SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended May 31, 2000
Commission File No. 333-61801
JURAK CORPORATION WORLD WIDE, INC.
(Exact name of registrant as specified in its charter)
Minnesota 88-0407679
(State or other jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
1181 Grier Drive, Suite C
Las Vegas, Nevada 89119
(Address of principal executive office) (Zip Code)
Registrant's telephone number: (702) 914-9888
Securities registered pursuant to Section 12(b) of the Act:
3,000,000 Shares Of Common Stock
Securities registered pursuant to Section 12(g) of the Act:
None
Common Stock, (no par value)
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for 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___
The aggregate market value of the voting stock held by non-affiliates of the
Registrant on May 31, 2000, based on the average bid and asked prices of Common
Stock in the over-the-counter market on that date was $28,699,875.
15,527,750 shares of Registrant's Common Stock, no par value were outstanding on
May 31, 2000, prior to the effectiveness of the latest practicable date.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
None.
2
<PAGE>
CONTENTS
Page
----
PART I
Item 1. BUSINESS 4
Item 2. PROPERTY 7
Item 3. LEGAL PROCEEDINGS 7
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 7
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER
MATTERS 7
Item 6. SELECTED FINANCIAL DATA 8
Item 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 8
Item 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA 9
Item 9. DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE 10
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANT 10
Item 11. EXECUTIVE COMPENSATION 10
Item 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT 11
Item 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 11
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K 12
3
<PAGE>
PART I
Item 1. - BUSINESS
The Jurak Classic Whole Body Tonic was first developed in 1945 by Carl
Jurak, the father of the founder of the Company. The tonic is a blend of
medicinal herbs, and other ingredients.
There are 30 separate ingredients to the tonic, all of them readily
available from suppliers in Canada, the United States and France. The Jurak
Classic Whole Body Tonic is supplied in bottles of one fluid oz. The bottles
will come in boxes of 35 bottles.
The tonic is a herbal supplement. The ingredients of the tonic include
chamomile, dandelion, licorice, passion flower, peppermint, saw palmetto, and
celery seed
The Company has purchased its initial inventory of raw materials, and
has made arrangements with a supplier, Confab Laboratories, Inc., to blend the
raw materials and package them in the mono dose package. This supplier has the
capacity to manufacture 180 million mono dose packages a year. There are a
number of other suppliers, but the plan of the Company is to establish a long
term relationship with the supplier to establish cost stability and first class
service. The supplier began work to blend the product and bottle it during the
last week of October, 1998. The Company has begun negotiations for a long term
contract, which have not been finalized. In the interim the Company has paid the
manufacturer $.17 (Canadian) for each mono dose manufactured.
The present inventory of raw materials came from eight suppliers. For
the production of the pilot batch and samples there has been approximately 3% of
the raw materials purchased were used. Gross profit on sales to date has been
approximately 87%.
Management of the Company feels that with the 1,000,000 one ounce mono
dose packages on hand, it is sufficient for the present.
The regulatory authority over dietary supplements is divided between
the Food and Drug Administration (FDA) and the Federal Trade Commission (FTC).
The
4
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FDA has authority to review the ingredients and safety, define misbranding, and
punish adulteration. The FTC regulates claims made in advertising and
promotional materials. The Company is a multi level distributor and does not
advertise nor issue promotional materials, so its activities are not regulated
by the FTC, only by the FDA.
The Congress of the United States established standards governing
dietary supplements when it enacted the Dietary Supplement Health and Education
Act (DSHEA) in 1994. The focus of DSHEA has been to limit the authority of the
FDA over dietary supplements. Now the DSHEA regulations, effective March 23,
1999, require certain additional labeling, all of which the tonic product
contains. The display panel for the Company states: "Jurak Classic Whole Body
Tonic Dietary Supplement," "Corrective and Digestive Herbal and Mineral
Supplement." It adds "This statement has not been evaluated by the Food and Drug
Administration. This product is not intended to cure, mitigate, treat or prevent
any disease." The labeling also includes nutritional labeling, including the
Latin name and plant part.
The Company filed a DSHEA required notice with the FDA that it was
going to market the product, and the FDA has not objected. Management of the
Company feels that it is in full compliance with the regulations of the FDA and
the FTC.
The Company has worked with consultants to make sure that the labeling
of the product is correct and that the labeling is attractive. The cost of
compliance is the cost of the consultants. The Company has had the ingredients
approved in the United States, and the manufacturer is certified as a
manufacturer in Canada.
Management of the Company has examined the marketing practices of
others, and has resolved to market the products through network marketing in the
United States and throughout the rest of the world. Network marketing consists
of distributors several layers deep that distribute product for a specific
company. Profits come from commissions on direct sales and money earned on sales
made by the network of downline distributors. Sales will be made by the
distributors to individuals, there will be no sales to retailers.
The Company will compete in the dietary supplement business, but there
are few companies selling products similar to the product of the Company. One
slightly similar product is Matol, for which Mr. Jurak worked for several years.
Mr. Jurak has no present connection with Matol except as a shareholder. He is
the holder of 2,000,000 preferred shares, which is one half of the preferred
shares. His preferred shares issued, however, have no voting rights. Matol is
based upon, but is a variation of, one of the many formulas of Carl Jurak.
Matol's product is sold in the United States as KM, which is sold as a Potassium
Mineral Supplement. There is at least one other product that is very similar to
Matol, BOTANOL, which is sold as an improvement to KM. The formula used for the
Jurak Classic Whole Body Tonic is different from those two in that it contains a
greater quantity of herbs and minerals, and the herbs in them are not all tonic
herbs, as is the case with the product of the
5
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Company, are not bi-directional and would not act to balance the systems in the
body. The Company feels that any litigation from either of the other two
products is remote. The Company has no patents and has applied for trademarks
for its products and logos.
The Jurak Classic Whole Body Tonic is the only product of the Company
at this time. However Carl Jurak developed several formulas, and some of them
were manufactured and sold many years ago. There is a variety of organ specific
herbal tablets and liquids as well as salves, ointments and liniments. The cost
to develop them is minimal because the cost will be to prepare pilot batches,
test them, and determine whether the product's ingredients and proposed labeling
comply with FDA requirements.
The Company is marketing the Jurak Classic Whole Body Tonic through
network marketing, called the Jurak Career Plan. There are a number of steps in
the Jurak Career Plan, starting with the Independent Distributor. An Independent
Distributor registers with the Company and gets the right to sponsor other
persons to purchase the product at a 30% discount from the retail price. There
are points awarded for personal consumption or sale of products. One may become
a Qualified Distributor when he has 160 points monthly.
In addition to the money made by the distributor on sales the Company
intends to issue shares of its stock to its distributors as an added incentive,
with the agreement that the shares of stock are restricted from sale for three
years from the time of being earned. A distributor who purchases enough product
for 160 points, sponsors three persons who each purchase enough product for 160
points and who in turn sponsor three additional persons who each purchase enough
product for 160 points will receive 10 certificates valued at $5.00 each. The
aggregate value for certificates earned will be redeemable for shares at the
current market price at the time the shares were earned.
Network marketing is known for persons switching to another company
with a better idea. The strategy of including the Company's distributors as
shareholders is to keep the distributors close to the Company for a long time,
and build into the future.
Also with a consultant the Company has developed custom designed
software to interface with the sales and bonus system. The software will also
process currencies of other countries so that when there is expansion into other
countries the system will be able to handle the volume.
Through Eagle Payment Solutions the Company has obtained merchant
credit card processing capabilities with the Harris Bank.
The Company has seven employees, and expects to have 10 employees
within
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two months, none are represented by a labor organization. The 10 employees do
not include independent distributors.
Item 2. - PROPERTY
Facilities
The Company has leased 8,500 square feet of office space in Las Vegas,
Nevada for its offices and warehouse, at an monthly rental of $5,500, plus
operating expenses. The warehouse will be used to hold and distribute the
Company's products. A part of the warehouse may be used for a research and
development laboratory.
Item 3. - LEGAL PROCEEDINGS
None
Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
None.
PART II
Item 5. - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock has been traded since February 16, 2000 on
the OTC Bulletin Board, before that time there was no activity. As of May 31,
2000 the following brokerage firms were making a market in the Company's common
stock: Protective Group Securities, Jill Thompson Magid & Co., Sharpe Capital,
Inc., and Knight Securities, Inc.
The following table sets forth for the periods indicated the range of
high and low closing bid quotations per share as reported by the
over-the-counter market. These quotations represent inter-dealer prices, without
retail markups, markdowns or commissions and may not represent actual
transactions.
7
<PAGE>
Price per Share
---------------
High Low
---- ---
Fiscal year 2000
Third quarter (December 1, 1999 $5.00 $4.00
through February 29, 2000)
Fourth quarter (March 1, 2000 $5.00 $4.00
through May 31, 2000)
There have never been any dividends, cash or otherwise, paid on the
common shares of the Company.
Item 6. - SELECTED FINANCIAL DATA
Fiscal Years Ended May 31,
--------------------------
2000 1999 1998
---- ---- ----
Income Statement Data
---------------------
Net Sales $ 406,335 $ 64,937 $ --
Net Income (loss) $(575,854) $(751,658) $100,795
Per Share Data
--------------
Net Income (loss) $(.04) $(.05) $(.01)
As of May 31,
-------------
2000 1999
---- ----
Balance Sheet Data
------------------
Total Assets $ 328,746 $ 309,807
Total Liabilities $1,172,367 $ 577,574
Stockholders' Equity (Deficit) $ (843,621) $(267,767)
Item 7. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company had revenue from sales of its products at May 31, 1999 of
$64,937, and in the year ended May 31, 2000 sales were $406,335. During the same
period the Company expended general, administrative and operating expenses of
$811,424 for a
8
<PAGE>
net loss of $751,658 in 1999, compared to expenses of $946,351 and a net loss of
$575,854 in 2000. The general, administrative and pre-operating expenses
included consulting expenses for Food and Drug Administration advice, computer
consultants, hardware and software, raw materials, travel, office, telephone
expenses, legal fees, Rent and wages.
Except for historical information, the matters discussed in this
Prospectus are forward looking statements which involve risks and uncertainties,
including, but not limited to economic, competitive, and technological factors
affecting the Company's operations, markets, products, services, prices and
other factors, which may cause actual results to differ materially from the
results discussed in the forward looking statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations with equity capital, and raised
a total of $584,686. In addition a stockholder has advanced $1,079,674 to the
Company. The business the Company is engaged in is not capital intensive, and
the Company hopes to be able to finance its future operations from the cash flow
from sales of the products of the Company. The business of the Company is not
capital intensive because it does not need to purchase any machinery, the costs
of the raw material is negligible, and, because all sales will be by check or
credit card, there will not be significant accounts receivable.
The Company has no plans to raise additional capital through private
placements or otherwise in the next 12 months. The only need for capital would
be if the Company deemed it a good investment to do its own manufacturing. The
issuance of shares in this offering will be an expense to the Company, based on
the fair value of the stock or the value of services, whichever is more evident.
This could have an adverse effect on the balance sheet of the Company and make
it more difficult to issue other shares for cash to raise additional capital.
PRODUCT RESEARCH AND DEVELOPMENT
The Company does not anticipate conducting any product research and
development during the next 12 months that would require significant capital.
PURCHASES OR SALE OF PLANT AND EQUIPMENT
The Company anticipates that it will not need any purchases of plant of
equipment in the near future.
Item 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
9
<PAGE>
The financial statements are attached following Item 14.
Item 9. - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
PART III
Item 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers and directors of the Company, with a brief
description, are as follows:
Name Age Position
---- --- --------
Anthony Carl Jurak 62 Chairman, Secretary
Roger Theriault 54 President, Director
Anthony Carl Jurak, Mr. Jurak is the Chairman, Secretary, and a
Director of the Company. Mr. Jurak has been Co-Chairman and Secretary Treasurer
for more than the past 5 years of Matol Partners Corporation until February,
1997, and since has worked as a founder of the Company. While with Matol he was
in charge of finances for six years, and then committed his time to marketing
the products by traveling to sales and marketing meetings.
Roger Theriault, Mr. Theriault is the President and a Director of the
Company. Mr. Theriault was the Director of National Sales for Shaklee Canada
from 1979 to 1984. During that time he was mostly involved in marketing of the
Company's products, he was responsible for three regional sales managers and
more than 100,000 distributors. He was the founder of Nova Sante Pacific
International where he worked form 1989 to 1994. Since 1995 he has been a
consultant to Triple Gold (Ecuador), Radical Advance Technologies and CiDem
(France).
The directors of the Company are elected annually by the shareholders
for a term of one year or until their successors are elected and qualified. The
officers serve at the pleasure of the Board of Directors.
Item 11. - EXECUTIVE COMPENSATION.
10
<PAGE>
There are no officers or directors that received compensation in excess
of $60,000 or more during the last year. Management has taken no remuneration to
date, except as noted in Certain Transactions.
Item 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
There are presently 15,527,750 shares of the Company's common shares
outstanding. The following table sets forth the information as to the ownership
of each person who, as of this date, owns of record, or is known by the Company
to own beneficially, more than five per cent of the Company's common stock, and
the officers and directors of the Company.
Shares of Percentage of
Name Common Stock Ownership
--------------------------------------------------------------------------------
Anthony Carl Jurak (1) 6,150,000 40%
Roger Theriault 1,500,000 10%
Michael Fielding 1,500,000 10%
Roger Matthews 1,300,000 8%
John H. Picken 920,000 6%
All officers and directors 7,650,000 50%
as a group
(1) Mr. Jurak's shares are in the name of Jurak Holdings, Ltd.
Item 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Beginning in September, 1997, before the Company was incorporated, the
founder of the Company, Anthony Carl Jurak, began paying expenses for the start
of the Company. The expenses paid were done by the personal credit cards of Mr.
Jurak. Mr. Jurak was reimbursed for his expenses by the Company in the amount of
$112,376 in August, 1998. Of the $112,376 paid to Mr. Jurak, $18,405 were
personal expenses on his credit cards, and not expenses of the Company. As a
result the $18,405 is income to Mr. Jurak.
11
<PAGE>
PART IV
Item 14. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.
(a) Attached are the Financial Statements and Independent Auditor's
Report on Examination of Financial Statements for the years ended May
31, 2000 and May 31, 1999.
(b) Attached are the following Financial Statement Schedules and
Auditors Report on Schedules,
None
All schedules are omitted because they are not required or not
applicable or the information is shown in the financial statements or
notes thereto.
(c) No report was filed on Form 8-K.
(d) There are no exhibits.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of 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, who is duly authorized.
Dated August 30, 2000
JURAK CORPORATION WORLD WIDE, INC.
by /s/ Anthony Jurak
--------------------------------------
Anthony Jurak
13
<PAGE>
JURAK CORPORATION WORLD WIDE, INC.
FINANCIAL REPORT
MAY 31, 2000 AND 1999
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Jurak Corporation World Wide, Inc.
We have audited the accompanying balance sheets of Jurak Corporation
World Wide, Inc., a Minnesota corporation, as of May 31, 2000 and 1999, and the
related statements of operations, stockholders' equity (deficit) and cash flows
for each of the three years in the period ended May 31, 2000. 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 financial statements present fairly, in all
material respects, the financial position of Jurak Corporation World Wide, Inc.
as of May 31, 2000 and 1999, and the results of its operations and its cash
flows for each of the three years in the period ended May 31, 2000, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 6 to the
financial statements, the Company has suffered recurring losses from operations
and its total liabilities exceed its total assets. These factors raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 6. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
VIRCHOW, KRAUSE & COMPANY, LLP
Bloomington, Minnesota
August 1, 2000
<PAGE>
JURAK CORPORATION WORLD WIDE, INC.
BALANCE SHEETS
May 31, 2000 and 1999
<TABLE>
<CAPTION>
ASSETS 2000 1999
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 12,899 $ 6,836
Accounts receivable 488 11
Inventories 174,852 203,451
------------ ------------
188,239 210,298
RESTRICTED CASH 37,059 23,983
DEPOSITS 28,900 28,400
OFFICE FURNISHINGS AND EQUIPMENT, less
accumulated depreciation 2000 $35,431; 1999 $6,781 74,548 47,126
------------ ------------
$ 328,746 $ 309,807
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 29,159 $ 71,129
Accrued expenses 63,534 3,945
Payable to stockholder, officer 1,079,674 502,500
------------ ------------
1,172,367 577,574
COMMITMENTS
STOCKHOLDERS' EQUITY (DEFICIT):
Convertible preferred stock, par value $.001 per share,
50,000,000 shares authorized, none issued or outstanding -- --
Common stock, par value $.001 per share, 150,000,000 shares
authorized, 15,527,750 shares issued and outstanding 15,528 15,528
Additional paid-in capital 569,158 569,158
Accumulated deficit (1,428,307) (852,453)
------------ ------------
(843,621) (267,767)
------------ ------------
$ 328,746 $ 309,807
============ ============
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
JURAK CORPORATION WORLD WIDE, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period From
Incorporation
(November 3
1997)
Year Ended May 31 through
----------------------------- May 31,
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Sales $ 406,335 $ 64,937 $ --
Cost of sales 38,220 8,202 --
------------ ------------ ------------
368,115 56,735 --
Selling, general and administrative expenses (946,351) (811,424) (102,022)
Other income 2,382 3,031 1,227
------------ ------------ ------------
Net loss $ (575,854) $ (751,658) $ (100,795)
============ ============ ============
Loss per common share $ (.04) $ (.05) $ (.01)
============ ============ ============
Loss per common share assuming dilution $ (.04) $ (.05) $ (.01)
============ ============ ============
Weighted average outstanding shares 15,527,750 15,486,394 15,421,250
============ ============ ============
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
JURAK CORPORATION WORLD WIDE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock Additional
----------------------------- Paid-In Accumulated
Shares Amount Capital Deficit
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares issued for cash 15,421,250 $ 15,421 $ 303,015 $ --
Net loss -- -- -- (100,795)
------------ ------------ ------------ ------------
Balance, May 31, 1998 15,421,250 15,421 303,015 (100,795)
Shares issued for cash 126,500 127 316,123 --
Redemption (20,000) (20) (49,980) --
Net loss -- -- -- (751,658)
------------ ------------ ------------ ------------
Balance, May 31, 1999 15,527,750 15,528 569,158 (852,453)
Net loss -- -- -- (575,854)
------------ ------------ ------------ ------------
Balance, May 31, 2000 15,527,750 $ 15,528 $ 569,158 $ (1,428,307)
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
JURAK CORPORATION WORLD WIDE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period From
Incorporation
(November 3
1997)
Year Ended May 31 through
----------------------------- May 31,
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (575,854) $ (751,658) $ (100,795)
Depreciation 28,650 6,781 --
Increase in accounts receivable (477) (11) --
Increase in inventories 28,599 (138,004) (65,447)
Increase in other assets -- 3,000 (3,000)
Increase in accounts payable (41,970) 69,027 2,102
Increase in accrued expenses 59,589 3,945 --
Increase (decrease) in payable to stockholder, officer 577,174 390,124 112,376
------------ ------------ ------------
Net cash provided by (used in) operating activities 75,711 (416,796) (54,764)
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits (paid) applied (500) (15,860) (12,540)
Purchase of office equipment (56,072) (53,907) --
Restricted cash (13,076) (23,983) --
------------ ------------ ------------
Net cash used in investing activities (69,648) (93,750) (12,540)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock -- 316,250 318,436
Redemption of common stock -- (50,000) --
------------ ------------ ------------
Net cash provided by financing activities -- 266,250 318,436
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents 6,063 (244,296) 251,132
Cash and cash equivalents:
Beginning 6,836 251,132 --
------------ ------------ ------------
Ending $ 12,899 $ 6,836 $ 251,132
============ ============ ============
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
JURAK CORPORATION WORLD WIDE, INC.
NOTES TO FINANCIAL STATEMENTS
May 31, 2000 and 1999
Note 1. Nature of Business and Summary of Significant Accounting Policies:
NATURE OF BUSINESS:
The Company was incorporated on November 3, 1997 in the State of
Minnesota, is located in Las Vegas, Nevada, and markets its products
throughout the U.S. and Canada. The Company manufactures and markets
dietary and herbal supplement products.
FORMATION AND DEVELOPMENT OF THE COMPANY:
The Company was engaged in raising capital and other developmental
activities through May 31, 1999 and became an operating company
during the year ended May 31, 2000.
A summary of the Company's significant accounting policies follows:
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents.
INCOME TAXES:
Deferred taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax
liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax basis. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets
and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of the enactment.
INVENTORIES:
Inventories are valued at the lower of cost (first-in, first-out
method) or market and consist of the following:
May 31
------------------------------
2000 1999
------------ -----------
Raw materials $ 16,900 $ 41,644
Finished goods 157,952 161,807
------------ -----------
$ 174,852 $ 203,451
============ ===========
OFFICE FURNISHINGS AND EQUIPMENT:
Office furnishings and equipment are recorded at cost and
depreciated on a straight-line basis over three to seven years.
6
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JURAK CORPORATION WORLD WIDE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2000 and 1999
Note 1. Nature of Business and Summary of Significant Accounting Policies
(Continued):
ESTIMATES AND ASSUMPTIONS:
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and revenues and expenses
during the reporting period. Significant estimates and assumptions
include the valuation of stock issued and ability to generate future
positive cash flows. Actual results could differ from Company
estimates.
LOSS PER COMMON SHARE:
Loss per share is computed based on the weighted average number of
common shares outstanding. Potential issuances that would reduce
loss per common share are considered anti-dilutive and are excluded
from the computation.
Note 2. Stockholder Rights:
The convertible preferred stock is convertible into ten common
shares at a price of $.10 per share for a period of ten years and
has no voting rights unless converted into common shares.
The Board of Directors have the power and authority to fix by
resolution any designation, class, series, voting power, preference,
right, qualification, limitation, restriction, dividend, time and
place of redemption and conversion right with respect to any stock
of the Corporation.
Note 3. Income Taxes:
For income tax purposes, pre-opening costs were deferred and are
being amortized to expense in future tax returns. The provision
(benefit) for income taxes differs from the amount computed by
applying the U.S. federal income tax rate to loss before income
taxes as follows:
May 31
------------------------
2000 1999
----------- ----------
Expected tax (benefit) at statutory rate $ (200,000) $ (260,000)
Effect of graduated federal rates 12,500 12,500
Increase in valuation allowance 187,500 247,500
----------- ----------
$ -- $ --
=========== ==========
The following is a summary of deferred taxes:
May 31
------------------------
2000 1999
----------- ----------
Deferred tax assets:
Net operating and pre-opening losses $ 457,500 $ 270,000
Valuation allowance (457,500) (270,000)
----------- ----------
$ -- $ --
=========== ==========
Tax law provides for limitation on the use of future loss carryovers
should significant ownership changes occur.
7
<PAGE>
JURAK CORPORATION WORLD WIDE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2000 and 1999
Note 4. Related Party Transactions:
The principal stockholder has advanced to the Company or requested
reimbursement for $1,079,674 and $502,500 at May 31, 2000 and 1999,
respectively. Interest on the advances is at 8% and a total of
$57,150 and $0 was charged to operations for the years ended May 31,
2000 and 1999, respectively.
Note 5. Commitments:
The Company rents 8,462 square feet of office and warehouse space in
Las Vegas, Nevada under terms of an operating lease which calls for
monthly rentals of approximately $5,500 plus operating expenses
through September 2001. Rent expense plus operating expenses under
this agreement for the years ended May 31, 2000 and 1999 was $73,161
and $56,006, respectively.
Minimum lease payments at May 31, 2000 are as follows:
Year Ending May 31:
2001 $ 67,360
2002 22,680
------------
$ 90,040
============
The Company is offering 3,000,000 of its shares to its distributors
under a plan whereby the distributors earn a stock bonus based on
sales and "bonus points." A distributor who purchases enough product
for 160 points, sponsors three persons who each purchase enough
product for 160 points and who in turn sponsor three additional
persons who each purchase enough product for 160 points will receive
10 certificates valued at $5.00 each. The number of certificates
outstanding at May 31, 2000 was 3,152. The aggregate value for
certificates earned will be redeemable for shares at the current
market price at the time of redemption. The shares of stock are
restricted from sale for three years from the time of issuance.
The Company entered into an agreement with a bank whereby ten
percent of certain sales must be deposited into a restricted cash
account in exchange for credit card processing. As of January 2000,
the Company is no longer required to make additional deposits into
the account.
The Company has entered into an intellectual property license
agreement with two entities related to the principal stockholder.
The ten-year agreement calls for royalty payments to the entities
that total 8% of "net sales price" subject to certain limitations
and conditions as defined by the agreement. The amount expensed for
the years ended May 31, 2000 and 1999 was $26,500 and $3,000,
respectively.
Note 6. Company's Continued Existence:
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplate continuation of the Company as a going concern. However,
the Company has sustained substantial losses in its initial years
and its liabilities exceed its assets. The Company intends to obtain
additional financing from the stockholder, officer (see Note 4).
8
