-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E+Oj11TI3vT7cGZya89B2Nc5LjUecFEGOZ7zBWdTYkXxsrtbVQgLN/ZZJ8hY8OH4 D4QgwrfMiu560RBGGlDhsA== 0000844055-98-000003.txt : 19981123 0000844055-98-000003.hdr.sgml : 19981123 ACCESSION NUMBER: 0000844055-98-000003 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19981120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMAZON NATURAL TREASURES INC CENTRAL INDEX KEY: 0000844055 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 870460880 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 033-26109 FILM NUMBER: 98755692 BUSINESS ADDRESS: STREET 1: 4011 WEST OQUENDO ROAD STREET 2: SUITE C CITY: LAS VEGAS STATE: NV ZIP: 89118 BUSINESS PHONE: 7027964333 MAIL ADDRESS: STREET 1: 4011 WEST OQUENDO AVE STREET 2: STE C CITY: LAS VEGAS STATE: NV ZIP: 89119 FORMER COMPANY: FORMER CONFORMED NAME: CONCORD CAPITAL INC /UT/ DATE OF NAME CHANGE: 19960306 FORMER COMPANY: FORMER CONFORMED NAME: MULTIMEDIA FACTORY INC DATE OF NAME CHANGE: 19930825 FORMER COMPANY: FORMER CONFORMED NAME: CONCORD CAPITAL INC DATE OF NAME CHANGE: 19920703 10KSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10KSB Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1997 Commission File Number: 33-26109 Amazon Natural Treasures, Inc. Nevada 87-0460880 --------------------- ----------------- State of Incorporation IRS Employer ID Number 4011 West Oquendo Avenue, Suite C, Las Vegas, Nevada 89118 Registrant's Telephone Number: (702) 795-4333 Securities Registered Pursuant to Section 12 (b) of the Exchange Act: None Securities Registered Pursuant to Section 12 (g) of the Exchange Act: Common Stock Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes_X__ No______ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB ____X_____ Issuer's revenues for its most recent fiscal year (1997) $44,849 ------- State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of a specified date within the past 60 days. $2,888,602 a/o 11/10/98. State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. 13,022,502 a/o 11/10/98. Amazon Natural Treasures, Inc. Form 10KSB December 31, 1997 TABLE OF CONTENTS Page ------- PART I - ------ ITEM 1 - Description of Business ................................. 3 ITEM 2 - Description of Property ................................. 10 ITEM 3 - Legal Proceedings ....................................... 11 ITEM 4 - Submission of Matters to a Vote of Security Holders ..... 11 PART II - ------- ITEM 5 - Market for Common Equity and Related Stockholder Matters . 11 ITEM 6 - Management's Discussion and Analysis or Plan of Operation. 12 ITEM 7 - Financial Statements ..................................... 14 ITEM 8 - Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ...................... 27 PART III - -------- ITEM 9 - Directors, Executive Officers, Promoters and Control Persons;Compliance With Section 16 (a) of the Exchange Act.27 ITEM 10 - Executive Compensation .................................. 29 ITEM 11 - Security Ownership of Certain Beneficial Owners and Management .......................................... 30 ITEM 12 - Certain Relationships and Related Transactions .......... 31 ITEM 13 - Exhibits and Reports on Form 8-K .........................31 PART I ITEM 1. Description of Business Background Amazon Natural Treasures, Inc. (the "Company") was incorporated under the laws of the state of Utah on November 23, 1988, as Concord Capital,Inc., to acquire or merge with an existing business. On March 28, 1996, the Company acquired all of the issued and outstanding shares of common stock of Amazon Natural Treasures, Inc., a Nevada corporation and changed its business purpose to that of importing, developing, manufacturing and selling products derived from plants grown in Brazilian Amazon Rain Forest. General The Company is engaged in the business of importing phytogenics (as defined by the Company) products for processing and selling in the United States. The products are developed and/or derived from plants and other natural occurring objects which grow in the Amazon Rain Forest of Brazil. Acquiring the Plants The Company acquires its plants from Amazon Natural Treasures Commercial Inportadora Exportadora LTDA ("ANTCIE"), a Brazilian corporation which is owned by Michael Sylver, the Company's President and Treasurer, Domingos Loricchio Jr., the Company's Senior Executive Vice-President, Director and Secretary, and Carlos Franco. The transactions between the Company and ANTCIE are more favorable to the Company than can be obtained from independent third parties. ANTCIE acquires its plants from Brazilian Indians and other sources who the Company understands gather and/or acquire the same in or from the Brazilian Rain Forest where the plants grow wild.These items are also obtained from Brazilian plantations where specific plants are grown. Some products are obtained from independent manufacturers. ANTCIE is a Brazilian corporation formed for the purpose of transacting business in Brazil. As the Company has been instructed, under Brazilian law, only Brazilian corporations can export or import products from Brazil. Because of the complicated nature of the laws in Brazil, it was expeditious for the Company to have individual shareholders for ANTCIE rather than incorporating ANTCIE as a wholly owned subsidiary of the Company. No fees or compensation, other than disclosed herein, are paid to ANTCIE for transacting business in Brazil on behalf of the Company. The Company only reimburses ANTCIE for its out of pocket expenses. The Company also acquires semi-processed products through ANTCIE from native Brazilians known as Coboclos and finished products from third party manufacturers. In the case of the finished products, independent manufac- turers are utilized to produce a finished product formulated for use by the Company. -3- Some of these product formulations (in pill or tea form) have been developed by Dr. Loricchio individually or in a collaborative process. Dr. Loricchio presently sits as Chairman of the Board of Directors of the Company. Dr. Loricchio has granted a license to the Company to manufacture and sell products with his assistance in exchange for 5,000,000 shares of common stock (restricted). There are no patents for formulas and the same are consi- dered proprietary trade secrets. The Company and Dr. Loricchio have executed an agreement which prohibits divulging the formulas for the products. It is believed that, in the event that the formulas are released to the public, such action could have an adverse impact upon the financial development of the Company in that third parties, over whom the Company has no control, would be able to manufacture the pills, teas and other products, subject to acquiring the critical raw materials from Brazil. Importing and Manufacturing After the plants are acquired by ANTCIE, they are crushed, sterilized, and shipped to the Company's Las Vegas clean room. Once in the clean room, the plants and semi-processed products are processed into the final form such as capsules, globules,gel caps, and teas. The finished products are inventoried and stored until sold. The Company processes a majority of its products on site at its facilities in Las Vegas, Nevada. After completion of the foregoing, the products are sold and distributed on a retail and whole- sale basis. Retail Distribution The Company intends for its products to be bottled, boxed and shrink wrapped at the facilities in Las Vegas, Nevada, as resources permit. The products are then shipped to customers in containers including, corrugated boxes with bubble wrap to protect the contents. Products and Regulation The Company currently manufactures, distributes and/or formulates in excess of one hundred different phytogenic products. The Company intends for a majority of its products to be 100% pure (no fillers are added). The products are designed for human consumption. There is no scientific evidence to establish that the products are safe or beneficial for human consumption. The formulation, manufacturing, packaging, storing, labeling, advertising, distribution and sale of the Company's products are subject to regulation by one or more governmental agencies,including, but possibly not limited to: the Food and Drug Administration ("FDA"), the Federal Trade Commission ("FTC"), the Consumer Product Safety Commission ("CPSC"), the United States Department of Agriculture ("USDA"), the Environmental Protection Agency ("EPA"), and the United States Postal Service. -4- The Company's activities are also regulated by various agencies of the states, localities, and foreign countries in which the Company's products are manufactured, distributed, and/or sold. The government regulations require the Company and its suppliers to meet relevant good manufacturing practice ("GMP") regulations for the preparation, packing and storage of these products. GMP for dietary supplements have yet to be promulgated but are expected to be proposed. The 1994 Dietary Supplement Health and Education Act ("DSHEA") revises the provisions of the Federal Food, Drug and Cosmetic Act ("FFDCA") concerning composition and labeling of dietary supplements and, the Company believes, is generally favorable to the dietary supplement industry. The legislation created a new statutory class of "dietary supplements". This new class includes: vitamins, minerals, herbs, amino acids and other dietary substances for human use to supplement the diet and, the legislation "grandfathered", with certain limitations, dietary ingredients that were on the market before October 15, 1994. A dietary supplement which contains a new dietary ingredient (i.e., not on the market before October 15, 1994) will require evidence of a historical use or other evidence of safety establishing that it is reasonably expected to be safe. Manufacturers of dietary supplements which make a "statement of nutritional support" must have substantiation that the statement is truthful and not misleading. As a marketer of dietary supplements and other products that are ingested by consumers, the Company is subject to the risk that one or more of the ingre- dients in its products may become the subject of adverse regulatory action. Certain products sold by the Company may be labeled or be classified as over-the-counter ("OTC") drugs, as opposed to dietary supplements, conventional foods and personal care items. Many OTC drug products do not require pre-approval by the FDA but, must comply with applicable OTC monographs, which prescribe ingredients and appropriate labeling language. In addition, the Company may have to register and file annual drug listing information with the FDA. Because the FDA could take the position that claims made with respect to any product of the Company fall within the OTC monograph, the regulatory status of some of the Company's products is or could become unclear. If any enforcement were undertaken, the Company could be required to relabel or reformulate such products, which the Company believes could have a material adverse effect on the Company and the sale of such products. The FTC, which exercises jurisdiction over the advertising of all of the Company's products, has in the past several years instituted enforcement actions against several dietary supplement companies for false or misleading advertising of certain products. These enforcement actions have resulted in consent decrees and monetary payments by the companies involved. In addition, the FTC has increased its scrutiny of the use of testimonials, which are -5- utilized by the Company. While the Company has not been the target of FTC enforcement action for the advertising of its products, there can be no assurance that the FTC will not question the Company's advertising or other operations in the future. The Company is unable to predict the nature of any future laws, regulations, interpretations, or applications nor can it predict what effect additional governmental regulations or administrative order, when and if promulgated, would have on its business in the future. They could, however, require the reformulation of certain products which the Company may not be able to reformulate, imposition of additional record keeping requirements, expanded documentation of the properties of certain products, expanded or different labeling and scientific substantiation regarding product ingredients, safety or usefulness, which the Company may not be able to do. Any or all of these requirements would have a material adverse effect on the Company's results of operations and financial condition. Product Liability The Company maintains product liability insurance. Because the Company's products are ingested and are/or applied to the customer's body, the potential for injury and resulting claims exists. Compliance Procedures The Company has no compliance procedures, however, it does from time to time, consult attorneys and undertakes to utilize its own diligence in seeking to comply with regulations set forth under the 1994 Dietary Supplement Health and Education Act ("DSHEA"). Marketing The Company's marketing plan remains the same as it has been since the Company's inception, in that, as permitted by available capital, it will pro- mote the sale of its products with advertisements placed in one or more of the widely circulated health magazines. It is anticipated, that the magazines may furnish the Company with a list of their subscribers which will allow the Company to personally approach those individuals through direct mail. The Company also proposes to market its products through the publication of its own catalog. As permitted by available capital, the Company's marketing plan for the next 12 months envisions the implementation of a multi-dimensional marketing campaign. This campaign is to include the use of direct mail to qualified leads. Additionally, the Company plans to place advertising in establishing and widely circulated health-related publications. Subsequently, this will be broadened to include general and other special interest publications. -6- Further, plans include the placing of television and radio advertisements and, the sales of products with one or more of the television shopping networks. The present "web-site" will be upgraded and made more attractive and, it is hoped, that increased sales revenue will be realized through "on-line" ordering. Competition The Company competes with other health and food providers, many of which have established markets and can rely on greater resources than is presently available to the Company. Material Contracts In addition to those contracts set forth in the previous 10KSB, on May 5, 1997, the Company entered into a five year agreement with C.A. Gama Franco ("Franco") wherein Franco was retained by the Company to open an office and/ or lab in Manaus, Brazil, obtain all necessary certificates and act as the Company's representative in Manaus, Brazil, hire and supervise all necessary employees, administer operational funds provided by the Company, be respon- sible for the exportation of the Company's products to Las Vegas, Nevada, and keep the Company apprised of his activities in Brazil. In consideration of the foregoing, the Company agreed to pay Franco the sum of $4,000 per month, issued Franco 9,000 restricted shares of common stock, pay additional compensation as the Company deems appropriate, issue two round trip airfare tickets between the cities of Manaus and Sao Paulo, Brazil, and pay all of Franco's pre- approved expenses. As of the date hereof, the Company has paid Franco $36,000. Offices The Company's Las Vegas warehouse, laboratory, and offices are located at 4011 West Oquendo Avenue, Suite C, Las Vegas, Nevada 89118 which are leased pursuant to a written lease. The monthly rental payments are $2,835. The Company leases additional warehouse, laboratory, and offices at 3977 West Oquendo Avenue in Las Vegas which are leased from Henry Sanchez for three years, beginning September 24, 1996, pursuant to a written lease. The monthly rental payments are $1,860. -7- The Company also maintains an office at 470 No. Rivermeade Dr., Unit #7, Concord, Ontario, Canada L4K 3R8. The Company has leased the foregoing premises from Les Freedman in consideration of 15,250 shares of common stock. The lease is oral and is intended to run for a period of sixty months. Employees In addition to the Company's officers, the Company employs 19 full time employees as of December 31, 1997. The Company intends to add or decrease employees as necessary. Risk Factors 1. Lack of Compliance with Federal Laws and Regulations. The Company is subject to oversight by the Securities and Exchange Commission as well as other federal agencies. A risk factor associated with the Company, as with the commencement of any new company or business can be up to and including, cessation of the business due to lack of sufficient revenue or funding. Additionally, as to the Company's products, it believes that they may be exempt from many of the regulations of one or more government agencies, including the Food and Drug Administration ("FDA"), the Federal Trade Commission, the Consumer Product Safety Commission, the United States Depart- ment of Agriculture, the Environmental Protection Agency, United States Department of Customs and the United States Postal Service. The Company further believes it does not have to comply with some, but not all of the regulations of various agencies of the states, localities and foreign coun- tries in which the Company's products are manufactured, distributed, and sold. The FDA, in particular, may regulate the formulation, manufacture and labeling of foods and dietary supplements, such as those distributed by the Company, if applicable, unless exempted pursuant to the Dietary Supplement Health and Education Act of 1994 ("DSHEA"). The Company's legal basis for such is the DSHEA and accordingly, if the Company is incorrect in its position, the Company could be subjected to civil suits, which could result in the termina- tion of the Company's operations. 2. Going Concern Uncertainty. The auditors of the financial statements of the Company have stated that the financial statements have been prepared on a going concern basis for the year ended December 31, 1997. That basis of accounting contemplates the realization of assets and the satisfaction of liabilities in the normal course of conducting business operations. As shown in the financial statements, operations for the year ended December 31, 1995 -8- resulted in a net loss of $17,977, operations for the year ended December 31, 1996 resulted in a net loss of $7,715,709 (includes a non-cash loss of $7,495,000 due to a loss on writedown of intangibles), operations for the year ended December 31, 1997 resulted in a net loss of $1,096,465, and, as of that date the Company had an accumulated deficit of $8,830,151. The Company's future is dependent on its ability to continue to obtain additional capital or adequate financing in order to achieve a level of sales adequate to support its operations and meet its financial obligations. 3. No Patents. The Company has not applied for a patent for any of its products. Even if it does however, there can be no assurance that the patent application will be issued as a patent, or the issued patent will provide the Company with significant competitive advantages, or that challenges will not be instituted against the validity or enforceability of any patents owned by the Company, or, if instituted, that such challenges will not be successful. See Item 1 - Description of Business. 4. Additional Financing Will be Necessary. The adequacy of funds will depend upon (a) the ability of the Company to successfully market its products, (b) the ability of the Company to attain profitable operations, and (c) obtain additional capital needs that may arise to satisfy product demand or company needs. There can be no assurance that the Company will be successful in obtaining any additional required financing or that, if such financing is obtained, its terms and conditions will be favorable. 5. Dependence Upon Management. The success of the Company is dependent upon the efforts of the Company's directors and executive officers. The Company has not obtained key-man life insurance coverage on any of its officers, directors, or employees. The Company's business could be adversely affected if Dr. Loricchio, his son, Domingos Loricchio, or Mr. Sylver; the Chairman of the Board, Senior Executive Vice-President, and President, respectively, became unable or unwilling to continue to serve in their respective capacities. See "Management" and "Conflict of Interest". 6. No Dividends Anticipated. At the present time the Company does not anticipate paying dividends, cash or otherwise, on its shares of Common Stock or Prederred Stock in the foreseeable futures. Future dividends will depend on earnings, if any, of the Company, its financial requirements, and other factors. 7. Conflicts of Interest. One or more of the Directors are associated with Amazon Natural Treasures Commercial Importadora Exportadora LTDA ("ANTCIE"), a Brazilian corporation which is owned by Michael Sylver, the Company's President and Treasurer, Domingos Loricchio, Jr., the Company's Director, Secretary and Senior Executive Vice-President, and Carlos Franco. Further, Domingos Loricchio and Michael Sylver are associated with Abracel USA Ltd. which has loaned money to the Company and/or been provided short-term financing by the Company. See Item 1 - Description of Business. Further, the Company has hired or utilized certain of the Company's officers and/or Directors relatives to perform work or provide materials to the Company. -9- 8. Suitability Standards. The Company recommends that its shares of Common Stock be purchased only by persons who have the knowledge, experience and capacity to evaluate the merits of such a purchase, and who can afford the loss of their entire investment in the shares of Common Stock. 9. Limited Public Market for Securities. At present, only a limited public market exists for the Company's securities and there is no assurance that a regular trading market will develop. A shareholder may, therefore, be unable to resell the shares of Common Stock should he or she desire to do so or he or she may receive a substantially reduced amount from that which was initially paid for the shares of Common Stock. Furthermore, it is unlikely that a lending institution will accept the Company's shares of Common Stock as pledged collateral for loans unless a regular trading market develops. 10. No Cumulative Voting and Preemptive Rights of Control. There are no preemptive rights in connection with the Company's shares of Common Stock. Shareholders may be further diluted in their percentage ownership of the Company's shares of Common Stock in the event additional shares are issued by the Company in the future. Cumulative voting in the election of Directors is not allowed. Accordingly, the holders of a majority of the shares of Common Stock and/or Preferred Stock, present in person or by proxy, will be able to elect all of the Company's Board of Directors. 11. Possible Contingent Liability for Prior Securities Sales of Unregu- lated Securities. The shares of Common Stock sold to certain of the Company's shareholders were not registered under the act or any state securities laws. The Company believes that such sales did not involve a public offering within the meaning of Section 4(2) of the Act. In the event that an exemption for such sales is later determined not to be available to the Company or that such offerings should be integrated with the public offering, the Company may be required to rescind such sales as are not entitled to any exemption or take such other steps as may be necessary to comply with federal and state securities laws for such sales. The Company does not intend to rescind such sales. 12. Control by Management. Management of the Company controls 79.62% of the Company's outstanding shares of Common Stock and accordingly, will be able to elect all of the directors and thereby direct the policies of the Company. See "Principal Shareholders". ITEM 2. Description of Properties. The Company owns no real property. It leases its office space, warehouse space and laboratory facilities from third parties at 4011 West Oquendo Avenue and 3977 West Oquendo Avenue, Las Vegas, Nevada 89118. The Company also leases space at 470 No. Rivermeade Dr., #7, -10- Concord, Ontario, Canada L4K 3R8. The Company owns the equipment which it uses to manufacture, package, and ship products. Item 3. Legal Proceedings as of December 31, 1997. The Company is not the subject of any pending legal proceedings; and to the knowledge of management, no proceedings are presently contemplated against the Company by any federal, state, or local governmental agency. The Company initiated an action in the Clark County, Nevada District Court regarding title to shares of its Common Stock. Further, to the knowledge of management, no director or executive officer is party to any action in which any has an interest adverse to the Company. Item 4. Submission of Matters to a Vote of Security Holders. Changing the Company's domicile to Nevada. Item 5. Market for Registrant's Common Equity and Related Stockholders Matters. (a) Market Information. The Registrant's securities are traded over-the-counter on the Bulletin Board operated by the National Association of Securities Dealers, Inc. under the symbol AZNT. The table shows the high and low bids of Regis- trant's Common Stock during the last two fiscal years. Quotations reflect interdealer prices without retail markup, markdown, or commissions and may not necessarily represent actual transactions. The Registrant's securities began trading actively in April 1996. Since the foregoing date, the high bid has been $2.75 and the low bid has been $.15. -11-
Bid Quarter Ended High Low December 31, 1997 $3.50 $1.875 September 30, 1997 $3.25 $1.75 June 30, 1997 $3.50 $1.75 March 31, 1997 $2.50 $1.875 December 31, 1996 $1.00 $0.625 September 30, 1996 $1.00 $0.625 June 30, 1996 $1.50 $1.375 March 31, 1996 $ -0- $ -0- December 31, 1995 $ -0- $ -0- September 30, 1995 $ -0- $ -0- June 30, 1995 $ -0- $ -0- March 31, 1995 $ -0- $ -0-
Item 6. Management's Discussion and Analysis or Plan of Operation. General The Company acquired all of the issued and outstanding shares of Common Stock of Amazon Natural Treasures, Inc., a Nevada corporation, on March 28, 1996 in exchange for 6,100,000 shares of the Company's Common Stock. The acquisition effectively changed the Company's operation from a blank check entity to a corporation engaged in business of importing, developing, manufacturing, and selling products derived from plants grown in the Brazilian Amazon Rain Forest. Liquidity and Capital Resources For the years ended December 31, 1996 and 1997, operating activities provided (used)$(156,843) and $(1,330,867) respectively; financing activities provided (used) $159,268 and $2,125,814 respectively; and investing activities provided (used) $(9,156) and $(663,582) respectively. Working capital for the same periods was $(67,589) and $162,501, an increase from 1996 to 1997 of $230,090. This was primarily a result of financing inventory with equity rather than debt. For 1996 and 1997 the Company was indebted to Directors, Officers, and other related parties in the amounts of $41,943 and $193,137 respectively. The Company intends to raise additional capital which is needed through the sale of Common Stock. There can be no assurance that the Company will be successful in the sale of its Common Stock. In the event that the Company does not generate sufficient sales or raise additional capital, it will have to curtail operations. The Company has no outside line of credit available and is dependent on cash from operations (which it anticipates to be negative for the coming year), contributions by officers and directors, and other financing arrangements to meet its obligations; however, there is no assurance such financing will be available when needed. As of December 31, 1997, the Company did not have any commitments for significant capital expenditures. -12- Results of Operations The Company was a dormant blank check entity on December 31, 1995 and accordingly had limited revenues from brief operations. The Company began operations on March 28, 1996. The Company had a net loss in 1996 of $7,715,709. The loss for 1996 was previously reported as $220,710. The increased loss, as shown in the restated financial statements incorporated herein, resulted from the correction of the treatment given to the Company's obtaining certain intangible assets in exchange for stock. The major factors contributing to the "hard" loss of $220,710 were: 1) insufficient revenues, 2) substantial operating expenses, 3) cost of goods sold, and 4) lack of adequate sales and marketing. Revenues were $34,975; cost of goods sold was $13,409; operating expenses were $3,318; and other expenses, exclusive of the $7,495,000 loss on impairment of intangible assets, were $239,051. The primary components of the other expenses were Consulting fees-$68,950; Rent/Lease expense-$32,248; Meals/Entertainment/Travel expense-$47,342; and Amortization and Depreciation-$24,139. For the year ended December 31, 1997 the Company experienced a net loss of $1,096,465. The primary components resulting in that loss were: revenues - $44,849; cost of goods sold - $22,078; operating expenses - $19,270; and other expenses of $1,102,464. While revenues only increased slightly, other expenses showed dramatic increases. This was primarily a result of the increased tempo in finding and developing markets and in the increased production process to get finished goods ready for sale. The major components of other expenses were Meals/Travel - $107,966; Amortization/Depreciation - $73,023; Professional Fees - $124,530; Salaries/Wages/Payroll Taxes - $237,586; and Consulting Fees of $144,823. The Company believes that it will have to start paying salaries to existing officers who have to date, worked without receiving compensation. On November 10, 1998, the Company cancelled the following shares of Common issued to the Principals (and related parties) and exchanged them for preferred voting only shares:
Name Number of Shares Exchanged Michael A. Sylver 17,169,813 Gary Sylver 1,999,000 Morris Sylver 10,000,000 Darral Sylver 152,000 Phillip Sylver 152,000 Robert S. Qualey 5,222,000 Domingos Loricchio 7,110,000 Domingos Loricchio Jr. 5,500,000 Denise Loricchio 3,000,000 Roc and Sherri Pucci Jt Ten 1,814,300 Allan Sylver 305,000 Benita Sylver 371,000 ---------- Total Shares Exchanged 52,795,113
The aforementioned common shares were cancelled in exchange for preferred voting only shares for the reason that the Principals of the Corporation, as previously arranged in early 1998, wished to decrease the number of outstanding common shares seeing that the principals have no intention of selling any of their shares. The deduction of these 52,795,113 from the total outstanding shares leaves a total of outstanding common stock at 13,022,502. The Company has inititated legal action in the federal courts in the seeking the cancellation of another 9,740,000 shares of common stock. -13- Item 7. Financial Statements and Supplementary Data. Financial Statements and Supplementary Data begin on the following page. INDEPENDENT AUDITOR'S REPORT The Board of Directors and Stockholders Amazon Natural Treasures, Inc. 4011 West Oquendo Road, Suite C Las Vegas, NV 89118 We have audited the Balance Sheet of Amazon Natural Treasures, Inc. as of December 31, 1997 and the related Statements of Income, Retained Earnings, and Cash Flows for the year 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. The financial statements of Amazon Natural Treasures, Inc. as of December 31, 1996 before the restatement described in Note 17 were audited by other auditors whose report dated April 26, 1997 expressed an unqualified opinion with a going concern uncertainty on those statements. We conducted our audit in accordance with generally accepted auditing stan- dards. 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 esti- mates made by management, as well as evaluating the overall financial state- ment presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 1997 financial statements referred to above present fairly, in all material respects, the financial position of Amazon Natural Treasures, Inc. as of December 31, 1997, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. We also audited the adjustments described in Note 17 that were applied to restate the 1996 financial statements. In our opinion, such adjustments are appropriate and have been properly applied. As discussed in Note 3, the Company has numerous related party transactions and is dependent upon a related party supplier for its phytogenics products. In addition, as discussed in Note 1, the company is dependent on its ability to continue to operate within United States Government guide- lines for nutritional supplements. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 5, the Company has been in the development stage. Further, the Company has sustained losses of $8,830,151 since its inception on June 27, 1995 and has experienced cash flow problems. Realization of a major portion of the assets is depen- dent upon the Company's ability to meet its future financing requirements, and the success of future operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Las Vegas, Nevada July 17, 1998 -14- AMAZON NATURAL TREASURES, INC. (A Development Stage Company) Balance Sheets December 31, 1997 and 1996 [CAPTION] 1997 1996 ------------ ------------ ASSETS Current Assets: Cash $ 132,755 $ 1,390 Related Party Receivables (Note 3) 64,768 0 Stock Subscription Receivable 0 2,000 Inventories (Note 9) 388,214 38,149 Prepaid Expenses 13,414 0 -------- ------- Total Current Assets 599,151 41,539 Fixed Assets: Net of Depreciation (Note 7) 480,049 46,960 ------- ------ Other Assets: Licenses and Trademarks (Net - Note 12) 128,000 5,000 Refundable Deposits 63,209 5,670 Organization Costs (Net - Note 12) 41,646 7,024 ------- ------- Total Other Assets 232,855 17,694 ------- ------- TOTAL ASSETS $1,312,055 $106,193 ========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 208,014 $ 59,549 Bank Overdraft 4,423 0 Payroll Taxes Payable 7,993 1,161 Customer Deposits 0 5,000 Other Accrued Expenses 23,083 1,475 Notes Payable-Current Portion (Note 11) 8,027 400 Accounts Payable-Related Parties (Note 3) 185,110 41,543 ------- ------ Total Current Liabilities 436,650 109,128 Long-Term Debt (Note 11) 13,289 0 ------- ------ Stockholders' Equity (Note 13): Common Stock 31,547 24,664 Additional Paid-in Capital 9,660,720 7,706,087 Accumulated Deficit (8,830,151) (7,733,686) ----------- ----------- Total Stockholders' Equity 862,116 (2,935) ---------- ---------- TOTAL LIABILITIES AND EQUITY $ 1,312,055 $ 106,193 =========== =========== The accompanying notes are an integral part of the financial statements. The financial statements and the notes should be read in conjunction with the auditor's report.
-15- AMAZON NATURAL TREASURES, INC. (A Development Stage Company) Income Statements Cumulative Since Inception (June 27,1995) and for the years ended December 31, 1997 and 1996
Cumulative 1997 1996 ---------- ---------- ---------- Net Sales $ 85,884 $ 44,849 $ 34,975 Cost of Sales 38,370 22,078 13,409 ---------- ---------- ---------- Gross Profit 47,514 22,771 21,566 Operating Expenses 22,588 19,270 3,318 ---------- ---------- ---------- Income from Operations 24,926 3,501 18,248 Other Income: Interest Income 2,561 2,467 94 Other Revenue 31 31 0 ---------- ---------- ---------- Total Other Income 2,592 2,498 94 Other Expenses: Amortization/Depreciation 97,162 73,023 24,139 Loss on Writedowm of Intangible 7,495,000 0 7,495,000 Meals/Travel 155,308 107,966 47,342 Insurance 24,131 23,302 829 Professional Fees 159,100 124,530 16,592 Maintenance and Repairs 11,561 7,461 4,100 Office Expense 68,005 58,913 9,092 Salaries, Wages & Payroll Tax 248,548 237,586 10,962 Advertising & Promotional 71,182 68,460 2,722 Printing 3,661 3,661 0 Rent/Lease Expenses 77,066 44,818 32,248 Research & Development 8,585 8,585 0 Warehouse/Lab Supplies 85,902 85,902 0 Interest Expense 9,417 7,942 1,475 Taxes & Licenses 3,428 3,014 414 Telephone 81,579 68,582 12,997 Utilities 2,454 1,401 1,053 Vehicle Expense 14,156 11,406 2,750 Consulting Fees 213,773 144,823 68,950 Miscellaneous 24,474 21,089 3,386 ------------ ------------ ----------- Total Other Expenses 8,836,515 1,102,464 7,734,051 ------------ ------------ ----------- Net Income Before Tax (8,830,151) (1,096,465) (7,715,709) Income Tax Expense 0 0 0 ----------- ------------- ----------- Net Income After Taxes $(8,830,151) $(1,096,465) $(7,715,709) ============ ============= ============ Loss Per Share $ (.04) $ (1.02) Weighted Average Number of Common Shares Outstanding 27,357,705 7,583,410 The accompanying notes are an integral part of the financial statements. The financial statements and the notes should be read in conjunction with the auditors' report.
-16- AMAZON NATURAL TREASURES, INC. (A Development Stage Company) Statement of Stockholders' Equity(Also see Note 13) From Inception (June 27,1995) to December 31, 1997
Common Stock Paid-in Accumulated ------------ Shares Amount Capital Deficit ------ ------ ------- ----------- Balance, June 27, 1995 97,151 $ 97 $ 71,743 $ (82,800) Shares Issued for Accounts Payable 1,760 2 48 Capital Contributed by Shareholders 626 Net Loss for Year Ended December 31, 1995 (16,337) Shares Issued for Cash Retroactively 116,161 116 16,384 Shares Issued for Services Retroactively Restated 10,913 11 299 Shares Issued for Recission Agreement Retroactively Restated 21,121 21 579 Shares Issued for Consulting Fees Retroactively Restated 52,894 53 1,450 Shares Issued to Effect Reverse Acquisition of Amazon Natural Treasures, Inc. 6,100,000 6,100 99,850 (17,977) Reverse Purchase Acquisition (96,529) 99,137 Balance, December 31, 1995 6,400,000 $ 6,400 $ 94,450 $ (17,977) Shares Issued for Cash @ $ .05/Share 500,000 500 24,500 Shares Issued for Cash @ $ .50/Share 54,000 54 26,946 Shares Issued to Acquire Licenses 5,000,000 5,000 7,495,000 Shares Issued in Satis- faction of Debt 12,060,360 12,060 55,242 Shares Issued for Services 650,000 650 9,949 Net Loss for Year Ended December 31, 1996 (7,715,709) Balance, December 31, 1996 24,664,360 $ 24,664 $7,706,087 $(7,733,686) Shares Issued for Cash: ----------------------- @$ .001/Share 25,000 25 0 @$ .50/Share 225,100 225 112,325 @$ .5714/Share 17,500 18 9,982 @$ .6667/Share 6,000 6 3,994 @$ .7692/Share 6,500 7 4,993 @$ .8333/Share 6,000 6 4,994 @$ .9091/Share 15,400 15 5,993 @$ .9901/Share 2,020 2 1,998 @$ .9950/Share 5,000 5 4,970 @$ .9999/Share 6,788 7 6,780 @$ 1.000/Share 2,561,153 2,561 2,503,057 Other Equity Transactions: Convert Debt to Equity 514,303 514 17,184 Cash Commissions Paid and Other Selling Expenses (788,016) Shares Cancelled (540,000) (540) NOTE 13 IS CONSIDERED ESSENTIAL TO THE UNDERSTANDING OF THE FOLLOWING INFORMATION Employee Bonuses 23,000 23 70,378 Pre-Merger Agreement Stock Issues 4,000,000 4,000 (4,000) Commissions (Investor Finding Fees) 8,825 9 Net Loss for Year Ended December 31, 1997 (1,096,465) Balance, December 31, 1997 31,546,949 $ 31,547 $ 9,660,720 $ (8,830,151) The accompanying notes are an integral part of the financial statements. The financial statements and the notes should be read in conjunction with the auditors' report.
-17- AMAZON NATURAL TREASURES, INC. (A Development Stage Company) Statement of Cash Flows Cumulative Since Inception (June 27, 1995) and for the years ended December 31, 1997 and 1996
Cumulative 1997 1996 ---------- ---------- ---------- Cash Flow from Operating Activities: Net Income (Loss) $ (8,830,151) $ (1,096,465) $ (7,715,709) Loss on Impairment of Intangible Asset 7,495,000 0 7,495,000 Depreciation and Amortization 96,944 70,871 24,215 (Increase) Decrease in: Accounts Receivable (2,325) (2,325) 0 Inventories (388,253) (350,065) (30,468) Prepaid Expenses (13,414) (13,414) 0 Deposits (63,209) (57,539) (3,976) Other Current Assets (47,430) (60,443) 10,600 Increase (Decrease) in: Accounts Payable 211,360 150,650 46,338 Bank Overdraft 4,423 4,423 0 Accrued Expenses 29,914 28,440 2,636 Customer Deposits 0 (5,000) 5,000 Deferred Debt 9,521 0 9,521 ------- ------- ------- Net Cash Provided (used) by Operating Activities $ (1,497,620) $ (1,330,867) $ (156,843) Cash Flows from Investing Activities: Purchase of Intangibles (185,484) (175,000) (943) Purchase of Property, Plant, and Equipment (558,017) (488,582) (8,213) ---------- ---------- --------- Net Cash Provided (used) by Investing Activities $ (743,501) $ (663,582) $ (9,156) Cash Flows from Financing Activities: Issuance of Long Term Debt 53,020 11,077 41,943 Issuance of Common Stock 2,003,691 1,864,874 50,023 Stock Payment for Debt 163,760 96,458 67,302 Related Party Payables 153,405 153,405 0 --------- --------- ------- Net Cash Provided (used) by Financing Activities $ 2,373,876 $ 2,125,814 $ 159,268 ----------- ---------- --------- Net Increase (Decrease) in Cash $ 132,755 $ 131,365 $ (6,731) Cash at Beginning of Period 0 1,390 8,121 ----------- ---------- --------- Cash at End of Period $ 132,755 $ 132,755 $ 1,390 =========== ========== ========= Interest Expense $ 9,417 $ 7,942 $ 1,475 The accompanying notes are an integral part of the financial statements. The financial statements and notes should be read in conjunction with the auditors' report.
-18- AMAZON NATURAL TREASURES, INC. (A Development Stage Company) Notes to Financial Statements Year Ended December 31, 1997 Note 1: Company History/Environment The Company was organized under the laws of the state of Nevada on June 27, 1995, using the name Amazon Natural Treasures, Inc. The Articles of Incorporation authorize the Company to engage in any lawful activity. In March, 1996, the Company exchanged all of its issued and outstanding shares for shares of a public company known as Concord Capital, Inc., a Utah corpor- ation. The exchange was accounted for using the purchase method of accounting. The stockholders of Amazon Natural Treasures, Inc. controlled the entity after the purchase. Concord Capital, Inc. was incorporated in 1988, in the state of Utah and was a public entity reporting to the Securities and Exchange Commission. In December, 1996, the Company amended its Articles of Incorporation and redomiciled the Company in the state of Nevada. The Company's primary focus currently is the development, production, and marketing of dietary supplements and phytogenics products from plants and herbs found within the Amazon Rain Forest in Brazil. Production and marketing of these products is dependent on the Company's ability to continue to operate within U.S. Government guidelines for nutritional supplements. In addition to dietary supplements the Company markets figurines made in part from semiprecious gemstones and also markets limited quantities of semiprecious and precious gems. Brazil and the Amazon Rain Forest are the source for all of these products. All of these products require inspection by various U.S. Government agencies at the port of entry including the Department of Agriculture and the Customs Service. The Company is in the early stages of planned business operations and has not produced revenues deemed to be significant and therefore remains a development stage company (see Note 5). Note 2: Accounting Policies (A) The Company uses the accrual method of accounting. (B) Revenues and cost of sales are recognized when sales are con- summated. (C) The Company considers all short term, highly liquid investments that are readily convertible to cash (within three months) as cash equivalents. The Company currently has no cash equivalents. (D) The Company has only one class of stock, Common, as of the balance sheet date and has no options or other convertible issues. Primary Earnings per Share are based on the weighted average number of shares outstanding at the financial statement dates. (E) Inventories are stated at the lower of cost (determined under the FIFO method) or market. (F) Depreciation (See Note 7). (G) The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. -19- Note 3: Related Party Transactions (should be read in conjunction with Notes 14 and 17). The Company currently has numerous related party transactions and relationships. The Company's President, Treasurer and CEO and its Chairman are also the owners of its primary supplier of phytochemical products. The Company's President and CEO is also the owner of a specialized equipment distributor from whom the Company purchased much of its laboratory equipment. In addition, the Company entered into an agreement with another related party (an entity owned by the Company's Chairman and his family) wherein the Company was licensed to use certain proprietary information in producing and marketing homeopathic products. In exchange for this licensing, the Company has issued approximately 5,000,000 shares of its restricted Common Stock and agreed to pay $8,000 per month for a minimum of 5 years. See Notes 14 and 16 for details of this transaction. There are also significant amounts due to officers and employees of the Company. Summarized transactions for the year ended December 31, 1997 follow (amounts are rounded): Inventory Purchased from Related Party $ 240,000 Equipment and Supplies Purchases from Related Party 30,000 Receivable from Related Party 62,400 Employee Advances 2,300 Accounts Payable to Related Parties 185,100 Note Payable to Related Party (Note 11) 6,000 Note 4: Reliance on Single Supplier The related party phytochemical product supplier discussed in Note 3 is the sole source of the Company's primary raw materials. Further, this supplier is located in Brazil and is dependent on the Brazilian government for its authority to export its products. Note 5: Development Stage Activities/Going Concern Uncertainty The Company's activities since inception have consisted of establish- ing sources of supply and financing as well as product and market development. Facilities for production have been established in Las Vegas, Nevada. Various items and amounts of raw materials have been received and processed into finished products. Sales, although not substantial, have occurred. The Company's primary efforts through the December 31, 1997 have been in the areas of obtaining financing and developing its markets. The Company has sustained losses of $7,715,709 in 1996 and $1,096,465 in 1997. Revenues totaled $34,975 and $44,849 in 1996 and 1997, respectively. The Company, through 1997, has been unable to generate enough revenues to meet expenses. The ultimate success of the Company is predicated on its ability to generate revenues in excess of expenses and produce profits. Through December 31, 1997 this has not occurred. Note 6: Operating Losses The Company has incurred losses since its inception and has conse- quently not been liable for any Federal income taxes. There is no corporate income tax in the State of Nevada. The accumulated losses to date are as follows: -20- Year of Loss Amount ------------ -------- 1995 $ 17,977 1996 7,715,709 1997 1,096,465 --------- Total Operating Losses $ 8,830,151 The amount of these losses which may be used to offset future taxable income is uncertain.None of these losses have been examined by the Internal Revenue Service. Their availability to offset future revenues for tax purposes is dependent upon their acceptance following such examination. Note 7: Property, Plant, & Equipment and Related Depreciation: The policy of the company is to expense all purchases under $1,000. Purchases in excess of this amount are capitalized at cost and depreciated over their estimated useful lives. Depreciation is recorded on a tax basis which approximates accepted methods and timing of depreciation for accounting purposes.The various classes of assets, their costs, depreciable lives, depreciation expense for each year shown on the Balance Sheet, and accumulated depreciation to December 31, 1997 are as follows: Depreciable Depreciation Accumulated Cost Life 1996 1997 Depreciation Asset Group Furniture/ Fixtures $ 82,383 5-7 $ 4,375 $ 5,404 $ 9,779 Lab Equipment 37,440 5 0 14,764 14,764 Clean Room 295,218 5-7 18,100 16,161 34,261 Warehouse 101,860 7 0 13,121 13,121 Computers 23,526 5 0 3,991 3,991 Vehicles 17,590 5 0 2,052 2,052 -------- ------- ------- ------- Totals $ 558,017 $22,475 $55,493 $ 77,968 Note 8: Leases The Company is a party to several leases. None of these leases meet criteria for capitalization and are therefore all classified as operating leases. Specific information on these leases is as follows: (A) Property Leased - Corporate offices/processing facility Lease Term - 3 years commencing October, 1996 Base Rent - $2,835.00/month through 12th month -21- $2,977.00/month 13th through 24th month $3,125.00/month 25th through 36th month Additional Required Payments - Real property tax increases during lease term. Utilities. Prorata share of common area maintenance expenses. The lease is silent with regard to renewal or purchase options. (B) Property Leased - Passenger vehicle Lease term - 3 years commencing June 1997 Rental Payments - $850.00/month Additional Required Payments - Excess mileage charges, if applicable, at termination ($.20/mile on all mileage over 30,024). Purchase option available at end of lease for $29,200. (C) Property Leased - Offices/warehouse Lease Term - 3 years commencing February, 1997 Rental Payments - $1,860.00/month, 5% annual increase. Additional Required Payments- None Renewal option available at end of lease for an additional 36 months. Rental payment under renewal will be the last months rent plus a CPI increase. (D) Property Leased - Copier Lease Term - 60 months commencing October, 1997 Rental Payments - $358.01/month. The lease is silent with regard to renewal or purchase options. (E) Property Leased - Warehouse/processing facility Lease Term - 5 years commencing December, 1997 Rental Payments - $16,700.00/month through 12th month increased by CPI each year thereafter. Additional Required Payments - Same as (A) above. The lease is silent regarding renewal or purchase options. Note: This space is being shared with another company which by verbal agreement is to reimburse the company for 50% of the costs. (F) Property Leased - Passenger Vehicle Lease Term - 36 months commencing August, 1997 Rental Payments - $281.26/month Additional Required Payments - Excess mileage payment, if applicable, at termination ($.15/mile on all mileage over 36,030). Purchase option available at lease end for $11,657 Minimum future rental payments under non-cancelable operating leases having remaining terms in excess of 1 year as December 31, 1997 for each of the next 5 years and in the aggregate are: -22- Year Ended Amount 1998 $273,236 1999 268,466 2000 213,516 2001 203,980 2002 200,400 Outyears 0 --------- Total Lease Obligations *$1,159,598 * Does not consider the agreed reimbursement from co-tenant at premises in lease (E) above. Note 9: Inventories Inventories shown at December 31, 1997 and December 31, 1996 consist of the following: 1997 1996 Finished Goods $ 97,136 $ 35,142 Work in Progress 20,375 0 Raw Materials 146,563 0 Figurines/Artifacts 40,261 3,007 Gems 14,525 0 Overhead Applied 69,354 0 -------- -------- Total Inventory $388,214 $ 38,149 Inventory values are stated at cost under the FIFO method and include all direct costs and those indirect costs attributable to inventory. Note 10: Policy on Advertising Costs Advertising costs are expensed as incurred. There are no prepaid advertising costs shown on the Balance Sheet. Note 11: Notes Payable Current Long Term Collateralized note with an unstated interest rate, imputed to be 17%, payable in monthly installments of $371.98 to American Express for 60 months. Unspecified furniture is the collateral. The note contains a substantial penalty for prepayment. $ 2,027 $ 13,289 Demand promissory note to a related party at 8%, no stated required periodic payment. -23- No stated maturity date. Uncollateralized. $ 6,000 -0- Note 12: Licenses/Trademarks and Organization Costs Balances in these accounts represent costs incurred for the acquiring of certain proprietary formulas for the processing of dietary supplement products (see also Notes 3, 14, & 17), the development of labels for those products, organizational costs associated with establishing the Company, and development of its website. Valuation is based on actual costs incurred. Balance Sheet amounts are shown net of amortization. For 1996, the assets acquired are being amortized over a 5 year period on a straightline basis. For 1997, it is believed that the assets acquired will have a longer useful life and are therefore being amortized over a 15 year period on a straightline basis. Amortization Expense - 1996 $ 1,831 - 1997 $ 15,377 -------- Accumulated Amortization to December 31, 1997 - $ 17,208 No intangibles were acquired prior to November 1, 1970 and consequently the additional disclosures required for such intangibles are not applicable. Note 13: Stockholders' Equity (should be read in conjunction with Note 17 and the Statement of Stockholders' Equity) Common ($ .001 par), 500,000,000 shares authorized. Issued and outstanding: 12/31/96 - 24,664,300; 12/31/97 - 31,546,949. There are no other classes authorized and there are no options or warrants issued. Stock issues to employees were authorized by the Board of Directors as Christmas bonuses. These shares have been recorded at the fair market value on the date of issuance. On July 10, 1995, prior to the merger with Concord Capital, the company authorized a total of approximately 60,000,000 shares to be issued over a three to four year period to various individuals. This transaction was subsequently determined to be invalid and as of December 31, 1997 all but 4,000,000 of the shares already issued were cancelled. The 4,000,000 shares are recorded at par value. Commissions in the form of stock were paid to several individuals in compensation for having found other investors. Note 14: Licensing Agreement In May 1996 the company entered into a licensing agreement with a non-public corporate entity (Licensor) owned by the company's Executive Vice President and his family. The agreement states that principals of the licensing entity are the proprietors, manufacturers, distributors, and/or inventors/developers of phytogenics. The agreement called for the Licensor to grant an exclusive license to Amazon (User) to use the unique products, licensed patents, and all know-how in the operation and to sell all products internationally. As consideration for the rights obtained the company agreed to: - Provide suitable housing accommodations for the family of the Licensor's principal for a temporary period of time. - Pay $8,000 per month for an initial period of five years. -24- - Provide the Licensor (designated to the principal and family) 5,000,000 shares of the company's common stock. - Provide the Licensor with an automobile for a period of five years plus extensions if necessary. - Provide the Licensor with health insurance for five years plus extensions if necessary. - Provide the Licensor with necessary legal support for five years plus extensions if necessary. - Reimburse the Licensor for operational costs (travel, hotels, etc.). The agreement continues in force for a minimum of 99 years and carries a substantial termination penalty for both parties. Beginning in 1996 the Licensor transferred certain proprietary formulas and processes to the company. In 1996 the company issued approximately 5,000,000 shares of its common stock to the principals of the Licensor. This stock issue was recorded (based on an audit of the company's financial statements for the year ended 12/31/96) in the accounting records at a value of $5,000. This value was based on the par value of the stock ($.001). It was subsequently determined that this treatment was incorrect. The details of the adjustments necessary to correctly show the effect of this transactions are contained in Note 17. Note 15: Current Legal Matters The company was involved in one lawsuit at the balance sheet date. On October 23, 1997, the company filed a Complaint for Declaratory Relief and Damages against several parties. The company is seeking a determination of the ownership rights of one of the parties to 540,000 shares of the company's common stock which the party currently holds. The action is currently in the discovery phase and no estimate can be made of the financial impact of the suit or of the likely outcome. Note 16: Subsequent Events In the period between 12/31/97 and the audit report date there were no known events which would require adjustment to the financial statements. The company has undertaken several actions to combat a decline in its stock's selling price on the open market. It has informed its stockholders (via press releases issued in June 1998) that, among other actions, it was going to retire all of the "principals" common stock and replace it with preferred stock. This action would have an anti-dilutive effect if consummated. Note 17: 1996 Restatement (See Auditor's Report and Notes 3, 12, 13, and 14). As indicated in the auditor's report, the 1996 financial statements were audited by other accountants. During the course of performing the audit of 1997 it became evident that certain transactions completed in 1996 required adjustment. In 1996 the company entered into a licensing agreement with a related party. Under the agreement the company received the exclusive right to utilize certain technologies in the production of its phytogenics products. As consideration for these rights the company agreed to issue approximately 5,000,000 shares of its common stock. At the time of signing of this agreement the company's stock was trading at approximately $1.50 per share. Since there was no quantifiable value for the technologies obtained, the transaction -25- was recorded at the par value of the stock issued ($.001 per share) or $5,000. The company subsequently determined that this transaction should have been recorded at the fair value of the stock rather than the par value. This resulted in an increase to assets and equity of $7,495,000. During the audit of the 1997 financial statements management of the company concluded that while the valuation of this transaction complied with generally accepted accounting principles, the underlying assets obtained could not be objectively valued. An adjustment was consequently posted to reflect this inability to objectively quantify any value.The net effect of these transactions was to increase Additional Paid-in Capital by $7,495,000 and increase the 1996 loss by the same amount resulting in no change to total equity or total assets. The transaction did however, generate additional operating losses. These adjustments have been audited by the current year auditors and the 1996 financial statements presented herein reflect these adjustments. A summary of the accounts affected in 1996 is as follows: Before Restatement After Restatement Balance Sheet Accounts Licenses and Trademarks $ 5,000 $ 5,000 Additional Paid-In Capital $ 211,088 $ 7,706,087 Accumulated Deficit $(238,687) $(7,733,686) Income Statement Accounts Loss on Impairment $ 0 $ 7,495,000 Net Loss for 1996 $ (220,710) $(7,715,709) -26- Item 8. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None. Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With section 16(a) of the Exchange Act. Identification of Directors and Executive Officers. The following table sets forth the names and nature of all positions and offices held by all directors and executive officers of the company for the calender year ending December 31, 1997, and to the date hereof, and the period or periods durieng which each such director or executive officer served in his or her respective positions.
Position Term of NAME Age Held Office Domingos Loricchio 68 Chairman of the Board and Vice President 3/96 to Present Michael Sylver 41 President, CEO and Director 3/96 to Present Robert Qualey 40 Secretary/Treasurer 3/96 to Present Director 3/96 to 12/97 Domingos Loricchio II 33 Vice President 3/96 to Present Director 12/97 to Rocque Pucci 52 Vice President 3/96 to 12/97
Term of Office The terms of office of the current directors continue until the annual meeting of stockholders, which the Bylaws provide shall be held on the third Friday of November of each year; officers are elected at the annual meeting of the board of directors, which immediately follows the annual meeting of stockholders. -27- Business Experience Domingos Loricchio - Chairman of the Board of Directors. Mr. Loricchio has been Chairman of the Board of Directors of the Company since March 1996. Since 1975, Mr. Loricchio has been the President of Abracel Industria E Commercio, LTDA, in Sao Paulo, Brazil. Prior to 1975, Mr. Lorcchio was employed by Carborundum Company, in research and develop- ment in their Sao Paulo plant. Mr. Lorcchio holds a degree in Chemistry from the Sorbonne - University of Paris. Michael A. Sylver - President, Treasurer, CEO, and a member of the Board of Directors. Mr. Sylver has over 20 years of executive level management, having formed and operated several innovative companies in the United States and Canada. His management expertise created and developed Energy Management Corporat- tion into, what was at one time, the largest independent company in Nevada. Domingos Loricchio II - Senior Executive Vice President, Director and Secre- tary. In March, 1996, Mr. Loricchio became the Senior Executive Vice President of the Company. Since July, 1985, Mr. Loricchio has been the manager of Abrace, Ltd., of Brazil. Abracel manufactures products primarily designed for road surface applications. Mr. Loricchio graduated from the University of Sao Paulo, Brazil with a degree in Chemical Engineering. Family Relationships. There is a family relationship between dirctors Domingos Loricchio and his son, Domingos Loricchio II and no other relationship of executive officers of the Company, either by blood or happenstance of marriage, other the Domingos Loricchio, the Company's Chairman of the Board of Directors, who is the father of Domingos Loricchio II, the Company's Senior Executive Vice President and Director. Involvement in Certain Legal Proceedings. During the past five years, no present or former director, executive officer, or person nominated to become a director or an executive officer of the Company has been the subject matter of any relevant legal proceed- ings, including bankruptcy, criminal proceedings, or civil proceedings. Further, no legal proceedings are known to be contemplated by governmental authorities against any director, executive officer and person nominated to become a director. -28- Compliance With Section 16(a) of the Exchange Act. No securities of the Company are registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, and the Company files reports under Section 15(d) of the Securities Exchange Act of 1934; accordingly, direc- tors, executive officers and ten percent stockholders are not required to make filings under Section 16 of the Securities Exchange Act of 1934. Item 10. Executive Compensation. Cash Compensation No cash compensation, deferred compensation or long-term incentive plan awards were issued or granted to the Company's management during the calendar years ended December 31, 1997, 1996, or 1995, or the period ending on the date of this report. Further, no member of the Company's management has been granted any option or stock appreciation right; accordingly, no tables relating to such items have been included within this item. Compensation of Directors The Company's Board of Directors unanimously resolved that the directors receive no compensation for their services; however, they are reimbursed for travel expenses incurred in serving on the Board of Directors. No additional amounts are payable to the Company's directors for committee participation or special assignments. Termination of Employment and Change of Control Arrangements There are no compensatory plans or arrangements, including payments to be received from the Company, with respect to any person holding an officer or director position which would in any result in payments to any such person because of his or her resignation, retirement, or other termination of such person's employment with the Company or its subsidiaries, or any change in control of the Company, or a change in the person's responsibilities following a change in control of the Company. -29- Item 11. Security Ownership of Certain Beneficial Owners and Management. The following table sets forth the ownership interest of all current or former officers, directors, or family members. There are no unrelated parties owning 5% or more of the company's Common stock. The Company has only one class of stock and there are no options, warrants, or other rights to acquire shares outstanding. Th below data reflects ownership as of Relationships are described in Note 1 below.
Name and Address Amount and Nature Percent of of Beneficial Owner of Beneficial Owner Class Domingos Loricchio 7,110,000 14.12% 4011 W. Oquendo Ave. Suite C Las Vegas, NV 89118 Michael Sylver 17,169,813 24.24% 4011 W. Oquendo Ave. Suite C Las Vegas, NV 89118 Robert Qualey 5,222,000 7.37% 4011 W. Oquendo Ave. Suite C Las Vegas, NV 89118 Domingos Loricchio II 5,550,000 7.76% 4011 W. Oquendo Ave. Suite C Las Vegas, NV 89118 Rocque Pucci 1,814,300 2.43% 4011 W. Oquendo Ave. Suite C Las Vegas, NV 89118 Gary Sylver 1,999,000 2.82% P.O. Box 96083 Las Vegas, NV 89183 Denise Loricchio 3,000,000 4.23% 4011 W. Oquendo Ave. Suite C Las Vegas, NV 89118 Total 41,865,113 62.97%
-30- Note 1: Domingos Loricchio - Chairman of the Board of Directors Michael Sylver - President, CEO, and Director, and Treasurer (since 12/97) Robert Qualey - Secretary/Treasurer (to 12/97) and Director Domingos Loricchio II - Senior Executive Vice President, Director and Secre- tary. Rocque Pucci - Vice President to 12/97 Gary Sylver - Father of Michael Sylver Denise Loricchio - Daughter of Domingos Loricchio Changes in Control To the knowledge of management, there are no present arrangements or pledges of securities of the Company which may result in a change in control of the Company. Item 12. Certain Relationships and Related Transactions. Item 13. Exhibits and Reports on Form 8-K. -31- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this day of AMAZON NATURAL TREASURES, INC. (Registrant) BY: MICHAEL A. SYLVER --------------------------------------- President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities and on this 19th day of November, 1998. SIGNATURES TITLE - ------------------ ---------------- DOMINGOS LORICCHIO - ---------------------------------- Chairman of the Board of Domingos Loricchio Directors MICHAEL A. SYLVER - ----------------------------------- President, Chief Executive Michael A. Sylver Officer, and member of the Board of Directors DOMINIGOS LORICCHIO II - ------------------------------------- Senior Executive Vice Domingos Loricchio II President, Director, and Secretary SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECUREITIES PURSUANT TO SECTION 12 OF THE ACT. No annual report material has been forwarded to securities holders of the Registrant during the period covered by this report or for the previous five calendar years ended December 31; however, if any annual report or proxy material is furnished to security holders in connection with the annual meeting of stockholders to be held in 1998, a copy of any such annual report or proxy materials shall be forwarded to the Commission when it is forwarded to security holders. -32- EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 1997 10-KSB
5 1 12-MOS 12-MOS DEC-31-1997 DEC-31-1996 JAN-01-1997 JAN-01-1996 DEC-30-1997 DEC-31-1996 132755 1390 0 0 64768 2000 0 0 388214 38149 599151 41539 558017 69435 (77968) (22475) 1312055 106193 436650 109128 13289 0 31547 24664 0 0 0 0 830569 (27599) 1312055 106193 44849 34975 47347 35069 22078 13409 41348 16727 1102464 7734051 0 0 7942 1475 (1096465) (7715709) 0 0 (1096465) (7715709) 0 0 0 0 0 0 (1096465) (7715709) (.04) (1.02) (.04) (1.02)
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