-----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, TMh5C46USDx5Cq5Vj6Y8BiKWukEp0tmRvsmg9+1qnTfIanQYbXYSaY2APxxMgjB5 by+AJn4a4qiykzhzUC129g== 0000844055-99-000028.txt : 19990902 0000844055-99-000028.hdr.sgml : 19990902 ACCESSION NUMBER: 0000844055-99-000028 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990901 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: 99704179 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 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1998 Commission File Number: 33-26109 Amazon Natural Treasures, Inc. -------------------------------------------------------------------- (Name of small business issuer in its charter) Nevada 87-0460880 ---------------------- ---------------------- State of Incorporation IRS Employer ID Number 4011 West Oquendo Avenue, Suite C, Las Vegas, Nevada 89118 -------------------------------------------------------------------- (Address of Principal Executive Offices) Zip Code 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: $392,061 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. $19,498,881 a/o 8/20/99. State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. 17,726,255 a/o 8/20/99. Amazon Natural Treasures, Inc. 1998 Form 10-KSB ANNUAL REPORT TABLE OF CONTENTS Page ---- PART I - ------ ITEM 1 - Description of Business 3 ITEM 2 - Description of Property 10 ITEM 3 - Legal Proceedings 10 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 16 ITEM 8 - Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 16 PART III - -------- ITEM 9 - Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16 (a) of the Exchange Act 17 ITEM 10 - Executive Compensation 19 ITEM 11 - Security Ownership of Certain Beneficial Owners and Management 20 ITEM 12 - Certain Relationships and Related Transactions 20 ITEM 13 - Financial Statements, Exhibits and Reports on Form 8-K 21 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 phytogenic(as defined by the Company) products for processing and selling in the United States and countries throughout the world. 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, a Brazilian native. 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. Certain products are obtained from Brazilian plantations where specific plants are grown. Some plants/ingredients in the company's 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 with 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). 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 granted a license to the Company to manufacture and sell products with his assistance in exchange for 5,000,000 shares of preferred stock (voting only). There are no patents for formulas and the same are considered 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 then put in their final packaged form for sale. 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 wholesale basis. Retail Distribution The Company bottles, boxes and shrink wraps its products at its facilities in Las Vegas, Nevada. The products are then shipped directly to its customers. 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. The Company's activities are regulated by additional 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") revised the provisions of the Federal Food, Drug and Cosmetic Act ("FFDCA")concerning composition and labeling of dietary supplements. 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 ingredients 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 falls 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 re-label 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 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 could occur and the Company may not have the ability to comply with such changes. 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 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 established and widely circulated health-related publications. Subsequently, this will be broadened to include general and other special interest publications. 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 to be more user friendly. The Company anticipates 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 The Company has not entered into any contracts. 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 Department 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 countries 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 termination 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 31,1998. 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, 1998 resulted in a net loss of $4,815,331. Operations for the year ended December 31, 1998 includes a non-cash loss of $3,763,100 due to a loss on stock issued for consulting fees and the accrual of officer's compensation. As of that date the Company had an accumulated deficit of $13,645,482. 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, 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 Preferred 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. 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 Unregulated 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 100% of the Company's outstanding shares of Preferred 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, 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, 1998, the Company was involved in several lawsuits. The first lawsuit was related to securities transactions. The Company has received a default judgement against several investors who were issued stock in exchange for a promise to pay the Company $1,000,000, calling for the return of the stock and damages as a result of stock fraud. The Company has been ordered to issue 224,000 shares of stock, initially issued to a former consultant, which was subsequently canceled by the Company due to a recession of the transaction resulting in the initial issuance. These shares were pledged as collateral for a loan to the former consultant. The second lawsuit involves a breach of contract suit. An arbitration award of $88,000 has been entered against the Company regarding a breach of contract lawsuit. The Company is currently appealing the decision. Item 4. Submission of Matters to a Vote of Security Holders. None PART II 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 Registrant's Common Stock during the last two fiscal years. Quotations reflect inter-dealer 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 $3.50 and the low bid has been $.15625.
Bid -------------------------- Quarter Ended High Low June 30, 1999 $0.59375 $0.53125 March 31, 1999 $1.00 $0.9375 December 31, 1998 $1.625 $0.625 September 30, 1998 $2.00 $0.15625 June 30, 1998 $1.25 $0.25 March 31, 1998 $3.125 $0.625 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-
These quotations reflect inter-dealer prices without retail markup, markdown, or commissions, and may not represent actual transactions. (b) The number of record holders of the Common Shares on December 31, 1998 was approximately 300. (c) Dividends. The Company has paid no dividends. Recent Sales of Unregistered Securities: Following is a summary of sales of unregistered securities through the date of filing of this Form 10-KSB. All securities were issued as restricted common shares, which are subject to Rule 144 of the Securities and Exchange Commission. Generally, Rule 144 requires shareholders to hold the shares for a minimum of one year before sale. In addition, officers, directors and more than 10% shareholders are further restricted in their ability to sell such shares. There have been no underwriters of these securities and no commissions or underwriting discounts have been paid.
Shares Value Transaction Description Issued Received - --------------------------------- --------- ------------ Sale of 144 common stock for cash 1,345,920 $360,510 Consulting and operating expenses 425,300 $ 42,530
The above transactions qualified for exemption from registration under Sections 3(b) or 4(2) of the Securities Act of 1933. Private placements for cash were non-public transactions. The Company believes that all such investors are either accredited or, either alone or with their purchaser representative, have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the prospective investment. 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, 1998 and 1997, operating activities provided (used) $(241,222) and $(1,330,867) respectively; financing activities provided (used) $354,071 and $2,125,814 respectively; and investing activities provided (used) $(243,443) and $(663,582) respectively. Working capital for the same periods was $(204,407) and $162,501, a (decrease) from 1998 to 1997 of $(366,908). This was primarily a result of an increase in accounts payable and other short-term debt to finance the operating losses incurred in 1998. For 1998 and 1997 the Company was indebted to Directors, Officers, and other related parties in the amounts of $140,758 and $185,110 respectively. The Company intends to raise additional capital, which is needed to maintain current operating activities, 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, 1998 the Company did not have any commitments for significant capital expenditures. 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 $5,444. 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. For the year ended December 31, 1998 the Company experienced a net loss of $4,815,331. The primary components resulting in that loss were: revenues - $392,061; cost of goods sold - $92,275; operating expenses - $5,120,982; and other expenses of $(5,865). While revenues increased by almost nine fold, general and administrative expenses showed dramatic increases. This was primarily a result of the recording of the sweat equity for shares issued based on a prior consulting agreement with certain officers and directors of the company. Additionally, certain salaries were accrued for officers for 1998. Lastly, as in 1997, the increased activities in finding and developing markets and in the increased production process to get finished goods ready for sale and the increased administrative costs. The Company believes that it will have to start paying salaries to existing officers who have to date, worked without receiving cash compensation. Working Capital/Liquidity As of December 31, 1999, the Company had a deficit in working capital of $204,407. The Company has from its inception continued to use working capital to finance its operations and does not expect to attain profitable operations for the next twelve month period. During this period the company intends to continue to finance its operations and other activities through private placements of common shares, conversion of debt to common shares, and payment of consulting and labor services with common shares. See Item 5 as to the recent sales of unregistered securities in 1999. Year 2000 Assessment The Company has begun its assessment of the potential effects of the Year 2000 issue on the Company's operations. The assessment is in two parts. First, an evaluation of the Company's computer systems and equipment with embedded computer chips for Year 2000 compliance. The majority of the Company's computers and software have been acquired within the last two years. Therefore, management anticipates only minor Year 2000 compliance problems with its computer systems. The second part of the assessment process involves the Year 2000 readiness of third parties. There are two primary issues related to the evaluation of the potential impact on the Company. First, interruption of the services provided by local public utilities, namely power and telephone service, would have a material negative impact on the Company's operations. Based on attendance at seminars and public reports, management believes that the local utility service providers are actively working on their Year 2000 compliance issues. At this time, management believes that no interruption of service will occur. Second, significant Year 2000 problems with the Company's major customers and suppliers could have a material negative impact on the Company's operations. At the present time the company does not have any one major customer that it believes would have a major impact from the Year 2000 problems. Certain shipping may cause delays in sending the Company's products to customers, but this will be the same impact that all manufacturers will incur from shipping companies, postal services and other transportation companies. As to the suppliers, most of the raw materials purchased from the natives of the Amazon jungle. Any negative impact would be caused by the shipping of the products to the United States through transportation companies as mentioned in the previous paragraph. The Company does not expect any major shipping delays and believes it will have enough raw materials on hand to deal with any impact from the Year 2000 problems. Based on current information, management does not anticipate the Year 2000 issue will have a material impact on the Company's operations. Forward-Looking Statements The statements in this Form 10-KSB that are not historical facts or statements of current status are forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties. Actual results may differ materially. Common Stock Cancellation On November 10, 1998, the Company cancelled the following shares of Common Stock 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 Company has also cancelled the following certificates in 1999:
Name Number of Shares - --------------------------------- ---------------- Attorney Business Advisors 100,000 J. Thomas Bonner III 1,000 Rose Mary Cabassa 2,125 Veronica Ann Cabassa 1,000 Michael Zappara 390,000 Danny Doumanis 85,000 Dick Dubrule 250,000 Hemisphere Holding Co., Inc. 50,000 Whitecliffe Investment Fund Ltd. 500,000 Whitecliffe Investment Fund Ltd. 500,000 Whitecliffe Investment Fund Ltd. 500,000 Whitecliffe Investment Fund Ltd. 500,000 Shoreline Securities Ltd. 500,000 Shoreline Securities Ltd. 500,000 Shoreline Securities Ltd. 500,000 Shoreline Securities Ltd. 500,000 Charles Kricfalusi 2,000,000 Wanda Kricfalusi 1,000 Wanda Joyce Kricfalusi 224,000 CW Kricfalusi 2,000,000 Linda McGee 1,650 Dr. Amazonimo Mendes 5,000 Gilberto Baptista Miranda 3,000 Pacific International Securities 50,000 James F. Palecek 250,000 Debra Reidl 1,000 Kevin Vader Kelen 100,000 --------- Total 9,514,775 ========= PART III 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 calendar year ending December 31, 1998, and to the date hereof, and the period or periods during which each such director or executive officer served in his or her respective positions. Position Term of NAME Age Held Office Domingos Loricchio 69 Chairman of the Board 3/96 to Present Michael Sylver 42 President, CEO, Director 3/96 to Present Treasurer 2/99 to Present Domingos Loricchio II 34 Secretary 2/99 to Present Director 12/97 to Present 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. 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 development 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 Corporation into, what was at one time, the largest independent company in Nevada. Domingos Loricchio II - Senior Executive Vice President, Director and Secretary. 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 directors 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 proceedings, 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. 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, directors, 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. Summary of Cash and Certain Other Compensation The following table sets forth information as to the compensation of the four most highly compensated officers whose compensation for the year ended December 31, 1998 exceeded $100,000.
Name and Annual Compensation Principal Calendar ------------------------ Position Year Salary Bonus ----------------- -------- --------- ------------ Michael A. Sylver 1998 $468,000 $-0- President and Treasurer Domingos Loricchio II 1998 $208,000 $-0- Secretary
For the year ended December 31, 1998, certain officers' were granted annual salaries as per the above table. As of December 31, 1998, none of the salaries that were granted have been paid. None of the compensation accrued will be paid until the Company is profitable and has positive cash flows. 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 and 1996. 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. 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 two classes of stock. The two classes are common stock and preferred stock. There are no options, warrants, or other rights to acquire shares outstanding. The below data reflects ownership as of December 31, 1998. 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* 13.47% 4011 W. Oquendo Ave. Suite C Las Vegas, NV 89118 Michael Sylver 17,169,813* 32.52% 4011 W. Oquendo Ave. Suite C Las Vegas, NV 89118 Robert Qualey 5,222,000* 9.89% 4011 W. Oquendo Ave. Suite C Las Vegas, NV 89118 Domingos Loricchio II 5,500,000* 10.42% 4011 W. Oquendo Ave. Suite C Las Vegas, NV 89118 Gary Sylver 1,999,000* 3.79% P.O. Box 96083 Las Vegas, NV 89183 Denise Loricchio 3,000,000* 5.68% 4011 W. Oquendo Ave. Suite C Las Vegas, NV 89118 Total 40,000,813* 75.77% *Denotes Preferred Stock No Officer or Director owns 5% or more of the Company's common stock.
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 Secretary. 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. None Item 13. Financial Statements, Exhibits and Reports on Form 8-K. Financial Statements and Supplementary Data begin on the following page. List of Financial Statements: ---------------------------- (a) Balance Sheets as of December 31, 1998 and 1997 (b) Statements of Operations for the Years ended December 31, 1998 and 1997 (c) Statements of Stockholders' Equity for the Years ended December 31, 1998, 1997, and 1996 (d) Statements of Cash Flows for the Years ended December 31, 1998 and 1997 (e) Notes to Financial Statements Reports on Form 8-K: ------------------- None Albright, Persing & Associates, Ltd. Certified Public Accountants Independent Auditor's Report To the Board of Directors and Stockholders of Amazon Natural Treasures, Inc. We have audited the balance sheet of Amazon Natural Treasures, Inc. as of December 31, 1998, and the related statements of comprehensive income, stockholder's equity, 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, 1997, were audited by other auditors whose report dated July 17, 1998 expressed an unqualified opinion with a going concern uncertainty on those statements. We did not observe the physical inventory in 1998 stated in the accompanying financial statements at $444,983. The Company's records do not permit the application of other auditing procedures to inventories. In addition, the Company does not maintain certain customary accounting records and supporting documents relating to transactions with suppliers and customers, nor, in our opinion, is the system of internal control adequate to provide safeguards of assets and to assure proper recording of transactions. Accordingly, it was impracticable to extend our procedures sufficiently to determine the extent to which the financial statements may have been affected by these conditions. Since inventory at December 31, 1998 enters significantly into the determination of financial position, results of operations, and cash flows, and since the Company does not maintain certain customary accounting records or documents, or an adequate system of internal control, as described in the preceding paragraph, the scope of our work was not sufficient to enable us to express an opinion, and we do not express an opinion on the financial statements referred to above. 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 guidelines 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 had been in the development stage in years prior to 1998, and the Company's ability to generate sufficient cash flows to meet its obligations and sustain its operations, either through future revenues and/or additional debt or equity financing, cannot be determined at this time. Further, the Company has sustained losses of $13,645,482 since its inception on June 27, 1995 and has experienced cash flow problems. These uncertainties raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also discussed in Note 5. The financial statements do not include any adjustments that might arise from the outcome of this uncertainty. /s/ Albright, Persing & Associates, Ltd. Reno, Nevada August 19, 1999
AMAZON NATURAL TREASURES, INC. BALANCE SHEETS DECEMBER 31, 1998 AND 1997 ASSETS 1998 1997 ----------- ----------- Current Assets Cash $ 2,161 $ 132,755 Related party receivables - 64,768 Trade receivables 6,017 - Inventories 444,983 388,214 Prepaid expenses 1,345 13,414 ----------- ----------- Total Current Assets 454,506 599,151 ----------- ----------- Fixed Assets, net of accumulated depreciation 560,210 480,049 ----------- ----------- Other Assets Licenses and trademarks 128,000 128,000 Refundable deposits 23,731 63,209 Organization Costs 41,646 41,646 ----------- ----------- Total Other Assets 193,377 232,855 ----------- ----------- Total Assets $ 1,208,093 $ 1,312,055 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities Accounts payable $ 354,269 $ 208,014 Bank overdraft 15,733 4,423 Payroll taxes payable 33,117 7,993 Accrued salaries and wages 13,083 - Other accrued expenses 101,953 23,083 Notes payable - current portion - 8,027 Accounts payable - related parties 140,758 185,110 ----------- ----------- Total Current Liabilities 658,913 436,650 ----------- ----------- Long-Term Debt 105,947 13,289 ----------- ----------- Deferred Revenue 76,000 - ----------- ----------- Stockholders' Equity (Deficit) Preferred stock 52,795 - Common stock 15,965 31,547 Additional paid-in-capital 14,943,955 9,660,720 Stock subscription receivable (1,000,000) - Accumulated deficit (13,645,482) (8,830,151) ----------- ----------- Total Stockholders' Equity 367,233 862,116 ----------- ----------- Total Liabilities and Stockholders' Equity $ 1,208,093 $ 1,312,055 =========== ===========
AMAZON NATURAL TREASURES, INC. STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 1998 1997 ----------- ----------- Net Sales $ 392,061 $ 44,849 Cost of Sales 92,275 22,078 ----------- ----------- Gross Profit 299,786 22,771 Operating Expenses 5,120,982 1,113,792 ----------- ----------- Loss from Operations (4,821,196) (1,091,021) ----------- ----------- Other Income (Expense) Interest income 576 2,467 Interest expense - (7,942) Other revenue 5,289 31 ----------- ----------- Total Other Income (Expense) 5,865 (5,444) ----------- ----------- Net Loss Before Taxes and Comprehensive Income (4,815,331) (1,096,465) Income Tax Expense - - ----------- ----------- Net Loss After Taxes (4,815,331) (1,096,465) Other Comprehensive Income, net of tax - - ----------- ----------- Comprehensive Income (Loss) $ (4,815,331) $ (1,096,465) =========== =========== Loss Per Share $ (0.15) $ (0.04) Weighted Average Number of Common Shares Outstanding 31,351,442 27,357,705
AMAZON NATURAL TREASURES, INC. STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 1998 1997 ----------- ----------- Cash Flow From Operating Activities Net income (loss) $ (4,815,331) $(1,096,465) ----------- ----------- Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 163,282 70,871 Noncash salaries for capital contribution 676,000 - Common stock for consulting 243,555 - Preferred stock for consulting 3,087,100 - Decrease (Increase) in accounts receivable 58,751 (2,325) (Increase) in inventories (56,768) (350,065) Decrease (Increase) in prepaid expenses 12,069 (13,414) Decrease (Increase) in deposits 39,478 (57,539) (Increase) in other current assets - (60,443) Increase in accounts payable 146,255 150,650 Increase in bank overdraft 11,310 4,423 Increase in accrued expenses 117,077 28,440 (Decrease) in customer deposits - (5,000) Increase in deferred revenue 76,000 - ----------- ----------- Total adjustments 4,574,109 (234,402) ----------- ----------- Net Cash (Used) by Operating Activities (241,222) (1,330,867) ----------- ----------- Cash Flows from Investing Activities Purchase on intangibles - (175,000) Purchase of property, plant and equipment (243,443) (488,582) ----------- ----------- Net Cash (Used) by Investing Activities (243,443) (663,582) ----------- ----------- Cash Flows from Financing Activities Issuance of long term debt 127,994 11,077 Payment of long term debt (43,363) - Issuance of common stock 313,792 1,864,874 Stock payment for debt - 96,458 Related party payables (44,352) 153,405 ----------- ----------- Net Cash Provided by Financing Activities 354,071 2,125,814 ----------- ----------- Net (Decrease) Increase in Cash (130,594) 131,365 Cash at Beginning of Period 132,755 1,390 ----------- ----------- Cash at End of Period $ 2,161 $ 132,755 =========== =========== Interest Expense $ - $ 7,942 =========== ===========
AMAZON NATURAL TREASURES, INC. STATEMENTS OF STOCKHOLDERS' EQUITY From Inception (June 27, 1995) to December 31, 1998 Preferred Stock Common Stock Shares Amount Shares Amount Balance, June 27, 1995 - $ - 97,151 $ 97 Shares issued for accounts payable - - 1,760 2 Capital contributed by shareholders - - - - Net loss for year ended December 31, 1995 - - - - Shares issued for cash retroactively restated - - 116,161 116 Shares issued for services retroactively restated - - 10,913 11 Shares issued for recission agreement retroactively restated - - 21,121 21 Shares issued for consulting fees retroactively restated - - 52,894 53 Shares issued for effect reverse acquisition of Amazon Natural Treasures, Inc. - - 6,100,000 6,100 Reverse purchase acquisition - - - - Balance, December 31, 1995 - - 6,400,000 6,400 Shares issued for cash at $.05/share - - 500,000 500 Shares issued for cash at $.50/share - - 54,000 54 Shares issued to acquire licenses - - 5,000,000 5,000 Shares issued in satisfaction of debt - - 12,060,360 12,060 Shares issued for services - - 650,000 650 Net loss for year ended December 31, 1996 - - - - Balance, December 31, 1996 - - 24,664,360 24,664 Shares issued for cash: at $.001/share - - 25,000 25 at $.50/share - - 225,100 225 at $.5714/share - - 17,500 18 at $.6667/share - - 6,000 6 at $7692/share - - 6,500 7 at $.8333/share - - 6,000 6 at $.9091/share - - 15,400 15 at $.9901/share - - 2,020 2 at $.9950/share - - 5,000 5 at $.9999/share - - 6,788 7 at $1.00/share - - 2,561,153 2,561 Other equity transactions: Convert debt to equity - - 514,303 514 Cash commissions paid and other selling expense - - - - Shares canceled - - (540,000) (540) Employee bonuses - - 23,000 23 Pre-merger agreement issues - - 4,000,000 4,000 Commissions (Investor finding fees) - - 8,825 9 Net loss for year ended December 31, 1997 - - - - Balance, December 31, 1997 - - 31,546,949 31,547 Shares converted to preferred stock 21,924,113 21,924 (21,924,113) (21,924) Preferred shares issued for consulting 30,871,000 30,871 - - Common shares issued for consulting - - 2,435,550 2,436 Common shares issued for cash - - 1,383,041 1,383 Stock subscription receivable - - 4,000,000 4,000 Shares canceled - - (1,476,892) (1,477) Officer salaries - - - - Net loss for year ended December 31, 1998 - - - - Balance, December 31, 1998 - - $52,795 $15,965 Stock Subscription Paid-In Accumulated Receivable Capital Deficit Balance, June 27, 1995 $ - $71,743 ($82,800) Shares issued for accounts payable - 48 - Capital contributed by shareholders - 626 - Net loss for year ended December 31, 1995 - - (16,337) Shares issued for cash retroactively restated - 16,384 - Shares issued for services retroactively restated - 299 - Shares issued for recission agreement retroactively restated - 579 - Shares issued for consulting fees retroactively restated - - 1,450 Shares issued for effect reverse acquisition - of Amazon Natural Treasures, Inc. - 99,850 (17,977) Reverse purchase acquisition - (96,529) 99,137 Balance, December 31, 1995 - 94,450 (17,977) Shares issued for cash at $.05/share - 24,500 - Shares issued for cash at $.50/share - 26,946 - Shares issued to acquire licenses - 7,495,000 - Shares issued in satisfaction of debt - 55,242 - Shares issued for services - 9,949 - Net loss for year ended December 31, 1996 - - (7,715,709) Balance, December 31, 1996 - 7,706,087 (7,733,686) Shares issued for cash: at $.001/share - - - at $.50/share - 112,325 - at $.5714/share - 9,982 - at $.6667/share - 3,994 - at $7692/share - 4,993 - at $.8333/share - 4,994 - at $.9091/share - 5,993 - at $.9901/share - 1,998 - at $.9950/share - 4,970 - at $.9999/share - 6,780 - at $1.00/share - 2,503,057 - Other equity transactions: Convert debt to equity - 17,184 - Cash commissions paid and other selling expense - (788,016) - Shares canceled - - - Employee bonuses - 70,378 - Pre-merger agreement issues - (4,000) - Commissions (Investor finding fees) - - - Net loss for year ended December 31, 1997 - - (1,096,465) Balance, December 31, 1997 - 9,660,720 (8,830,151) Shares converted to preferred stock - - - Preferred shares issued for consulting - 3,056,229 - Common shares issued for consulting - 241,119 - Common shares issued for cash - 312,410 - Stock subscription receivable (1,000,000) 996,000 - Shares canceled - 1,477 - Officer salaries - 676,000 - Net loss for year ended December 31, 1998 - - (4,815,331) Balance, December 31, 1998 $(1,000,000) $14,943,955 $(13,645,482)
AMAZON NATURAL TREASURES, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1998 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 Corporation. 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 re-domiciled 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 the 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 of 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 was in the development stage through December 31, 1997. The year 1998 is the first year during which it is considered an operating entity. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES Basis of accounting The Company uses the accrual method of accounting. Revenue Recognition Revenues and cost of sales are recognized when sales are consummated Cash and Cash Equivalents 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. Inventories Inventories are stated at the lower of cost (determined under the FIFO method) or market. AMAZON NATURAL TREASURES, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1998 NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - Continued Financial Statement Estimates 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. Concentrations Concentration of Credit Risk - Financial instruments which potentially subject the Company to credit risk consist primarily of cash in bank, trade receivables, and receivables from officers and stockholders. The Company maintains its cash in various bank deposit accounts. Accounts at each bank are insured by the Federal Deposit Insurance Corporation (FDIC) up to $100,000 per bank. The Company's accounts at these institutions, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. Concentrations of Operations - All of the Company's current products are designed for operation in the consumer market for nutritional supplements. Any recessionary pressures or other disturbances in the national consumer market could have an adverse effect on the Company's operations. Concentration of Suppliers - The related party phytogenics 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. Income Taxes The Company accounts for income taxes by the asset/liability approach in accordance with the provisions of Statement of Financial Accounting Standard ("SFAS") No. 109, "Accounting for Income Taxes". Under this pronouncement, deferred income taxes, if any, reflect the estimated future tax consequences when reported amounts of assets and liabilities are recovered or paid. Deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are scheduled to be in effect when the differences are expected to reverse. The provision for income taxes, if any, represents the total income taxes paid or payable for the current year, plus the change in deferred taxes during the year. The tax benefits related to operating loss carry-forwards are recognized if management believes, based on available evidence, that it is more likely than not that they will be realized. AMAZON NATURAL TREASURES, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1998 NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - Continued Net Loss Per Share In February, 1997, the Financial Accounting Standards Board issued SFAS No. 128, Earnings per Share. SFAS No. 128 simplifies the standards for computing earnings per share ("EPS") and was effective for financial statements issued for periods ending after December 15, 1997, with earlier application not permitted. Upon adoption, all prior EPS data was restated. Basic EPS is determined using net income divided by the weighted average shares outstanding during the period. Diluted EPS is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued. Since the fully diluted loss per share for 1998 and 1997 was antidilutive, and the Company has not issued any options, warrants, or other common stock equivalents, basic and diluted earnings per share are the same. Advertising The Company periodically places advertisements on the radio, in newspapers and magazines, and through television media. Costs of advertising are expensed when incurred. Total advertising costs for the years ended December 31, 1998 and 1997 were $1,257 and $68,460, respectively. New Accounting Standards In June, 1997, the Financial Accounting Standards Board issued SFAS No. 130, Reporting Comprehensive Income. SFAS No. 130 establishes standards for reporting and presentation of comprehensive income and its components in a full set of general-purpose financial statements. This statement does not, however, require a specific format for the disclosure but requires the Company to display an amount representing total comprehensive income for the period in its financial statements. Comprehensive income is determined by adjusting net income by other items not included as a component of net income, such as the unrealized loss on marketable securities. The Company implemented SFAS No. 130 for its year ended December 31, 1998, but had no items of comprehensive income. In June, 1997, the Financial Accounting Standards Board issued SFAS No. 131, Disclosures about Segments of an enterprise and Related Information. SFAS No. 131 establishes standards for the manner in which public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. This statement also requires that a public business enterprise report financial and descriptive information about its reportable operating segments. The Company has determined that segment disclosures are not appropriate because the Company operates in only one segment. AMAZON NATURAL TREASURES, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1998 NOTE 3 - RELATED PARTY TRANSACTIONS The Company currently has numerous related party transactions and relationships. The Company's President and CEO and its Chairman are also the owners of its primary supplier of phytogenics 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 five years. See Notes 13 and 17 for details of this transaction. There are also significant amounts due to Officers and employees of the Company. Summarized transactions for the years ended December 31, 1998 and 1997 follow (amounts are rounded):
1998 1997 ------------ ------------ Inventory purchased from related party $ - $ 240,000 Equipment and supplies purchased from related party - 30,000 Receivable from a related party - 62,400 Employee advances - 2,300 Accounts payable to related parties 140,800 185,100 Note payable to related party (Note 10) 105,900 6,000
NOTE 4 - RELIANCE ON SINGLE SUPPLIER The related party phytogenics 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. AMAZON NATURAL TREASURES, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1998 NOTE 5 - DEVELOPMENT STAGE ACTIVITIES/GOING CONCERN UNCERTAINTY The Company was in the development stage through December 31, 1997. The year 1998 is the first year during which it is considered an operating entity. The Company's activities since inception have consisted of establishing 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. The Company's primary efforts through December 31, 1998 have been in the areas of obtaining financing and developing its markets. The Company has sustained losses of $4,815,331 in 1998 and $1,096,465 in 1997. Revenues totaled $392,061 and $44,849 in 1998 and 1997, respectively. The Company, through 1998, has been unable to generate enough revenues to meet expenses and has funded its operation primarily through the issuance of equity. Accordingly, the Company's ability to accomplish its business strategy and to ultimately achieve profitable operations is dependent upon its ability to obtain additional financing and to execute its business plan. There can be no assurance that the Company will be able to obtain additional funding, and, if available, will be obtained on terms favorable to, or affordable by, the Company. The Company's management is exploring several funding options and expects to raise additional capital in 1999 and it expects to continue to develop the Company's operations around its products. Ultimately, however, the Company will need to achieve profitable operations in order to continue as a going concern. Through December 31, 1998, this has not occurred. NOTE 6 - OPERATING LOSSES The Company has incurred losses since it inception and has consequently 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:
Year of Loss Amount -------------- ----------- 1995 $ 17,977 1996 7,715,709 1997 1,096,465 1998 4,815,331 ----------- Total Operating Losses $13,645,482 ===========
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. AMAZON NATURAL TREASURES, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1998 NOTE 7 - PROPERTY, PLANT AND EQUIPMENT AND RELATED DEPRECIATION The policy of the Company is to expense all purchases under $1,000. Purchases in excess of these amounts 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, 1998 are as follows:
Cost Depreciation Expense ------------------- Depreciable -------------------- Accumulated Asset Group 1998 1997 Life 1998 1997 Depreciation --------- --------- ------------ ---------- ------- --------- Furniture/Fixtures $ 176,128 $ 82,383 5-7 $ 20,929 $ 5,404 $ 30,708 Laboratory equipment 40,648 37,440 5 9,652 14,764 24,416 Clean room 335,816 295,218 5-7 92,734 16,161 126,994 Warehouse equipment 102,580 101,860 7 25,354 13,121 38,475 Computer equipment 80,702 23,526 5 11,980 3,991 15,972 Leasehold improvements 36,525 - 30 339 - 339 Vehicles 29,061 17,590 5 2,294 2,052 4,346 --------- --------- ------------ ---------- ------- --------- $ 801,460 $ 558,017 $163,282 $22,475 $ 241,250 ========= ========= ========== ======= =========
AMAZON NATURAL TREASURES, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1998 NOTE 8 - LEASES The Company is 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: Property leased - Corporate offices/processing facility Lease Term - 3 years commencing October, 1996 Base Rent - $2,835/month through 12th month $2,977/month 13th through 24th month $3,125/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. Property leased - Passenger vehicle Lease Term - 3 years commencing June, 1997 Rental Payments - $850 per month Additional Required Payments - Excess mileage charges, if applicable, at termination ($.20/mile on all mileage over 30,024). Purchase option available at end of lease for $29,200. Property Leased - Offices/Warehouse Lease Term - 3 years commencing February, 1997 Rental Payments - $1,860/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. Property Leased - Copier Lease Term - 60 months commencing October, 1997 Rental Payments - $358.01 per month The lease is silent with regard to renewal or purchase options. Property Leased - Warehouse/processing facility Lease Term - 3 years commencing September, 1998 Base Rent - $4,026/month through 12th month $4,239/month 13th through 24th month $4,450/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. AMAZON NATURAL TREASURES, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1998 NOTE 8 - LEASES - Continued Property Leased - Passenger Vehicle Lease Term - 36 months commencing August, 1997 Rental Payments - $281.26 per month Additional Required Payments - Excess mileage payment, if applicable, at termination ($.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 one year as of December 31, 1998, for each of the next five years and in the aggregate are:
Year Ended Amount - ---------- ----------- 1999 $ 119,668 2000 65,296 2001 39,896 2002 3,222 2003 and Thereafter - ----------- $ 228,082 ===========
NOTE 9 - INVENTORIES Inventories at the Balance Sheet date consisted of the following:
1998 1997 ----------- ----------- Finished goods $ 86,976 $ 97,136 Work in progress 30,457 20,375 Raw materials 163,674 146,563 Figurines/artifacts 40,262 40,261 Gems 14,525 14,525 Overhead applied 109,089 69,354 ----------- ----------- Total Inventory $ 444,983 $ 388,214 =========== ===========
Inventory values are stated at cost under the FIFO method and include all direct costs and those indirect costs attributable to inventory. AMAZON NATURAL TREASURES, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1998 NOTE 10 - NOTES PAYABLE
1998 1997 ------------ ----------- Various demand notes payable to related parties, interest at 5% per annum, payable weekly, payment amount varies based on monies collected by the Company in excess of $20,000, no stated maturity date, unsecured. $ 105,947 $ - Demand promissory note to a related party at 8%, no stated required periodic payment. No stated maturity date. Uncollateralized - 6,000 Collateralized note with an unstated interest rate, imputed to be 17%, payable in monthly installments of $372 to American Express for 60 months, unspecified furniture is the collateral. - 15,316 ------------ ----------- 105,947 21,316 Less: current portion - (8,027) ------------ ----------- Long-Term Portion $ 105,947 $ 13,289 ============ ===========
AMAZON NATURAL TREASURES, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1998 NOTE 11 - LICENSES/TRADEMARDS 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 and 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 1998 and 1997, it is believed that the assets acquired will have a longer useful life and are therefore being amortized over a fifteen year period on a straight-line basis. Amortization Expense - 1998 - - 1997 15,377 --------- Accumulated Amortization to December 31, 1998 $ 19,209 ========= No intangibles were acquired prior to November 1, 1970 and consequently the additional disclosures required for such intangibles are not applicable. NOTE 12 - STOCKHOLDERS' EQUITY Preferred Stock ($.001 par) - 500,000,000 shares authorized, shares are not convertible into common stock and are voting shares only. Shares issued and outstanding as of December 31, 1998 - 52,795,113. Common Stock ($.001 par) - 500,000,000 shares authorized. Shares issued and outstanding as of December 31, 1998 and 1997 were 15,964,535 and 31,546,949, respectively. 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, 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 as compensation for having found other investors. During 1998 and as part of a financing arrangement with a private company, the Company issued 4,000,000 shares of stock in exchange for a promise to receive $1,000,000. No monies were ever received by the Company. As a result of the default, the Company filed suit against the investors whereby it demanded the return of the 4,000,000 shares of common stock. To date, none of the stock has been returned. AMAZON NATURAL TREASURES, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1998 NOTE 13 - 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 homeopathic medicines. 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. 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 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 December 31, 1996) 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 transaction are contained in Note 17. AMAZON NATURAL TREASURES, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1998 NOTE 14 - CURRENT LEGAL MATTERS The Company was involved in several lawsuits at the Balance Sheet date, as follows: Securities Transactions The Company has received a default judgement against several investors who were issued stock in exchange for a promise to pay the Company $1,000,000, calling for the return of the stock and damages as a result of stock fraud. The Company has been ordered to issue 224,000 shares of stock, initially issued to a former consultant, which was subsequently canceled by the Company due to a recision of the transaction resulting in the initial issuance. These shares were pledged as collateral for a loan to the former consultant. Breach of Contract An arbitration award of $88,000 has been entered against the Company regarding a breach of contract lawsuit. The Company is currently appealing the decision. NOTE 15 - YEAR 2000 ISSUES Because many computer systems and programs use only two digits to record the year in date fields, such systems may not be able to accurately process dates including the year 2000 and after. The effects of this problem will vary from system to system and may result in a major system failure, or adversely affect a company's operations as well as the ability to prepare financial statements. In order to determine the impact that Year 2000 issues have on the Company, (1) a complete assessment of all systems potentially affected by Year 2000 issues needs to be completed, and (2) management needs to determine the consequences that its Year 2000 issues would have on its business, results of operations, and financial condition. The Company's assessment of its Year 2000 issues includes addressing whether third parties with whom the Company has a material relationship are Year 2000 compliant. At the current time, the Company has conducted a comprehensive review of its computer systems to identify the systems that could be affected by the Year 2000 issue, and is in the process of identifying all third parties with whom the Company has a material relationship so that they may determine if such parties are Year 2000 compliant. The Company presently believes that its existing software is Year 2000 compliant. Additionally, if the Company's customers and vendors are unable to resolve such processing issues in a timely manner, it could result in material financial risk. NOTE 16 - SUBSEQUENT EVENTS In the period between December 31, 1998 and the audit report date there were no known events which would require adjustments to the financial statements. The Company entered into a capital lease obligation subsequent to December 31, 1998 for computer equipment in the amount of $40,560. AMAZON NATURAL TREASURES, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1998 NOTE 17 - 1996 RESTATEMENT As indicated in the auditors' 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 the signing of this agreement, the Company's stock was trading at approximately $1.50 per share. Since there was no quantifiable value for the technologies obtained, the transaction was recorded at the par value of the stock issued ($.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 Statements Accounts - -------------------------- Loss on Impairment - 7,495,000 Net Loss for 1996 (220,709) (7,715,709)
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 1999, a copy of any such annual report or proxy materials shall be forwarded to the Commission when it is forwarded to security holders. -----END PRIVACY-ENHANCED MESSAGE-----