-YinLu 100 $1.00 per share
8/23/96 Min-Hsin AngelaLin 200 $1.00 per share
8/23/96 Chou, Clairehsing Hsien 300 $1.00 per share
8/23/96 Chou Hsing-Mei 200 $1.00 per share
8/23/96 Chou Hsing-Huei 100 $1.00 per share
8/23/96 Chen Shu 200 $1.00 per share
8/23/96 Chen Chang Amei 200 $1.00 per share
8/23/96 Chen, Shu-Chen 200 $1.00 per share
8/23/96 Chen, Shu-Fen 200 $1.00 per share
8/23/96 Chen, Shu-Chuan 200 $1.00 per share
8/23/96 Kuo, Yan-Tin 100 $1.00 per share
8/23/96 Chang, Fan-Ming 100 $1.00 per share
8/23/96 Lu, Christina 100 $1.00 per share
8/23/96 Cheng, Gwendolyn 100 $1.00 per share
8/23/96 Pei, Ching Chen 100 $1.00 per share
8/23/96 Ting, Kim 200 $1.00 per share
8/23/96 Sam, Mavis 200 $1.00 per share
8/23/96 Tse, Emme 200 $1.00 per share
8/23/96 Tang, Bellissa Hsiao 200 $1.00 per share
8/23/96 Wang, Kevin Ching Lung 100 $1.00 per share
8/23/96 Wu, Hsiang Sheng 300 $1.00 per share
8/23/96 Wu Chang, Chung Fang 200 $1.00 per share
8/23/96 Alex Chen 5,000 $1.00 per share
8/28/96 Chiung- Yen Wang 1,000 $1.00 per share
( Joann )
8/28/96 Roger Chang 1,500 $1.00 per share
8/28/96 Lu Lu Wang 2,000 $1.00 per share
8/28/96 Hsu, Ju Jen 100 $1.00 per share
8/28/96 Pei Kan 100 $1.00 per share
10/7/96 Lee Yu-Ying 100 $1.00 per share
10/7/96 Fang Yi Ming 200 $1.00 per share
10/7/96 Lohachitranont 100 $1.00 per share
Compatana
10/7/96 Huang Yen-Ta 100 $1.00 per share
10/7/96 LimLih-Shiann 100 $1.00 per share
12/11/96 Ching Hang Fung 30,000 $1.00 per share
12/20/96 Hsiu Chu Liang 100,000 $1.00 per share
12/20/96 Kikawa Tomokatsu 100,000 $1.00 per share
7/1/97 Mrs.Yueh- Hua, Chen 5,000 $1.00 per share
7/1/97 Shun-Yi(Jeff) Hsieh 2,000 $1.00 per share
7/1/97 Chao-Ying Wu 1,100 $1.00 per share
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DATE NAME SHARES CONSIDERATION
- ---- ---- ------ -------------
7/1/97 Yi-Min Fang 800 $1.00 per share
7/1/97 Kikawa Tomokatsu 100,000 $1.00 per share
7/1/97 Tien Chang Enterprises 37,200 $1.00 per share
Ltd
7/8/97 Loo Lin Pei-Chu 30,000 $1.00 per share
7/8/97 Lai Syh-Ching 10,000 $1.00 per share
8/5/97 Fan Yang Kwan 7,000 $1.00 per share
</TABLE>
The shares described above were issued to the respective shareholders located
in China and in Canada from the Company's offices located in Vancouver,
Canada. Consequently, the issuance of such shares are not subject to the
jurisdiction of the Securities Act of 1933, as amended. Alternatively, the
shares issued to (i) Georgia Pacific, Peter Khean, Nico Huang, Eunice Khean
and Tomo Huang were issued in reliance of Section 4(2) of the Securities Act
of 1933, as amended ("Act") and other rules and regulations promulgated
thereunder and (ii) the remaining shares were sold to non-US persons under
circumstances and restrictions that exempted the sales from registration
pursuant to Regulation S promulgated under the Act.
Item 5. Indemnification of Directors and Officers.
------------------------------------------
Section 6 of the Company's Articles of Incorporation eliminates personal
liability in accordance with Section 78.037 of the Nevada Revised Statutes.
Section 78.037 of the NRS provides that a corporation may eliminate personal
liability of an officer or director to the corporation or its stockholders for
breach of fiduciary duty as an officer or director provided that such
provision does not eliminate liability for acts or omissions which involve
intentional misconduct, fraud or a knowing violation of the law; or the
payment of distributions in violation of NRS 79.300.
In so far as indemnification for liability arising from the Securities Act of
1933 may be permitted to Directors, Officers or persons controlling the
Company, it has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
20
<PAGE>
Part F/S
Page
- -Independent Auditors' Report....................................F-1
- -Consolidated Balance Sheets as of December 31, 1995
(audited), December 31, 1996 (audited)
and September 30, 1997 (unaudited)..............................F-2
- -Consolidated Statements of Operations for
Fiscal Years Ended December 31, 1995 (audited),
December 31, 1996 (audited) and nine months ended
September 30, 1996 and
September 30, 1997 (unaudited). .............................F-3
- -Consolidated Statements of Stockholder's Equity
From inception to December 31, 1996 (audited)
and September 30, 1997 (unaudited)..............................F-4
- -Consolidated Statements of Cash Flows for
Fiscal Years Ended December 31, 1995 (audited),
December 31, 1996 (audited) and Nine Month Ended
September 30, 1996 and September 30, 1997 (unaudited)...........F-5
- -Notes to Financial Statements...................................F-6
<PAGE>
AVANI INTERNATIONAL GROUP INC.
(formerly Rainfresh Technologies, Inc.)
AND SUBSIDIARIES
FINANCIAL STATEMENTS
<PAGE>
AVANI INTERNATIONAL GROUP INC.
(formerly Rainfresh Technologies, Inc.)
AND SUBSIDIARIES
C O N T E N T S
PAGE
----
INDEPENDENT AUDITORS' REPORT F-1
CONSOLIDATED BALANCE SHEETS F-2
CONSOLIDATED STATEMENTS OF OPERATIONS F-3
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-6 to F-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Avani International Group Inc.
(formerly Rainfresh Technologies, Inc.)
We have audited the accompanying consolidated balance sheets of Avani
International Group Inc. (formerly Rainfresh Technologies, Inc.) (a Nevada
corporation) and Subsidiaries as of December 31, 1995 and 1996 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the period November 29, 1995 (inception) to December 31, 1995 and for the year
ended December 31, 1996. 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. (formerly Rainfresh Technologies, Inc.) and Subsidiaries as of
December 31, 1995 and 1996 and the results of their operations and their cash
flows for the period November 29, 1995 (inception) to December 31, 1995, and for
the year ended December 31, 1996 in conformity with generally accepted
accounting principles.
COGEN SKLAR LLP
Bala Cynwyd, Pennsylvania
September 25, 1997
F-1
<PAGE>
AVANI INTERNATIONAL GROUP INC.
(formerly Rainfresh Technologies, Inc.)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996 1997
---- ---- ----
ASSETS (Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 145,948 $ 898,581 $ 135,621
Accounts receivable -- 43,784 59,482
Goods and services tax receivable -- 75,414 34,604
Subscription receivable 160,000 -- --
Loan receivable 30,000 -- --
Inventory -- 78,069 132,106
Prepaid expenses -- 28,630 24,051
----------- ----------- -----------
TOTAL CURRENT ASSETS 335,948 1,124,478 385,864
----------- ----------- -----------
PROPERTY, PLANT AND EQUIPMENT - NET 10,000 1,662,796 1,807,144
----------- ----------- -----------
OTHER ASSETS
Security deposits -- 1,720 1,706
Trademarks -- 4,593 4,555
License 5,000 5,000 5,000
----------- ----------- -----------
5,000 11,313 11,261
----------- ----------- -----------
TOTAL ASSETS $ 350,948 $ 2,798,587 $ 2,204,269
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ -- $ 63,771 $ 62,973
Accounts payable and accruals 4,000 130,832 104,229
Wages and benefits payable -- 34,944 15,322
Unearned income -- 8,485 16,202
Bottle and cooler deposits -- 27,641 61,980
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 4,000 265,673 260,706
LONG-TERM DEBT - NET OF CURRENT PORTION -- 421,826 471,902
----------- ----------- -----------
TOTAL LIABILITIES 4,000 687,499 732,608
----------- ----------- -----------
STOCKHOLDERS' EQUITY
COMMON STOCK, $.001 par value, 25,000,000 shares authorized;
6,390,000, 9,456,500 and 9,648,600 shares issued and outstanding 6,390 9,457 9,649
ADDITIONAL PAID-IN CAPITAL 189,810 2,938,443 3,130,351
COMMON STOCK SUBSCRIBED 160,000 -- --
ACCUMULATED DEFICIT (9,252) (823,505) (1,637,246)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT -- (13,307) (31,093)
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY 346,948 2,111,088 1,471,661
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 350,948 $ 2,798,587 $ 2,204,269
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-2
<PAGE>
AVANI INTERNATIONAL GROUP INC.
(formerly Rainfresh Technologies, Inc.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period
November 29, 1995 Nine Months Ended
(Inception) to Year Ended September 30,
December 31, 1995 December 31, 1996 1996 1997
----------------- ----------------- ------------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUE
Bottled water and supply sales $ -- $ 57,140 $ 2,364 $ 352,628
Cooler and equipment sales -- 6,709 2,187 9,465
Cooler rentals -- 4,860 515 17,875
----------- ----------- ----------- -----------
-- 68,709 5,066 379,968
----------- ----------- ----------- -----------
COST OF GOODS SOLD
Cost of goods sold (excluding
depreciation) -- 99,104 27,166 235,552
Depreciation -- 56,179 20,367 121,417
----------- ----------- ----------- -----------
-- 155,283 47,533 356,969
----------- ----------- ----------- -----------
GROSS PROFIT (LOSS) -- (86,574) (42,467) 22,999
----------- ----------- ----------- -----------
OPERATING EXPENSES
General and administrative 9,252 522,974 280,085 531,258
Marketing -- 207,794 128,103 274,491
Research and development -- -- -- 9,957
----------- ----------- ----------- -----------
9,252 730,768 408,188 815,706
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (9,252) (817,342) (450,655) (792,707)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest income -- 26,158 18,719 13,656
Interest expense -- (23,069) (12,824) (34,690)
----------- ----------- ----------- -----------
-- 3,089 5,895 (21,034)
----------- ----------- ----------- -----------
NET LOSS $ (9,252) $ (814,253) $ (444,760) $ (813,741)
=========== =========== =========== ===========
LOSS PER COMMON SHARE $ -- $ (.10) $ (.06) $ (.08)
=========== =========== ----------- -----------
WEIGHTED AVERAGE NUMBER
OF SHARES 6,295,000 7,999,921 7,479,075 9,612,583
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
<PAGE>
AVANI INTERNATIONAL GROUP INC.
(formerly Rainfresh Technologies, Inc.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NOVEMBER 29, 1995 (INCEPTION) TO DECEMBER 31, 1996
AND SEPTEMBER 30, 1997 (UNAUDITED)
<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>
ISSUANCE OF COMMON STOCK
Founders $6,200,000 $6,200 $ - $ - $ - $ -
Cash 190,000 190 189,810 - - -
COMMON STOCK SUBSCRIBED - - - 160,000 - -
NET LOSS FOR THE PERIOD NOVEMBER 29, 1995
(INCEPTION) TO DECEMBER 31, 1995 - - - - (9,252) -
---------- ------ ---------- -------- ----------- --------
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 (1,000) (1) (999) - - -
ISSUANCE OF COMMON 193,100 193 192,907
NET LOSS FOR NINE MONTHS ENDED SEPTEMBER 30, 1997 - - - - (813,741) -
FOREIGN CURRENCY TRANSLATION ADJUSTMENT - - - - - (17,786)
---------- ------ ---------- -------- ----------- --------
BALANCE, SEPTEMBER 30, 1997 (UNAUDITED) $9,648,600 $9,649 $3,130,351 $ - $(1,637,246) $(31,093)
========== ====== ========== ======== =========== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated inancial statements.
F-4
<PAGE>
AVANI INTERNATIONAL GROUP INC.
(formerly Rainfresh Technologies, Inc.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period
November 29, 1995 Nine Months Ended
(Inception) to Year Ended September 30,
December 31, 1995 December 31, 1996 1996 1997
----------------- ----------------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (9,252) $ (814,253) $ (444,760) $(813,741)
Adjustments to reconcile net loss
to net cash used in operating
activities
Stock compensation 1,200 - - -
Depreciation - 83,889 28,040 166,586
(Increase) decrease in assets
Accounts receivable - (120,271) (4,483) 24,347
Inventory - (78,772) (76,754) (54,930)
Prepaid expenses - (28,697) (13,179) 4,434
Other assets - (1,736) - -
Increase (decrease) in liabilities
Accounts payable 4,000 162,938 100,523 (52,573)
Unearned income and deposits - 36,451 11,886 42,546
------------- -------------- ------------ -----------
Net cash used in operating activities (4,052) (760,451) (398,727) (683,331)
------------- -------------- ------------ -----------
INVESTING ACTIVITIES
Acquisition of property, plant and
equipment (10,000) (1,752,251) (1,681,693) (325,332)
Investment in trademarks and patents - (4,634) (2,403) -
Loan (receivable) repayment (30,000) 30,000 (342,481) -
------------- -------------- ------------ -----------
Net cash used in investing activities (40,000) (1,726,885) (2,026,577) (325,332)
------------- -------------- ------------ -----------
FINANCING ACTIVITIES
Proceeds from mortgages payable - 529,608 529,608 116,209
Payments of mortgages payable - (39,637) (1,537) (62,691)
Issuance of common shares 190,000 2,751,700 2,371,100 493,100
Purchase of common shares - - - (301,000)
------------- -------------- ------------ -----------
Net cash provided by financing activities 190,000 3,241,671 2,899,171 245,618
------------- -------------- ------------ -----------
EFFECT OF EXCHANGE RATES ON CASH - (1,702) 17 85
------------- -------------- ------------ -----------
NET INCREASE (DECREASE) IN CASH 145,948 752,633 473,884 (762,960)
CASH - BEGINNING OF PERIOD - 145,948 145,948 898,581
------------- -------------- ------------ -----------
CASH - END OF PERIOD $ 145,948 $ 898,581 $ 619,832 $ 135,621
========= ============ =========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid for:
Interest $ - $ 23,095 $ 10,088 $ 34,690
============= ============= ============ ===========
Income taxes $ - $ - $ - $ -
============= ============= ============ ===========
SUPPLEMENTAL DISCLOSURES OF NON-
CASH FINANCING ACTIVITIES
Issuance of common stock for license $ 5,000 $ - $ - $ -
============= ============= ============ ===========
Subscription receivable $ 160,000 $ - $ - $ -
============= ============= ============ ===========
</TABLE>
The accompanying notes are an integral part of these
consolidate financial statements.
F-5
<PAGE>
AVANI INTERNATIONAL GROUP INC.
(formerly Rainfresh Technologies, Inc.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND SEPTEMBER 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 two wholly-owned
subsidiaries, Avani Marketing Corp., organized under the laws of Nevada, and
Avani Water Corporation, organized under the laws of British Columbia (Canada).
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 principally in
Taiwan. International sales for the year ended December 31, 1996 and nine months
ended September 30, 1997 were $26,725 and $192,719.
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, 1996 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.
(formerly Rainfresh Technologies, Inc.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND SEPTEMBER 30, 1997
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
Loss per share was computed by dividing net loss by the weighted average number
of common shares outstanding during the respective periods.
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.
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 February 1997, the FASB issued SFAS No. 128, "Earnings Per Share". 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
F-7
<PAGE>
AVANI INTERNATIONAL GROUP INC.
(formerly Rainfresh Technologies, Inc.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND SEPTEMBER 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recently Issued Accounting Pronouncements (Continued)
of securities into common stock and is similar to the currently required fully
diluted EPS. SFAS 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods, and earlier
application is not permitted. Adoption of SFAS 128 is not expected to have a
material effect on the Company's loss per share.
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.
Interim Periods Presented
The interim financial statements for the nine months ended September 30, 1997
and 1996 are unaudited. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of the Company, these unaudited financial
statements reflect all adjustments necessary, consisting of normal recurring
adjustments, for fair presentation of such data on a basis consistent with that
of the audited data presented herein. The results of operations for interim
periods are not necessarily indicative of the results for a full year.
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:
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996 1997
------- ---------- ----------
(Unaudited)
<S> <C> <C> <C>
Land $ - $ 136,230 $ 158,824
Building - 815,204 908,305
Plant equipment 10,000 698,679 886,856
Office furniture and equipment - 74,800 82,562
Vehicles - 21,773 21,595
------- ---------- ----------
10,000 1,746,686 2,058,142
Less: Accumulated depreciation - 83,890 250,998
------- ---------- ----------
Property, Plant and Equipment - Net $10,000 $1,662,796 $1,807,144
======= ========== ==========
</TABLE>
F-8
<PAGE>
AVANI INTERNATIONAL GROUP INC.
(formerly Rainfresh Technologies, Inc.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND SEPTEMBER 30, 1997
NOTE 4 - LONG TERM DEBT
<TABLE>
<CAPTION>
Following is a summary of long-term debt: December 31,
------------------------ September 30,
1995 1996 1997
--------- ----------- ----
(Unaudited)
<S> <C> <C> <C>
Mortgage payable due in monthly installments of $2,624 including
interest at 8.3%, balloon payment of $309,992 due May 1, 2001,
secured by land and building with a net book value of $550,700. $ - $332,885 $326,842
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 $550,700. - 36,450 -
Mortgage payable due in monthly installments of $563 including
interest at 8.3%, due July 2001, secured by land and
building with a net book value of $117,950. - 72,522 71,215
Second mortgage payable, interest only, interest at 8% per annum,
principal payments due $21,870 on June 30, 1997 and $21,680 on
January 31, 1998, secured by land and building with a net book
value of $117,950. - 43,740 21,690
Mortgage payable due in monthly installments of $504 including
interest at 7%, balloon payment of $66,789 due March 2002,
secured by land and building with a net book value of $118,798. - - 71,748
Second mortgage payable, interest only, interest at 8% per annum,
principal payments due $21,690 on March 30, 1998 and August
30, 1998, secured by land and buildings with a net book value
of $787,448. - - 43,380
------------- -------- -------
- 485,597 534,875
Less: Current portion - 63,771 62,973
------------- -------- --------
$ - $421,826 $471,902
============= ======== ========
</TABLE>
The minimum annual repayment requirements on long-term debt as of December 31,
1996 are as follows:
YEARS ENDING
DECEMBER 31, AMOUNT
- ------------ --------
1997 $ 63,771
1998 27,782
1999 6,414
2000 6,957
2001 380,673
--------
$485,597
========
F-9
<PAGE>
AVANI INTERNATIONAL GROUP INC.
(formerly Rainfresh Technologies, Inc.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND SEPTEMBER 30, 1997
NOTE 5 - INCOME TAXES
There is no income tax benefit for operating losses for the period from November
29, 1995 (inception) to December 31, 1995 and the year ended December 31, 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:
1995 1996
------------ ------------
Property, plant and equipment $ - $ (29,700)
Net operating loss carryforwards 3,700 355,400
Valuation allowance (3,700) (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, 1996, the Company had net operating loss carryforwards of
approximately $175,000 for U.S. income tax purposes, which if not used will
expire during the years 2010 and 2011. At December 31, 1996, the Company had net
operating loss carryforwards of approximately $713,000 for Canadian income tax
purposes, which if not used will expire during the years 2002 and 2003.
NOTE 6 - COMMON STOCK
In December 1995, the Company originally issued 6,200,000 shares of common stock
at $.001 par value to its founders, of which $5,000 was assigned as the value to
the license for the rights to the oxygen enrichment process and $1,200 as
compensation.
From December 1995 through December 1996, the Company raised $2,941,700, net of
offering costs of $314,800 from a private placement of its common stock. In
December 1995, the Company received subscriptions for 350,000 shares of common
stock at $1.00 per share, of which $190,000 in cash was received in December
1995 and the remainder of $160,000 was received in January 1996. During 1996,
the Company issued and sold an additional 2,906,500 shares of common stock at
$1.00 per share for $2,906,500.
F-10
<PAGE>
AVANI INTERNATIONAL GROUP INC.
(formerly Rainfresh Technologies, Inc.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND SEPTEMBER 30, 1997
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, 1996, the Company paid
the Taiwanese company $218,800. In addition, the Company entered into a
marketing agreement for a term of one year 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.
NOTE 8 - LEASES
For the period from November 29, 1995 (inception) to December 31, 1995, the year
ended December 31, 1996 and the nine months ended September 30, 1997 and 1996,
total rental expenses under leases amounted to $-0-, $19,155, $34,141, and
$3,730. At December 31, 1996, the Company was obligated under various
noncancelable operating lease arrangements for vehicles as follows:
YEARS ENDING LEASE
DECEMBER 31, OBLIGATIONS
- ------------ -----------
1997 $ 51,941
1998 52,260
1999 39,036
2000 3,825
2001 319
-----------
$147,381
===========
NOTE 9 - MAJOR CUSTOMERS AND SUPPLIER
The Company sells a substantial portion of its product to one customer. During
the year ended December 31, 1996 and the nine months ended September 30, 1997,
sales to this customer aggregated $26,725, and $170,498. At December 31, 1996
and September 30, 1997, amounts due from this customer included in trade
accounts receivable were $26,506 and $-0-. 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 year ended December 31, 1996 and the nine months ended September 30,
1997, the Company purchased approximately 54% and 36% of its materials from one
supplier. At December 31, 1996 and September 30, 1997 amounts due to that
supplier were $60,869, and $-0-. If the supplier ceased doing business with the
Company, management believes that other sources of materials are available.
F-11
<PAGE>
Part III
Index to Exhibits
Exhibit
- -------
3.(i) Articles of Incorporation, as amended of the Company.
Articles of Incorporation, as amended of Avani Marketing Corp.
Certificate of Incorporation and Name Change and Articles of Avani
Water Corporation.
3.(ii) By-Laws of the Company
By-Laws of Avani Marketing Corp.
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.(x) Agreement dated April 29, 1997 by and between the Company and Georgia
Pacific Company. *
21.(i) Subsidiaries of the registrant
* Filed herewith.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this Form 10-SB to be signed on its
behalf by the undersigned, thereunto duly authorized.
Avani International Group, Inc.
- -------------------------------------- ----------------------------
Nico Huang Date
Treasurer
22
<PAGE>
EXHIBIT 10.(x)
Agreement with Georgia Pacific dated April 29, 1997
<PAGE>
AGREEMENT
This agreement is made on the 29th day of April, 1997.
BETWEEN: AVANI INTERNATIONAL GROUP INC., a Nevada corporation with it
registered office at One East First Street, Reno, Nevada 89501, USA
(hereinafter called "Avani"
AND: GEORGIA PACIFIC COMPANY, having it business at 8F-1, 110 Hon Ko Street,
Taipei, Taiwan (hereinafter called "GP")
WHEREAS GP has an existing network of professional proficient in marketing
state of the art product primarily in the Pacific Rim countries, and worldwide
as well.
WHERESAS Avani desires to enlist the assistance of GP in marketing its
products worldwide , especially in the growth regions of the Pacific Rim.
NOW THEREFORE this Agreement witnesses that in consideration of the premises
hereto and covenants and agreements contained, the parties hereinto covenant
and agree to each other as follows:
SECTION 1 - RESPONSIBILITIES OF GP
1.00 GP will use its resources to assist Avani in getting the necessary
contacts for the establishment of export opportunities, and licensees for its
technology throughout the world, but especially in the countries of the
Pacific Rim.
1.02 All export contacts and licensee leads received through the efforts of
GP, will be re-directed to Avani for processing.
1.04. GP will assist in interviewing the prospective joint venture or licensee
parties from Pacific Rim countries.
SECTION 2 - RESPONSIBILITIES OF AVANI
2.00 Utilize its corporate infrastructure as much as possible in assisting GP
in its search for potential joint venture and licensee parties for Avani.
2.01 Effective May 1, 1997, pay GP US$12,000 a month for services.
SECTION 3 - DURATION OF AGREEMENT
3.00 The effective date of this Agreement is May 1, 1997.
3.01 This Agreement will continue till December 31, 1997. Thereafter, this
Agreement will be renegotiated between the parties.
23
<PAGE>
SECTION 4 - ENTIRE AGREEMENT
4.00 This Agreement constitutes the sole agreement between the parties. All
negotiations, representations and oral statements are hereby merged herein.
This Agreement is entered into by and between the parties on this 29th day of
April, 1997.
GEORGIA PACIFIC COMPANY AVANI INTERNATIONAL GROUP INC.
Per: Per:
/s/___________________ /s/__________________________
