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, 1999
[ ] 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.
(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
(Address of principal executive offices) (Zip Code)
Issuer's telephone number 604-525-2386.
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
(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: X. No
- 1 -
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation SB 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 year.
$613,966.
As of March 24, 2000, the aggregate market value of the
voting and non-voting common equity held by non-affiliates
is approximately $2,077,425. This calculation is based upon
the average of the bid price of $0.0625 and asked price of
$0.26 of the common stock on March 24, 2000.
The number of shares issued and outstanding of issuer's
common stock, $.001 par value, as of December 31, 1999 was
20,233,257.
DOCUMENTS INCORPORATED BY REFERENCE
None.
- 2 -
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
manufacturing and distributing 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 Oxygen Water
Corporation (formerly Avani Water Corporation), Avani
Manufacturing (China), Inc., and Avani International
Marketing Corp. It also owns 50% of Marina Bottling Company,
Ltd.
Avani Marketing Corp. was organized under the laws of the
State of Nevada on August 16, 1994. Avani Oxygen Water
Corporation was organized under the laws of the Province of
British Columbia (Canada) on December 8, 1995. Avani
Manufacturing (China), Inc. was organized under the laws of
the State of Nevada on December 1, 1997. Avani International
Marketing Corp. was incorporated under the laws of the
Province of British Columbia on September 22, 1999. Marina
Bottling Company, Ltd. was incorporated under the laws of
the Province of British Columbia on October 2, 1997. Unless
the context indicates otherwise, (i) all references to the
Company herein shall include the Company and its
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.
- 3 -
The Company sells its product in the greater Vancouver
metropolitan area and internationally to the United States,
Taiwan, Korea, Hong Kong, Malaysia, Japan and Australia. 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. The Company's sales
nationally and internationally have been limited. The
Company seeks to increase its national and international
sales to existing and other markets including the Unites
States, through licensing agreements, distribution
agreements or joint ventures with third parties; however, no
assurances can be given that the Company will be successful
in its efforts.
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 it 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 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).
--------------
- 4 -
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 Wwater 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 Wwater, 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 years ending December 31, 1998 and December
31, 1999, the Company had no 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 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.
- 5 -
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, 1999, 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 internal sales
personnel, independent distributors and commissioned
brokers. Its product is sold in the greater Vancouver
metropolitan area and internationally to United States,
Korea, Hong Kong, Malaysia, Japan and Australia.
The Company provides home and business delivery of five
gallon bottles in the Vancouver metropolitan area and
sells 500 ml and 1.5 liter PET bottles directly to
retail outlets in the Vancouver area.
- 6 -
The Company's sales development plan includes the
increased of local and national sales to distributors, and
the expansion of sales to existing and new markets through
existing and other sales channels.
The Company directly markets its five gallon bottles in the
greater Vancouver metropolitan area to business and
residential users through commissioned salespersons. 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 4
or more bottles per month. The customer pays a minimum
charge of $32.00(Cdn) per month, a one time bottle deposit
charge of $10.00(Cdn), a one time cooler deposit charge of
$100(Cdn) and an annual cooler lease charge of $160(CDN).
The Company owns and operates three delivery vehicles and
employs three delivery persons to service its customers. As
of December 31, 1999, the Company has approximately
1,500 customers. Revenues from its five gallon bottles
represent approximately 47% of total water sales.
The Company also directly markets its 500 ml and 1.5 liter
PET products to a limited number of specialty food outlets
in the Vancouver area. As of December 31, 1999, direct
sales to local retail outlets has been insignificant.
During fiscal 1999, the Company sold its PET products to the
United States, Korea, Hong Kong, Malaysia, Japan and
Australia. In the first quarter of 2000, the Company
initiated sales to Great Britain through a recently
established distributor. Product sales to these markets has
been limited. In March 1999, the Company terminated its
agreement with a distributor for Taiwan. The Company
presently is negotiating with a number of other distributors
for this territory, however, a formal arrangement has not
been established. The Company continues to seek distributors
in these and other territories that will significantly
advance product sales, however, no assurances can be given
that the Company will be successful in its efforts.
In connection with the Company's overseas marketing efforts,
in January 2000, the Company entered into an agreement with
an unaffiliated Malaysian company to assist the Company in
establishing distributors and other marketing channels for
the Company's product on a worldwide basis, with principal
concentration in Malaysia and other Asian markets. The
Company will pay commissions on any resulting sales, and
also will pay certain administrative expenses of the third
party. At this time, the Company can not predict the amount
of sales that may result from this agreement.
- 7 -
Joint Venture Arrangements
On February 11, 2000, the Company and Multimega Technologies
Sdn. Bhd. mutually terminated its joint venture agreement.
The joint venture proposed, among other terms, the
construction of a bottling facility in Malaysia and the
payment of a royalty and other consideration in the form of
net profits to the Company.
On February 18, 2000, the Company and Avani O2 Water Sdn.
Bdh., a Malaysian company ("Avani O2 (Malaysia)"), entered
into a joint venture agreement pursuant to which Avani O2
(Malaysia) received, among other rights, the exclusive right
and license to construct manufacturing facilities and to
produce and sell the Company's proprietary water product
worldwide, subject to certain conditions. The rights granted
exclude Canada and the Canada operations. Avani O2
(Malaysia) is required to pay the Company a licensing fee of
$500,000 for each manufacturing facility constructed. In
addition, the Company will receive a 2% gross royalty, and
20% of the net profits realized by Avani O2 (Malaysia). The
Company also will sell to its joint venturer certain
equipment relating to the technology at a price to be
negotiated. The term of the agreement is 30 years. Pursuant
to the joint venture agreement, Kam Chong Yip, a controlling
shareholder of the Company, was appointed to the board of
directors of Avani O2 (Malaysia). No other affiliation
exists between Avani O2 (Malaysia) and the Company or its
affiliates. As of this date, the joint venturer has not
initiated construction of any facility nor paid the
licensing fee to the Company.
Backlog.
The Company had no backlog for the year ended December 31
1999. There is no seasonal impact on the Company's sales.
Facilities.
The Company 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 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.
- 8 -
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 that 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, 1999, the Company has 14 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.
- 9 -
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 $300,655 as of
December 31, 1999. The mortgages are amortized over 25 years
and bear interest at the rate of 8.30% per annum. A balloon
payment of $295,244 is due May 1, 2001. The sixth building
was purchased on July 1996 for $119,500 and is subject to a
first mortgage and second mortgages in the principal amounts
of $65,547 as of December 31, 1999. The first mortgage is
amortized over 25 years and bears interest at the rate of
8.30% per annum. A balloon payment of $64,386 is due July 29,
2001. The second mortgage bears interest at the rate of 8%
and has a balloon payment of remaining principal due on
January 31, 1998. The seventh building was purchased in
March 1997 for $119,500 and is subject to a first mortgage
in the principal amount of $65,737 as of December 31, 1999.
The first mortgage is amortized over 25 years and bears
interest at the rate of 7.00% per annum. A balloon payment
of $63,064 is due March 27, 2002. 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.
-----------------
On August 18, 1998, a former sales representative of Avani
Water Company filed an action against the Avani Water
Corporation and Avani Marketing Corporation, among other
defendants, in the Superior Court for the State of
California alleging breach of contract and intentional
misrepresentation, among other claims. The amount demanded
by the plaintiff is actual damages in the amount of
$100,000, plus other actual and punitive damages. The
Company has filed an answer to such claims and the action is
presently in discovery. The plaintiff and the Company have
entered into a settlement agreement, which provides for the
payment of the sum of $12,500 to plaintiff.
Item 4. Submission of Matters to Vote of Security Holders.
--------------------------------------------------
None
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
--------------------------------------------------------
The table below sets forth the high and low bid prices of
the Common stock of the Company as reported by NASDAQ. The
quotations reflect inter-dealer prices, without retail mark-
up, mark-down, or commissions and may not necessarily
represent actual transactions. The Company's common stock is
listed on the NASDAQ OTC Bulletin Board under the symbol
"AVIG". There is an absence of an established trading market
for the Company's common stock, as the market is limited,
sporadic and highly volatile. The absence of an active
market may have an effect upon the high and low price as
reported.
- 10 -
1998 Low Bid High Bid
3rd Quarter 2 2.0625
4th Quarter 0.5625 2
1999 Low Bid High Bid
1st Quarter 0.25 0.5625
2nd Quarter 0.125 0.25
3rd Quarter 0.125 0.25
4th Quarter 0.1875 0.25
As of December 31, 1999, there are 739 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 and does not anticipate paying
dividends in the future.
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.
Results of Operations
Fiscal year end 1999 compared with Fiscal year end 1998.
- -------------------------------------------------------
Revenues for fiscal 1999 were $613,966 which representing an
increase of $45,957 or 8.1% from revenues of $568,009 for
the comparable period in 1998. This increase was due to
increase of PET bottle sales overseas, principally
Australia, coupled with a 50% increase of unit sales prices
of PET products. Revenues in 1999 consisted of $587,128 in
water and supply sales (an increase of $70,537 or 13.7% from
$516,591 for the prior period), $5,959 in cooler and
equipment sales (a decrease of $5,006 or 45.7% from
$10,965 for the prior period) and $20,879 in cooler rentals
(a decrease of $19,574 or 48.4% from $40,453 for the prior
period). Of the total revenue for the 1999 period, $49,397
(or 8.0% of total revenue) represented sales to an
Australian distributor. Interest income earned on
investment of cash totaled $21,304 for the period in
1999 representing an increase of $6,316 or 42.1% from
$14,988 for the prior period. The increase is a result of
private placements that occurred during 1999.
- 11 -
Cost of sales for the 1999 period totaled $418,418 or 68.2%
of total revenue contrasted with $387,367 or 68.2% of total
revenue for the 1997 period. The flat cost of goods sold on
a percentage basis for 1999 and 1998 reflects higher prices
of raw materials offset by increased unit sale prices of PET
products for the 1999 period compared with 1998. Cost of
sales consisted of $332,425 in bottled water, supplies,
coolers and related equipment (an increase of $29,017 or
9.6% from $303,408 for the prior period) and $85,993 in
depreciation (an increase of $2,034 from $83,959 for the
prior period). Gross profit for period was $195,548 compared
with $180,642 for the prior period.
General and administrative expenses which includes
administrative salaries and overhead for the period totaled
$771,201 which represents a decrease of $306,179 or 28.4%
from $1,077,380 for the prior period. This decrease is due
principally to cost reduction measures implemented by the
Company in late 1998 and early 1999. Marketing expenses
totaled $83,575 for the 1999 period, representing a decrease
of $302,808 or 78.4% from $386,383 for the prior period.
The significant decrease in marketing expenses is due to
elimination of expenses relating to the Los Angeles Marathon
that occurred in the prior period. No research and
development costs were incurred in 1999 or 1998. Interest
expense relates to mortgage interest incurred in connection
with the Company's real estate and totaled $28,244 for the
1999 period, representing a decrease of $9,226 or 24.62%
from $37,470 for the prior period. The decrease is due to
the reduction of the principal amount of the real estate
mortgages. Net loss for the 1999 fiscal period was $664,525
which represents a decrease of $621,309 or 48.3% from the
loss of $1,285,834 for the prior period.
Fiscal year end 1998 compared with Fiscal year end 1997.
- --------------------------------------------------------
Revenues for fiscal 1998 were $568,009 representing an
increase of $94,795 or 20% from revenues of $473,214 for the
comparable period in 1997. This increase was due to
increased local sales of the 5 gallon bottles and related
equipment leases for the 1998 period contrasted with 1997.
Revenues in 1998 consisted of $516,591 in water and supply
sales (an increase of $77,955 or 17.8% from $438,636 for the
prior period), $10,965 in cooler and equipment sales (an
decrease of $11,897 or 52% from $22,862 for the prior
period) and $40,453 in cooler rentals (an increase of
$28,737 or 245% from $11,716 for the prior period). Of the
total revenue for the 1998 period, $121,499 (or 23.5%
of total water sales) represented sales to a Taiwan
distributor. This amount represents a decrease of $70,960
from sales of $192,459 to the distributor for the prior
period. Interest income for the period earned on investment
of cash totaled $14,988 for the period in 1998 representing
a decrease of $796 or 5% from $15,784 for the prior period.
The decrease is a result the reduction of available cash
which was used for increased operations during the 1998
period.
- 12 -
Cost of sales for the 1998 period totaled $387,367 or 68.2%
of total revenue contrasted with $400,738 or 84.7% of total
revenue for the 1997 period. The decrease of 16.5% in the
cost of sales was a result of price reductions of raw
material purchases in 1998 and sales discounts and
allowances in 1997. Cost of sales consisted of $303,408 in
bottled water, supplies, coolers and related equipment (a
decrease of $13,327 or %4.2 from $316,735 for the prior
period) and $83,959 in depreciation (a decrease of $44 from
$84,003 for the prior period). Gross profit for period was
$180,642 compared with $72,476 for the prior period.
General and administrative expenses which includes
administrative salaries and overhead for the period totaled
$1,077,3800 which represents an increase of $384,548 or
55.5% from $692,832 for the prior period. This increase is
due to costs related to certain write-offs related to bad
debts and an investment in an affiliated company, and
increased salaries, consulting and professional fees.
Marketing expenses totaled $386,383 for the 1998 period,
representing an increase of $14,273 or 3.8% from $372,110
for the prior period. The slight increase in marketing
expenses is due to expenses of the Company's sponsorship of
the Los Angeles Marathon. No research and development
costs were incurred in 1998 compared with $12,022 in 1997.
Interest expense relates to mortgage interest incurred in
connection with the Company's real estate and totaled
$37,470 for the 1998 period, representing a decrease of
$5,184 or 12.2% from $42,654 for the prior period. The
decrease is due to the reduction of principal amount of the
real estate mortgages. Net loss for the 1998 fiscal period
was $1,285,834 which represents an increase of $254,827 or
24.7% above the loss of $1,030,997 for the prior period.
Liquidity and Capital Resources
Since its inception, the Company has financed its operations
principally through the private placement of its common
stock. During 1999, the Company raised approximately
$1,450,000 net of offering costs from the private placement
of its common stock.
The Company continues to experience significant losses from
operations. During the last month of 1998 and continuing to
the first quarter of 1999, the Company has undertaken cost
reduction measures in an effort to reduce operating losses.
These measures include personnel reductions and the
elimination of certain promotional charges. Despite these
measures, the Company is uncertain as to when it will
achieve profitable operations, however, the Company does
believes that it will be able to meet its current
obligations for fiscal 2000. Until such time as it achieves
profitable operations, the Company intends to finance its
ongoing operations through the private placement of its
capital stock or through 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. In March 2000, the Company entered into two
agreements with an unaffiliated company to identify
potential sources of capital and to provide investor
relations services. The Company granted 3,200,000 stock
options to the third party at an option price of $0.20 per
share. The options are exercisable monthly on or before the
end of each calendar month from June to December 2000 in the
following respective monthly increments; 250,000, 250,000,
1,000,000, 250,000, 1,250,000 and 200,000. In the event an
increment is not exercised by any such respective date, the
remaining unexercised options expire automatically.
- 13 -
Property, plant and equipment, net of accumulated
depreciation totaled $2,027,440 on December 31, 1999.
Property, plant and equipment, net of accumulated
depreciation, totaled $1,647,871 on December 31, 1998. The
increase, net of depreciation, represents mainly equipment
purchased by the Company and shipped to Malaysia in
anticipation of a joint venture arrangement in that country.
In connection with its real estate properties, as of
December 31, 1999, the Company has balloon mortgage payments
of; $295,244 due May 1, 2001, $64,386 due July 29, 2001, and
$63,064 due March 27, 2002 (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.
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.
- 14 -
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
inception, the Company has experienced significant operating
losses. Loss from operations for fiscal years 1998 and 1999
exceeded $1,000,000 and $600,000, respectively. 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 channels in various geographical markets
through distributors and food brokers, and having funds
available for product marketing and slotting fees. As of
December 31, 1999, although the Company has distribution
agreements in place for various markets, to date it has
affected limited sales through these channels. The Company
will be required to raise additional funds in the near
future to fund its operating deficits, including the
expansion of its marketing efforts. Although the Company
recently has entered into a product marketing agreement and
joint venture with two Malaysian companies, the Company
cannot predict the amount of sales to result from these
agreements. Consequently, no assurances can be given that
the Company will be able to successfully develop the
necessary markets 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. As of December 31, 1999,
the Company has limited distribution channels in various
markets. Although the Company continues to seek distributors
to advance sales, to date it has been unsuccessful in
establishing any meaningful distributor arrangements. In the
event the Company is unable to establish any meaningful
distribution channels, sales of its water product will
continue to languish.
- 15 -
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.
Director/
Officer
Name Age Since Position
Ngai Sou Chang 61 1999 Chairman
Robert Wang 51 1999 President and Director
Dennis Robinson 58 1999 Secretary, Treasurer and
Director
Jeffrey Lightfoot 41 1999 Director
Wai Meng Yeap 27 1999 Director
______________________________________________________________
Ngai Sou Chang - Ms Chang has been Chairman of the Company
since August 1999. From 1989 to the present, Ms. Chang has
been an owner and managing director of a property
development company located in Sydney, Australia and a real
estate investment company located in Kuala Lumpur, Malaysia.
Robert Wang - Mr. Wang has been President and Director of
the Company since August 1999. From 1992 to the present, Mr.
Wang has been president and director of Multiplex
Technologies Inc., a Canadian public company involved in
real estate development.
Dennis Robinson - Mr. Robinson has been a Director of the
Company since May 1999, and Secretary and Treasurer of the
Company since August 1999. From 1991 to the present, Mr.
Robinson has maintained a public accounting practice in
Vancouver, British Columbia.
- 16 -
Jeffrey Lightfoot - Mr. Lightfoot has been a Director of the
Company since May 1999. Mr. Lightfoot is a licensed attorney
in Canada, and since 1994, has been an associate or partner
in the law firm of Maitland and Company, Vancouver, British
Columbia. Mr. Lightfoot is a director of a company publicly
traded on the Vancouver Stock Exchange.
Wai Meng Yeap - Mr. Yeap has been a director of the Company
since August 1999. From 1996 to present, Mr. Yeap has been
finance manager of a real estate development company located
in Selangor, Malaysia. Mr. Yeap graduated from the
University of Kentucky in May 1996.
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, 1999, 1998 and 1997, 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(1) 1999 -0- -0- -0- -0- -0- -0- -0-
President and 1998 -0- -0- -0- -0- -0- -0- -0-
Chairman 1997 -0- -0- -0- -0- -0- -0- -0-
Ngai Sou Chang(2) 1999 -0- -0- -0- -0- -0- -0- -0-
Chairman
Robert Wang(2)(3) 1999 -0- -0- $16,000 -0- -0- -0- -0-
President and
Director
(1). Mr. Peter Khean resigned as an officer and director of the
Company on May 11, 1999.
(2). Both officers were appointed in 1999.
(3). Represents a monthly transportation allowance of $2,000 for
eight months during the past fiscal year.
Dennis Robinson, Jeffrey Lightfoot and Bryce Stewart, each
received 50,000 shares of common stock in 1999 as members of the
board of directors. In 1999, Dennis Robinson was paid the sum
of $1,500 in consideration for accounting services performed for
the Company. No other compensation was paid to directors of the
Company during 1999. Directors, however, are reimbursed for
expenses incurred by them in connection with the Company's
business. Mr. Bryce Stewart resigned in his capacity as director
of the Company on March 24, 2000.
- 17 -
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.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
--------------------------------------------------------------
The following table will identify, as of December 31, 1999, 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 Ngai Sou Chang(1) 7,000,000 29.49%
Stock 12/28 Claude Street
Chatswood, N.S.W. 2067
Australia
Common Robert Wang(2) -0- 0%
Stock 328-17 Fawcett Road
Coquitlam, B.C. V3K 6V2
Common Dennis Robinson(2) 50,000 0.2%
Stock 328-17 Fawcett Road
Coquitlam, B.C. V3K 6V2
Common Bryce Stewart(2)(3) 50,000 0.2%
Stock 328-17 Fawcett Road
Coquitlam, B.C. V3K 6V2
Common Jeffrey Lightfoot(2) 50,000 0.2%
Stock 328-17 Fawcett Road
Coquitlam, B.C. V3K 6V2
Common Wai Meng Yeap -0- 0%
Stock No. 26 Jalan Pasar
Bara 1 Off. Jalan Meru
41050 Klang, Selangor
Malaysia
Common Kam Chong Yip(3) 7,500,000 31.27%
Stock No. 26 Jalan Pasar
Bara 1 Off. Jalan Meru
41050 Klang, Selangor
Malaysia
Common Chin Yen Ong(4) 1,450,000 6.92%
Stock 106 Taman Sri Selayang
68100 Batu Caves, Selangor
Malaysia
- 18 -
Common Officers and 7,150,000 30.13%
Stock Directors, as
a group (6 persons)
_______________________________________________________________
(1). Includes 3,500,000 common stock warrants held by Ms.
Chang (see "Certain Relationships and Related Transactions").
(2). Represents the address of the Company.
(3). Mr. Bryce Stewart resigned as a director of the
Company effective March 24, 2000.
(4). Includes 3,750,000 common stock warrants held by Mr.
Yip (see "Certain Relationships and Related Transactions").
(5). Includes 725,000 common stock warrants held by Mr. Ong
(see "Certain Relationships and Related Transactions").
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.
On June 10, 1999, the Company completed a private placement
whereby it sold 3,500,000 shares of common stock and
3,500,000 common stock warrants to Ngai Sou Chang and
received the sum of $700,000. The stock purchase warrants
are exercisable at a price per share of $0.20 on or before
July 1, 2000, $0.25 on or before July 1, 2001, and $0.30 on
or before July 1, 2002. Ms. Chang is the Chairman of the
Company.
On August 3, 1999, the Company completed a private placement
whereby it sold 3,750,000 shares of common stock and
3,750,000 common stock warrants to Kam Chong Yip, and
received the sum of $750,000. The stock purchase warrants
are exercisable at a price per share of $0.20 on or before
August 12, 2000, $0.25 on or before August 12, 2001, and
$0.30 on or before August 12, 2002.
In connection with the two private placements, the Company
paid a finder's fee to an unaffiliated third party. The
Company issued 350,000 common shares and 350,000 common
stock warrants, and in a second increment issued 375,000
common shares and 375,000 common stock warrants to the third
party, representing 10% of the common shares and common
stock warrants subscribed in the two private placements.
Each stock warrant increment is exercisable on the same
dates and at the same prices as the principal transactions.
- 19 -
PART IV
Item 13. Exhibits and reports on Form 8-K.
(a)(1). Exhibits
EXHIBIT INDEX
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.*
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. *
10.(xiii) Joint Venture Agreement dated May 5, 1999 by and
between the Avani International Group, Inc. and Multimega
Technologies SDN. BHD.***
10.(xiv) Share Subscription Agreement dated and effective
May 12, 19999 by and between Avani International Group, Inc.
and Yip, Kam Chong.***
10.(xv) Warrant Agreement dated and effective May 12, 19999
by and between Avani International Group, Inc. and Yip, Kam
Chong.***
10.(xvi) Share Subscription Agreement dated May 12, 1999 by
and between Avani International Group, Inc. and Ngai Sou
Chang.***
10.(xvii) Warrant Agreement dated May 12, 1999 by and
between Avani International Group, Inc. and Ngai Sou
Chang.***
10.(xviii) Finder's Fee Agreement dated June 12, 1999 by
and between Avani International Group, Inc. and Chin Yen
Ong.***
10.(xix) Warrant Agreement dated June 12, 1999 by and
between Avani International Group, Inc. and Chin Yen Ong.***
10. (xx) Joint Venture Agreement dated February 18, 2000 by
and between the Company and Avani O2 Water Sdn. Bdh.(filed
herewith).
10. (xxi) Agreement dated January 4, 2000 by and between
Avani International Marketing Corp. and Avani Water
Corporation Sdn. Bdh. (filed herewith).
10. (xxii) Financial Consulting Agreement dated March 23,
2000 by and between the Company and SJH Corporate Services,
Inc. (filed herewith).
10. (xxiii) Investor Relations Service Agreement dated March
23, 2000 by and between the Company and SJH Corporate
Services, Inc. (filed herewith).
10. (xxiv) Agreement dated January 4, 2000 by and between
Avani Water Corporation and Prime Source International
Consultants (filed herewith).
21.(i) Subsidiaries of the Registrant.
27.1 Financial Data Schedule.
* Incorporated by reference to the Company's Form 10-SB
Registration Statement filed on November 4, 1997.
** Incorporated by reference to the Company's Form 10-KSB
for the period ended December 31, 1997.
*** Incorporated by reference to the Company's Form 10-QSB
for the period ended June 30, 1999.
3.(a)(2). Financial Statements
FINANCIAL STATEMENTS INDEX
Independent Auditors' Report...........................F-1
- -Consolidated Balance Sheets as of December 31, 1999
and December 31, 1998.................................F-2
- -Consolidated Statements of Operations for
Fiscal Years Ended December 31, 1999 and
December 31, 1998......................................F-3
- -Consolidated Statements of Stockholder's Equity
For Years Ended December 31, 1999
and December 31, 1998..................................F-4
- -Consolidated Statements of Cash Flows for
Fiscal Years Ended December 31, 1999 and
December 31, 1998......................................F-5
- -Notes to consolidated Financial Statements............F-6
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
AVANI INTERNATIONAL GROUP 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 STATEMENTS OF STOCKHOLDERS' EQUITY F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-6 - F-11
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, 1999 and 1998 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, 1999 and 1998 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
February 10, 2000
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
1999 1998
------------- ------------
ASSETS
CURRENT ASSETS
Cash $ 954,606 $ 103,428
Accounts receivable, net 62,419 79,398
Goods and services tax receivable 20,675 44,280
Inventory 65,078 33,122
Prepaid expenses 12,874 38,650
----------- ----------
TOTAL CURRENT ASSETS 1,115,652 298,878
----------- ----------
PROPERTY, PLANT AND EQUIPMENT - Net 2,027,440 1,647,871
----------- ----------
OTHER ASSETS
Security deposits 10,709 10,217
Trademarks and licenses 15,318 18,031
---------- ----------
26,027 28,248
---------- ----------
TOTAL ASSETS $3,169,119 $1,974,997
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Loans payable stockholders $ 109,521 $ -
Current portion of long-term debt 7,865 6,869
Accounts payable and accruals 144,632 77,446
Wages and benefits payable 23,548 14,453
Unearned income 15,542 16,127
Bottle and cooler deposits 107,915 85,901
----------- ----------
TOTAL CURRENT LIABILITIES 409,023 200,796
LONG-TERM DEBT - Net of current portion 424,074 408,361
----------- ----------
TOTAL LIABILITIES 833,097 609,157
----------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
COMMON STOCK, $.001 par value,
25,000,000 shares authorized; 20,233,257 and
11,608,257 shares issued and outstanding 20,233 11,608
COMMON STOCK DISCOUNT (55,000) (55,000)
WARRANTS OUTSTANDING 547,114 -
ADDITIONAL PAID-IN CAPITAL 5,789,693 4,765,432
ACCUMULATED DEFICIT (3,804,861) (3,140,336)
ACCUMULATED OTHER COMPREHENSIVE LOSS (161,157) (215,864)
----------- ------------
TOTAL STOCKHOLDERS' EQUITY 2,336,022 1,365,840
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,169,119 $ 1,974,997
============ ============
The accompanying notes are an integral part of these consolidated
financial statements.
F-2
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
----------- ------------
REVENUE
Bottled water and supply sales $ 587,128 $ 516,591
Cooler and equipment sales 5,959 10,965
Cooler rentals 20,879 40,453
----------- -----------
613,966 568,009
----------- -----------
COST OF GOODS SOLD
Cost of goods sold (excluding depreciation) 332,425 303,408
Depreciation 85,993 83,959
----------- ------------
418,418 387,367
----------- ------------
GROSS PROFIT 195,548 180,642
----------- ------------
OPERATING EXPENSES
General and administrative 771,201 1,077,380
Marketing 83,575 386,383
----------- -----------
854,776 1,463,763
----------- -----------
LOSS FROM OPERATIONS (659,228) (1,283,121)
----------- -----------
OTHER INCOME (EXPENSE)
Other 1,643 19,769
Interest income 21,304 14,988
Interest expense (28,244) (37,470)
------------ -----------
(5,297) (2,713)
------------ -----------
NET LOSS $ (664,525) $(1,285,834)
=============== ============
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.04) $ (0.12)
============== ============
WEIGHTED AVERAGE NUMBER OF SHARES 15,850,965 11,090,997
============== ============
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
PAGE 1 OF 2
Accumulated
Common Stock Common Additional
--------------------- Stock Warrants Paid-In
Shares Amount Discount Outstanding Capital
---------- ------- --------- ----------- -----------
BALANCE,
DECEMBER 31, 1997 10,113,600 $10,114 $ - $ - $3,465,257
RETIREMENT OF
COMMON STOCK (400,000) (400) - - (399,600)
ISSUANCE OF
COMMON STOCK 1,654,657 1,654 (55,000) - 1,618,000
OFFERING COSTS - - - - (157,985)
COMMON STOCK SUBSCRIBED 240,000 240 - - 239,760
NET LOSS - - - - -
FOREIGN CURRENCY
TRANSLATION ADJUSTMENTS - - - - -
COMPREHENSIVE LOSS - - - - -
---------- ------ --------- --------- ------------
BALANCE,
DECEMBER 31, 1998 11,608,257 11,608 (55,000) - 4,765,432
ISSUANCE OF COMMON STOCK 8,625,000 8,625 - - 1,716,375
ISSUANCE OF COMMON STOCK
WARRANTS IN CONJUNCTION
WITH COMMON STOCK - - - 497,376 (497,376)
COMMON STOCK WARRANTS
ISSUED FOR OFFERING COSTS - - - 49,738 (49,738)
OFFERING COSTS - - - - (145,000)
NET LOSS - - - - -
FOREIGN CURRENCY
TRANSLATION ADJUSTMENTS - - - - -
COMPREHENSIVE LOSS - - - - -
---------- ------ --------- --------- ------------
BALANCE,
DECEMBER 31,1999 20,233,257 $20,233 $(55,000) $547,114 $5,789,693
========== ======= ========= ========= ============
The accompanying notes are an integral part of these consolidated financial
statements.
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
CONTINUED
PAGE 2 OF 2
Accumulated
Common Other
Stock Accumulated Comprehensive Comprehensive
Subscribed Deficit Loss Loss
---------- ----------- ------------- --------------
BALANCE,
DECEMBER 31, 1997 $240,000 $(1,854,502) $(100,361)
RETIREMENT OF
COMMON STOCK - - - $ -
ISSUANCE OF
COMMON STOCK - - - -
OFFERING COSTS - - - -
COMMON STOCK SUBSCRIBED (240,000) - - -
NET LOSS - (1,285,834) - (1,285,834)
FOREIGN CURRENCY
TRANSLATION ADJUSTMENTS - - (115,503) (115,503)
COMPREHENSIVE LOSS - - - $(1,401,337)
--------- ------------ ---------- ============
BALANCE,
DECEMBER 31, 1998 - (3,140,336) (215,864)
ISSUANCE OF COMMON STOCK - - - $ -
ISSUANCE OF COMMON STOCK
WARRANTS IN CONJUNCTION
WITH COMMON STOCK - - - -
COMMON STOCK WARRANTS
ISSUED FOR OFFERING COSTS - - - -
OFFERING COSTS - - - -
NET LOSS - (664,525) - (664,525)
FOREIGN CURRENCY
TRANSLATION ADJUSTMENTS - - 54,707 57,707
----------
COMPREHENSIVE LOSS - - - $(609,818)
-------- ----------- --------- ==========
BALANCE,
DECEMBER 31,1999 $ - $(3,804,861) $(161,818)
======== ============ ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4 (con't)
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
------------- -------------
OPERATING ACTIVITIES
Net loss $ (664,525) $(1,285,834)
Adjustments to reconcile net loss to
net cash used in operating activities
Issuance of common stock for consulting fees 80,000 10,000
Issuance of common stock for directors fees
and officers' compensation 50,000 -
Depreciation and amortization 140,651 133,270
(Increase) decrease in assets
Accounts receivable 20,963 (143)
Inventory (29,222) 16,478
Prepaid expenses 26,329 21,043
Other assets 24,73 (10,872)
Increase in liabilities
Accounts payable 68,918 24,354
Unearned income and deposits 15,112 21,059
------------ -------------
Net cash used in operating activities (267,036) (1,070,645)
------------ -------------
INVESTING ACTIVITIES
Acquisition of property, plant and equipment (414,838) (76,307)
------------ -------------
FINANCING ACTIVITIES
Proceeds from stockholder loans 109,521 -
Payments of mortgages payable (8,952) (66,928)
Issuance of common shares, net of
offering costs 1,450,000 1,636,670
Purchase of common shares - (400,000)
------------ ------------
Net cash provided by financing activities 1,550,569 1,169,742
------------ -------------
EFFECT OF EXCHANGE RATES ON CASH (17,517) (39,854)
------------ ------------
NET INCREASE (DECREASE) IN CASH 851,178 (17,064)
CASH - BEGINNING OF YEAR 103,428 120,492
------------ ------------
CASH - END OF YEAR $ 954,606 $ 103,428
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for:
Interest $ 28,244 $ 37,470
============= ============
Income taxes $ - $ -
============= ============
The accompanying notes are an integral part of these consolidated
financial statements.
F 5
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
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 Oxygen Water Corporation (formerly Avani
Water Corporation), organized under the laws of British
Columbia (Canada); Avani Manufacturing, Inc. (China),
organized under the laws of Nevada, and Avani
International Marketing Corp., organized under the laws
of British Columbia (Canada).
Marina Bottling Company, Ltd.,("Marina") organized under
the laws of British Columbia (Canada), is 50% owned by
the Company and is accounted for utilizing the equity
method. There is no market for Marina's common stock.
Marina was inactive during 1999 and 1998 and due to
certain factors that existed in 1998, the Company
determined that the carrying value of its investment
exceeds the estimated recovery value. Accordingly, at
December 31, 1998 an allowance of $35,592 had been
established and a corresponding amount had been charged
to operations in 1998.
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 Australia, Malaysia, and Hong Kong.
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 subsidiary 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 (other
comprehensive loss).
Financial Instruments
- ---------------------
The carrying amount of cash, accounts receivable,
accounts payable, other liabilities and deposits
approximates fair value as of December 31, 1999 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 reviews the outstanding accounts receivable
periodically and establishes an allowance for doubtful
accounts for uncollectible amounts, which was $41,650
and $-0- in 1999 and 1998. Bad debts during 1999 and
1998 amounted to $41,650 and $108,013.
- F6-
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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
and water coolers for resale.
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 and leased water coolers 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 Statement
of Financial Accounting Standard (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
- --------------
The Company computes its earnings (loss) per share under
SFAS No. 128. 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
- -----------------------------------
The Company follows 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.
Comprehensive Income (Loss)
- ---------------------------
The Company adopted SFAS No. 130, "Reporting Comprehensive
Income", beginning January 1, 1998. Comprehensive income
is a more inclusive financial reporting methodology that
includes disclosure of certain financial information that
historically has not been recognized in the calculation of
net income.
The component of comprehensive income (loss) consists of
foreign currency translation adjustments of ($54,707) and
($115,503), with no applicable tax benefit for the years
ended December 31, 1999 and 1998.
Disclosures About Segments of an Enterprise and Related Information
- -------------------------------------------------------------------
The Company adopted SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information"
beginning January 1, 1999. Since the company only has one
reportable segment, the required disclosures relate to
product and services, geographic areas and major customers.
- F 7 -
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 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,
--------------------------------
1999 1998
------------ -------------
Land $ 151,289 $ 143,030
Building 869,421 821,954
Plant equipment 1,273,471 812,032
Office furniture and
equipment 112,091 101,195
Coolers 76,818 67,138
Vehicles 20,710 19,580
------------ -------------
2,503,800 1,964,929
Less: Accumulated
depreciation 476,360 317,058
------------ -------------
Property, Plant and
Equipment - Net $2,027,440 $1,647,871
============= =============
NOTE 4 - LONG TERM DEBT
Following is a summary of long-term debt:
December 31,
------------------------
1999 1998
--------- -----------
Mortgage payable due in monthly installments
of $2,478 including interest at 8.3%,
balloon payment of $295,244 due May 1, 2001,
secured by land and building with a net book
value of $514,337. $300,655 $288,958
Mortgage payable due in monthly installments
of $539 including interest at 8.3%, balloon
payment of $64,386 due July 29, 2001, secured by
land and building with a net book value of
$103,204. 65,547 62,980
Mortgage payable due in monthly installments
of $482 including interest at 7%, balloon
payment of $63,064 due March 27, 2002, secured by
land and building with a net book value of
$104,651. 65,737 63,292
---------- ----------
431,939 415,230
Less: Current portion 7,865 6,869
--------- ----------
$424,074 $408,361
========= ==========
- F 8 -
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 4 - LONG TERM DEBT (Continued)
The minimum annual repayment requirements on long-term debt as of
December 31, 1999 are as follows:
YEARS ENDING
DECEMBER 31, AMOUNT
--------------- --------------
2000 $ 7,865
2001 361,014
2002 63,060
-----------
$431,939
===========
NOTE 5 - INCOME TAXES
There is no income tax benefit for operating losses for years
ended December 31, 1999 and 1998 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 reconciliation of the statutory federal rate to the Company's
effective income tax rate is as follows:
1999 1998
------------ ------------
Statutory tax benefit provision $(461,400) $(424,200)
Nondeductible expense 800 2,500
Increase in valuation allowance 460,600 421,700
------------ ------------
$ - $ -
============ ============
Under SFAS No. 109, Accounting for Income Taxes, deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax baxses. Deferred tax assets and liabilities
are measured using enacted tax rates.
The components of the net deferred tax assets (liabilities) are
as follows:
1999 1998
-------------- --------------
Property, plant and equipment $ (98,000) $ (241,400)
Net operating loss carryforwards 1,514,000 1,196,800
Valuation allowance (1,416,000) (955,400)
-------------- --------------
$ - $ -
============== ==============
- F 9 -
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 5 - INCOME TAXES (Continued)
Avani International Group Inc., Avani Marketing Corp. and
Avani Manufacturing, Inc. (China) file a consolidated
corporate income tax return in the United States and
Avani Oxygen Water Corporation and Avani International
Marketing Corp. filed 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, 1999, the Company had net operating loss
carryforwards of approximately $1,135,000 for U.S. income
tax purposes, which if not used will expire during the
years 2010 through 2014. At December 31, 1999, the
Company had net operating loss carryforwards of
approximately $2,649,000 for Canadian income tax purposes,
which if not used will expire during the years 2002 through
2006.
NOTE 6 - COMMON STOCK
During 1999, the Company raised $1,450,000 from a private
placement through the issuance of 7,250,000 shares of common
stock and an associated 7,250,000 shares of warrants.
Offering costs related to the private placement amounted to
$145,000, which were paid through the issuance of an
additional 725,000 shares with warrants to purchase a like
amount of shares. The Company also issued 400,000 shares
of common stock valued at $80,000 for consulting services
and 250,000 shares of common stock valued at $50,000
for officers' and directors' compensation.
3,850,000 of the stock purchase warrants are exercisable at
a price per share of $.20 on or before July 1, 2000, $.25 on
or before July 1, 2001, and $.30 on or before July 1, 2002
in accordance with the Share Subscription Agreement and
Warrant Agreement. 4,125,000 of the stock purchase
warrants are exercisable at a price per share of $.20 on or
before August 12, 2000, $.25 on or before August 12, 2001
and $.30 on or before August 12, 2002.
The following table summarizes activity for common stock
warrants outstanding during 1999:
Weighted Average
Exercise Price Exercise Price
Shares Per Share Per Share
----------- --------------- -----------------
Warrants outstanding,
January 1, 1999 - $ - $ -
Warrants issued 7,975,000 $.20 - $.30 $.25
--------- ------------ ---------------
Warrants outstanding,
December 31, 1999 7,975,000 $.20 - $.30 $.25
========== ============ ===============
The Company has adopted FASB Statement 123, "Accounting for
Stock-Based Compensation," which requires compensation cost
associated with warrants issued to other than employees to
be valued based on the fair value of the warrants. Such fair
value was estimated using the Black-Scholes model with the
following assumptions: a risk free rate of return of 5.5%,
expected volatility of 70% and no dividend yield. The Black-
Scholes model valued the warrants issued during 1999 at
$547,114.
- F 10 -
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1998
NOTE 6 - COMMON STOCK (Continued)
During 1998, the Company raised $1,554,654 from a private
placement through the issuance of 1,554,657 shares of common
stock. Offering costs related to the private placement
amounted to $157,985. The Company also issued 100,000
shares of restricted common stock valued at $65,000 for
professional services valued at $10,000. The Company
redeemed and retired 400,000 shares of common stock for
$400,000.
NOTE 7 - RELATED PARTY TRANSACTIONS
During 1999, the Company received various loans from
stockholders. One loan in the amount of $68,875, bearing
interest at 8%, was due on December 31, 1999 and remains
unpaid. Another in the amount of $29,789 with no specific
terms of repayment was partially repaid in the amount of
$28,925 in January 2000.
NOTE 8 - LEASES
For the years ended December 31, 1999 and 1998 total rental
expenses under leases amounted to $44,906 and $46,147.
At December 31, 1999, the Company was obligated under
various noncancelable operating lease arrangements for
vehicles as follows:
YEARS ENDING LEASE
DECEMBER 31, OBLIGATIONS
------------- --------------
2000 $30,598
2001 26,228
2002 7,450
-------------
$64,276
=======
Subsequent to December 31, 1999, the Company entered into two
leases, which will require lease payments of $10,702 in the
year 2000 only.
NOTE 9 - GEOGRAPHIC AREAS, MAJOR CUSTOMERS AND SUPPLIERS
The Company had sales of $18,062 and $183,788 to Taiwan
during 1999 and 1998, $100,326 to Japan, $56,020 to Malaysia
and $49,397 to Australia during 1999 with the remaining
sales being predominantly generated in Canada.
All of the Company's long-lived assets are located in Canada,
except for manufacturing equipment in the amount of $401,872
located in Malaysia.
During the year ended December 31, 1999, the Company purchased
approximately 27% of its materials from one supplier. At
December 31, 1999, $4,936 was due that supplier.
The Company sold a substantial portion of its product to one
customer in 1999 and a different customer in 1998. During the
year ended December 31, 1999 and 1998, sales to these
customers aggregated $49,397 and $121,499.
- F 11 -
AVANI INTERNATIONAL GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1998
NOTE 9 - GEOGRAPHIC AREAS, MAJOR CUSTOMERS AND SUPPLIERS (Continued)
-----------------------------------------------------------
During the year ended December 31, 1998, the Company
purchased approximately 34% of its materials from one
supplier. At December 31, 1998, there were no amounts
due to that supplier. The supplier filed for bankruptcy in
1998 and the Company has established relationships with other
suppliers.
NOTE 10 - MANAGEMENT'S PLANS
The Company has recurring losses, which for the year ended
December 31, 1999 amounted to $664,525, which was a
significant reduction from $1,285,834 for the year ended
December 31, 1998. While the Company is expected to be able
to meet its current obligations, its future is dependent on
the ability to obtain capital infusions and/or develop
profitable operations.
Management is in the process of instituting certain revenue
enhancing measures, including the establishment of other
manufacturing facilities in Malaysia, and continuing
expansion of its exports to other areas of the world,
including Australia, Japan, Malaysia, Hong Kong and other
Asian countries.
- F 12 -
(b). Reports on Form 8-K.
None
- 22 -
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/ Robert Wang March 29, 2000
- ------------------------ -----------------
Robert Wang Date
Principal Executive 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/ Robert Wang March 29, 2000
- ----------------------- ------------------
Robert Wang
Director
/s/ Dennis Robinson March 29, 2000
- ----------------------- -------------------
Dennis Robinson
Director
/s/ Jeffrey Lightfoot March 29, 2000
- ---------------------- -------------------
Jeffrey Lightfoot
Director
-23-
EXHIBIT (xx)
JOINT VENTURE AGREEMENT
THIS AGREEMENT is made and entered into this February 18, 2000.
BETWEEN: AVANI INTERNATIONAL GROUP INC., a company incorporated
under the laws of State of Nevada and having its
principal place of business at Suite 328, 17 Fawcett
Road, Coquitlam, British Columbia V3K 6V2 Canada.
(hereinafter called "AIG")
AND: AVANI O2 WATER SDN. BHD., a corporation organized
under the laws of Malaysia and having its business
office at No.2, Jalan 37, Taman Desa Jaya, Kepong
52100 Kuala Lumpur, Malaysia.
(hereinafter called "AOW")
WHEREAS:
a) AIG has certain exclusive technology with the value of
US$12.5 million and the proprietary technology is able
to dissolve large amounts of oxygen in purified water
for application in the bottled water industry;
b) AIG has agreed to grant to AOW the exclusive right and
license to produce and sell AIG's proprietary enriched
water products; all on the terms and conditions herein
set forth.
NOW THEREFORE in consideration of the mutual terms and
conditions contained herein, the parties do hereby agree as
follows:
1. DEFINITIONS
a) "Equipment" means the proprietary equipment referred to
in Exhibit "A" hereto, which Equipment incorporates the
Technology; as well as the filtering and bottling
equipment referred to in Exhibit "B" hereto; which
equipment is necessary to complete a full bottling line
to produce the Products;
b) "Names and Marks" means the names, insignias, labels,
slogans and other identification, trade marks, service
marks and trade names and/or applications that have been
used by AIG and that may be used from time to time by
AIG in connection with the Technology and the sale and
distribution of the Products, including the name "Avani";
- 24 -
c) "Products" means all oxygen enriched water products
developed by AIG to date, including all of its bottled
water products,and includes all enhancements, derivatives,
modifications and replacements thereof, and the
Proprietary Rights associated therewith;
d) "Proprietary Rights" means copyrights, rights in and to
trade secrets, patents, patent applications and patents
pending, trademarks and trade names, proprietary and
confidential information and data, and all equivalent
rights throughout the world; and
e) "Technology" means all information, data, processes,
know-how and concepts now owned or which may in the
future be developed and owned by AIG associated with
the development, use and manufacture of the Products and
the Proprietary Rights.
All references herein to dollar amounts are to United States
dollars, unless otherwise stated.
2. GRANT OF LICENSE
2.1 Subject to the terms and conditions set forth in this
Agreement, AIG hereby grants to AOW and AOW hereby
accepts from AIG the exclusive world wide rights and
licenses (the "Licences") to:
a) to have access to and to use for all purposes herein
set forth, AIG's documents, records, trade secrets,
engineering reports, formulae, studies, data and information
comprising or otherwise relating to the Technology,
Proprietary Rights and the Products;
b) to undertake manufacturing of the Products except in
Canada;
c) to undertake research, development and modification of
the Products;
d) to sell, market, promote and exploit the Technology and
Products;
e) to use the Proprietary Rights in connection with
carrying out the above;
f) to use the Names and Marks in connection with carrying
out the above;
g) to use and exploit the Technology and Products for all
uses, purposes and applications, whether known or unknown as
of the date of this Agreement; and
h) to grant or enter into sub-licenses or similar
agreements with third parties whereby such third parties may
undertake any of the above rights of AOW.
- 25 -
2.2 AOW has the exclusive world wide rights and licenses
except Canada; where AIG or its subsidiaries has the rights
to manufacture and market its products worldwide.
2.3 AIG shall refer all inquiries, pertaining to the
licenses to AOW.
2.4 In consideration of the grant of the Licences , AOW
hereby agrees to pay to AIG or its subsidiaries a 2% gross
revenue royalty, and licensing fee $500,000 per production
facility established in the manner as set forth in paragraph
5.1 and 5.2 respectively hereof.
2.5 AOW hereby agrees to pay 20% of AOW's net profit to AIG
or its subsidiaries in the manner as set forth in paragraph
6.1 hereof.
2.6 AIG & its subsidiaries have the right to appoint
representatives & distributors to market and promote the
products worldwide which are manufactured in Canada.
3. OBLIGATIONS OF AIG
3.1 AIG hereby represents, warrants and covenants in favour
of AOW that:
a) AIG is the sole owner of the Products, the Technology
and the Proprietary Rights;
b) The Technology is proprietary to AIG, and to the
knowledge of AIG, no other person has a similar technology;
c) AIG owns or where deemed appropriate has undertaken
steps to obtain patents or otherwise protect its interest in
the Products, Technology and Proprietary Rights;
d) AIG will continue to undertake research and development
to enhance and improve the Products, Technology and
Proprietary Rights;
e) AIG will advise and forthwith make available to AOW all
enhancements, modifications, derivatives, improvements and
replacements to the Products, Technology and Proprietary
Rights;
f) Subject to the non-disclosure provisions contained
herein, AIG will provide to AOW all information pertaining
to the Technology and the Proprietary Rights.
g) AIG shall assist AOW to set up manufacturing
facilities.
4. OBLIGATIONS OF AOW
4.1 AOW will source and secure factory space in
Malaysia, be it leased or purchased outright. If
purchased outright, AOW will pay for it. If
leased, it is the responsibility of AOW to
service the lease.
- 26 -
4.2 AOW will be responsible entirely for the marketing
costs, overheads, payroll, and all other operating
costs associated with the factory. AIG will not be
responsible for contributing any funds or Equipment.
AOW will be responsible for financing all loses
incurred and costs associated therewith. All of the
above capital and operating costs will be absorbed
by AOW until such time as the production line is
operating on a profitable basis.
4.3 AOW will designate December 31 as its fiscal year end
to assist AIG in its year end consolidation.
4.4 AOW will prepare and maintain adequate books,
records and accounts of its operations, which
shall be audited yearly in accordance with United
States Generally Accepted Accounting Standards
(U.S. GAAP) by an independent firm of auditors.
Such annual audited financial statements
converted to U.S. dollars, will be completed and
sent to AIG on or before the end of February of
each year.
4.5 AOW will provide AIG with quarterly financial
statements for quarters ending the last day of
March, June and September in a prompt manner.
4.6 AOW shall purchase the filteration, Avani Oxygen
Enriched machine, PET Line Equipment and other
related necessary machinery from AIG or its
subsidiaries and to install the equipment for the
Manufacturing Plant with a complete system of
30,000 GPD Purified Water Station with Bottling Plant.
4.7 AOW will conduct its business in compliance with all
applicable laws and regulations in the region and
country it is located, and it will obtain all
licences necessary to conduct its business.
4.8 AOW will not, at any time, reveal or otherwise
disclosed to any person, firm, corporation,
association or other entity any of the confidential
information or data which AOW may have acquired in
connection with receiving, operating, and inspecting
the Technology and/or Equipment. This covenant shall
survive the termination of this Agreement for any
reason other than as contemplated by paragraph 3.1 (f).
4.9 AOW will commence operation of the manufacturing
facility on or before December of year 2000.
4.10 AOW agrees to the appointment of two directorships by
AIG to the board of AOW.
5. ROYALTY AND FEES
- 27 -
5.1 The 2% gross revenue royalty will initially be
calculated annually, based on AOW's annual audited
financial statements. For purposes hereof, "gross
revenues" mean the aggregate cash or kind received by
AOW from the sale of its Product. Unless otherwise
challenged, the financial statements prepared by the
independent auditing firm will be considered definitive.
Initially the royalty will be payable within 60 days
of preparation of the annual audited financial
statements; however, once AOW has completed one
profitable year, the royalty will be calculated
quarterly on the last day of each of March, June and
September of each year, and payable within 60 days of
the end of each year. In each year, the determination
of annual gross revenues will be calculated by the
independent auditors, and any difference in payment of
the royalty will be either paid by AOW or offset
against the next annual payment made by AOW.
5.2 The licensing fee of $500,000 per production facility
is payable to AIG or its subsidiaries on or before 6
months from the date of each facility is commissioned
and begins productions.
6. PROFIT SHARING
6.1 In consideration of AIG granting the exclusive world
wide rights and license, AOW agrees to pay to AIG or
its subsidiaries an ongoing amount equal to 20% of the
net profits realized by AOW from time to time, payable
within 90 days of the end of each financial year. For
purposes hereof "net profits" will be net profits after
tax calculated in accordance with U. S. GAAP, as
determined by an independent firm of auditors
acceptable to both parties.
7. ADDITIONAL MANUFACTURING FACILITIES
7.1 The same terms and conditions of this Agreement are
applied to any additional manufacturing facilities.
8. TERM
8.1 The term of the Licences granted herein shall be for an
initial period of 30 years from the date of February 18,
2000, and shall automatically renew for another 30 years
provided that AOW is not otherwise in default hereunder.
9. DEFAULT
9.1 An event of default shall occur if:
- 28 -
a) AOW fails to pay AIG or its subsidiaries any amount
when due, and such failure continues for a period of
30 days following receipt of written notice of such
failure by AIG;
b) AOW files for relief or liquidation under the
bankruptcy, insolvency or similar laws of its
jurisdiction;
c) AOW consents to the appointment of a trustee,
custodian, receiver or an officer of similar powers,
d) AOW is subject to the execution of a judgment; and any
such event is not cured within 30 days following the
occurrence of such event;
e) AOW breaches any term, covenant or condition of this
Agreement and such breach is not cured within 30 days
following receipt of written notice of such breach by
AIG;
f) AOW fails to receive or maintain the necessary permits
or licences from any governmental authority within the
territory necessary for it to conduct its business
within such jurisdiction and such failure continues
for 30 consecutive days.
g) In the event of an occurrence of default, AIG, without
prejudicing its other rights and remedies, may declare
this Agreement terminated and of no force and effect;
9.2 Upon the termination of this Agreement for any reason
set forth in paragraph 9.1:
a) all rights of AOW under this Agreement shall cease
forthwith and AOW shall cease conducting its business
of manufacturing and sale of the Products and shall
cease using the Technology and Equipment.
b) AOW, within 30 days from the date of termination, will
provide AIG with a final accounting statement and shall
remit all royalties due and owing to AIG or its
subsidiaries. The accounting statement shall identify
the gross sales of the Product from the last statement
provided by AOW.
9.3 An event of default shall occur if AIG breaches any
term, covenant or condition of this Agreement and such
breach is not cured within 30 days following receipt of
written notice of such breach by AOW. In the event AIG
should default under this Agreement, AOW's obligations to
pay royalties and shares of profit will cease until the
default is remedied.
10. MODIFICATION AND ENHANCEMENTS
10.1 It is a fundamental term of this Agreement that AIG
will not create or design a product and compete,
directly or indirectly, with AOW. AOW will be
entitled to the rights and licences referred to
herein pertaining to all Products now or at any time
during the term of this Agreement available to AIG.
AIG agrees that all future enhancements, improvements,
derivatives, modifications and replacements of the
Products by AIG, whether based on existing Products,
or derived independently which may in any way compete
with an existing or future Product, shall be made
available to AOW under this Agreement.
- 29 -
10.2 AIG reserves the unfetted right to modify and improve
the Products and the Technology, and in the event the
Products or the Technology are replaced by a modified
or improved product or technology, this Agreement
shall be read to include the modified or improved
product or technology.
10.3 AOW may also undertake research and development toward
modifying and improving the Products and Technology,
and in the event the Products of Technology are
replaced by a modified or improved product or
technology, this Agreement shall be read to include
the modified or improved product or technology.
10.4 AOW may request that AIG undertake research and
development toward the modification, enhancement or
improvement of the Products or Technology in certain
manners or to obtain certain end results. AOW will pay
AIG's costs in undertaking the same on the basis of
previously agreed to budgets.
10.5 All derivations, revisions, enhancements, modifications
or improvements made to the Products and Technology, by
both AIG and Licensee, shall be and remain the property
of AIG, but shall form "Products" or "Technology"
hereunder and be subject to the terms of this Agreement.
11. NAMES AND MARKS
11.1 AOW may designate, develop, commission and use various
Names and Marks in selling and promoting the Products; and
AIG acknowledges that AOW shall retain ownership of all
Names and Marks used by it. Any goodwill associated with
the Names and Marks shall enure exclusively to the benefit
of AOW.
12. NON-DISCLOSURE OF INFORMATION
12.1 AOW hereby acknowledges that the information contained
herein and all other information, whether oral or written,
otherwise disclosed to AOW by AIG pursuant to this Agreement
has been disclosed to AOW in the strictest confidence and
accordingly, AOW hereby covenants and agrees that AOW will
not otherwise than in accordance with the terms of this
Agreement, either during the term of this Agreement, or at
any time thereafter anywhere in the world, make use of , for
its own use or otherwise, or disclose any information with
respect to the Products, the Proprietary Rights, or the
business or affairs of AIG that it may obtain from AIG
pursuant to this Agreement.
- 30 -
13. INDEMNIFICATION
13.1 AOW, its successors, transferees and assigns, jointly
and severally, do hereby forever indemnify, covenant to
defend and hold harmless AIG, their affiliates,
officers, directors, contractors, sub-contractors and
successors in interest from any and all claims, losses
(consequential or otherwise), demands, causes of
action, lawsuits, administrative actions, losses and
expenses, including reasonable attorneys' fees, of any
kind, character of nature, arising from or in any way
connected, directly or indirectly, with the business of
AOW, including operation of the Equipment, the use of
the Technology, or the sale of the Product.
14. INDEPENDENCE
14.1 Neither party shall have the authority to act on behalf
or bind the other party.
15. NOTICES
15.1 Any notice or other communication required or permitted
hereunder shall be made in writing, and shall be deemed
to have been given if placed in the mail, registered
and certified, postage prepaid, or if personally
delivered, to the addresses stated above.
16. LAW AND ARBITRATION
16.1 This Agreement shall be governed in accordance with the
laws of the Province of British Columbia and the laws of
Canada then in force and effect.
16.2 In the event of any dispute arising between the parties
concerning this Agreement or its enforceability, the same
shall be settled by a single, arbitrator pursuant to the
provisions of the Commercial Arbitration Act (British
Columbia), or any successor legislation then in force.
17. AGREEMENT, MODIFICATION, WAIVER AND HEADINGS
17.1 This Agreement constitutes the entire agreement between
the parties hereto pertaining to the subject matter herein
and supercedes all prior and contemporaneous agreements,
understandings, negotiations and discussions among the
parties, written or otherwise. No supplement, modification
or waive or termination of this Agreement shall be binding
unless executed in writing by the party to be bound thereby.
- 31 -
17.2 All exhibits, schedules and documents referred to in this
Agreement are incorporated herein for all purposes.
Moreover, the recitals set forth above are likewise
incorporated herein for all purposes.
17.3 The terms and provisions herein shall be binding on and
inure to the benefit of the parties hereto, and their
respective transferees, successors and assigns.
IN WITNESS WHEREOF the parties have caused this Agreement to
be effective all as of the date set forth above.
A Common Seal of AVANI INTERNATIONAL )
GROUP INC. is affixed in the presence of: )
)
)
___________________________________
Director
Director/Co. Secretary
A Common Seal of AVANI O2 WATER )
SDN. BHD. is affixed in the
presence of: )
)
)
_______________________________________
Director
Director/Co. Secretary
- 33 -
EXHIBIT "A"
AIG OXYGEN ENRICHMENT EQUIPMENT
AVANI ADVANCED OXYGEN ENRICHEMENT EQUIPMENT
Avani Oxygen Enrichment Equipment is to stimulate the
atmospheric conditions of rain water. Ozone and ozone
lattices allow the oxidation potential to be multiplied
tremendously. The equipment is composed of three processes
including electron bond angle shifter , oxygen infusion
process and the vortex cyclonic shifter. AVIG will
continuously work on R & D to improve the preceding
mentioned processes. Their functions and methods of
improvement are shown as follows:
1. ELECTRON BOND ANGLE SHIFTER
This device is an electro magnetic process which neutralizes
the water in nano seconds, thereby allowing ozone and ozone
lattices to be multiplied tremendously. This in turn, will
subsequently create tremendous infusion of oxygen molecules.
It is located in the first cabinet.
The functions will be improved by the following:
a. by varying the impact of long chain ozone and the
pressure;
b. by varying and alternating the degree of conductivity
of the electromagnetic device;
c. by varying the degree of electrical charge to the
device;
d. by changing the mathematical formula and by altering
the size and shape of the device;
e. by testing combinations of the above.
2. OXYGEN INFUSION PROCESS
The neutralized highly oxygen enriched water is sucked
through the oxygen infusion process. This device works
through a vaccum system at varying precise pressure and
force throughout the process which located in the first
cabinet. This process allows the oxygen molecules to be
compacted and ready to be introduced to the next Avani
process - the Vortex Cyclonic Shifter.
The process can be enhanced by
- 34 -
a. lengthening and expanding the surface area of contact
throughout the device;
b. altering the precise pressure and force of the device
through mathematical calculations;
c. altering the suction pressure of the water when going
through the device;
d. testing combination of the above.
3. THE VORTEX CYCLONIC SHIFTER
Oxygenated water is puched through this device at 80PSI or
more. It is through this device in the second cabinet that
intense cyclonic actions are created to enable the
systematic freeing of the oxygen molecules, and causing them
to bond with the water molecules at precise moments, to
achieve the final stablized oxygen enrichment of the water.
The improvement can be done by
a. varying the input pressure;
b. altering the intensity of the cyclonic actions;
c. altering the mathematical calculations of the cyclonic
pulses;
d. testing combination of the above.
The equipment consists of the following components and
accessories:
The First Cabinet
1 unit of Stainless Steel Cabinet 8' x 4' x 4'contains:
(1) Polarizing Array 8" x 24 1/2"
(2) Air Modules
(1) 50' 1/4" Tubing
(1) Pressure Regulator
(1) Flow Meter
(1) 30' x 2'' pvc Spiral Tubing
1 unit of Stainless Steel Cabinet 8' x 4' x 4'contains:
(1) Massic Injection (Kynar)
(2) 2" PVC Ball Valves
(2) Air Flow meter
(1) Water Flow Meter
- 35 -
The Second Cabinet
1 unit of Stainless Steel Control Platform 6' x 8' x 2'
contains:
(1) Long chain ozone machine consist of 4 glass tubes, 4
Electrodes, high voltage transformer (60,000 volts)
(6) Push/pull mushroom buttons
(6) Contactors
(6) Transformers
(6) Relays;
- 36 -
Equipment For Research and Development
The following is the equipment use to monitor and enhance
the functions.
- high purity air compressor;
- medical grade air dryer;
- sub micron filtration equipment for air compressor;
- medical grade oxygen connectrator;
- oxygen chiller equipment;
- ozone generation system;
- oxygen diagnostic equipment;
- computer control lathe;
- tungsten inert gas welder;
- high pressure hydraulic press;
- hydraulic water pressure testing equipment;
- high oxygen saturation digital meter;
- TDS meter;
- PH meter;
- high pressure metal forming machinery.
- 37 -
EXHIBIT "B"
LIST OF FILTERING AND BOTTLING EQUIPMENT
30,000 GPD Purified Water Station with Bottling Plant
TECHNICAL SPECIFICATIONS
- 38 -
Item 1 Accessories of Raw Water Storage Tank
Quantity: Four (4)
High Density Polyethylene
Material:
Accessories: (4) 16" manway
(4) Outlet nozzle 2" dia.
(4) Inlet nozzle 2" dia.
(4) Ozonated water return 11/2" dia.
(4) Low and high level switches
(4) Set ozone diffusers
Item 2 Twenty Micron Cartridge Filter Housing
Quantity: Two (2)
Material: -316SS const. housing
Cartridges: Qty: 8 nos. 21/2"x 10" long
Material: -polypropylene construction cartridge
Rating: -20 microns
Accessories: -(1) 11/2" inlet isolation valve
-(1) 11/2" outlet isolation valve
-(1) 1/4" vent valve
-(2) Inlet and outlet pressure gauges
Item 3 Ozonator Equipment, totally enclosed self contained ozone
generator and oxygen generator in a single epoxy coated
aluminum structure.
Quantity: One (1)
Model No.: G-21
Capacity: 0.84 Lbs./day
Dimensions: 45 cm height x 40 m. width x 22.5 cm depth
Weight: 22 Kgs.
Accessories: -(3) 1 1/2" isolation valves.
-(1) Ozone venturi type eductor
-(1) Lot PVC piping
-(1) Ten micron cartridge filter
- 39 -
Ozone Recirculation Pump
Quantity: One (1)
Type: Stainless steel, close coupled centrifugal pump
Model CDU series
No.:
Capacity: 20 gpm at 45 psi
Size: 1" x 1 1/4" x 6-3/16"
Motor: 2 HP, 415V, 3Ph, 50Hz motor
Accessories: (1) 1 1/2" suction valve
(1) 1" discharge valve
(1) Discharge pressure gauge 0-100 psi
(1) Discharge check valve
Item 4 Raw Water Pumps assembled and mounted on a skid:
Quantity : Two (2)
Type: Stainless steel, close coupled centrifugal pump
Model No.: CDU series
Capacity: 30 gpm at 45 psi
Size: 1" x 1 1/4" x 6-3/16"
Motor: 3 HP, 415V, 3Ph, 50Hz motor
Accessories: (2) 1 1/2" suction valve, PVC const.
(2) 1" discharge valve, PVC const.
(2) Discharge pressure gauge 0-100 psi, 1/4"
lower mounting
(2) Discharge check valves
Item 5 Duty-Standby Multimedia Filters
Quantity : Two (2)
Model: 31F1855MM
Vessels 18" x 85"
size:
Media: 5.5 ft3 of anthracite and silica sand
Power 220V, 1Ph, 50Hz
supply:
Pipe size: 2"
Dimensions: 18" x 18" x 75" (LxWxH)
Weight: 577 Lbs.
- 40 -
Accessories: (1) time controller valve
(1) filter lateral
Item 6 Duty-Standby Activated Carbon Media Filters
Quantity : Two (2)
Model: 31F24100AC
Vessels 24" x 72"
size:
Media: 10 ft3 of activated carbon media 12 x 40 mesh
Power 220V, 1Ph, 50Hz
supply:
Pipe size: 2"
Dimensions: 24" x 24" x 81" (LxWxH)
Weight: 480 Lbs.
Accessories: (1) time controller valve
(1) filter lateral
Item 7 Duty-Standby by Softener Units
- 41 -
Quantity : Two (2)
Model: 28F18150
Exchange 150,000 grains at 15 Lbs./ Ft3
cap.:
Vessels
Sizes:
Softener 18" x 65"
tank:
Brine 24" dia. X 48" high, polyethylene const.
tank:
Resin 5 ft3
volume:
Salt 525 Lbs.
storage:
Power 220V, 1Ph, 50Hz
supply:
Pipe size: 1 1/2"
Accessories: (2) Softener control valve
(2) Softener laterals
(2) Brine valve assembly
Item 8 Ultraviolet Sterilizer Lights
Quantity : One (1)
Model: UVS-24A
Flow rate: 24-30 gpm
Inlet/outle 1" MNPT
t size
Lamps: 170 watts
Chamber 316SS
material
- 42 -
Control Aluminum
panel:
Dimensions: 37" high x 7" dia. X 9.5"
Power 220V, 1Ph, 50Hz
supply:
Shipping 23 lbs. each.
weight:
Item 9 Skid Mounted Reverse Osmosis Unit with second-pass RO,
30,000 GPD second-pass product capacity, Aquamatch model
TFZ-33-AG, piped, wired and tubed. Factory assembled on the
skid, consisting of the following components:
Technical Parameters:
Quantity: One (1)
Model: TFZ-33-AK with second pass RO design
Apprx. size: 240" x 52" x 55"
Shipping wt. 1,800 Lbs.
Product water 37,296 gpd and 30,000 gpd
output:
Feedwater type: Less than 1,500 ppm 1st pass and 30 ppm 2nd pass
Recovery: Up to 75% recovery 1st pass and 85% 2nd pass
Motor 415Volts, 3Ph, 50Hz
electrical:
Membrane mftr.: Osmonics Desal or equal
Min. inlet 30 psi
pressure:
Max. inlet 70 psi
pressure:
Max. temp.: 40oC
Max. conc. PH 8.0
Feedwater flow 34.5 gpm 1st pass/ 25.9 gpm 2nd pass
rate:
Reject flow 8.6 gpm 1st pass/ 3.9 gpm 2nd pass
rate:
Product flow 25.9 gpm 1st pass/ 22 gpm 2nd pass
rate:
Connections
Inlet: 11/2"
Concentrate: 1/2"
Product: 1"
- 43 -
Technical Specification of Each Component
Prefilter: Two (2) duty-standby 5 micron sediment
polypropylene construction (multiple cartridges), shell
constructed in 304 Stainless Steel, top loading housing.
Frame: This system is fully skid mounted on heavy duty
carbon steel frame, completely sand blasted, primed, and
enameled fuse coated for maximum corrosion resistance and
durability.
High Pressure Pump: High pressure multistage centrifugal
pump Two (2) in series, internal Stainless Steel moving
parts. Manufactured by Grundfos Pumps. Heavy duty and
corrosion resistant.
- 44 -
Reverse Osmosis Pressure Vessel: Heavy duty Reverse Osmosis
pressure vessel housings are constructed in fiberglass. End
cap retainers are constructed of Stainless Steel. The
exterior of the pressure vessel is enameled coated white
and wrapping with stainless steel materials. Easy membrane
removal, inspection, and installation.
TOTAL QUANTITY: 9
Reverse Osmosis Membrane Elements: The Reverse Osmosis
membranes used in this application will be manufactured by
Osmonics Desal. Membranes shall be thin film composite
(TFC) spiral wound type and shall be 4" x 40" long and
approved by FDA.
TOTAL QUANTITY: 45
Sample Permeate Ports: Sample ports will be installed in
each Reverse Osmosis pressure vessel to allow evaluation of
the product water quality.
Main Electrical Enclosure: Totally enclosed NEMA 4,
corrosion resistant control box.
Flow Meters: Panel mounted product water flow meter.
Rotary meter type.
Flow Meters: Panel mounted reject water flow meter. Rotary
meter type.
Pressure Gauges: Stainless Steel liquid filled pressure
gauges mounted on main control panel for maximum
visibility. A total of 8 pressure gauges will be provided:
- Inlet low pressure
- Delta low pressure between the two prefilter
- Post low pressure gauge
- Inlet high pressure to RO membranes
- Post high pressure after RO membrane
High Pressure Regulator Valve: Heavy duty Stainless Steel
pressure regulator, constructed in 316 Stainless Steel.
This regulator will allow the operator to adjust the back
pressure in the Reverse Osmosis membranes.
- 45 -
Product Water Conductivity Monitor: Analogue readout of the
total dissolved solids for the final product water quality
of the Reverse Osmosis system. The sensor used is a
compensated probe. A set point can be set so that the
Reverse Osmosis plant will shutdown at any desired quality
readout. The Reverse Osmosis unit has a 5 minute time
delay before shutdown. The monitor is completely panel
mounted in the front of the electrical control box.
Inlet Automatic Shut off Valve: This valve will close the
inlet feedwater flow rate to the Reverse Osmosis when
shutdown.
Programmable Logic Control (PLC): The equipment features
state of the art PLC system to accurately monitor and
control all the different functions of the Reverse Osmosis
plant.
Magnetic Starter: All of the motor in the Reverse Osmosis
plant are equipped with magnetic motor starters.
Breakers and Relays: All of the breakers and relays in the
Reverse Osmosis plant feature state of the art Allen
Bradley.
Visual Indicator Lights: The following indicator lights are
featured standard on our equipment:
- Tank filling (yellow)
- Tank full (green)
- Low water pressure (yellow)
- High water pressure (yellow)
- High pressure pump overload (yellow)
- Alarm on (red)
- System in manual operation (green)
- System in automation mode (green)
- High pressure pump on (green)
- Main control switch (MANUAL-OFF-AUTOMATIC)
- Emergency shutdown switch
Main Disconnect Switch: This feature will allow the
disconnection of the electricity to the complete Reverse
Osmosis plant.
Product Water Float Switch: This feature will allow the
Reverse Osmosis to stop and start automatically in
conjunction with the product water storage tanks.
Low Pressure Piping and Valves: All low pressure piping and
valves will be supplied in rigid PVC schedule 80 and
flexible reinforced plastic polyethylene tubing.
- 46 -
High Pressure Piping and Valves: All high pressure piping
and valves will be supplied in Stainless Steel.
Item 10 RO Membrane Cleaning System
Technical Parameters: This feature will allow the operator
to conduct a complete cleaning of the Reverse Osmosis
membranes when the product quality drops of 15% and the
output decreases of 15%. The following is a list of what
the integrated cleaning system includes:
Skid mounted
- Pre-plumbed for easy operation
- Electrical control functions on main control electrical
panel
- 5-micron polypropylene cartridges. Housing is
constructed of 304 Stainless Steel
- Polyethylene cleaning tank
- Stainless steel recirculating pump
- Built-in filling valve to fill tank with pure water
- Drain valve to be connected directly to drain system
- 47 -
Item 11 Ozonator Equipment: totally enclosed self contained ozone
generator and oxygen generator in a single epoxy coated
aluminum structure.
Model: G-21
Capacity: 0.84 Lbs./day
Dimensions: 45 cm height x 40 m. width x 22.5 cm depth
Weight: 22 Kgs.
Accessories: (3) 1 1/2" isolation valves
(1) Ozone venturi type eductor
(1) Lot PVC piping
Item 12 Accessories of R.O. Water Storage Tank
Quantity: One (1)
High Density Polyethylene
Material:
Accessories: (1) 16" manway
(1) Outlet nozzle 2" dia.
(1) Inlet nozzle 2" dia.
(1) Ozonated water return 2" dia.
(1) Low and high level switches
(1) Set ozone diffusers
Item 13 R.O. Raw Water Booster Pumps:
Quantity : One (1)
Type: Stainless steel, close coupled centrifugal pump
Model No.: CDU series
Capacity: 20 gpm at 50 psi
Size: 1" x 1 1/4" x 6-3/16"
Motor: 3 HP, 415V, 3Ph, 50Hz motor
Accessories: (1) 1 1/2" suction valve, PVC const.
(2) 1" discharge valve, PVC const.
(1) Discharge pressure gauge 0-100 psi, 1/4"
lower mounting
(2) Discharge check valves
- 48 -
Item 14 One Micron Cartridge Filter Housing
Quantity : One (1)
Material: -316SS const. housing
Model: SST-20
Rated 30gpm
capacity:
Cartridges: Qty: 1 nos. 2 1/2"x 10" long
Material: -polypropylene construction cartridge
Rating: -1 microns
Item 15 Ultraviolet Sterilizer Light
Quantity : One (1)
Model: S24Q/2
Flow rate: 24-30 gpm
Inlet/outle 1" MNPT
t size
Lamps: 170 watts
Chamber 316SS
material
Control Aluminum
panel:
Dimensions: 37" high x 7" dia. X 9.5"
Power 220V, 1Ph, 50Hz
supply:
Shipping 23 lbs. each.
weight:
Item 16 Oxygen Enrichment Process
See Exhibit A
PET BOTTLING PLANT:
The line is capable of washing, filling, capping, labeling and
coding bottles with a total water volume of 3600 liters/hour:
0.5 L bottles at a rate of 7200 bottles per hour
1.5 L bottles at a rate of 2880 bottles per hour
- 50 -
Item 17 Rinser: Bottle Rinser- (0.5-2 liter bottles). 304 stainless
steel construction, 12 pressure rinse sprayers, fully adjustable
to operate with the Fill Table.
Item 18 Filler: Gravity Filler Assembly Table- (0.5-2 liter bottles).
304 Stainless steel construction, with ozone and UV resistant
poly hoses, connections, microprocessor controlled 12 fill
heads, 220 V.
Item 19 Automatic Capper: Fully automatic capper, complete with
vibratory bowl, adjustable cap chute, three cubic foot
hopper, fully adjustable, variable speed controllers,
clutch (set of two), double gripper belts, stainless steel
gripper belt assembly, NEMA 4 controls and switches,
stainless steel frame, and wooden shipping crates 220 V.
Item 20 Automatic Labeler: Labeler- Automatic labeling system.
Includes stand spooler and conveyor adjustable connections.
Labels round bottles up to 2 liter. Quick change over from
one size to another, adjustable head, photoelectric
products sensor for accurate label placement, easy access
control panel 220V.
Item 21 Packaging System:
Quantity : One (1)
Type: Adjustable case sealer
Box Style regular slotted container
Bursting test: 125 to 275 lbs. per square inch, single or
double
Tape: 1.5" to 2" tape leg length and upper mast
stops relocated
Machine:
Power: 220V, 1ph, 50Hz
Weight: 321 lbs. (created)
Operating Upto 30 cases per minute
rate:
Box drive-belt 75 ft per minute
speed:
Operating Dry clean environment
condition:
Item 22 System Air Compressor: Air Compressor, 5 HP Ingersoll Rand
2340-L5 (220 volt, 1 ph, 50 HZ), 60 gallon tank, 15.2 CFM,
100 PSI. Air pressure regulator regulator/ moisture filter
Air hose, heavy-duty industrial hose w/ QC fitting 25'.
Item 23 Ozonation System to Ozonate "Rinse" Water: Frame Mount,
Ozone generator, oxygen generator, interlock box, 220V/ 50
Hz with stainless steel repressurization pump skid complete
with contractor, motor protector, low tank safety control
circuit, SS pump, 220 VAC, 1 ph, 50 Hz.
- 50 -
SYSTEM ACCESSORIES OF PET LINE SYSTEM:
---------------------------------------
- 51 -
Coding System -Hot Stamp: Automatic jet ink coder system
onto the bottle for up to 100 labels/ minute, codes
vertically or horizontally, 37-1/8" high characters for
date code, mounts on Automatic Labeler 220V. Codes and
dates are placed on label itself.
Accumulator Turntable: 60" Dia Turntable to collect the
capped and labeled bottles. Adjustable Height. 304
stainless steel construction powered with a variable speed
drive.
High Efficiency Clean Room Air Cleaner: (Clean Room to be
built by customer) Non electronic extended surface
mechanical-type unit. Utilizes a unique filter media where
the level of airborne particles must be kept low, emits no
ozone, 3 speed blower will handle up to 15,000 ft3 of
space, 8 foot cord, 6.5 amps, 120 volts, 50 Hz., 1 phase.
Unscramble Turntable: 60" Dia Turntable with special half-
moon plate to arrange the empty bottles and feed them to
the conveyor. Adjustable Height. 304 Stainless steel
construction powered with a variable speed drive.
Converyor (s): A total of 85 feet Straight Conveyor length
and two 90o Turn Conveyors, to transfer the bottles across
the entire bottling process, starting with unscramble
turntable and ending with the accumulator turntable.
Conveyors are driven by built-in electric motors and pass
inside/ under all the bottling equipment. The body of the
conveyors will be constructed of 304 stainless steel. The
conveyor belt itself will be constructed of CETAL plastic
material. Unlike steel, the rotating CETAL conveyor plates
will not produce any noise. They are also more resistant
to bending and twisting and much less expensive.
Item 24 Motor Starter Main Control Panel: In NEMA 12 Enclosure,
motor starter panel shall consist of magnetic motor
starters, relays and accessories required to run each
motor.
Item 25 Main Instrumentation & Control Panel: with panel view man-
machine-interface and Programmable Logic Controller (PLC).
- 52 -
Item 26 Laboratory Equipment: to include the following:
-Dissolved oxygen meter, model 870
-PH/conductivity meter
-Auto-vac release unit (bacteria detect)
-Isotemp incubator
-Yeast mold test kit, Chloroform P/A test kit, Test tubes
EXHIBIT (xxi)
AGREEMENT
This Agreement is made on the 4th day of January, 2000.
BETWEEN: AVANI INTERNATIONAL MARKETING CORP., a British
Columbia, Canada company, having its Business
office at Suite 328-17 Fawcett Road, Coquitlam,
B.C., Canada V3K 6V2
(Hereinafter called "AIMC")
AND: AVANI WATER CORPORATION SDN BHD, a Malaysia
company, having its business office at Room 819
(8th Floor) Sun Complex, Jalan Bukit Bintang,
55100 Kuala Lumpur, Malaysia.
(Hereinafter called "AWC")
WHEREAS AWC will create a marketing network in the Territory
(see definition under SECTION 1)
WHEREAS AIMC has been appointed by Avani Water Corporation
of Canada (hereinafter called "Avani") to have the sole
right to set up a marketing arm to market the Avani Oxygen
Enriched Water ("the Said Product") (see definition under
SECTION 1), and it desires to further expand its sales to
potential distributors and marketers in the Territory.
- 53 -
WHEREAS AIMC desires to appoint AWC to market Avani Products
on a non exclusive basis to wholesale outlets and to seek
distributors and marketers for Avani and its associated
company in the Territory.
AND WHEREAS AWC desires to market Avani Products, utilizing
its marketing expertise to wholesale outlets and to seek
distributors and marketers in the Territory, and the parties
have made an agreement which they now record in this
Agreement.
NOW THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as
follows:
SECTION 1 - DEFINITIONS
1.00 Territory shall mean worldwide.
1.01 Products shall mean the 500ml and 1.5 litre bottled
oxygen enriched water produced by Avani from the
existing manufacturing facilities only at Suite 328-17
Fawcett Road, Coquitlam, B.C., Canada V3K 6V2
SECTION 2 - SCOPE OF THE AGREEMENT
2.00 This Agreement covers within its scope all phases of
marketing Avani Products by AWC in the Territory.
2.01 The essence of this Agreement is the establishment of
marketing networks of the Products by AWC and the
dedication of AWC to create a market for the Products
to wholesale outlet, distributors and marketers in the
Territory.
- 54 -
SECTION 3 - THE APPOINTMENT
3.0 AIMC hereby appoints AWC and AWC agrees to be appointed
on a non exclusive basis, to introduce the Products to
wholesale outlets distributors and marketers in the
Territory.
3.01 As part of the appointment, AIMC grants AWC the right to,
a) use and demonstrate the Products from the existing
manufacturing facilities.
b) assist AIMC to recruit international marketing
personnel and office staffs.
c) advertise and market the Products in the Territory
at the expense of AIMC.
d) assist AIMC to set up a marketing office space in
Kuala Lumpur, Malaysia.
e) assist AIMC to purchase office equipment such as
computers, furniture, telephone system, office
renovation, office stationary and etc.
f) authorize AWC to sign an agreement with
distributors or marketers on behalf of AIMC.
3.02 AIMC hereby appoints AWC to look after the office day
to day operation and management.
3.03 Except for the rights granted pursuant to Section
3.01,there are no other rights granted to AWC.
3.04 AIMC shall reimburse all expenses & commissions (if
any) to AWC on a monthly basis.
SECTION 4 - OBLIGATIONS OF AIMC
4.00 AIMC will provide AWC supply of all promotional
materials.
4.01 AIMC will advance the loan to AWC when required,
pending to the agreement by both parties.
4.02 AIMC will reimburse all expenses incurred by the office
in Kuala Lumpur, Malaysia.
4.03 AIMC will give incentive bonus to AWC, subject to the
approval by the Board of Directors of AIMC.
SECTION 5 - OBLIGATION OF AWC
- 55 -
5.00 AWC will do everything which is possible by all
practical means to create, extend and develop the
market for the Products in the Territory, through
consistent and continuous marketing efforts.
5.01 AWC will not market or promote any other brand of
bottled water,other than the Avani Products.
5.02 AWC will seek suitable distributors and marketers for
AIMC and the terms & conditions shall be determined
between AIMC and the distributors and marketers in the
Territory themselves.
SECTION 6 - INDEPENDENT CONTRACTOR
6.00 AWC shall carry out its obligations under this
Agreement as an independent contractor and not as an
agent of AIMC. Each party shall have no power or
authority to bind the other Party or to assume or
create any obligation or responsibility, express or
implied, on the other Party's behalf, or in its name,
nor shall such represent to anyone that it has such
power or authority.
SECTION 7 - INDEMNIFICATION
7.00 AWC shall indemnify and hold harmless AIMC and Avani
against any and all law suits, proceedings and claims
brought against AIMC, and all liability, costs,
damages, and expenses incurred by AIMC, based upon the
wrongful acts of AWC under this Agreement.
SECTION 8 - FORCE MAJEURE
8.00 The parties agree to use their best efforts to carry
out their part of this Agreement, but in the event of
strikes, fires, delays of carriers, acts of God,
government actions, state of war, neither party
guarantees performance nor shall incur liability to the
other due to the resulting inability to perform.
SECTION 9 - NOTICE
9.00 Any notice, consent, request demand or communication
required or permitted to be given or delivered under
this Agreement shall be given in writing and delivered
by person, by registered mail, addressed to the party
as its address first set out above.
- 56 -
Each notice shall be deemed to have been received upon
delivery to the addressee, provided that if not
delivered in person, such notice shall be deemed to
have been received upon expiry of 12 days from the date
of mailing. Said address may be changed from time to
time by written notice to the party.
SECTION 10- CONFIDENTIALITY
10.00 Both parties shall keep in strict confidence from
all third parties, excluding their respective
affiliates, all matters concerning the business
affairs and transactions undertaken pursuant to this
Agreement, except as necessary to carry out the
intent of this Agreement, and the Disclosure
requirements of AIMC's publicly traded parent
company.
SECTION 11 - TERMINATION
11.10 AIMC and AWC have the right to terminate this
Agreement by giving 30 days written notice to either
party.
SECTION 12 - EFFECTIVE DATE AND TERM
12.00 The effective date of this Agreements is January 4, 2000.
12.01 This Agreement shall be in effect on a monthly basis.
SECTION 13 - MISCELLANEOUS
13.00 This Agreement contains the entire agreement and
understanding of the parties with respect to the
subject matter hereof and supersedes any and
all prior proposals, negotiations, Agreements,
understandings, representations and warranties of any
form or nature whatsoever, whether oral or written,
and whether express or implied, which may have been
entered into between the parties relating to its
subject matter.
This Agreement supersedes all other agreements made
between the parties for sales within the Territory,
either verbal or written.
13.01 This Agreement is not assignable by either party
without the express written consent of the non-
assigning party and this Agreement is not binding
upon, nor shall it ensure to the benefit of the
sucessors, assigns, or administrators of either party
except for the payment of invoices pursuant to this
Agreement.
- 57 -
13.02 This Agreement shall be deemed to have been entered
into in the Province of British Columbia, Canada,
on the effective date hereof. All questions
concerning the validity, interpretation or performance
of any of its terms or provisions, or of rights or
obligations of the parties hereto shall be determined
in accordance with the laws of British Columbia.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
Signed, Sealed and Delivered by Signed,
Sealed and Delivered by
AVANI INTERNATIONAL MARKETING CORP. AVANI WATER CORPORATION SDN BHD
Per: _________________________ Per:__________________________
Authorized Signatory
EXHIBIT (xxii)
FINANCIAL CONSULTING AGREEMENT
This Agreement is made as of the 23rd day of March 2000.
BETWEEN:
AVANI INTERNATIONAL GROUP INC., having its business
office at Suite 328-17 Fawcett Road, Coquitlam, B.C.
Canada V3K 6V2
(hereafter referred to as the "Company" or "Avani")
AND:
SJH CORPORATE SERVICES INC., having an office at
Suite 112, 5800 Andrews Road, Richmond, B.C. V7E 6M2
(hereinafter referred to as "SJH").
- 58 -
WHEREAS: Avani, a reporting company in the United States
whose shares are listed on the NASD OTC Bulletin Board, is
engaged in the production and marketing of the exclusive
Avani oxygen enriched purified bottled water. Avani in its
efforts to expand further, is seeking further capital
injection, and it wishes to engage SJH to assist it in
sourcing the required funding for its anticipated expansion.
WHEREAS: SJH specializes in sourcing funding for
companies in their infancy stage, as well as
introducing potential distributors for their
products. SJH desires to be engaged by Avani to
source the required funding for Avani's further
expansion.
NOW THEREFORE this Agreement witnesses that in consideration
of the premises and of the covenants and agreements
contained, the parties have agreed as follows:
SECTION 1 - OBLIGATIONS OF AVANI
1.01. As consideration for the services rendered herein,
Avani hereby will grants to SJH a stock option ("Stock
Option") to acquire 3,200,000 shares of common stock of
Avani ("Option Shares"),subject to the terms and conditions
herein:
(i). The option price per share is $0.20.
(ii). The Option Shares, in the increments stated below,
must be exercised on or before each respective date.
250,000 on or before June 30, 2000.
250,000 on or before July 31, 2000.
1,000,000 on or before August 30, 2000.
250,000 on or before September 30, 2000.
1,250,000 on or before November 30, 2000.
200,000 on or before December 31, 2000.
In the event any increment of Option Shares is not exercised
on or before the respective date (as stated above), then in
such event, the Option for all of the remaining unexercised
Option Shares will automatically expire effective as of the
respective date. The Option may be exercised for an amount
less than the stated Option Share increments, subject
however, to the termination provisions of the preceding
sentence.
(iii). In order to exercise the Option for the Option Shares
in the increments stated above, SJH must deliver to an
attorney acceptable to Avani on or before the respective
date (provided in ii above) for any such increment, written
notice of its intention to exercise the Option accompanied
by certified cheque, bank draft or money order payable to
Avani for the full amount of the purchase price of such
Option Shares then being purchased, provided that, such
funds will be held in trust by the attorney and will be
released to Avani simultaneous with the receipt by SJH of
one or more stock certificates representing the number of
the Option Shares then exercised. Upon receipt of funds by
the such attorney, Avani will promptly (not to exceed seven
days from receipt of funds) instruct the transfer agent to
issue one or more stock certificates representing such
Option Shares then exercised, to SJH.
- 59 -
(iv). In the event of any subdivision, consolidation or
other changes in the share capital of Avani while any
portion of the Option is outstanding, the number of shares
under Option to SJH and the exercise price thereof shall be
deemed adjusted in accordance with such subdivision,
consolidation or other change in the share capital of Avani.
(v). In the event that Avani shall amalgamate, consolidate
with, or merge into another corporation, SJH will thereafter
receive, upon exercise of the Option, the securities or
property to which a holder of the number of shares then
deliverable upon the exercise of the Option would have been
entitled upon such amalgamation, consolidation or merger and
Avani will take steps in connection with such amalgamation,
consolidation or merger as may be necessary to ensure that
the provisions hereof shall thereafter be applicable, as
near as reasonably may be, in relation to any securities or
property thereafter deliverable upon the exercise of the
Option.
A sale of all or substantially all of the assets of Avani
for a consideration (apart from the assumption of
obligations), a substantial portion of which consists of
securities, shall be deemed a consolidation, amalgamation or
merger for the purposes of this Agreement.
(vi). The Option and Option Shares are restricted securities
and the certificate representing the Option Shares will bear
a customary restrictive legend under the federal securities
laws of the United States.
(vii). The Option may not be assigned in whole or in part
without the express written consent of Avani. SJH hereby
represents that the Option Shares, when acquired, will be
acquired for investment purposes and not with a view towards
distribution. SJH hereby represents that it is sophisticated
investor, and has read and reviewed all of the information,
including financial, and reports filed by the Company with
the United States Securities and Exchange Commission.
1.02. Avani will use its best efforts to assist SJH in
obtaining the latest accurate corporate information,
financial data, marketing materials, and other pertinent
data that may be required by SJH from time to time. If
and when required, management of Avani will attend meetings
arranged by SJH.
1.03. Avani will detail out the areas where the funds will
be expended if and when sourced by SJH.
1.04. Avani will use its best efforts to aggressively market
its products throughout the world.
- 60 -
1.05. The granting and exercise of the option by optionee
are subject to the rules and regulations of the United
States Securities and Exchange Commission ("Commission"),
the National Association of Securities Dealers, Inc.
("NASD"), and the applicable regulatory authorities in
Canada, provided that, in the event that any such rules and
regulations are contravened, then this Agreement shall be
null and void and of no further force and effect.
1.06 In addition to the Option, Avani shall pay SJH a
finder's fee equal to 10% of the total funds received by
Avani that have been directly sourced by SJH.
SECTION 2 - OBLIGATIONS OF SJH
2.01. ABCSJH shall use its best efforts to raise on behalf
of Avani the necessary funds of US$1 million at a minimum
US$1.00 per share on or before December 31, 2000 and up to
an amount of US$10 million at a minimum US$2.00 per Avani
share on or before March 31, 2001, on a private placement
basis, and on terms acceptable to Avani. SJH further
covenants that it will not accept from or pay to any third
party remuneration of any kind regarding or relating in any
way to the securities of Avani, except as otherwise
disclosed in advance to Avani and accepted in writing by
Avani. Avani understands that any financing will be subject
to the due diligence review by such funding group.
2.02. All expenses incurred by SJH in sourcing the
necessary funding for Avani, will be borne by SJH.
2.03 The services performed by SJH will comply to the
rules and regulations of the Commission, The NASD and the
applicable regulatory authorities in Canada, provided that,
in the event that any such rules and regulations are
contravened, then this Agreement shall be null and void and
of no further force and effect.
2.04 SJH and third party providing such funding will be
required to guarantee and confirm at the time of funding
that such funds were not obtained and/or will not otherwise
be in violation of or contravene any law of the United
States, Canada or situs of the funding.
SECTION 3 - NOTICE. Any notice to be given under this
Agreement will be in writing and will be deemed to have been
given if personally delivered, delivered to, or sent by
prepaid registered mail or overnight delivery addressed to
the respective address of the parties appearing on the first
page of this Agreement (or to such other address as one
party provides to the other in a notice given according to
this paragraph).
SECTION 4 - CONFIDENTIALITY. The parties shall keep in
strict confidence from all third parties, excluding their
respective attorneys and affiliates, all matters concerning
the business affairs and transactions undertaken pursuant to
this Agreement, except as necessary to carry out the intent
of this Agreement.
- 61 -
SECTION 5 - INDEMNIFICATION. SJH, its successors and
assigns, jointly and severally, do hereby forever indemnify,
covenant to defend and hold harmless Avani, its affiliates,
officers, directors, contractors, sub-contractors and
successors in interest from any and all claims, losses
(consequential or otherwise), demands, causes of action,
lawsuits, administrative actions, losses and expenses,
including reasonable attorneys' fees, of any kind, character
of nature, arising from or in any way connected, directly or
indirectly, with the services rendered by SJH under this
Agreement or any breach of this Agreement by SJH.
SECTION 6 - INDEPENDENT CONTRACTOR. In performing the
services provided herein, SJH shall be deemed an
independent contractor to Avani and shall not be construed
to be an employee, officer or director of Avani. SJH shall
have no authority to bind Avani with respect to any matters
covered under this Agreement.
SECTION 7- GOVERNING LAWS/ARBITRATION. This Agreement will
be construed under and governed by the laws of the Province
of British Columbia. Any controversy or claim arising
out of or relating to this Agreement or any breach of this
Agreement will be finally settled by arbitration in
accordance with the provision of the Commercial
Arbitration Act (British Columbia).
SECTION 8 - NON EXCLUSIVITY. The parties agree that this
is a non exclusive agreement, and Avani may enter into
other similar agreements with other parties during the term
of this Agreement.
SECTION 9 - ENTIRE AGREEMENT
This Agreement represents the entire agreement between the
parties and supersedes any and all prior agreements and
understandings whether oral or written between the parties.
IN WITNESS WHEREOF the parties have entered into this
Agreement by their duly authorized representatives.
Signed, Sealed and Delivered by
Avani in the presence of: AVANI INTERNATIONAL GROUP INC.
___________________________ ______________________________
Witness Authorized Signatory
Signed, Sealed and Delivered by
ABCSJH in the presence of: ABCSJH CORPORATE SERVICES INC.
____________________________ __________________________________
Witness Authorized Signatory
- 62 -
EXHIBIT (xxiii)
INVESTOR RELATIONS SERVICE AGREEMENT
THIS AGREEMENT made as of the 23rd day of March 2000.
BETWEEN:
AVANI INTERNATIONAL GROUP INC., having an office
at Suite 328-17 Fawcett Road, Coquitlam, B.C. V3K 6V2
(the "Company" or "Avani").
AND:
SJH CORPORATE SERVICES, having an office at Suite
112, 5800 Andrews Road, Richmond, B.C. V7E 6M2
("SJH").
WHEREAS: The Company is a reporting company whose
shares are listed for trading on the NASD OTC Bulletin
Board and is engaged in the business of developing,
manufacturing, marketing and distributing oxygen
enriched, purified bottled water under the Avani brand
name.
WHEREAS: The Company wishes to retain the services of
SJH and to appoint SJH to provide certain investor
relations and financial services to the Company and SJH
has agreed to provide investor relations and financial
services of the Company and is qualified to render the
aforesaid services. SJH has indicated its willingness
to accept and undertake the duties and responsibilities
on the terms and conditions set out here.
WHEREAS: The parties have agreed that the terms
and conditions of such employment will be as
hereinafter set forth.
NOW THEREFORE, this agreement witnesses that in
consideration of the premises and of the covenants
and agreements hereinafter contained, the parties have
agreed as follows:
1. TERM
Subject to the provisions hereinafter contained,
the term of this agreement shall be for an initial
term of two months commencing from the date of
this agreement and concluding 60 days from the
date of this Agreement.
2. DUTIES AND RESPONSIBILITIES
SJH will:
a. have the obligation, duties, authorities,
responsibilities and power, at the
discretion of the Company, to carry out
investor relations activities (the
"Investor Relations Services") on behalf of
the Company including, such activities to
include but not limited to the following:
- 63 -
i. assisting management of the Company in
the preparation of promotional
brochures, booklets, corporate updates
and other material;
ii. representing the Company in connection
with its shareholder and investor
relations; initiating and maintaining a
regular program of contacting
stockbrokers, investment and advisors
with information about the Company;
b. prepare the terms of financing to be subject
to the approval of the Board of Directors
of the Company and accordance with the
policies of the applicable securities
regulatory bodies.
c. in conducting his duties under this
Agreement, report to the Company, and the
Company's Directors and will act consistently
with their directives, policies and as
required by the regulatory authorities;
d. perform the Investor Relations Services and
Financial Services (collectively the
"Services") and fulfill his obligations in a
sound and workmanlike manner;
e. perform the Services in compliance with the
rules and regulations of the United States
Securities and Exchange Commission, the
National Association of Securities Dealers,
Inc., and the applicable regulatory
authorities in Canada;
f. not engage in any other position or vocation
for gain or accept any office position,
whether or not for gain, or engage in any
business that might reasonably interfere with
the business and well being of the Company,
except with the prior consent of the Company.
Consultant covenants and agrees that it will not
recommend the purchase of securities of Avani to
any prospective investor. Rather, the
responsibilities of SJH shall be limited to the
presentation of corporate material to various
financial markets for their independent review
and analysis. SJH further covenants that it will
not accept from or pay to any third party
remuneration of any kind regarding or relating in
any way to the securities of Avani, except as
otherwise disclosed in advance to Avani and
accepted in writing by Avani.
The Company will:
a. provide all publicly released documentation in
support of an investor relations programme, as
requested, under the terms of this Agreement.
- 64 -
b. provide access to senior personnel or their
designates to attend broker conferences, dog
and pony shows, investment chat lines,
investment conferences, and industry trade
shows.
c. provide timely news releases in all material
changes to the Company.
d. maintain all regulatory filings in compliance
with SEC and NASD rules and regulations.
3. REMUNERATION
a. Monthly Services Fee:
SJH will faithfully, honestly and diligently
serve the Company in the capacity of the
investor relations in consideration of which the
Company will pay to SJH a retainer fee in the
amount of CAD$5,000 per month. SJH's
remuneration will be paid $5,000 on signing of
this contract and $5,000 within 30 days of the
first payment.
b. Expenses
SJH is responsible for all costs incurred in
rendering the Services. The Company shall not pay
any other consideration to SJH for rendering the
Services except for the fees provided in
paragraph a above, unless as requested by Avani.
4. NOTICE. Any notice to be given under this Agreement
will be in writing and will be deemed to have been
given if personally delivered, delivered to, or sent
by prepaid registered mail or overnight delivery
addressed to the respective address of the parties
appearing on the first page of this Agreement (or to
such other address as one party provides to the other
in a notice given according to this paragraph).
5. INDEPENDENT CONTRACTOR.
In performing the services provided herein, SJH shall
be deemed an independent contractor to Avani and
shall not be construed to be an employee, officer or
director of Avani. SJH shall have no authority to
bind Avani with respect to any matters covered under
this agreement.
6. CONFIDENTIAL INFORMATION. The Parties hereto
acknowledge and agree that SJH by virtue of
contract with the Company will have access to
confidential and secret information and therefore
SJH agrees that during the term of this Agreement
and on termination or expire of the same, for any
reason whatsoever, he will not divulge or utilize
to the detriment of the Company any so such
confidential or secret information so obtained
without prior written consent from the Company.
- 65 -
7. TERMINATION. Notwithstanding any other provision
herein, it is understood and agreed by and between
the parties hereto that the parties may terminate
this Agreement in its entirety by giving not less
than 30 days written notice of such intention to
terminate. The termination period may be reduced by
mutual consent in writing.
8. ARBITRATION. Any controversy or claim arising out of
or relating to this Agreement or any breach of this
Agreement will be finally settled by arbitration in
accordance with the provision of the Commercial
Arbitration Act (British Columbia).
9. GOVERNING LAWS. This Agreement will be construed
under and governed by the laws of British Columbia.
10. AMENDMENTS. This Agreement may not be amended to
otherwise modified except by an instrument in writing
signed by the parties hereto.
11. ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the parties and supersedes any and
all prior agreements and understandings whether
written or oral, between the parties.
12. HEADINGS. The titles or headings of the respective
paragraphs of this Agreement shall be regarded as
having been used for reference and convenience only.
13. INDEMNIFICATION. SJH, its successors, transferees and
assigns, jointly and severally, do hereby forever
indemnify, covenant to defend and hold harmless the
"Company", their affiliates, officers, directors,
contractors, sub-contractors and successors in interest
from any and all claims, losses (consequential or
otherwise), demands, causes of action, lawsuits,
administrative actions, losses and expenses, including
reasonable attorneys' fees, of any kind, character of
nature, arising from or in any way connected, directly
or indirectly, with the services rendered by SJH under
this Agreement or any breach of this Agreement by SJH.
14. FURTHER AGREEMENTS. The parties hereto hereby covenant
and agree that they will execute such further
agreements, conveyances and assurances as may be
requisite, or which counsel for the parties may deem
necessary to effectively carry out the intent of this
Agreement.
15. EXCLUSIVITY. The parties agree that SJH's engagement is
non-exclusive and the Company may also enter into
similar agreements with other parties during the term
of this agreement.
- 67 -
IN WITNESS WHEREOF the Company has hereunto caused its
corporate seal to be affixed in the presence of its duly
authorized officers on that behalf and SJH has hereunto set
its hand and seal as of the day and year first above
written.
Signed, Sealed and Delivered by
Avani in the presence of: AVANI INTERNATIONAL GROUP INC.
____________________________ __________________________________
Witness Authorized Signatory
Signed, Sealed and Delivered by
ABCSJH in the presence of: ABCSJH CORPORATE SERVICES
____________________________ __________________________________
Witness Authorized Signatory
EXHIBIT (xxiv)
THIS AGREEMENT made this 4th day of January, 2000, in the
City of Vancouver, in the Province of British Columbia by
and between:
Prime Source International Business Consultants
of the City of Vancouver,
in the Province of British Columbia
(hereinafter referred to as the "Consultant")
- -and-
AVANI WATER CORPORATION.
of the City of Coquitlam,
in the Province of British Columbia
(hereinafter referred to as the "Client")
The CONSULTANT agrees:
1. To advise and direct the Client to the appropriate
provincial, federal and/or international
contribution program(s), and to the appropriate
Government department where the contribution
program(s) will be received. No application for
contributions will be made without the express
consent of the Client.
- 67 -
2. To advise and direct the Client in the provision
of financing services and loan applications, the
sourcing of strategic partners and/or investments/
financing.
3. To assist the Client in completing the application
in conformity with the requirements of the said
Government programs.
4. The Client is under no obligation to make all or
any applications suggested by the Consultant.
5. That he does not warrant or represent that any
application will be successful. In the event, the
applications are not successful, Consultant will
reapply for government programs on behalf of
Client without any additional fees.
6. No to disclose (except in the proper performance
of his duties hereunder during or after the
termination of his engagement) to any person
whatsoever and information relating to the Client's
business or trade secrets of which it has hereafter
become possessed.
7. To not act as Lobbyist on the behalf of the
Client under the Lobbyist Registration Act of
the Government of Canada.
The CLIENT agrees:
8. To provide factual information that is required by
the Consultant for the preparation of applications.
9. To provide, if required, a standard letter of
consent that will authorize the Consultant to
discuss applications with the relevant government
agencies and institutions.
P.S.I. - AVANI AGREEMENT
Page 2
- ---------------------------------------------------------------------
10. To provide the consultant with all correspondence
to and from the government agencies, financial
institutions and copies of cheques received by fax
and regular mail within the same week of receipt
of Client. The Client will undertake to forward
copies of all correspondence to the Consultant.
- 68 -
AGREEMENT
11. This Agreement shall take effect in substitution
of all previous agreements and arrangements
whether written, oral or implied between the
Client and Consultant relating to the services of
the Consultant.
12. This Agreement is valid on an exclusive basis for
an initial term of two (2) years from the date of
the Agreement, to allow sufficient time to
implement a program for the Client. The Agreement
will automatically be renewed year to year until
canceled by either party, without any contract
signing fee.
13. This Agreement may be terminated by either party,
for any reason whatsoever, upon giving thirty (30)
days notice in writing to the other party.
14. Any applications worked on by the Consultant during
the terms of the Agreement but approved or obtained
after the expiration or cancellation of this
Agreement shall be subject to the fees of the
Consultant as outlined in this Agreement.
15. The Agreement shall be governed by the laws of
British Columbia and the parties agree that the
courts of British Columbia shall have exclusive
jurisdiction as to any matter in dispute hereunder.
COMPENSATION (as outlined in Fee Schedules attached)
16. The Client agrees to pay the appropriate consulting
fees as outlined and initialed in the Schedules
Attached.
17. Arbitration Rules
Subject to any rights or provisions in the Arbitration
Act to the contrary, the following rules apply to
arbitration proceedings:
a. They shall take place in Vancouver, British
Columbia before a single arbitrator acceptable
to both parties, and the expenses of the single
arbitrator shall be cost-shared by the Client
and Consultant;
- 69 -
b. If the parties cannot agree upon a single
party arbitrator within 30 days of a party
initialing arbitration proceedings, each party
shall forthwith at its own expense designate as
arbitrator and those designated arbitrators
shall collectively constitute and arbitration
tribunal; and
c. Each party agrees not to take any actions or
proceedings that dispute, challenge
P.S.I. - AVANI AGREEMENT
- -------------------------------------------------------------------------
Page 3
or appeal the award, authority, jurisdiction or
proceedings of the single arbitrator or the
arbitration tribunal.
This instrument constitutes the entire agreement between
the parties and nothing else is implied or promised. It is
binding in the respective heirs, executors, administrators,
successors and assigns of the parties hereto.
In witness whereof the parties hereto have executed this
Agreement as of the date first above written.
AVANI Water Corporation Prime Source International
Per: Dennis Robinson Per: Tom Sadler
Title: President Title: Partner
EXHIBIT 21 (i)
SUBSIDIARIES
Wholly Owned
Avani Oxygen Water Company
Avani Marketing Company
Avani Manufacturing (China), Inc.
Avani International Marketing Corp
Fifty Percent Owned
Marina Bottling Company Ltd.
- 70 -
EXHIBIT 27.1
FINANCIAL DATA SCHEDULE
ART.5 FDS
Multiplier 1,000
PERIOD TYPE 12 MONTHS
FISCAL YEAR END DEC-31-1999
PERIOD START JAN-1-1999
PERIOD END DEC-31-1999
CASH 955
SECURITIES 0
RECEIVABLES 104
ALLOWANCES 42
INVENTORY 65
CURRENT-ASSETS 1,116
PP&E 2,503
DEPRECIATION 476
TOTAL ASSETS 3,169
CURRENT-LIABILITIES 409
BONDS 0
COMMON 20
PREFERRED-MANDATORY 0
PREFERRED 0
OTHER-SE 2,316
TOTAL-LIABILITIES-AND-EQUITY 3,169
SALES 614
TOTAL-REVENUES 614
CGS 418
TOTAL-COST 855
OTHER-EXPENSES (23)
LOSS-PROVISION 0
INTEREST-EXPENSE 28
INCOME-PRETAX (664)
INCOME-TAX 0
INCOME-CONTINUING (664)
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME (664)
EPS-PRIMARY (.04)
EPS-DILUTED (.04)
- 71 -
