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.
<PAGE>
Amazon Natural Treasures, Inc.
Form 10KSB
December 31, 1997
TABLE OF CONTENTS
Page
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PART I
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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
<PAGE>
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-
<PAGE>
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.
<PAGE> -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
<PAGE> -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.
<PAGE> -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.
<PAGE> -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
<PAGE> -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.
<PAGE> -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,
<PAGE> -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.
<PAGE> -11-
<TABLE>
<CAPTION>
Bid
Quarter Ended High Low
<S> <C> <C>
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-
</TABLE>
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.
<PAGE> -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:
<TABLE>
<CAPTION>
Name Number of Shares Exchanged
<S> <C>
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
</TABLE>
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.
<PAGE> -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
<PAGE> -14-
AMAZON NATURAL TREASURES, INC.
(A Development Stage Company)
Balance Sheets
December 31, 1997 and 1996
[CAPTION]
<TABLE>
1997 1996
------------ ------------
<S> <C> <C>
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
=========== ===========
<FN>
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.
</TABLE>
<PAGE> -15-
<TABLE>
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
<CAPTION>
Cumulative 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
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.
</TABLE>
<PAGE> -16-
<TABLE>
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
<CAPTION>
Common Stock Paid-in Accumulated
------------
Shares Amount Capital Deficit
------ ------ ------- -----------
<S> <C> <C> <C> <C>
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.
</TABLE>
<PAGE> -17-
<TABLE>
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
<CAPTION>
Cumulative 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
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.
</TABLE>
<PAGE> -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.
<PAGE> -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:
<PAGE> -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
<PAGE> -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:
<PAGE> -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.
<PAGE> -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.
<PAGE> -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 $1.50 per share. Since
there was no quantifiable value for the technologies obtained, the transaction
<PAGE> -25-
was recorded at the par value of the stock issued ($.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)
<PAGE> -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.
<TABLE>
<CAPTION>
Position Term of
NAME Age Held Office
<S> <C> <C> <C>
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
</TABLE>
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.
<PAGE> -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.
<PAGE> -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.
<PAGE> -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.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Owner Class
<S> <C> <C>
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%
</TABLE>
<PAGE> -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.
<PAGE> -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.
<PAGE> -32-
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<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> DEC-30-1997 DEC-31-1996
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<COMMON> 31547 24664
0 0
0 0
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<INTEREST-EXPENSE> 7942 1475
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<INCOME-CONTINUING> (1096465) (7715709)
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<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1096465) (7715709)
<EPS-PRIMARY> (.04) (1.02)
<EPS-DILUTED> (.04) (1.02)
</TABLE>
