UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
Amendment #1
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
The Voyager Group, Inc.
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(Name of Small Business Issuer in its charter)
Delaware 33-0649562
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
6354 Corte Del Abeto, Suite F, Carlsbad, California 92009
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (760)-603-0999
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $0.001 Par Value
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(Title of class)
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TABLE OF CONTENTS
Item Number and Caption Page
PART I
Item 1. Description of Business........................................... 3
Item 2. Management's Discussion and Analysis or Plan of Operations........19
Item 3. Description of Property...........................................23
Item 4. Security Ownership of Certain Beneficial Owners and Management....23
Item 5. Directors, Executive Officers, Promoters and Control Persons......25
Item 6. Executive Compensation............................................26
Item 7. Certain Relationships and Related Transactions....................27
Item 8. Description of Securities.........................................28
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity
and Related Stockholder Matters...................................29
Item 2. Legal Proceedings.................................................31
Item 3. Changes in and Disagreements With Accountants.....................31
Item 4. Recent Sales of Unregistered Securities...........................31
Item 5. Indemnification of Directors and Officers.........................31
PART F/S
Financial Statements.........................................................32
PART III
Item 1. Index to Exhibits.................................................33
Item 2. Description of Exhibits...........................................33
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As used in this report on Form 10-SB, unless the context otherwise
requires, the terms "we," "us," or "the Company" "Vygp" and "Voyager" refer to
Voyager Group, Inc., A Delaware corporation.
PART I
Item 1. Description of Business.
General
In early January of 1999, Voyager Internet Group.Com determined that
it would be advisable and in the best interest of Voyager Internet Group.Com and
its stock holders and Voyager Group Inc for the business to be divided into two
independent businesses. Whereas Voyager Internet Group.Com has transferred and
assigned or caused to be transferred and assigned to Voyager Group Inc.
substantially all of the assets and Voyager Group Inc. has agreed to assume or
cause to be assumed certain liabilities and obligations arising out of or
relating to the Voyager Group Inc. Voyager Group Inc. is an independent publicly
held company, in the direct marketing business.
Voyager Group, Inc. ("VYGP" or the "Company") develops and
manufactures high-quality nutritional, personal care and weight management
products. The Company distributes its products through a network marketing
system and refers to its sales force as "Associates."
Voyager is committed to state of the art technological support for
Voyager associates, continuous product innovation and sound scientific research
with a very strong e-commerce presence. The primary products consist of modular
designed nutritional systems, anti-ageing systems and weight management. Modular
designed nutritional products accounted for the majority of net sales in both
fiscal year 2000 and 1999. Weight management product systems center around low
glycemic shakes which has recipes for low glycemic meal entrees with
instructional, how to information, videos and other products developed to
provide a comprehensive approach to weight management, proper diet and exercise,
nutrition and healthy living. The Company believes bioavailability, safety and
quality characterize Voyager's products.
Business of Voyager
The Company's products are distributed through a network marketing
system. The Company believes that network marketing is an effective and
efficient way to distribute its products because network marketing allows
person-to-person product education, which is not readily available through
traditional distribution channels. Network marketing appeals to a broad
cross-section of people, particularly those seeking to supplement family income,
start a home-based business or pursue entrepreneurial opportunities other than
conventional full-time employment. The Company considers its rewarding
compensation program and weekly associate incentive payments to be attractive
components of its network marketing system. As of October 31, 2000, the Company
has
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approximately one thousand five hundred (1,500) current associates in the United
States. The company defines a current associate as an associate that has
purchased product anytime from the company in the most recent twelve-month
period. North America is the primary market for the Company' products. Preferred
Customer purchase Voyager products for personal use, but do not wish to become
associates.
Voyager Distribution Philosophy
Voyagers sales philosophy and distribution system is network
marketing. Products are sold exclusively to or through independent associates
who are not employees of the Company.
Network marketing is an effective vehicle to distribute the Company's
products because (i) a consumer can be educated about a product in person by an
associate, which is more direct than the use of television and print
advertisements; (ii) direct sales allow for actual product sampling by a
potential consumer; (iii) the impact of associate and consumer testimonials is
enhanced; and (iv) as compared to other distribution methods, associates can
give customers higher levels of service and attention among other things,
educating consumers on product benefits and following up on sales to ensure
proper product usage and customer satisfaction, and to encourage repeat
purchases. Under the Company's network marketing system, most independent
associates purchase products either for personal consumption or resale. Direct
selling as a distribution channel has been enhanced in the past decade due to
advancements in communications, including telecommunication, and the
proliferation of the use of videos and fax machines. Direct selling companies
can now produce high quality videos for use in product education, demonstrations
and sponsoring sessions that project a desired image for the Company and the
product line.
Management believes that high quality sales aids play an important
role in the success of associate efforts. For this reason the Company will in
the next 12 months, engage in the production of video and audio cassettes, for
the purposes of affecting a more efficient and comprehensive sales tool.
Management is committed to fully utilizing current and future technological
advances that continue to enhance the effectiveness of direct selling.
The Company's network marketing program differs from many other
network-marketing programs in several respects. First, the compensation plan
allows the Company associates to develop a seamless network of down line
associates. Second, the Company's order and fulfillment systems eliminate the
need for associates to carry significant levels of inventory. Third, the
compensation plan is financially rewarding and can result in commissions to
associates aggregating up to fifty three percent (53%) of a product's price.
Commissions have averaged fifty one percent (51%) of revenue from commissionable
sales over the past 2 years.
Voyager's Compensation Plan
Management believes that one of the Company's key competitive
advantages is the compensation plan. The compensation plan is seamlessly
integrated across all markets in which company products are sold. This seamless
integration means that the Company's associate base has total reach and that the
knowledge and experience resident in current associates can be used to build
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associate leadership in new markets. The compensation plan allows an individual
the opportunity to develop a business, the success of which is based upon that
individual's level of commitment, time spent, personal skills, contacts and
motivation. For many, a distributorship is a very small business, in which
products may be purchased primarily for personal consumption and for resale to
relatively few customers. For others, a distributorship becomes a full time
occupation. The Company believes that the compensation plan is among the most
financially rewarding plans offered to associates by network marketing
companies. There are two fundamental ways in which associates can earn money:
(i) through retail markups; and (ii) through a series of commissions on product
sales within the associates's down line.
Each product carries a specified commission value. Commissions are
based on total personal and group sales volume per month. Commission value is
essentially based upon a product's cost, net of sales tax. As an associates's
retail business expands and as he or she successfully sponsors other associates
into the business who in turn expand their own business, he or she may qualify
to receive a higher percentage of commissions.
Generally, associates can receive commission bonuses if, on a monthly
basis (I) the associates achieves a qualifying personal volume, (ii) the
associate sells and/or consumes at least 51% of personal sales volume, and (iii)
the associate is not in default of any material policies or procedures.
Voyager's Associate Support
The Company is committed to providing a high level of support
services to the needs of its associates in each market. The Company meets the
needs and builds the loyalty of its associates with personalized associate
services. A support staff that assists associates as they build networks of down
line associates. Because many associates have only a limited number of hours
each week to concentrate on their business, management believes that maximizing
an associate's efforts through effective support of each associate will continue
to be important to the success of the Company.
Through training meetings, annual conventions, associate focus
groups, regular telephone conference calls and personal contacts with
associates, the Company seeks to understand and satisfy the needs of each
associate. The Company provides walk-in, telephonic and computerized fulfillment
and tracking services that result in user-friendly, and timely product
distribution. In addition, the Company is committed to evaluating new ideas in
technology and services, such as automatic product reordering, that the Company
can provide to associates. The Company currently utilizes, teleconferencing, fax
services, and Internet. Online Internet access including associate sign- up,
shipment tracking, ordering, and group and personal sales volume inquiries are
also provided to associates. The Company sponsors events throughout the year ,
which offer information about the Company's products and network marketing
system. These meetings are designed to assist Voyager associates in business
development and to provide a forum for interaction with successful Voyager
associate communities and the Company's Scientific Medical Advisory Board.
Voyager associates may not use any form of media advertising not
approved by the Company to promote products. Products may be promoted by
personal contact or by literature produced by or approved by the Company.
Generic business opportunity advertisements without using the
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company name may be placed in accordance with certain guidelines in certain
markets. Associates may not use trademarks or other intellectual property of the
Company without consent.
Products may not be sold, and the business opportunity may not be
promoted, in traditional retail environments such as food markets, pharmacies
and drugstores. Associates who own or are employed by a service related business
such as a doctor's office, hair salon, or health club, may make products
available to regular customers as long as products are not displayed visibly to
the general public in such a way as to attract the general public into the
establishment to purchase products.
Voyager's Associate Payments
Associates generally pay for products prior to shipment. The Company
carries no account receivable from associates. Associates pay for products in
one of several ways: cash, money order, check or credit card.
Voyager Growth Strategy
During the fiscal year 2001, Voyager will introduce novel, patented,
patent pending and proprietary products. Management believes the novel products
will attract participation from additional associates around the United States.
Voyager's Management is totally committed to growth through proprietary and
patent applied products which will attract and retain associates and preferred
customers though "Modular Designs" formulated by Voyager's Scientific and
Medical Advisory Board, which should increase total product sales through an
e-commerce infrastructure.
Industry Overview
The nutritional supplements industry includes many small and
medium-sized companies that manufacture and distribute products generally
intended to enhance the body's performance and well- being. Nutritional
supplements include vitamins, minerals, dietary supplements, herbs, botanicals
and compounds derived there from.
According to Adams, Harkness & Hill in their Living Industry report
dated February 28, 2000, the overall market for natural products is
approximately $19 billion and growing at a 15% annual rate.
The Company believes that growth in the nutritional supplement market
is driven by several factors including:
o Increased public's awareness and understanding of the Connection
between diet and health, by way of the Internet.
o The aging baby-boomer generation, which is more likely to consume
nutritional supplements,
o Product and scientific research,
o The adoption of the Dietary Supplement Health and Education Act of
1994 ("DSHEA") in the United States.
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Nutritional supplements are sold through mass-market retailers,
including mass merchandisers, drug stores, supermarkets and discount stores,
health food stores and direct sales organizations, including network marketing
organizations and catalog companies. Direct selling, of which network marketing
is a significant segment, has increased in popularity as a distribution channel
due primarily to advances in technology and communications resulting in improved
product distribution and faster dissemination of information. The distribution
of products through network marketing has grown significantly in recent years.
The World Federation of Direct Selling Associations reported that, from 1990
through 1998, worldwide direct distribution of goods and services to consumers
increased approximately 71%, resulting in the sale of approximately $81.3
billion of goods and services in 1998. The Direct Sellers Association ("DSA")
reported total 1998 direct sales at retail of $23.2 billion in the United
States. According to the "Survey of Attitudes toward Direct Selling,"
commissioned by the DSA, and conducted and prepared by Wirthlin Worldwide, among
the three product categories experiencing the greatest gains in the direct
selling industry since 1976 are food, nutrition and wellness products.
As a developer of novel nutritional supplements with a network
marketing distribution system, the Company believes it is well positioned to
capitalize on the demand for nutritional supplement products and growth trends
in direct sales.
Markets.
The Company believes that, significant growth opportunities exist in
the United States markets. The Company's decision to enter new markets is based
on its assessment of several factors, (a) anticipated demand for the Company's
novel products, and (b) increased e-commerce Internet interactive associate
support systems for global sales aids with real science.
The Company's state of the art infrastructure has integrated its
associate compensation plan in markets where the Company's products are sold in
order to allow associates to receive commissions through its ability to process
associate and preferred customer product orders for next day commission on
products sales by our website which integrates a credit card processing
structure. The Company's Internet wireless presence allows associates to receive
a commission on product orders the same day, and simplifies order entry. The
Company anticipates that our Internet e- commerce support for the associates
will attract new associates.
Products
Product names used in this report are, in certain cases, trademarks
and are also the proprietary and patent applied for property of the Company,
including:
Trademarks - Tiger Power, Dolorx, Bodylite, Vital 90, Biorenew and the
phrase "You Never See A Fat Tiger".
Applied for - Biomatrix (New Product) and Vital Spectrum (New Product)
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The Company's primary product lines consist of nutritional,
anti-ageing, weight management and pain relief products. In each of the last
three fiscal years, the nutritional product line constituted 80% or more of the
Company's net sales. The Company's principal product lines are briefly described
below:
Primary Products
TIGER POWER
Tiger Power (Liquid & Capsules) is a non-ephedrine weight loss
formula-based preparation. Dr. John Hower a member of the Scientific Medical and
Advisory Board, using new "Modular Design" technology, has been able to create a
dietary supplement, both safe and effective, that helps not only promotes
significant weight loss but also works to maintain desirable weight levels over
time. Recent scientific advances establish that weight gain or loss is the
result of a complex interplay between emotions, moods, hormone levels and to an
extent the foods we eat. Tiger Power contains forty-one (41) ingredients,
combined into "Modules", formulated into a proprietary patented exclusive
one-of-a-kind product. Tiger Power promotes sugar and insulin stabilization so
that fat is used more for energy rather than for storage as unwanted pounds. The
appetite suppressant properties of Tiger Power promote more control over food
choices. Tiger Power promotes neurotransmitter synthesis and function, thus
stabilizing moods and eliminating cravings. By promoting general metabolic
wellness and nutrition, Tiger Power provides the building blocks naturally for a
sound nutritional strategy.
BIOMATRIX
The Source of Life
BioMatrix is a new product introduction. It is a complete super food
containing Blue Green Algae, Digestive Enzymes, Probiotics and Curcumin. This is
a very futuristic and innovative product. It represents the company's direction
for product development and has caused a lot of interest from Associates and
Customers alike. Since its introduction it is moving toward becoming the best
selling product available and has been a major contributor to a substantial
increase in sales during the last quarter of the year.
Further product introductions through 2001 will reflect this
sensitivity to the current trend in whole food development in the market.
Voyager's Product Research and Development
The Company's Medical Board is committed to continuous novel product
innovation and improvement through sound scientific research. The mission of the
Company's research and development team is to develop superior products that
support life-long health. Products are developed and enhanced using a
combination of published research, in vitro testing, in-house clinical studies
and sponsored research. The Company and the Medical Board periodically consults
with additional physicians who advise the Medical board and the Company on
product development. The Scientific medical Advisory Board has limited the
Company cost for research and development
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activities to a very small amount of money by absorbing costs themselves. The
Voyager Medical Advisory Board intends to continue to use its resources in the
research and development of new products and reformulation of existing products
of the Company. The Scientific Medical Advisory Board and the Company maintains
a research and development program based upon established scientific research
methodologies. Contract clinical studies are conducted on selected existing
products for which the retrospective analysis has demonstrated a positive effect
and on new products to investigate efficacy.
Product Manufacturing and Quality Assurance
The company requests information so listed below in the following
steps and additional confidential information is requested from the F.D.A.
o Identifying and evaluating suppliers of raw materials,
o Acquiring premium-quality raw materials,
o Weighing or otherwise measuring the raw materials,
o Mixing raw materials into batches,
o Forming the mixtures into tablets,
o Coating and sorting the tablets, and
o Bottling and labeling the finished products.
All the Company's products are currently produced by manufactures
unaffiliated with the Company. The Company's profit margins and its ability to
deliver its existing products on a timely basis are dependent upon the ability
of the Company's outside manufactures to continue to supply products in a timely
and cost efficient manner. Furthermore, the Company's ability to enter new
markets and sustain satisfactory levels of sales in each market depends in part
upon the ability of suitable outside manufactures to reformulate existing
products, if necessary to comply with local regulations or market environments,
for introduction into such markets.
The Company currently acquires products or ingredients from suppliers
that are considered by the Company to be the superior suppliers of such
ingredients. The Company believes that, in the event it is unable to purchase
any products or ingredients from its current suppliers, the Company could
produce such products, replace such products, or substitute ingredients without
great difficulty or prohibitive increases in the cost of goods sold. However,
there can be no assurance that the loss of such a supplier would not have a
material adverse effect on the Company's business and results of operations.
The Company currently relies on three (3) unaffiliated manufacturers
to produce approximately 99% of its products, the Company's agreement with the
primary supplier of the Company's products is limited to a non-disclosure
agreement. The Company believes that in the event that the Company's
relationship with the key manufacturer is terminated, the Company will be able
to find suitable replacement manufacturers. However, there can be no assurance
that the loss of the manufacturer would not have a material adverse effect on
the Company's business and results of operations.
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Product Testing Year 2001
The Company will contract independent companies to conduct sample
testing of raw materials and finished products for purity, potency and
composition conforming to the Company's specifications.
The Company's third-party manufacturers and vendors package the
Company's products according to formulations developed by or in conjunction with
Voyager's product development team.
Voyager will conduct product quality assurance testing in
laboratories located in California. The tests will be for biological
contamination in raw materials, finished goods and for chemical contamination,
accurate active ingredient levels of raw materials, finished products and
conduct stability tests on finished products. The Company will ask for assays on
vitamins and mineral constituents under United States Pharmacopoeia and other
validated methods in its analytical chemistry laboratories.
Product Availability
Most of the raw ingredients used in the manufacture of the Company's
products are available from a number of suppliers. The Company has not generally
experienced difficulty in obtaining necessary quantities of raw ingredients.
When supplies of certain raw materials have tightened, the Company has been able
to find alternative sources of raw materials when needed and believes it will be
able to do so in the future.
Distribution and Marketing
Voyager distributes its products primarily through a network
marketing system. Network marketing is a form of person-to-person direct selling
through a network of vertically organized associates who purchase products at
wholesale prices from the manufacturer and then make retail sales to consumers.
The emergence of readily available means of mass communication such as personal
computers, facsimiles, low-cost long distance telephone services, satellite
conferencing and the Internet have contributed to the rapid growth of direct
selling, including network marketing. Network marketing is gaining in popularity
as a viable alternative to traditional retail and mail order marketing. The
concept of network marketing is based on the strength of personal
recommendations that frequently come from friends, neighbors, relatives and
close acquaintances. The Company believes that network marketing is an effective
way to distribute its products because it allows person-to-person product
education, which is not as readily available through traditional distribution
channels.
Customers who desire to sell the Company's products may become
associates by being sponsored into the program by another associate, thereby
becoming part of the sponsoring associate's down line. The Company believes many
of its associates are attracted to Voyager because of the quality of its
products and its rewarding compensation plan. New associates must enter into a
written contract, which obligates them to adhere to Voyager's policies and
procedures.
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Associates order products directly from the Company's website
(www.voyagergroupinc.com), subject to certain limitations and restrictions. For
example, an associate may not purchase more products during any four-week period
than the associate can reasonably expect to sell and personally consume during
that same period. Associate status continues until terminated by the Company or
voluntarily canceled by the associate. Primarily an associate's sponsor provides
initial training of associates about the Company, its products, the associate
compensation plan, and how to effectively engage in network marketing and others
in their up line organization. In addition, the Company develops and sells a
variety of training materials and sales aids, as well as a detailed policies and
procedures manuals and description of the Company's associate compensation plan.
The Company sponsors and conducts regional, national and international associate
events and intensive leadership training seminars. Attendance at these sessions
is voluntary, and the Company undertakes no generalized effort to provide
individualized training to associates. Associates may not sell competitive
products to other Voyager associates or solicit Voyager associates to
participate in other network marketing opportunities. The Company also restricts
advertising and making representations or claims concerning its products or
compensation plan.
The Voyager Compensation Plan
The compensation plan provides several opportunities for associates
to earn compensation, provided they are willing to consistently work at
building, training and retaining their down line organizations to maintain sales
of the Company's products to consumers. The Company believes its associate
compensation plan is distinctive for its equitable associate payouts, which are
designed to create appropriate incentives for sales of Voyager products. Each
associate must purchase and sell product in order to earn commissions and
bonuses. Associates cannot simply recruit others for the purpose of developing a
down line and then earn income passively. Associates can earn compensation in
three ways:
o Purchasing products at special associate prices from the Company and
selling them to consumers at higher retail prices,
o Generating sales volume points in their down lines, and
o Participating in a leadership bonus pool paid to associates who meet
certain performance requirements.
The Company seeks to seamlessly integrate its associate compensation
plan across all markets in which its products are sold, in order to allow
Voyager associates to receive commissions for global, rather than merely local,
product sales in the future. This seamless down line structure is being designed
to allow an associate to build a global network by creating down lines across
national borders in the future.
Product Return Policy
The Company's product return policy allows retail customers to return
unused portion of any product to the associate and receive a full cash refund.
Any associate who provides a refund to a customer is reimbursed by the Company
with product or credit in his or her account upon providing
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proper documentation and the remainder of the returned product. Return of unused
and resalable products initiated by an associate will be refunded 100% of the
purchase price to the associate, less a 10% restocking fee for up to 60 days
from the date of purchase. Product that was damaged during shipment to the
associate is also 100% refundable. Product returns valued at $100 or more, other
than product that was damaged at the time of receipt by the associate, may
result in termination of the associate status. Returns as a percentage of net
sales were less than .5%in 2000.
Substantially all of the Company's sales are made through independent
Voyager associates. No single associate accounted for 3% or more of net sales in
any of the last three fiscal years. Associates submit signed application and
agreement forms to the Company, which obligate the associates to follow the
Company's policies and procedures. Associates are independent contractors and
are not agents, employees, or legal representatives of Voyager. Employees and
affiliates of the Company cannot be associates, although there is no prohibition
on their family members from becoming associates as long as they do not reside
in the same household. Associates may sell products only in markets where the
Company has approved the sale of its products.
Policies and Procedures Manual - Voyager Associate misbehavior.
The Company systematically reviews reports of alleged associate
misbehavior. If Voyager determines that an associate has violated any of the
associate policies or procedures, it may take a number of disciplinary actions.
For example, the Company may terminate the associate's rights completely or
impose sanctions such as warnings, fines, probation, withdraw or deny awards,
suspend privileges, withhold commissions until specific conditions are
satisfied, or take other appropriate injunctions at the Company's discretion.
Infractions of the policies and procedures reported to an elected compliance
committee by the Board of Directors will determine what disciplinary action may
be warranted in each case.
Information Technology - Internet Automation
The Company believes its ability to efficiently manage its
distribution, compensation, manufacturing, inventory control and communications
functions through the use of sophisticated and dependable information processing
systems is critical to its success. The Company's former information technology
infrastructure system has been totally replaced with a new state of the art
technologically designed system selected to facilitate order entry and customer
billing, maintain associate records, accurately track purchases and associate
incentive payments, manage accounting, finance and manufacturing operations, and
provide customer service and technical support.
Regulatory Matters
Product Regulation.
Manufacturing, packaging, labeling, advertising, promotion,
distribution, and sale of the Company's products are subject to regulation by
numerous governmental agencies in the United States. In the United States, the
FDA regulates the Company's products under the Food, Drug, and Cosmetic Act
("FDC Act") and regulations promulgated hereunder. The Company's products are
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also subject to regulation by, among others, the Consumer Product Safety
Commission, the US Department of Agriculture, and the Environmental Protection
Agency ("EPA"). Advertising of the Company's products is subject to regulation
by the Federal Trade Commission ("FTC") under the Federal Trade Commission Act
("FTC Act").
The majority of the Company's products are regulated as dietary
supplements under the FDC Act. Dietary supplements are regulated as foods under
the Nutrition Labeling and Education Act of 1990 ("NLEA"). The LEA establishes
requirements for ingredient and nutritional labeling and labeling claims for
foods. Dietary supplements are also regulated under DSHEA. The Company believes
DSHEA is favorable to the dietary supplement industry. The legislation for the
first time defined "dietary supplement". Under DSHEA, a dietary supplement is a
product intended to supplement the diet that contains one or more of certain
dietary ingredients, such as a vitamin, a mineral, an herb or botanical, amino
acid, a dietary substance for use by humans to supplement the diet by increasing
the total dietary intake, or a concentrate, metabolite, constituent, extract or
combination of the preceding ingredients.
Under the current provisions of the FDC Act, there are four
categories of claims that pertain to the regulation of dietary supplements. Drug
claims are representations that a product is intended to diagnose, mitigate,
treat, cure, or prevent a disease. Drug claims are prohibited from use in the
labeling of dietary supplements. Health claims are claims that describe the
relationship between a nutrient or dietary ingredient and a disease or
health-related condition and can be made on the labeling of dietary supplements
if supported by significant scientific agreement and authorized by the FDA in
advance after notice and comment rulemaking. Nutrient content claims, which
describe the nutritional value of the product, may be made if defined by the FDA
through notice and comment rulemaking and if one serving of the product meets
the definition. Nutrient content claims may also be made for dietary supplements
if a scientific body of the US government with official responsibility for the
public health has made an authoritative statement regarding the claim, the claim
accurately reflects that statement, and the manufacturer, among other things,
provides the FDA with notice of and basis for the claim at least 120 days before
the introduction of the supplement with a label containing the claim into
interstate commerce. Statements of nutritional support or product performance,
which are permitted on labeling of dietary supplements without FDA pre-approval,
are defined to include statements that:
o Claim a benefit related to a classical nutrient deficiency disease and
discloses the prevalence of such disease in the United States,
o Describe the role of a nutrient or dietary ingredient intended to
affect the structure or function in humans,
o Characterize the documented mechanism by which a dietary ingredient
acts to maintain such structure or function, or
o Describe general well being from consumption of a nutrient or dietary
ingredient.
In order to make a nutritional support claim the marketer must
possess substantiation to demonstrate that the claim is not false or misleading.
If the dietary ingredient does not provide traditional nutritional value, or a
structure/function claim does not derive from an ingredient's nutritional value,
prominent disclosure of the lack of FDA review of the relevant statement and
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notification to the FDA of use of the claim is required. The FDA recently issued
a proposed rule on what constitutes permitted structure/function claims as
distinguished from prohibited disease claims. Although the Company believes its
product claims comply with the law, depending on the content of the final
regulation, the Company may need to revise its labeling.
In addition, a dietary supplement that contains a new dietary
ingredient (defined as an ingredient not on the market before October 15, 1994)
must have a history of use or other evidence of safety establishing that it is
reasonably expected to be safe. The manufacturer must notify the FDA at least 75
days before marketing products containing new dietary ingredients and provide to
the FDA the information upon which the manufacturer based its conclusion that
the product has a reasonable expectation of safety.
The FDA issued final dietary supplement labeling regulations in 1997
that require a new format for product labels and will necessitate revising
dietary supplement product labels by March 23, 1999. All companies in the
dietary supplement industry are required to comply with these new regulations.
The Company updated its product labels in 1997 in response to these new
regulations. The FDA also announced that it is considering the adoption of new
GMP's specific to dietary supplements. Such GMP's, if promulgated, may be
significantly more rigorous than currently applicable GMP's and contain quality
assurance requirements similar to the FDA's GMP's for drug products. The Company
believes it currently manufactures its dietary supplement products according to
the standards of the drug GMP's. However, the Company may be required to expend
additional capital and resources on manufacturing controls in the future in
order to comply with the law.
Future products marketed by the Company may include over-the-counter
("OTC") drugs, and medical devices. The Company may have future products subject
to premarket approval by the FDA. Future products maybe subject to regulation by
the FDA under the FDC Act's adulteration and misbranding provisions. Future
products may also be subject to specific labeling regulations, including warning
statements if the safety of a cosmetic is not adequately substantiated or if the
product may be hazardous, as well as ingredient statements and other packaging
requirements under the Fair Packaging and Labeling Act. Future Products of the
Company may meet the definition of a drug (e.g., are intended to treat or
prevent disease or affect the structure or function of the body), such as the
Company's anti-aging products, may be regulated as drugs. OTC drug products may
be marketed if they conform to the requirements of any OTC monograph that is
applicable to a drug. Drug products not conforming to monograph requirements for
OTC drug products require an approved New Drug Application ("NDA") before
marketing. An NDA requires, among other things, one or more adequate and
well-controlled clinical trials demonstrating the drug's safety and
effectiveness before approval. The Company in the future if the agency finds
that a product or ingredient of one of the Company's OTC drug products is not
generally recognized as safe and effective or does not include it in a final
monograph applicable to one of the Company's OTC drug products, the Company will
have to reformulate or cease marketing the product until it is the subject of an
approved NDA or until such time, if ever, that the monograph is amended to
include the Company's product..
The Company's future products will be designed and marketed not to
require premarket approval or clearance by the FDA. The Medical Device
Amendments of 1976 to the FDC Act
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<PAGE>
established three regulatory classes for medical devices depending on the degree
of control necessary to provide a reasonable assurance of safety and
effectiveness. Generally, Class I devices present the least risk to health and
Class III devices present the greatest risk to health and the most complex or
novel technologies. Some Class I and most Class II devices currently require
pre-market notification and clearance by the FDA before marketing under section
510(k) of the FDC Act. Devices for which the FDA has not promulgated a
classification regulation also require premarket notification and clearance.
Class III devices require premarket approval before commercial distribution,
because the FDA either has promulgated a regulation requiring a premarket
application for a pre-amendments type of device, or a post-amendments device was
not found substantially equivalent to a legally marketed device.
The Company's advertising of its products is subject to regulation by
the FTC under the FTC Act. Section 5 of the FTC Act prohibits unfair methods of
competition and unfair or deceptive acts or practices in or affecting commerce.
Section 12 of the FTC Act provides that the dissemination or the causing to be
disseminated of any false advertisement pertaining to drugs or foods, which
would include dietary supplements, is an unfair or deceptive act or practice.
Under the FTC's Substantiation Doctrine, an advertiser is required to have a
"reasonable basis" for all objective product claims before the claims are made.
Failure to adequately substantiate claims may be considered either deceptive or
unfair practices. Pursuant to this FTC requirement, the Company is required to
have adequate substantiation for all material advertising claims made for its
products.
In recent years the FTC has initiated numerous investigations of and
actions against dietary supplement, weight loss, and cosmetic products and
companies. The FTC has recently issued a guidance document to assist these
companies in understanding and complying with the substantiation requirement.
The Company is organizing the documentation to support its advertising and
promotional practices in compliance with the guideline.
The FTC may enforce compliance with the law in a variety of ways,
both administratively and judicially. Means available to the FTC include
compulsory process, cease and desist orders, and injunctions. FTC enforcement
can result in orders requiring, among other things, limits on advertising,
corrective advertising, consumer redress, divestiture of assets, rescission of
contracts, and such other relief as deemed necessary. Violation of such orders
could result in substantial financial or other penalties. Any such action by the
FTC could materially adversely affect the Company's ability to successfully
market its products.
The Company cannot predict the nature of any future laws,
regulations, interpretations, or applications, nor can it determine what effect
additional governmental regulations or administrative orders, when and if
promulgated, would have on its business in the future. They could include,
however, requirements for the reformulation of certain products to meet new
standards, the recall or discontinuation of certain products that cannot be
reformulated, additional record keeping, expanded documentation of the
properties of certain products, expanded or different labeling, and additional
scientific substantiation. Any or all such requirements could have a material
adverse effect on the Company's business, financial condition and results of
operations.
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<PAGE>
Regulations-Network Marketing.
Other laws and regulations affecting the Company have been enacted to
prevent the use of deceptive or fraudulent practices that have sometimes been
inappropriately associated with legitimate direct selling and network marketing
activities. These include anti-pyramiding, securities, lottery, referral
selling, anti-fraud and business opportunity statutes, regulations and court
cases. Illegal schemes typically referred to as "pyramid," "chain distribution,"
or "endless chain" schemes, compensate participants primarily for the
introduction or enrollment of additional participants into the scheme. Often,
such schemes are characterized by large up-front entry or sign-up fees, over-
priced products of low value, little or no emphasis on the sale or use of
products, high-pressure recruiting tactics and claims of huge and quick
financial rewards with little or no effort. Generally these laws are directed at
ensuring that product sales ultimately are made to consumers and that
advancement within such sales organizations is based on sales of the
enterprise's products, rather than investments in such organizations or other
non-retail sales related criteria. Where required by law, the Company obtains
regulatory approval of its network marketing system, or, where such approval is
not required or available, the favorable opinion of local counsel as to
regulatory compliance.
o In the United States, the FTC and state attorneys generally regulate
the network marketing system of the Company.
The Company has never received a request to supply information
regarding its network- marketing plan to certain regulatory agencies. Although
the Company has from time to time modified its network marketing system to
comply with interpretations of various regulatory authorities, it believes that
its network-marketing program presently is in compliance with laws and
regulations relating to direct selling activities. Nevertheless, the Company
remains subject to the risk that, in one or more of its present or future
markets, its marketing system or the conduct of certain of its associates could
be found not to be in compliance with applicable laws and regulations. Failure
by the Company or its associates to comply with these laws and regulations could
have an adverse material effect on the Company in a particular market or in
general. Any or all of such factors could adversely affect the way the Company
does business and could affect the Company's ability to attract potential
associates or enter new markets. In the United States, the FTC has been active
in its enforcement efforts against both pyramid schemes and legitimate network
marketing organizations with certain legally problematic components, having
instituted several enforcement actions resulting in signed settlement agreements
and payment of large fines. Although the Company has not been the target of an
FTC investigation, there can be no assurance that the FTC will not investigate
the Company in the future.
The Company cannot predict the nature of any future law, regulation,
interpretation or application, nor can it predict what effect additional
governmental legislation or regulations, judicial decisions, or administrative
orders, when and if promulgated, would have on its business in the future. It is
possible that such future developments may require revisions to the Company's
network marketing program. Any or all of such requirements could have a material
adverse effect on the Company's business, results of operations and financial
condition.
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<PAGE>
Competition
The business of developing and distributing nutritional, anti-ageing,
weight management, and pain relief products such as those offered by the Company
is highly competitive. Numerous manufacturers, associates and retailers compete
for consumers and, in the case of other network marketing companies, for
associates. The Company competes directly with other entities that manufacture,
market and distribute products in each of its product lines. Many of the
Company's competitors are substantially larger than the Company and have greater
financial resources and broader name recognition. The Company's markets are
highly sensitive to the introduction of new products that may rapidly capture a
significant share of such markets.
The nutritional supplement market in which the Company's leading
products compete is characterized by:
o Large selections of essentially similar products that are difficult to
differentiate,
o Retail consumer emphasis on value pricing,
o Constantly changing formulations based on evolving scientific
research,
o Low entry barriers resulting from low brand loyalty, rapid change,
widely available manufacturing, low regulatory requirements and ready
access to large distribution channels, and
o A lack of uniform standards regarding product ingredient sources,
potency, purity, absorption rate and form.
Similar factors are also characteristic of products comprising the
Company's other product lines. There can be no assurance that the Company will
be able to effectively compete in this intensely competitive environment. In
addition, nutritional, anti-ageing, weight management and pain relief products
can be purchased in a wide variety of channels of distribution, including retail
stores. The Company's product offerings in each product category are relatively
few compared to the wide variety of products offered by many of its competitors
and are often premium priced. As a result, the Company's ability to remain
competitive depends in part upon the successful introduction of new products and
enhancements of existing products.
The Company is also subject to significant competition from other
network marketing organizations for the time, attention and commitment of new
and current associates. The Company's ability to remain competitive depends, in
significant part, on the Company's success in recruiting and retaining
associates. The Company believes that it offers a rewarding associate
compensation plan and attractive associate benefits and services.
Intellectual Property
Trademarks
The Company uses registered trademarks in its business, particularly
relating to its corporate and product names. The Company owns five trademarks
registered with the United States Patent and Trademark Office. The Company has
also filed applications to register eight additional
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<PAGE>
trademarks. Federal registration of a trademark enables the registered owner of
the mark to bar the unauthorized use of the registered mark in connection with a
similar product in the same channels of trade by any third party anywhere in the
United States, regardless of whether the registered owner has ever used the
trademark in the area where the unauthorized use occurs. The Company also has
filed applications and owns trademark registrations, and intends to register
additional trademarks, in foreign countries where the Company's products are or
may be sold. Protection afforded registered trademarks in some jurisdictions may
not be as extensive as the protection available in the United States. The
Company under common law claims certain product names, unregistered trademarks
and service marks.
Common law trademark rights do not provide the Company with the same
level of protection afforded by registration of a trademark. In addition, common
law trademark rights are limited to the geographic area in which the trademark
is actually used. The Company believes its trademarks, registered and claimed
under common law, constitute valuable assets of the Company, adding to
recognition of the Company and the marketing of its products. The Company
therefore believes such proprietary rights have been and will continue to be
important in enabling the Company to compete in its industry.
Trade Secrets
The Company has certain trade secrets that it intends to protect, in
part, through confidentiality agreements with employees and other parties.
Certain of the Company's employees involved in research and development
activities have not entered into such agreements. Even where such agreements
exist, there can be no assurance that these agreements will not be breached,
that the Company would have adequate remedies for any breach or that the
Company's trade secrets will not otherwise become known to or independently
developed by competitors.
Patents (Not Meaningful Protection)
To the extent we may have patents, we found the scope of such patents
are not sufficiently broad to provide meaningful protection against
infringement. Labeling regulations require the Company to disclose product
ingredients and formulations, which makes enforcement of patents in the
nutritional supplements industry difficult. The Company does not believe that
the lack of patents in any way will adversely affect the Company's ability to
compete in the nutritional supplement, anti- ageing, pain relief or weight
management industries.
The Company intends to protect its legal rights concerning its
intellectual property (except perhaps patent rights) by all appropriate legal
action. The Company may become involved from time to time in litigation to
determine the enforceability, scope and validity of any of the foregoing
proprietary rights. Any such litigation could result in substantial cost to the
Company and divert the efforts of its management and technical personnel.
Product Backlog
The Company typically ships products within 24 hours after the
receipt of the order. As of
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<PAGE>
October 31, 2000, there was no backlog.
Product Inventory Practices
The Company maintains significant amounts of inventory in stock in
order to provide a high level of service to its independent associates.
Environment
The Company presently is not aware of any instance in which it has
contravened federal, state or local provisions enacted for or relating to
protection of the environment or in which it otherwise may be subject under such
laws to liability for environmental conditions that materially could affect the
Company's operations.
Employees
As of October 31, 2000, the Company had approximately seven (7)
employees (as measured by full time equivalency) The Company believes its
relationship with its employees is good.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
report.
Overview
Voyager develops and manufactures high-quality nutritional,
anti-ageing, pain relief and weight management products. The Company distributes
its products through a network marketing system.
The Company's four primary product lines consist of nutritional,
anti-ageing, pain relief and weight management products. Nutritional products
accounted for approximately 80% of the Company's net sales in 2000.
Cost of sales primarily consists of expenses related to raw
materials, labor, and quality assurance and overhead directly associated with
the procurement and production of Voyager's products and sales materials.
Selling and marketing include associate incentives, promotion and
advertising expenses. Associate incentives and promotion are the Company's most
significant expenses and represented 86 % of net sales in 2000. Associate
incentives include commissions and leadership bonuses, and are paid weekly based
on sales volume points. Each product sold by the Company is assigned a sales
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<PAGE>
volume point value independent of the product's price. Associates earn
commissions based on sales volume points generated in their down line.
General and administrative expenses include wages and benefits,
depreciation and amortization, rents and utilities, and professional fees along
with other administrative expenses. Wages and benefits represent the largest
component of general and administrative expenses. The Company has added human
resources and associated infrastructure for future expansion of operations.
Depreciation and amortization expense has increased as a result of
substantial investments in computer and systems communications equipment and
systems to support domestic expansion. The Company anticipates that additional
capital investments will be required in future periods to promote and support
growth in sales and the increasing size of the associate and Preferred Customer
base.
Research and development
The Company did not have any research and development costs during
2000 as compared to $50,000 in 1999. Expenses when incurred include costs in
developing new products, supporting and enhancing existing products and
reformulating products for introduction in domestic markets. The Company would
if incurred capitalize product development costs after market feasibility is
established. These costs are amortized as cost of sales over an average of 12
months, beginning with the month the products become available for sale.
Results of Operations
The following table summarizes operating results as a percentage of
net sales, respectively for the periods indicated:
(Unaudited)
For the Year Ended For the Three Months Ended
July 31 October 31,
----------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Sales, Net 100% 100% 100% 100%
Cost of Sales 31% 39% 28% 51%
Gross Margin 69% 61% 72% 49%
Operating Expenses 187% 156% 151% 164%
Operating Loss 118% 95% 79% 115%
Net Sales.
Net sales for the year ended July 31, 2000 were less than 1999 by
approximately $617,000 or 48%. Net sales for the three months ended October 31,
2000 were less than 1999 by
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approximately $63,000 or 30%. During 2001 management will implement a plan of
restructuring the independent associates compensation plan and revise certain
products. Management plans further formulation of novel, proprietary, products,
and reformulation of certain existing products. Management has added an
executive team with over 60 years combined experience in the direct marketing
industry replacing vacancies created by resignations of former executive
officers. Management believes the implementation of these plans will promote
sales growth in the years to come. The introduction of new products during the
year 2001, in the opinion of management, will promote long-term growth, with a
high associate enrollment.
Cost of Sales
Cost of sales for the year ended July 31, 2000 decreased
approximately $298,000 or 59% compared to 1999. As a percentage of sales, cost
of sales decreased from 39% to 31%. Cost of sales for the three months ended
October 31, 2000 decreased approximately $65,000 or 62% compared to 1999. As a
percentage of sales, cost of sales decreased from 51% to 28%. The decrease in
cost of sales as a percentage of net sales is attributable to the reprising of
products as part of managements overall restructuring and implementation of its
independent associates compensation plan, reprising of products, and total
reorganization of executive management team.
Operating Expenses
Operating expenses during the year ended July 31, 2000 decreased
approximately $748,000 or 37% compared to 1999 from $2,002,547 to $1,254,863.
Operating expenses during the three months ended October 31, 2000 decreased
approximately $121,000 or 36% compared to 1999 from $339,000 to $218,000. Newly
elected executives have completely overhauled the Company's human resources,
technological communications, product order processing of customers, and
increase in volume based efficiencies in production and procurement activities.
Liquidity and Capital Resources
The President, C.E.O. and shareholders have committed to funding
required working capital necessary for the Company. Funding during the year
ended July 31, 2000 was for infrastructure such as communication and computer
systems. There are no formal contractual commitments between the Company and
these parties for capital, lines of credit or similar short-term borrowings.
It is anticipated that the year 2001 should expand current sales and
increase associates membership through the introduction of new products and
associate services which should exceed the Company's working capital
requirements for the next fiscal year.
The Company generates and uses cash flows through three activities:
operating, investing, and financing. During the year ended July 31, 2000,
operating activities used cash of $373,000 as compared to net cash used of
$18,000 for 1999. During the three months ended October 31, 2000, operating
activities used cash of $90,000 as compared to net cash used of $104,000 for
1999.
Cash flows used in investing activities is primarily due to the
acquisition of $102,000 of
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<PAGE>
computer equipment and office furniture for the year ended July 31, 2000
compared to $0 for 1999 and $31,000 of computer equipment and office furniture
for the three months ended October 31, 2000 compared to $500 for 1999.
Financing activities provided $459,000 for the year ended July 31,
2000 compared to $34,000 for 1999. The increase in cash flow from financing
activities was primarily from shareholder loans from an officers and a
shareholder of the Company in the form of promissory notes. Financing activities
provided $317,000 for the three months ended October 31, 2000 compared to
$100,000 for 1999. The increase in cash flow from financing activities was
primarily from the sale of Series F Convertible Preferred Shares and shareholder
loans from an officer and a shareholder of the Company in the form of promissory
notes.
Management believes that its current cash balances, the available
line of credit and cash provided by operations will be sufficient to cover its
needs in the ordinary course of business for the next 12 months. If the Company
experiences unusual capital requirements to complete the new infra structure and
communication systems, additional financing may be required. However, no
assurance can be given that additional financing, if required, would be
available on favorable terms. The Company may attempt to raise additional
financing through the sale of its equity securities in the form of preferred
stock or loans to finance future growth of the Company. Any financing, which
involves the sale of equity securities and loans in the form of short-term
instruments convertible into such securities, could result in immediate dilution
to existing shareholders.
Inflation
The Company does not believe that inflation has had or will have a
material effect on its historical operations or profitability.
Regulation
The Company is not aware of any recently enacted, presently pending
or proposed state or federal legislation, which would have a material adverse
effect on its results of operations.
Outlook -Forward Looking Statements
According to the Nutrition Business Journal, the nutritional industry
in the United States will grow at an annual rate of approximately 10% over the
next three years. This does represent a slower rate of industry growth than in
prior years. Management believes the Company's products offer opportunities for
rapid expansion.
If the Company's products fail consumer demand, the Company would
experience downward pressure on its net sales.
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Item 3. Description of Property
The Company's headquarters are located in Carlsbad, California. The
Company at this time has no properties. The company occupies certain sales
offices under a noncancellable lease. This lease is for office space and expires
September 30, 2001. It is expected that in the normal course of business, leases
that expire will be renewed or replaced by leases on other properties. The
current lease requires rental payments of $43,188.00 per year.
Item 4. Security Ownership of Certain Beneficial Owners and Management
Voting Securities and Principal Holders Thereof
The following table sets forth, as of December 20, 2000 the number of
shares of the Company's 46,253,941 shares of voting securities owned by each
person known to the Company to be the beneficial owner of more than five percent
of the Company's outstanding voting securities. Except as indicated in the
footnotes below, each of the persons listed exercises sole voting and investment
power over the shares of the Company's voting securities listed for such person
in the table.
Class Name/Address Number of Shares Percent of Class
----- ------------ ---------------- -------------
Common Stock
Marvin Higbee** 11,444,400 (1) 25%
6354 Corte Del Abeto, Suite F
Carlsbad, California 92009
Richard Higbee** 11,444,400 (2) 25%
6354 Corte Del Abeto, Suite F
Carlsbad, California 92009
Jeff Breakey** 5,522,000 (3) 12%
6354 Corte Del Abeto, Suite F
Carlsbad, California 92009
Marlen Johnson ** 5,297,600 (4) 11%
Box 8029
La Jolla, Ca 92038
John Southerland, ** 5,297,600 (5) 11%
6354 Corte Del Abeto, Suite F
Carlsbad, California 92009
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<PAGE>
The following table sets forth, as of December 20, 2000 the number of
shares of the Company's 46,253,941 voting securities owned by the executive
officers and directors of the Company individually, and as a group. Except as
indicated in the footnotes below, each of the persons listed exercises sole
voting and investment power over the shares of the Company's voting securities
listed for such person in the table.
Class Name/Address Number of Shares Percent of Class
----- ------------ ---------------- -------------
Common Stock
Marvin Higbee** 11,444,400 (1) 25%
6354 Corte Del Abeto, Suite F
Carlsbad, California 92009
Richard Higbee** 11,444,400 (2) 25%
6354 Corte Del Abeto, Suite F
Carlsbad, California 92009
Officers and Directors as a group (4) 24,010,800 52%
Percentages rounded to nearest one percent.
(1) Consists of 52.02 shares of Series J Convertible Preferred Stock
convertible into Common Stock on the basis of 1 to 220,000 for total
voting shares of 11,444,400. Of these, 8,976,000 (40.8 Series J) are
held in The Voting Trust Company, Inc.
(2) Consists of 52.02 shares of Series J Convertible Preferred Stock
convertible into Common Stock on the basis of 1 to 220,000 for total
voting shares of 11,444,400. Of these, 8,976,000 (40.8 Series J) are
held in The Voting Trust Company, Inc.
(3) Consists of 25.10 shares of Series J Convertible Preferred Stock
convertible into Common Stock on the basis of 1 to 220,000 for total
voting shares of 5,522,000. Of these, 4,490,200 (20.41 Series J) are
held in The Voting Trust Company, Inc.
(4) Consists of 24.08 shares of Series J Convertible Preferred Stock
convertible into Common Stock on the basis of 1 to 220,000 for total
voting shares of 5,297,600. Of these, 1,122,000 (5.10 Series J) are
held in The Voting Trust Company, Inc.
(5) Consists of 24.08 shares of Series J Convertible Preferred Stock
convertible into Common Stock on the basis of 1 to 220,000 for total
voting shares of 5,297,600. Of these, 1,122,000 (5.10 Series J) are
held in The Voting Trust Company, Inc.
** Controling Stockholders:
On November 6, 2000, three officers and three shareholders
contributed 117.316 (220,000 votes per share or 25,809,520 votes) into The
Voting Trust Company, Inc. (a newly formed Delaware
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<PAGE>
corporation). As of December 20, 2000, The Voting Trust Company, Inc. controls
56% of the outstanding voting shares. Accordingly, as of such date, the Voting
Trust Company, Inc., is able to control the election of the Board of Directors
of the Company and thus the direction and future operations of the Company
without supporting vote of any other of the company's common shareholders,
including decisions regarding acquisitions and other business opportunities, the
declaration of dividends and the issuance of different class of securities.
Item 5. Directors, Executive Officers, Promoters and Control Persons
The executive officers of Voyager are as follows:
<TABLE>
<CAPTION>
Name Age Position Term of Office
---- --- -------- --------------
<S> <C> <C> <C>
Marvin Higbee 43 President, Chief Executive Officer September 16, 2000 to present
and Chairman of the Board
Peter Powderham 44 Executive President of Business September 16, 2000 to present
Development, Secretary and Director
Richard Higbee 31 Executive President of Sales and September 16, 2000 to present
Marketing, Treasurer and Director
Meitzu Chen 38 Executive President of October 4, 2000 to present
Product Development and Director
</TABLE>
The term of office of each director and executive officer ends at, or
immediately after, the next annual meeting of shareholders of the Company.
Marvin Higbee
Became President, Chief Executive Officer and Chairman of the Board
of Directors Of Voyager in September 16, 2000. He was a former executive officer
with Forever Living Products with worldwide sales in excess of one Billion. He
joined Natures Sunshine Products in 1995 as the Chief Executive in Venezuela
wherein he increased products sales by 176%. In 1996, Mr. Higbee became the head
of European Operations headquartered in England. In 1998, he became Chief
Executive Officer of Life Force International where he grew annual sales from
$3,000,000 to $30,000,000. Mr. Higbee holds a MSS in Economics from Brigham
Young University, and a BA in History from Utah State.
Peter Powderham,
A Director since September 16, 2000 serving as Executive President of
Business Development From January 1998 to August 2000 Mr. Powderham was an
advisor to Excel International, New Vision International and several other
companies concerning their European
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<PAGE>
Integration. Further Mr. Powderham held the position of Managing Director for
the UK and Ireland with the Europe group of Nu Skin International Inc from April
1995 to August 1997. Mr. Powderham has held similar positions as COO or Managing
Director with many other privately held industry companies and he holds a
Diploma in Company Direction with the Institute of Directors, London.
Richard Higbee
Richard Higbee became Executive Vice President of Sales and Marketing
for Voyager Group Inc. on 16 September 2000. He was Vice President of Training
and Development for Life Force International, where he helped annual sales grow
from $3 million to $30 million. Mr Higbee worked as the Regional Sales Trainer
for Nature's Sunshine Products where sales increased by $20 million per anumn.
He was also Regional Sales Manager for, Vinca Corporation. Mr Higbee holds a
bachelors degree in Psychology from Brigham Young University, Utah.
Meitzu Chen
Accepted the office of Director October 4 2000 and serves as
Executive President of Product Development. From June 1992 to July 1994 Ms Chen
held the position of Quality Control Manager for Pepsi/Frito-Lay. She has also
been quality auditor for Kraft General Foods and quality control supervisor with
Dominick's Finer Foods. Ms. Chen has an MBA and a BS Degree in Food Science.
Item 6. Executive Compensation.
None of the executive officers of the company earn in excess of
$100,000.
During the year ended July 31, 2000 the Company reimbursed
approximately $2,850 in lodging expenses of the Company's CEO during the period
from September, 1, 1999 through November 30, 1999. Additionally, the Company
agreed to pay lodging expenses on behalf of the Company's CEO of approximately
$1,500 per month beginning December 1, 1999 through November 30, 2000. These
payments and reimbursements were in lieu of a salary and have been reported in
the accompanying financial statements as General & Administrative Expenses.
During the three months ended October 31, 2000, the Company began
accruing $7,500 per month for the Company's C.E.O.
Employment Contracts and Other Arrangements
As of December 20, 2000 the Company has no employment agreement or
arrangements.
Compensation Report on Executive Compensation
This Compensation Report discusses the Company's compensation
policies and the basis for the compensation paid to its executive officers
(including the Named Executive Officers), during the
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<PAGE>
year ended July 31, 2000.
Compensation Policy
The Company's policy with respect to executive compensation has been
designed to:
Adequately and fairly compensate executive officers in
relation to there Responsibilities, capabilities and
contributions to the Company and in a manner that is
commensurate with compensation paid by companies of
comparable size or within the Company's industry;
Reward executive officers for the achievement of key
operating objectives and for the enhancement of the
long-term value of the Company; and
Align the interests of the executive officers with those
of the Company's shareholders.
The components of compensation paid to executive officers consist of:
(a) base salary, and (b) certain other benefits.
Year 2001, Voyager will approve a cash bonus program as an additional
component of executive compensation.
Item 7. Certain Relationships and Related Transactions.
There are no agreements or understandings between the Company and any
of the Board of Directors families members pursuant to which anything more than
the ordinary compensation otherwise payable under the associate compensation
plan is paid to these associates or pursuant to which any other treatment is
offered them. The Board of Directors does not receive any position of the
associate incentives paid to these family members or their affiliates and has no
beneficial ownership interest in any of their business'.
During the year ended July 31, 2000 and the three months ended
October 31, 2000, two controlling shareholders of the Company loaned $398,550
and $25,000, respectibely, to the Company in the form of promissory notes
bearing interest at 7.5% and payable upon demand. Interest on these notes accrue
until paid. The notes provide for a perpetual payment of 2% of the total Monthly
Gross Sales in any month the Company's sales reach or exceed $200,000. In the
event of default, the notes shall bear interest at an alternative rate equal to
an additional 2%. As of July 31, 2000 and October 31, 2000, $416,983 and
$450,336 including interest was due on these promissory notes.
During the year ended July 31, 2000 the Company reimbursed
approximately $2,850 in lodging expenses of the Company's CEO during the period
from September, 1, 1999 through November 30, 1999. Additionally, the Company
agreed to pay lodging expenses on behalf of the Company's CEO of approximately
$1,500 per month beginning December 1, 1999 through
27
<PAGE>
November 30, 2000. These payments and reimbursements were in lieu of a salary
and have been reported in the accompanying financial statements as General &
Administrative Expenses.
Convertible Preferred Stock Series J includes a royalty certificate
for each "Major Investor" (meaning investors owning over 10 shares of Series J
preferred stock or common stock issued upon conversion thereof. The royalty
certificates represent a perpetual royalty payment of one percent on or before
the 15th of each month following the starting month when gross sales of the
Company exceeds $120,000 per month.
Item 8. Description of Securities
The corporation has authorized one-hundred million (100,000,000)
shares of common stock with a par value of $0.001 per share, and five million
(5,000,000) of preferred stock (Series J and Series F) with a par value of
$0.001 per share, for a total capitalization of $105,000. The corporation's
capital stock may be sold from time to time for such consideration as may be
fixed by the Board of Directors, provided that no consideration so fixed shall
be less than par value. There are no preemptive rights. No dividends have been
declared. Fully-paid stock of this corporation shall not be liable to any
further call or assessment.
The Series J Convertible Preferred Stock are convertible at a ratio
of 220,000 shares of common stock per preferred share. In the event of any
voluntary or involuntary liquidation, the holders of Series J preferred stock
are entitled to an amount equal to the net book value of the corporation plus
all unpaid dividends, before any distributions to holders of Common Stock, or
any other series of preferred stock of the corporation by reason of any
voluntary or involuntary liquidation, dissolution or winding up of the
corporation unless each holder of series J shall have received all amounts to
which such series J holders are entitled. The preferred stock is entitled to
vote 220,000 votes per preferred share.
Convertible Preferred Stock Series J also includes a royalty
certificate for each "Major Investor" (meaning investors owning over 10 shares
of Series J preferred stock or common stock issued upon conversion thereof. The
royalty certificates represent a perpetual royalty payment of one percent on or
before the 15th of each month following the starting month when gross sales of
the Company exceeds $120,000 per month.
The Series F Convertible Preferred Stock are convertible at a ratio
of 100 shares of common stock per preferred share. In the event of any voluntary
or involuntary liquidation, the holders of the preferred stock are entitled to
an amount equal to the net book value of the Corporation plus all unpaid
dividends. The preferred stock is entitled to vote 100 votes per preferred
share.
As of December 20, 2000, there were 985,641 (1 vote per share)
Common, 3,883 (100 votes per share) Convertible Preferred Series F, and 204
(220,000 votes per share) Convertible Preferred Series J, for a total 46,253,941
shares of the Registrant's voting stock, par value $0.001, issued and
outstanding.
28
<PAGE>
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Related Shareholder Matters.
MARKET FOR VOYAGER GROUP INC- COMMON STOCK-RISK FACTORS
Shares of our common stock distributed in the spin-off will be freely
transferable, except for shares received by persons who may be deemed to be our
"affiliates" under the Securities Act of 1933, as amended (the "Securities
Act"). Persons who may be deemed to be our affiliates after the spin-off
generally include individuals or entities that control, are controlled by, or
are under common control with, us and may include some of our officers,
directors or principal stockholders. Persons or entities who or which are our
affiliates will be permitted to sell shares of our common stock only pursuant to
an effective registration statement under the Securities Act or any exemption
from the registration requirements of the Securities Act that may be available.
There are RISKS relating to securities markets that you should
consider in connection with your ownership of our common stock THE MARKET PRICE
FOR OUR COMMON STOCK COULD BE ADVERSELY AFFECTED BY SALES OF COMMON STOCK IN THE
PUBLIC MARKET
OUR STOCK PRICE MAY FLUCTUATE SIGNIFICANTLY FOLLOWING THE SPIN-OFF
The market price of our common stock could be subject to significant
fluctuations in response to our operating results, changes in earnings estimated
by securities brokers or our ability to meet those estimates, publicity
regarding the direst sales industry in general and other factors. Some or all of
these factors may be beyond our control. In addition, the stock market in
general has experienced extreme volatility that has often been seemingly
unrelated to the operating performance of particular companies, particularly
those that are technology related. These broad market fluctuations may adversely
affect the trading price of our common stock. In the past, securities class
action litigation has often been instituted against companies following periods
of volatility in the market price of their securities. Such litigation could
result in substantial costs and a diversion of management's attention and
resources.
In addition, the stock market has historically experienced extreme price and
volume fluctuations which have particularly affected the market prices of many
nutritional supplement companies and network marketing companies and which often
have been unrelated to the operating performance of such companies. Moreover,
the Company's common stock may be even more prone to volatility than the
securities of other businesses in similar industries in light of the relatively
small number of shares of common stock not held by affiliates. Given such
relatively small "public float," there can be no assurance that the prevailing
market prices of common stock will not be artificially inflated or deflated by
trading even on relatively small amounts of common stock.
29
<PAGE>
Currently there is no regular public market for our common stock.
Voyager Group Inc. will make application for approval and for listing the common
stock on the NASDAQ Bulletin Board Market under the symbol "VYGP," subject to
official notice of NASDAQ BB. The following high and low sale prices for the
Company's common stock as reported on the Nasdaq Bulletin Board for the period
indicated:
1999 High Low
First Quarter (10/31/98) - -
Second Quarter (01/31/99) - -
Third Quarter (04/30/99) - -
Fourth Quarter (07/31/99) - -
2000
First Quarter (10/31/99) - -
Second Quarter (01/31/00) - -
Third Quarter (04/30/00) - -
Fourth Quarter (07/31/00) - -
2001
First Quarter (10/31/00) - -
To the best of management's knowledge, there has been no trading of
the company's stock during the past two fiscal years.
Shareholders
As of October 29, 2000 there were approximately 200 stockholders of
record of the Company's common stock and an estimated 40 beneficial owners,
including shares of common stock held in street name.
Dividends
The Company has never declared or paid cash dividends on its common
stock. The Company currently intends to retain future earnings to fund the
development and growth of its business and does not anticipate paying any cash
dividends in the foreseeable future. Future cash dividends, if any, will be
determined by the Board of Directors and will be based on the Company's
earnings, capital, financial condition and other factors deemed relevant by the
Board of Directors. The Company's credit facility contains restrictions on the
Company's ability declare cash dividends on its capital stock or redeem or
retire such stock without the lender's written consent.
30
<PAGE>
Item 2. Legal Proceedings.
The Company is not engaged in any legal proceedings other than the
ordinary routine litigation incidental to its business operations, which the
Company does not believe, in the aggregate, will have a material adverse effect
on the Company, or its operations.
Item 3. Changes in and Disagreements With Accountants
There are not and have not been any disagreements between the Company
and its accountants on any matter of accounting principles, practices or
financial statements disclosure.
Item 4. Recent Sale of Unregistered Securities
During the quarter ended October 31, 2000, the Company sold 3,883
shares of Series F Convertible Preferred Stock for $75.00 per share or
approximately $291,225. The shares were sold under Rule 506 of the Securities
Act.
On October 16, 2000 the Board of Directors authorized 10 to 1 reverse
stock split for the Company's common stock. All references in the accompanying
financial statements to the number of common shares and per-share amounts have
been restated to reflect the reverse stock split.
On November 6, 2000 the Company sold 104 shares of Series J
Convertible Preferred Stock for $146.48 per share or approximately $15,234.
Item 5. Indemnification of Directors and Officers
The Company's By-laws contain provisions which reduce the potential
personal liability of directors for certain monetary damages and provide for
indemnity of directors and other persons. The Company is unaware of any pending
or threatened litigation against the Company or its directors that would result
in any liability for which such director would seek indemnification or similar
protection.
The provisions regarding indemnification provide, in essence, that
the Company will indemnify directors against expenses (including attorneys
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with any action, suit, or proceeding arising out of the
director's status as a director of the Company, including actions brought by or
on behalf of the Company (stockholder derivative actions). The provisions do not
provide indemnification for liability in proceedings arising out of personal
benefit improperly received or where a person is found liable to the Company.
31
<PAGE>
PART F/S
FINANCIAL STATEMENTS PAGE
Independent Auditor's Report..............................................F - 1
Balance Sheet,
July 31, 2000 and 1999..................................................F - 2
Statements of Income,
For the Years Ended July 31, 2000 and 1999..............................F - 4
Statements of Cash Flows,
For the Years Ended July 31, 2000 and 1999..............................F - 5
Statements of Changes in Stockholders' Equity,
For the Years Ended July 31, 2000 and 1999..............................F - 7
Notes to Financial Statements.............................................F - 8
Interim Financial Statements.............................................F - 13
2. Financial Statement Schedules
All Schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
32
<PAGE>
PART III
Item 1 & 2. Index to and Description of Exhibits
The following exhibits are included as part of this report:
Exhibit
Number Exhibit
3.1 Certificate of Incorporation The Voyager Group, Inc.(1)
3.2 Corporate By-Laws of The Voyager Group Inc.(1)
3.3 Amended and Restated Certificate of Incorporation of The Voyager
Group, Inc.(1)
27.1 Financial Data Schedule(2)
(1) Incorporated by reference to the Company's Form 10-KSB filed on
December 14, 2000.
(2) Incorporated by reference to the Company's Form 10-KSB filed on
December 14, 2000, and Form 10-QSB filed on December 21, 2000.
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
The Voyager Group, Inc.
Registrant
DATE: January 10, 2001 By: /S/ Marvin Higbee
---------------------
Marvin Higbee, President, C.E.O., and
Chairman of the Board
DATE: January 10, 2001 By: /S/ Peter Powderham
-----------------------
Peter Powderham, Executive President,
Business Development, Secretary and
Director
DATE: January 10, 2001 By: /S/ Richard Higbee
----------------------
Richard Higbee, Executive President of
Sales & Marketing, Treasurer, and
Director
DATE: January 10, 2001 By: /S/ Meitzu Chen
-------------------
Meitzu Chen, Executive President of
Product Development, and
Director
34
<PAGE>
THE VOYAGER GROUP, INC.
- : -
INDEPENDENT AUDITORS' REPORT
JULY 31, 2000 AND 1999
<PAGE>
Independent Auditor's Report
To the Stockholders
of The Voyager Group, Inc.
We have audited the balance sheet of The Voyager Group, Inc. as of July 31,
2000 and 1999, and the related consolidated statements of income, stockholders'
equity, and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects the financial position of The Voyager Group, Inc. as of
July 31, 2000 and 1999 and the results of its operations and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.
Respectfully submitted
/s/ ROBISON, HILL & CO.
Certified Public Accountants
Salt Lake City, Utah
September 16, 2000
F - 1
<PAGE>
THE VOYAGER GROUP, INC.
BALANCE SHEETS
July 31,
---------------------------
2000 1999
--------- ---------
ASSETS
Current Assets:
Cash ..................................... $ -- $ 16,539
Inventory ................................ 146,304 113,504
Prepaid Expenses ......................... 4,960 1,575
Accounts Receivable ...................... 7,295 6,536
--------- ---------
Total Current Assets .................. 158,559 138,154
--------- ---------
Fixed Assets, at Cost:
Furniture and Equipment .................. 136,527 140,135
Leasehold Improvements ................... 6,741 6,741
Less - Accumulated
Depreciation ......................... (44,063) (89,716)
--------- ---------
99,205 57,160
--------- ---------
Other Assets:
Intangible Assets, Net ................... -- 25,000
Deposits ................................. 6,752 5,327
--------- ---------
Total Other Assets .................... 6,752 30,327
--------- ---------
Total Assets .......................... $ 264,516 $ 225,641
========= =========
F - 2
<PAGE>
THE VOYAGER GROUP, INC.
BALANCE SHEETS
(Continued)
July 31,
---------------------------
2000 1999
----------- -----------
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable ............................. $ 42,107 $ 80,630
Accrued Liabilities .......................... 20,609 32,301
Accrued Commissions .......................... 12,837 30,934
Shareholder Advances ......................... 8,726 --
Parent Company Advances ...................... -- 2,222,536
Bank Indebtedness ............................ 99,233 109,806
Lease Obligations - Current Portion .......... 26,974 --
Shareholder Loans ............................ 416,983 3,087
----------- -----------
Total Current Liabilities ................. 627,469 2,479,294
----------- -----------
Long Term Liabilities:
Lease Obligations ............................ 35,560 --
----------- -----------
Total Liabilities ......................... 663,029 2,479,294
----------- -----------
Stockholders' Equity
Preferred Stock, $.001 par value;
Series J; 100 shares authorized,
100 and 0 shares issued and
outstanding .............................. -- --
Common Stock; $.001 par value;
100,000,000 shares authorized;
9,856,413 and 1000 shares
issued and outstanding July 31, 2000
and 1999, respectively ..................... 9,856 1
Additional Paid-in Capital ................... 2,716,644 5,321
Retained Earnings (Deficit) .................. (3,125,013) (2,258,975)
----------- -----------
Total Stockholders' Equity ................ (398,513) (2,253,653)
----------- -----------
Total Liabilities, and
Stockholders' Equity .................... $ 264,516 $ 225,641
=========== ===========
The accompanying notes are an integral part of these financial statements.
F - 3
<PAGE>
THE VOYAGER GROUP, INC.
STATEMENTS OF INCOME
For the Year Ended
July 31,
----------------------------
2000 1999
----------- -----------
Sales, net of allowances
of $2,534 and $13,594 ........................ $ 670,234 $ 1,287,419
Cost of Sales ................................ 209,180 507,496
----------- -----------
Gross Margin ............................ 461,054 779,923
Selling & Marketing .......................... 575,074 620,274
Research & Development ....................... -- 50,000
General & Administrative ..................... 679,789 1,332,273
----------- -----------
Net Income (Loss) from
Operations ............................... (793,809) (1,222,624)
Other Income (Expense)
Interest ................................... (35,120) (15,459)
Write Down of Assets ....................... (36,309) --
----------- -----------
Income (Loss) Before Income Taxes ............ (865,238) (1,238,083)
----------- -----------
Income Tax Benefit (Expense) ................. (800) (173,099)
----------- -----------
Net Income (Loss) ............................ $ (866,038) $(1,411,182)
=========== ===========
Earnings (Loss) Per Common Share:
Basic & Diluted ............................ $ (0.26) $ (1,411.18)
=========== ===========
Weighted Average Shares Outstanding:
Basic & Diluted ............................ 3,295,472 1,000
=========== ===========
The accompanying notes are an integral part of these financial statements.
F - 4
<PAGE>
THE VOYAGER GROUP, INC.
STATEMENTS OF CASH FLOWS
For the Year Ended
July 31,
-----------------------
2000 1999
--------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) .......................... $(866,038) $(1,411,182)
Adjustments to Reconcile Net Loss
to Net Cash Used in Operating Activities:
Depreciation and Amortization ............ 61,069 27,273
Non Cash Expenses ........................ 498,643 1,138,256
Loss on Disposal of Assets ............... 36,309 --
Changes in Assets and Liabilities-
Increase in Accounts Receivable ...... (758) 22,336
Increase in Prepaid Expenses ......... (3,385) (775)
Increase in Inventory ................ (32,800) 59,626
Increase in Other Assets ............. (1,425) 172,301
Increase in Accounts Payable ......... (38,523) 48,848
Increase in Accrued Liabilities ...... (8,110) (57,083)
Increase in Accrued Commissions ...... (18,096) (17,517)
--------- -----------
Net Cash Provided by Operating Activities (373,114) (17,917)
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase Furniture and Equipment ........... (102,662) --
--------- -----------
Net Cash Provided by Investing Activities (102,662) --
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Capital Lease Obligations ..... 82,412 --
Payments of Capital Lease Obligations ....... (19,878)
Proceeds from Bank Indebtedness ............. --
Repayments of Bank Indebtedness ............. (10,573)
Shareholder Advances ........................ 8,726 --
Proceeds from Shareholder Loans ............. 398,550 34,456
--------- -----------
Net Cash Provided by Financing Activities 459,237 34,456
--------- -----------
Net Increase in Cash and Cash Equivalents ... (16,539) 16,539
Cash and Cash Equivalents at Beginning of Year 16,539 --
--------- -----------
Cash and Cash Equivalents at End of Year ... $ -- $ 16,539
========= ===========
F - 5
<PAGE>
THE VOYAGER GROUP, INC.
STATEMENTS OF CASH FLOWS
(Continued)
For the Year Ended
July 31,
---------------------
2000 1999
------- -------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash Paid During the Year For:
Interest ....................................... $19,775 $15,459
Income Taxes ................................... $ 800 $ 800
The accompanying notes are an integral part of these financial statements.
F - 6
<PAGE>
THE VOYAGER GROUP, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Stock Additional
Series J Common Stock Paid-in Retained
Shares Amount Shares Amount Capital Earnings
------ --------- --------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance July 31, 1998 ....... -- $ -- 1,000 $ 1 $ 5,321 $ (847,793)
Net Loss .................... -- -- -- -- -- (1,411,182)
------ --------- ---------- --------- ---------- ------------
Balance July 31, 1999 ....... 1,000 1 5,321 (2,258,975)
Shares issued in spin off ... 100 -- 9,855,413 9,855 2,763,600 --
Net Loss .................... -- -- -- -- -- (892,455)
------ --------- ---------- --------- ---------- -----------
Balance July 31, 2000 ....... 100 $ -- 9,856,413 $ 9,856 $2,768,921 $(3,151,430)
====== ========= ========== ========= ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 7
<PAGE>
THE VOYAGER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2000, AND 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for The Voyager Group, Inc. is
presented to assist in understanding the Company's financial statements. The
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.
Organization and Basis of Presentation
The Company was first incorporated in the State of Delaware on January 5,
1995. On July 17, 1996 the Company entered into an agreement of reorganization
with Voyager Group USA-Brazil, Ltd. (a Nevada Corporation) (the "Parent
Company")whereby the Company became a wholly owned subsidiary of the Parent
Company.
On March 31, 2000, the Parent Company did spin off the Company, pursuant to
which the Company is no longer a wholly owned subsidiary of the Parent Company.
In accordance with the spin off, holders of the Parent Company Common Stock
received one share of the Company's Common Stock for each share of the Parent
Company Common Stock owned immediately prior to the spin off, and holders of the
Parent Company Series J Convertible Preferred Stock received one share of the
Company's Series J Convertible Preferred Stock for each share of the Parent
Company Series J Convertible Preferred Stock owned immediately prior to the spin
off.
Nature of Business
The Company's independent distributors distribute dietary supplements and
personal care products through a multi-level marketing network. The products are
formulated to appeal to the general public and address overall health
considerations.
Inventories
Inventories consist of dietary and personal care products and related
materials and are stated at the lower of cost (first-in, first-out method) or
market, or net realizable value.
Revenue Recognition
The Company recognizes revenue from product sales at the time of shipment.
Income Taxes
The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 requires recognition of deferred
income tax assets and liabilities for the expected future income tax
consequences, based on enacted tax laws, of temporary differences between the
financial reporting and tax bases of assets and liabilities.
F - 8
<PAGE>
THE VOYAGER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2000, AND 1999
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Depreciation
Depreciation is provided at rates based on estimated useful service lives
(five to seven years for office furniture and fixtures), using accelerated
methods.
Maintenance and repairs are charged to operations; betterments are
capitalized. The cost of property sold or otherwise disposed of and the
accumulated depreciation thereon are eliminated from the property and related
accumulated depreciation accounts, and any resulting gain or loss is credited or
charged to income.
Amortization
Intangible assets are amortized over useful life.
Cash Equivalents
For the purpose of reporting cash flows, the Company considers all highly
liquid debt instruments purchased with maturity of three months or less to be
cash equivalents to the extent the funds are not being held for investment
purposes.
Earnings (Loss) Per Share
The effect of outstanding common stock equivalents, including Convertible
Preferred Stock Series J are anti-dilutive for the years ended July 31, 2000 and
1999 and are thus not considered.
The reconciliations of the numerators and denominators of the basic
and dilutedearnings per share computations are as follows:
2000 1999
----------- -----------
NUMERATOR
Net Loss ....................................... $ (892,455) $(1,411,182)
Net Loss To Common Stockholders ................ $ (892,455) $(1,411,182)
=========== ===========
DENOMINATOR
Weighted Average Number of Common Shares ....... 3,295,472 1,000
=========== ===========
F - 9
<PAGE>
THE VOYAGER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2000, AND 1999
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Concentration of Credit Risk
The Company performs ongoing credit evaluations of its customers' financial
condition and generally does not require collateral. The Company maintains
reserves for estimated credit losses. Its accounts receivable balances are
primarily domestic. No customer accounts for more than 10% of sales.
The Company has no significant off-balance-sheet concentrations of credit
risk such as foreign exchange contracts, options contracts or other foreign
hedging arrangements.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made in the 1999 financial statements
to conform with the 2000 presentation.
NOTE 2 - PREFERRED STOCK
The Company created convertible Preferred Stock Series J-1999, authorizing
the issuance of 100 shares of convertible preferred stock to be sold, with a par
value of $.001. The preferred stock are convertible at a ratio of 220,000 shares
of common stock per preferred share converted. In the event of any voluntary or
involuntary liquidation, the holders of Series J preferred stock are entitled to
an amount equal to the net book value of the corporation plus all unpaid
dividends, before any distributions to holders of Common Stock, or any other
series of preferred stock of the corporation by reason of any voluntary or
involuntary liquidation, dissolution or winding up of the corporation unless
each holder of series J shall have received all amounts to which such series J
holders are entitled. The preferred stock is entitled to vote 220,000 votes per
preferred share.
F - 10
<PAGE>
THE VOYAGER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2000, AND 1999
(Continued)
NOTE 2 - PREFERRED STOCK (Continued)
Convertible Preferred Stock Series J also includes a royalty certificate
for each "Major Investor" (meaning investors owning over 10 shares of Series J
preferred stock or common stock issued upon conversion thereof. The royalty
certificates represent a perpetual royalty payment of four percent on or before
the 15th of each month following the starting month when gross sales of the
Company exceeds $120,000 per month.
NOTE 3 - RELATED PARTY TRANSACTIONS
During the year ended July 31, 2000, two officers of the Company loaned
$398,550 to the Company in the form of promissory notes bearing interest at 7.5%
and payable upon demand. Interest on these notes accrue until paid. The notes
provide for a perpetual payment of 2% of the total Monthly Gross Sales in any
month the Company's sales reach or exceed $200,000. In the event of default, the
notes shall bear interest at an alternative rate equal to an additional 2%. As
of July 31, 2000, $416,983.37 including interest was due on these promissory
notes.
During the year ended July 31, 2000 the Company reimbursed approximately
$2,850 in lodging expenses of the Company's CEO during the period from
September, 1, 1999 through November 30, 1999. Additionally, the Company agreed
to pay lodging expenses on behalf of the Company's CEO of approximately $1,500
per month beginning December 1, 1999 through November 30, 2000. These payments
and reimbursements were in lieu of a salary and have been reported in the
accompanying financial statements as General & Administrative Expenses.
NOTE 4 - RENT EXPENSE
The Company occupies certain sales offices under a noncancellable lease.
The lease is for one year expiring September 30, 2001, after which the Company
has an option to renew at a 4% increase. The current lease requires minimum
rental payments of $3,599 per month ($43,188 per year).
NOTE 5 - INCOME TAXES
As of July 31, 2000, the Company had a net operating loss ("NOL") carry
forward for income tax reporting purposes of approximately $3,000,000 available
to offset future taxable income. This net operating loss carry-forward expires
at various dates between July 31, 2011 and 2019. An NOL generated in a
particular year will expire for federal tax purposes if not utilized within 15
years (for years beginning before August 6, 1997, and 20 years after August 6,
1997. Additionally, the Internal Revenue Code contains provisions which could
reduce or limit the availability and utilization of these NOLs if certain
ownership changes have taken place or will take place. In accordance with
F - 11
<PAGE>
THE VOYAGER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2000, AND 1999
(Continued)
NOTE 5 - INCOME TAXES (Continued)
SFAS No. 109, a valuation allowance is provided when it is more likely than not
that all or some portion of the deferred tax asset will not be realized. Due to
the uncertainty with respect to the ultimate realization of the NOLs, the
Company established a valuation allowance for the entire net deferred income tax
asset of $572,000 as of July 31, 1999, which includes $3,000 from the difference
between financial accounting and tax depreciation and $569,000 from net
operating loss carry forward. Also consistent with SFAS No. 109, an allocation
of the income (provision) benefit has been made to the loss from continuing
operations for the year ended July 31, 1999.
The components of the income tax (benefit) provision are as follows:
July 31,
--------------------------
2000 1999
--------- ----------
Current
Federal ............................... $ -- $ --
State ................................. 800 800
Deferred
Federal ............................... -- 108,423
State ................................. -- 63,876
--------- ----------
Total ............................. $ 800 $ 173,099
========= ==========
NOTE 6 - BANK INDEBTEDNESS
The Company has three lines of credit from banks with a total amount owing
of $99,233 and $109,806 as of July 31, 2000 and 1999 respectively. These lines
carry interest rates from 12.25% to 14.80%. The total available credit from
these sources is $110,000.
F - 12
<PAGE>
THE VOYAGER GROUP, INC.
BALANCE SHEETS
(Unaudited)
October 31, July 31,
2000 2000
--------- ---------
ASSETS
Current Assets:
Cash ...................................... $ 196,923 $ --
Inventory ................................. 157,340 146,304
Prepaid Expenses .......................... 19,785 4,960
Accounts Receivable ....................... 8,338 7,295
--------- ---------
Total Current Assets .................... 382,386 158,559
--------- ---------
Fixed Assets, at Cost:
Furniture and Equipment ................... 167,436 136,527
Leasehold Improvements .................... 6,741 6,741
Less - Accumulated
Depreciation ............................ (54,098) (44,063)
--------- ---------
120,079 99,205
--------- ---------
Other Assets:
Deposits .................................. 7,152 6,752
--------- ---------
Total Other Assets ...................... 7,152 6,752
--------- ---------
Total Assets ............................ $ 509,617 $ 264,516
========= =========
F - 13
<PAGE>
THE VOYAGER GROUP, INC.
BALANCE SHEETS
(Continued)
(Unaudited)
October 31, July 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 2000
----------- -----------
Current Liabilities:
Accounts Payable ........................... $ 47,324 $ 42,107
Accrued Liabilities ........................ 49,802 20,609
Accrued Commissions ........................ 16,254 12,837
Shareholder Advances ....................... 26,578 8,726
Bank Indebtedness .......................... 98,523 99,233
Lease Obligations - Current Portion ........ 27,640 26,974
Shareholder Loans .......................... 450,336 416,983
----------- -----------
Total Current Liabilities ............... 716,457 627,469
----------- -----------
Long Term Liabilities:
Lease Obligations .......................... 28,394 35,560
----------- -----------
Total Liabilities ....................... 744,851 663,029
----------- -----------
Stockholders' Equity
Preferred Stock, $.001 par value;
5,000,000 shares authorized
Series J; 100 shares issued and
outstanding .......................... -- --
Series F; 3,883 and 0 shares
issued and outstanding ............... 4 --
Common Stock; $.001 par value;
100,000,000 shares authorized;
985,641 issued and outstanding ........... 986 986
Additional Paid-in Capital ................. 3,016,735 2,725,514
Retained Earnings (Deficit) ................ (3,252,959) (3,125,013)
----------- -----------
Total Stockholders' Equity .............. (235,234) (398,513)
----------- -----------
Total Liabilities, and
Stockholders' Equity ................... $ 509,617 $ 264,516
=========== ===========
The accompanying notes are an integral part of these financial statements.
F - 14
<PAGE>
THE VOYAGER GROUP, INC.
STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended
October 31,
-------------------------
2000 1999
--------- ----------
Sales, Net ..................................... $ 144,143 $ 206,913
Cost of Sales .................................. 40,015 105,325
--------- ----------
Gross Margin .............................. 104,128 101,588
Selling & Marketing ............................ 57,239 116,560
General & Administrative ....................... 160,994 222,249
--------- ----------
Total Expenses ............................ 218,233 338,809
Operating Loss ................................. (114,105) (237,221)
Other Income (Expense)
Interest ...................................... (13,641) (3,491)
--------- ----------
Income (Loss) Before Income Taxes .............. (127,746) (240,712)
Income Tax Benefit (Expense) ................... (200) (200)
--------- ----------
Net Income (Loss) .............................. $(127,946) $ (240,912)
========= ==========
Earnings (Loss) Per Common Share:
Basic & Diluted ............................... $ (0.13) $(2,409.12)
========= ==========
Weighted Average Shares Outstanding:
Basic ......................................... 985,641 100
========= ==========
The accompanying notes are an integral part of these financial statements.
F - 15
<PAGE>
THE VOYAGER GROUP, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
October 31,
------------------------
2000 1999
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) ............................... $(127,946) $(240,912)
Adjustments to Reconcile Net
Income (Loss) to Net Cash
Used in Operating Activities:
Depreciation and Amortization .................. 10,035 6,807
Non-Cash Expenses .............................. -- 191,937
Changes in Assets and
Liabilities-
Increase in Accounts Receivable .............. (1,043) (1,218)
Increase in Prepaid Expenses ................. (14,825) (82,020)
Increase in Inventory ........................ (11,036) 31,219
(Increase) Decrease in Other Assets .......... (400) (9,925)
Increase in Accounts Payable ................. 5,217 (18,023)
Increase in Other Accrued Liabilities ........ 47,045 (4,956)
Increase in Accrued Commissions .............. 3,417 22,702
--------- ---------
Net Cash Provided by Operating
Activities ................................... (89,536) (104,389)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase Furniture and Equipment ................ (30,909) (538)
--------- ---------
F - 16
<PAGE>
THE VOYAGER GROUP, INC.
STATEMENTS OF CASH FLOWS
(Continued)
(Unaudited)
For the Three Months Ended
October 31,
-----------------------
2000 1999
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal Payments on Capital Leases .............. $ (6,500) $ --
Principal Payments on Bank Indebtedness ........... (710) --
Proceeds from Issuance of Preferred Stock ......... 291,225 --
Proceeds from Shareholder Loans ................... 33,353 100,000
--------- ---------
Net Cash Provided by
Financing Activities ............................ 317,368 100,000
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS .......... 196,923 $ (4,927)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR ................................. -- 16,539
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR .......... $ 196,923 $ 11,612
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash Paid During the Year For:
Interest ......................................... $ 13,642 $ 3,491
Income Taxes ..................................... $ -- $ --
The accompanying notes are an integral part of these financial statements.
F - 17
<PAGE>
THE VOYAGER GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2000
Basis of Presentation
The unaudited interim consolidated financial information of The Voyager
Group, Inc. (the "Company" ) has been prepared in accordance with Regulations
promulgated by the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. In the opinion of management,
the accompanying interim consolidated financial information contains all
adjustments, consisting of normal recurring adjustments, necessary to present
fairly the Company's financial position as of October 31, 2000, and results of
operations for the three months ended October 31, 2000. These financial
statements should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-KSB for the year ended July 31, 2000. The results of operations for the three
months ended October 31, 2000 may not be indicative of the results that may be
expected for the fiscal year ending July 31, 2001.
Series F Convertible Preferred Stock
During the quarter the Company authorized an offering under Rule 506 of
Series F Convertible Preferred Stock ("Series F"). Series F shares Convertible
into 100 common shares for each share of Series F. As of December 20, 2000,
3,883 of Series F have been sold.
Stock Split
On October 16, 2000 the Board of Directors authorized 10 to 1 reverse stock
split for the Company's common stock. All references in the accompanying
financial statements to the number of common shares and per-share amounts have
been restated to reflect the reverse stock split.
Voting Trust
On November 6, 2000, three officers and three shareholders contributed
117.316 (220,000 votes per share or 25,809,520 votes) into The Voting Trust
Company, Inc. (a newly formed Delaware corporation). As of December 20, 2000,
The Voting Trust Company, Inc. controls 56% of the outstanding voting shares.
F - 18
