U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
OMB Approval Expires: Approval Pending
OMB Number: xxxx-xxxx Estimated Average Burden Hours Per Response: 1.0
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the quarterly period ended JULY 31, 2000
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
----------- ----------.
Commission file number 0-23356
---------------------
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
- -------------------------------------------
(Name of Small Business Issuer in Its Charter)
UTAH 87-0421089
(State or Other Jurisdiction of IRS Employer Identification
Incorporation or Organization)
6015 LOHMAN FORD ROAD, SUITE 100 LAGO VISTA, TEXAS 78645
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
512-267-2221
- --------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section13 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 such filing requirements for past 90 days.
Yes X No
------------ ----------
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the Registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court.
Yes__________ No___________
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable DATE: JULY 31, 2000
5,588,261 ($0.001 PAR VALUE) COMMON SHARES
294,584 ($0.001 PAR VALUE) PREFERRED SHARES
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The following interim consolidated financial statements as of July 31, 2000 and
for the six months and quarter then ended, are unaudited, but in the opinion of
management, have been prepared in conformity with generally accepted accounting
principles applied on a basis consistent with those of the annual audited
financial statements and in conformity with the instructions provided in Item
310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete audited financial statements. Such interim financial statements
reflect all adjustments (consisting of normal recurring adjustments and
accruals) which management considered necessary for a fair presentation of the
financial position and the results of operations for the quarters presented. The
results of operations for the quarters presented are not necessarily indicative
of the results to be expected for the year ending January 31, 2001. The interim
consolidated financial statements should be read in connection with the audited
consolidated financial statements for the year ended January 31, 2000.
SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Forward looking statements made herein are based on current expectations of the
Company that involve a number of risks and uncertainties and should not be
considered as guarantees of future performance. These statements are made under
the Safe Harbor Provisions of the Private Securities Litigation Reform Act of
1995. The factors that could cause actual results to differ materially include
but are not limited to: interruptions or cancellation of existing contracts,
impact of competitive products and pricing, product demand and market acceptance
risks, the presence of competitors with greater financial resources than the
Company, product development and commercialization risks and an inability to
arrange additional debt or equity financing.
2
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Financial Statements
For the Six Months Ended
July 31, 2000 and 1999
(Unaudited)
INDEX
PART I. FINANCIAL INFORMATION PAGE NUMBERS
Item 1. Financial Statements (Unaudited) 4
Consolidated Balance Sheets at July 31, 2000 and January 31, 2000 4-5
Consolidated Statement of Operations for the three months and quarter 6
ended July 31, 2000
Consolidated Statements of Stockholders' Equity from inception on 7-11
February 9, 1984 through July 31, 2000
Consolidated Statement of Cash Flows for the six months and
quarters ended 12-13 July 31, 2000 and 1999 and from inception
to July 31, 2000
Notes to the Consolidated Financial Statements 14-19
Item 2. Management's Discussion and Analysis of Financial Condition and 20-21
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Changes in Securities 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security-Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
Exhibit 1, Statement of Earnings (Loss) Per Share 24
Exhibit 2, Subsidiary of the Registrant 25
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets
July 31, 2000 and January 31, 2000
(unaudited)
ASSETS
JULY 31, 2000 JANUARY 31, 2000
------------- ----------------
CURRENT ASSETS
Cash $ 18,258 $ 9,512
Accounts receivable
Trade 8,572 31,447
Prepaid expenses 2,459 17,208
Inventory 340,440 345,851
---------- ----------
Total Current Assets 369,729 404,018
---------- ----------
PROPERTY AND EQUIPMENT 502,317 651,984
---------- ----------
OTHER ASSETS
Mining claims 5,081,569 5,081,569
Certificates of deposit 15,000 15,000
Trademarks & product development cost 1,725 1,725
---------- ----------
Total Other Assets 5,098,294 5,098,294
---------- ----------
TOTAL ASSETS $5,970,340 $6,154,296
========== ==========
4
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
July 31, 2000 and January 31, 2000
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
JULY 31, 2000 JANUARY 31, 2000
------------- ----------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 387,644 $ 391,938
Note payable 0 155,000
Current portion of related party long-term debt 476,500 252,397
------------ ------------
Total current liabilities 864,144 799,335
------------ ------------
COMMITMENTS AND CONTINGENCIES
LONG-TERM LIABLITIES
Related Party Long-Term Debt, Less Current Maturities 562,388 755,884
------------ ------------
Total Liabilites 1,426,532 1,555,219
------------ ------------
STOCKHOLDERS' EQUITY
Common stock; authorized 50,000,000 common shares at $0.001 par value
8,478,261 and 7,635,766 shares issued and 5,588,261 and 4,745,766 shares
outstanding respectively (2,890,000 in treasury) 8,403 7,560
Preferred stock; authorized 10,000,000 preferred shares at 295 295
$0.001 par value; 294,584 shares issued and outstanding
Common Stock Subscription 187,500 0
Common Stock Subscription Receivable (128,744) 0
Capital in excess of par value 10,316,275 10,120,390
Deficit accumulated during the development
stage (4,894,921) (4,584,168)
Treasury stock (cost of 2,890,000 shares held by the company) (945,000) (945,000)
------------ ------------
Total Stockholders' Equity 4,543,808 4,599,077
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,970,340 $ 6,154,296
============ ============
5
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations
July 31, 2000 and 1999
(unaudited)
Second Quarter (three months)
Six Months Ended July 31 Ended July 31 From Inception
-------------------------- -------------------------- (February 9, 1984)
2000 1999 2000 1999 to July 31, 2000
----------- ----------- ----------- ----------- ------------------
REVENUES
Net sales $ 69,676 $ 18,539 $ 68,937 $ 8,398 $ 568,415 498739
Cost of goods sold 28,136 12,977 27,693 5,879 344,809 316673
----------- ----------- ----------- ----------- ----------- -----------
Gross Profit 41,540 5,562 41,244 2,519 223,606 182066
----------- ----------- ----------- ----------- ----------- -----------
EXPENSES
General and administrative 481,339 394,599 247,287 215,322 5,041,622 4560283
Depreciation and amortization 48,575 47,348 24,288 23,503 287,402 238827
----------- ----------- ----------- ----------- ----------- -----------
Total expenses 529,914 441,947 271,575 238,825 5,329,024 4799110
----------- ----------- ----------- ----------- ----------- -----------
Other Income
Rent 5,220 5,220 2,610 2,610 32,092 26872
Interest 379 345 171 173 3,047 2668
Other Income 57,084 0 0 0 57,084 0
Gain on sale of assets 68,335 0 68,335 0 74,318 5983
----------- ----------- ----------- ----------- ----------- -----------
Net Other Income 131,018 5,565 71,116 2,783 166,541 35523
Net loss before provision ----------- ----------- ----------- ----------- ----------- -----------
for income taxes (357,356) (430,820) (159,215) (233,523) (4,938,877) (4,581,521)
Provision for income taxes 0 0 0 0 2,647 2647
----------- ----------- ----------- ----------- ----------- -----------
Net loss before extraordinary items (357,356) (430,820) (159,215) (233,523) (4,941,524) -4584168
Extraordinary gain, modification
of note payable, net of taxes 46,603 0 0 0 46,603 0
----------- ----------- ----------- ----------- ----------- -----------
Net Loss $ (310,753) $ (430,820) $ (159,215) $ (233,523) $(4,894,921) $(4,584,168)
=========== =========== =========== =========== =========== ===========
Weighted average loss per share $ (0.06) $ (0.06) $ (0.03) $ (0.04)
=========== =========== =========== ===========
Average shares outstanding 5,063,556 6,944,075 5,282,640 6,538,948
=========== =========== =========== ===========
6
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
From Inception on February 9, 1984 to April 30, 2000
(unaudited)
Capital
Capital Stock
Common Stock Preferred Stock Stock Subscription
Shares Amount Shares Amount Subscription Receivable
---------------------------------------------------------------------------------
Balance At Inception February 9, 1984 -0- $ -0- -0- $ -0- -0- $ -0-
Issuance of Common Stock for Cash 37,500 38 -0- -0- -0- -0-
Expenses Paid by Shareholders for the Years
Ended January 31, 1990 -0- -0- -0- -0- -0- --
Net Loss From Inception to January 31, 1990 -0- -0- -0- -0- -0- -0-
-------- -------- --------- -------- ---------- --------
Balance At January 31, 1990 37,500 38 -0- -0- -0- -0-
Issuance of Common Stock for Services Rendered
in August 1990 391,000 391 -0- -0- -0-
Issuance of Common Stock in September 1990 for
Various Assets From Austin-young, Inc. 50,000 50 -0- -0- -0- -0-
Issuance of Common Stock for Distribution
Licenses From Global Environmental
Industries (GEI) for UT & WA, September 1990 50,000 50 -0- -0- -0- -0-
Contribution from Austin-Young, Inc. -0- -0- -0- -0- -0- -0-
Issuance of Common Stock for Services Rendered
in October 1990 12,500 12 -0- -0- -0- -0-
Net Loss for the Year Ended January 31, 1991 -0- -0- -0- -0- -0- -0-
-------- -------- --------- -------- ---------- --------
Balance At January 31, 1991 541,000 541 -0- -0- -0- -0-
Common Stock Returned in Exchange for Common
Stock of Gei in March 1991 (17,000) (17) -0- -0- -0- -0-
Repurchase of Common Stock From Austin-young,
Inc. in May 1991 (338,000) (338) -0- -0- -0- -0-
Deficit
Accumulated
Additional During the
Treasury Paid-in Development
Stock Ampount Capital Stage
------------- ---------- ------------
Balance At Inception February 9, 1984 $ -0- $ -0- $ -0-
Issuance of Common Stock for Cash -0- 962 -0-
Expenses Paid by Shareholders for the Years
Ended January 31, 1990 -0- 518 -0-
Net Loss From Inception to January 31, 1990
-0- -0- (1,618)
------ ------- -------
Balance At January 31, 1990 -0- 1,480 (1,618)
Issuance of Common Stock for Services Rendered
in August 1990 -0- 7,429 -0-
Issuance of Common Stock in September 1990 for
Various Assets From Austin-young, Inc. -0- 198,890 -0-
Issuance of Common Stock for Distribution
Licenses From Global Environmental -0- 37,070 -0-
Industries (GEI) for UT & WA, September 1990
Contribution from Austin-Young, Inc. -0- 13,500 -0-
Issuance of Common Stock for Services Rendered
in October 1990 -0- 37,488 -0-
Net Loss for the Year Ended January 31, 1991 -0- -0- (57,756)
------ ------- -------
Balance At January 31, 1991 -0- 295,857 (59,374)
Common Stock Returned in Exchange for Common
Stock of GEI in March 1991 -0- (85,423) -0-
Repurchase of Common Stock From Austin-young,
Inc. in May 1991 -0- (64,682) -0-
7
Capital
Capital Stock
Common Stock Preferred Stock Stock Subscription
Shares Amount Shares Amount Subscription Receivable
---------------------------------------------------------------------------------
Cancellation of Common Shares (20,000) (20) -0- -0- -0- -0-
Issuance of Common Stock for the Purchase of
Product From Steelhead Specialty Mineral in
August 1991 10,000 10 -0- -0- -0- -0-
Issuance of Common Stock for the Purchase of
Mining Claims in October 1991 13,214 13 -0- -0- -0- -0-
Common Stock Canceled by Officers/directors in
January 1992 (20,000) (20) -0- -0- -0- -0-
Contribution From Austin -0- -0- -0- -0- -0- -0-
Net Loss for the Year Ended January 31, 1992 -0- -0- -0- -0- -0- -0-
-------- -------- ------- -------- -------- --------
Balance At January 31, 1992 169,214 169 -0- -0- -0- -0-
Issuance of Common Stock for the Acquisition of
Geo-Environment Services, Inc. in February
1992 701,800 702 -0- -0- -0- -0-
Issuance of Common Stock for the purchase of
mining Claims in March 1992 243,000 243 -0- -0- -0- -0-
Common Stock Canceled by Officers and Directors
in June 1992 (32,430) (32) -0- -0- -0- -0-
Cancellation of Fractional Shares Due to
Reverse Stock Split (21) -0- -0- -0- -0- -0-
Contribution by Austin-young, Inc. -0- -0- -0- -0- -0- -0-
Issuance of Common Stock (Pursuant to a
Repurchase Agreement in May, 1991) to
Austin-young, Inc. for relief of Debt in
July 1992 3,380,000 3,380 -0- -0- -0- -0-
Net Loss for the Year Ended January 31, 1993 -0- -0- -0- -0- -0- -0-
-------- -------- ------- -------- -------- --------
Balance At January 31, 1993 4,461,563 4,462 -0- -0- -0- -0-
Issuance of Common Stock for Services Rendered 17,800 -0- -0- -0- -0- -0-
in June 1993
Deficit
Accumulated
Additional During the
Treasury Paid-in Development
Stock Ampount Capital Stage
------------- ---------- ------------
Cancellation of Common Shares -0- 20 -0-
Issuance of Common Stock for the Purchase of
Product From Steelhead Specialty Mineral in -0- 74,990 -0-
August 1991
Issuance of Common Stock for the Purchase of
Mining Claims in October 1991 -0- 184,987 -0-
Common Stock Canceled by Officers/directors in
January 1992 -0- 20 -0-
Contribution From Austin -0- 17,000 -0-
Net Loss for the Year Ended January 31, 1992 -0- -0- (93,315)
------- -------- --------
Balance At January 31, 1992 -0- 422,769 (152,689)
Issuance of Common Stock for the Acquisition of
Geo-Environment Services, Inc. in February -0- 96,442 -0-
1992
Issuance of Common Stock for the purchase of
mining Claims in March 1992 -0- 4,859,757 -0-
Common Stock Canceled by Officers and Directors
in June 1992 -0- 32 -0-
Cancellation of Fractional Shares Due to
Reverse Stock Split -0- -0- -0-
Contribution by Austin-young, Inc. -0- 10,000 -0-
Issuance of Common Stock (Pursuant to a
repurchase agreement in May, 1991) to
Austin-young, Inc. for relief of debt in
July 1992 -0- 61,620 -0-
Net Loss for the Year Ended January 31, 1993 -0- -0- (136,304)
------- -------- --------
Balance At January 31, 1993 -0- 5,450,620 (288,993)
Issuance of common stock for services rendered
in June 1993 -0- 26,682 -0-
8
Capital
Capital Stock
Common Stock Preferred Stock Stock Subscription
Shares Amount Shares Amount Subscription Receivable
---------------------------------------------------------------------------------
Issuance of common stock Austin-young, Inc. in
June 1993 12,000 12 -0- -0- -0- -0-
Issuance of common stock for cash October 1993 66,667 67 -0- -0- -0- -0-
Issuance of common stock as down payment on
building October 1993 6,000 6 -0- -0- -0- -0-
Issuance of common stock for services rendered
October 1993 17,000 17 -0- -0- -0- -0-
Issuance of common stock for cash December 1993 80,072
-0- -0- -0- -0-
Contribution by Austin-Young, Inc. -0- -0- -0- -0- -0- -0-
Net loss for the year ended January 31, 1994 -0- -0- -0- -0- -0- -0-
--------- -------- --------- --------- --------- --------
Balance at January 31, 1994 4,661,102 4,662 -0- -0- -0- -0-
Issuance of common stock for services rendered
February 1994 6,000 6 -0- -0- -0- -0-
Issuance of common stock for services rendered
in June 1994
Issuance of common stock in a private offering 22,500 22 -0- -0- -0- -0-
Issuance of common stock for services rendered
in November 1994 15,000 -0- -0- -0- -0- -0-
Contribution by Austin-Young, Inc. -0- -0- -0- -0- -0- -0-
Net loss for the year ended January 31, 1995 -0- -0- -0- -0- -0- -0-
Balance at January 31, 1995 4,746,352 4,747 -0- -0- -0- -0-
--------- -------- --------- --------- --------- --------
Issuance of common stock for services 9,000 9 -0- -0- -0- -0-
Issuance of common stock in a private offering 214,168 214 -0- -0- -0- -0-
Contribution by Austin-Young, Inc. -0- -0- -0- -0- -0- -0-
Net loss for the year ended January 31, 1996 -0- -0- -0- -0-
--------- -------- --------- --------- --------- --------
Deficit
Accumulated
Additional During the
Treasury Paid-in Development
Stock Ampount Capital Stage
------------- ---------- ------------
Issuance of common stock Austin-young, Inc. in -0- 35,988 -0-
June 1993
Issuance of common stock for cash October 1993 199,936
-0- -0-
Issuance of common stock as down payment on
building October 1993 -0- -0-
Issuance of common stock for services rendered 983
October 1993 -0- -0-
Issuance of common stock for cash December 1993 191,32
-0- -0-
Contribution by Austin-Young, Inc. -0- 36,000 -0-
Net loss for the year ended January 31, 1994 (310,862)
-------- -------------------------
-0- -0-
--- ---
Balance at January 31, 1994 -0- 6,021,524 (599,855)
Issuance of common stock for services rendered
February 1994 -0- -0-
Issuance of common stock for services rendered
in June 1994 -0- -0-
Issuance of common stock in a private offering -0- 89,978 -0-
Issuance of common stock for services rendered 35
in November 1994 -0- -0-
Contribution by Austin-Young, Inc. -0- 36,000 -0-
Net loss for the year ended January 31, 1995 -0- (709,048)
--- -------------------------
-0-
---
Balance at January 31, 1995 -0- 6,399,189 (1,308,903)
Issuance of common stock for services -0- 22,391 -0-
Issuance of common stock in a private offering -0- 394,148 -0-
Contribution by Austin-Young, Inc. -0- 36,000 -0-
Net loss for the year ended January 31, 1996 -0-
---
-0- (401,467)
9
FINANCIALS TO COME
10
FINANCIALS TO COME
11
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statement of Cashflows
From Inception on
Six Months Ended February 9, 1984
July 31 Through
---------------- ----------------
2000 1999 July 31, 2000
------------ ---------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss (310,753) (197,302) (4,894,921)
Extraordinary gain, modification of debt (46,603) 0 (46,603)
Depreciation and amortization 48,575 20,513 287,402
(Increase) decrease in receivables 22,875 9,146 (8,572)
Decrease (increase) in prepaid expenses 14,749 7,375 9,541
Non Cash Consulting Expense 58,756 0 58,756
Decrease (increase) in inventory 5,411 (32,738) (267,265)
Increase (decrease) in payables (4,294) 30,732 350,227
Gain from disposal of fixed assets (68,335) 0 (54,958)
Stock issued for services 91,728 0 1,097,343
Expenses paid by shareholder 0 0 149,018
---------------------------------------
Net cash used by operating activities (187,891) (162,274) (3,320,032)
---------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed & other assets (16,000) 27,312 (737,511)
Proceeds from Sale of warehouse 185,427 0 185,427
Purchase certificates of deposit 0 0 (15,000)
Purchase of product tradenames 0 0 (28,683)
Purchase of note receivable 0 0 (5,000)
Organization costs 0 0 (1,524)
Business Development Costs 0 0 (58,599)
Purchase/sale of mining development costs 0 0 7,920
Purchase of mining claims 0 0 150,000
Sale of licenses & other assets 0 0 (65,000)
---------------------------------------
Net cash used by investing activities 169,427 27,312 (567,970)
---------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 0 30,000 3,210,061
Issuance of preferred stock 0 0 152,500
Issuance of notes payable 0 184,145 1,203,031
Purchase of treasury stock 0 0 (108,400)
Principal payments on long-term debt (184,492) 0 (762,634)
Draw on Line of Credit 211,702 0 211,702
---------------------------------------
Net cash provided by financing activities 27,210 214,145 3,906,260
---------------------------------------
Net (decrease) increase in cash 8,746 79,183 18,258
Cash at beginning of period 9,512 4,966 0
---------------------------------------
Cash at end of period 18,258 84,149 18,258
=======================================
12
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
From Inception on
For the Six Months Ended February 9, 1984
July 31 Through
2000 1999 July 31, 2000
---------- ---------- -----------------
SUPPLEMENTAL CASH FLOW INFORMATION:
CASH PAID FOR:
Interest 11,047 6,627 51,937
Income taxes 0 0 2,547
NON-CASH TRANSACTIONS:
Stock issued for mining claims 0 0 5,045,000
Stock issued for down payment on building 0 0 30,000
Stock issued for services 91,728 0 1,097,343
Stock issued for stock of Geo-Environmental
Services, Inc. (name changed to
American Absorbents, Inc.) 0 0 97,144
Stock issued for inventory 0 0 75,000
Stock issued for assets of Austin-Young, Inc.
and Global Environmental Industries 0 0 236,000
Stock issued for purchase of equipment 0 0 136,803
Stock issued for redemption of note 105,000 0 142,500
Treasury stock repurchased in exchange for debt 0 0 831,600
Treasury stock repurchased in settlement of note receivable 0 0 5,000
Debt assumed by buyer of fixed asset disposition 0 0 14,281
Preferred stock issued as redemption of debt 0 0 142,084
13
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
July 31, 2000
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ORGANIZATION
American Absorbents Natural Products, Inc. was incorporated on
February 9, 1984 under the laws of the State of Utah and under the
name of TPI Land, Inc. as a wholly-owned subsidiary of TPI, Inc. On
September 14, 1990, the Company changed its name to Environmental
Fuels, Inc. and began developing its involvement in various phases of
the conversion of vehicles to operating on compressed natural gas.
That developing business was sold on April 23, 1991.
On May 6, 1991, the Company changed its name to Geo-Environmental
Resources, Inc. and is now developing its involvement in the
distribution of zeolite, a mineral product which is an absorbent and
has many potential uses such as oil and gas well cleanup, shoe and
refrigerator freshener, landfill absorption, and other agricultural
uses.
On February 6, 1992, the Company acquired the outstanding stock of
Geo-Environment Services, Inc., a wholly owned subsidiary involved in
marketing of the zeolite products. The transaction was accounted for
at historical cost in a manner similar to that in pooling of interest
accounting for business combinations.
In June 1995, the Company changed its name to American Absorbents
Natural Products, Inc. and the name of its subsidiary to American
Absorbents, Inc.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of American
Absorbents Natural Products, Inc. and its subsidiary American
Absorbents, Inc. Collectively, these entities are referred to as the
Company. All significant intercompany transactions and accounts have
been eliminated.
METHOD OF ACCOUNTING
The Company recognizes income and expenses according to the accrual
method of accounting. Expenses are recognized when performance is
substantially complete and income is recognized when earned. Earnings
(loss) per share are computed based on the weighted average method.
Stock options, preferred stock and convertible debt currently
outstanding were not used in calculating earnings per share since the
effect would be antidilutive. The fiscal year of the Company ends on
January 31 of each year. The financial statements reflect activity
from inception, February 9, 1984.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers
all highly liquid debt instruments with a maturity of three months or
less to be cash equivalents.
NONMONETARY TRANSACTIONS
Nonmonetary transactions are transactions for which no cash was
exchanged and for which shares of common stock were exchanged for
assets or services. These transactions are recorded at fair market
value as determined by the board of directors.
14
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
July 31, 2000
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INVENTORIES
Inventories are accounted for using the first in, first out (FIFO)
method and are valued at the lower of cost or market. Inventories
consist of finished goods and packaging materials.
ACCOUNTS RECEIVABLE
Accounts receivable are shown net of the allowance for doubtful
accounts. This amount was determined to be $0 and $0 at July 31, 2000
and 1999 after writing off all accounts determined to be
uncollectible.
PREPAID EXPENSES
Prepaid expenses consist of the following:
July 31, 2000 January 31, 2000
-------------- ----------------
Prepaid mining land lease $ 2,459 $ 17,208
MINING CLAIMS
Mining claims are stated at the lower of cost or market. Any costs
incurred for the betterment or to increase the expected efficiency of
the operations related to the extraction from the Company mining
claims are capitalized and charged off to operations over the expected
economic life of the claims.
PROPERTY AND EQUIPMENT
The Company has adopted SFAS statement #121, which requires a review
of any potential for the impairment of value of any long-lived assets.
It is the policy of the Company to annually review the future economic
benefit of all long-lived assets and to charge off to operations any
potential impairment of value of long-lived assets when applicable.
NOTE 2 - DEVELOPMENT STAGE ENTERPRISE
The Company, per FASB Statement No. 7, is properly accounted for and
reported as a development stage enterprise. Substantially all of the
Company's efforts since its formation have been devoted to
establishing its new business. No significant revenue has been earned
as of the balance sheet date. Operations have been devoted to raising
capital, purchasing zeolite property and establishing a marketing
plan.
Continuation of the development effort is contingent upon the Company
raising sufficient capital from shareholders or other sources. It is
management's intent to raise capital and further develop the marketing
of its zeolite products.
15
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
July 31, 2000
(unaudited)
NOTE 3 - COMMON STOCK AND STOCKHOLDERS' EQUITY
Stock of the Company has been issued for cash, license agreements,
mining claims, compensation for services, and in exchange for other
stock.
During the period ended July 31, 2000, the Company issued shares of
stock for services, the payment of debt, and compensation.
On March 7, 2000, the Company issued 12,616 shares at $0.33/share for
legal services.
On April 13, 2000, the Company issued 330,906 shares at $0.33/share
for payment of debt and accrued interest.
On April 13, 2000, the Company issued 84,848 shares at $0.33/share for
payment of accrued salaries to an officer of the Company.
On April 27, 2000, the Company cancelled 33,000 shares issued for
compensation to two officers of the Company. The shares were issued at
$0.50/share.
On April 27, 2000 the Company issued 100,000 shares at $0.25/share for
compensation to two officers of the Company.
On July 21, 2000 the Company issued 500 shares at $0.21/share as part
of the judgement directed in the Calkins' lawsuit.
On July 21, 2000 the Company issued 21,625 shares at $0.21/share for
professional services and as part of the settlement with a former
officer of the company.
On July 21, 2000 the Company issued 325,000 shares at $0.13/share for
consulting and investor relations services.
NOTE 4 - MINING CLAIMS
The Company has purchased several zeolite mining claims in three
different regions in the western United States. All purchases were
acquired through stock issuance and are described below.
In April 1991 (before acquisition by Geo-Environmental Resources) (now
American Absorbents Natural Products, Inc.), the Company's subsidiary
issued 440,000 shares of its stock for mining claims containing
zeolite in the Mohave County, Arizona region, and the stock given was
originally valued at $.50 per share. Thus the mining claims were
originally valued at $220,000. Since the value of the mining claims
was not readily determined the mining claims were written down to a
nominal value.
16
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
July 31, 2000
(unaudited)
NOTE 4 - MINING CLAIMS (Continued)
In October 1991 the Company acquired twenty zeolite mining claims in
Harney County, Oregon. The value of the claims was agreed to be
$185,000 by the seller and purchaser and 13,214 (132,143 pre-split)
shares of common stock were issued. The stock was quoted on the market
at $1.40 per share, thus determining the number of shares to be issued
for the claims.
In December 1991, the Company acquired an additional 203 zeolite
mining claims in the Harney County, Oregon region. A geological study
was conducted and reserves were estimated at over 477,600,000 tons.
The value per ton was also estimated based on mining costs and market
value of other companies in the industry. The reserves were then
discounted 99 1/2% and a value was determined to be approximately
$4,800,000. Stock was then issued at market price to equal the value
given to the claims.
On July 10, 1997, the Department of the Interior Bureau of Land
Management granted approval of the Company's Permanent Mining Permit
and Plan of Operations to mine its Harney County, Oregon zeolite
properties.
To date $100 depletion has been taken on any of these claims.
Additional depletion of these assets will begin once material mining
operations on these claims begins.
NOTE 5 - NOTES PAYABLE
During the quarter ended July 31, 2000, total notes payable
outstanding increased by $63,657 from the previous quarter due
primarily to the draws on the line of credit. Of the remaining three
notes payable, all are outstanding to stockholders and bear interest
at the rate of 8.25, 10.5%, and 0.00%. On July 24, 2000 the Company
closed the sale of the Austin warehouse and paid off the $150,000 loan
from Frost National Bank. The Company continued to draw funds on its
$215,000 line of credit and as of July 31, 2000 the outstanding
balance was $211,702. Subsequent to the end of the quarter, the
$118,800 payment due to Austin-Young, Inc. for the first installment
of the long-term debt was made through the escrow agent at Frost
National Bank. Centre Capital Corp made the funds available as part of
the capitalization plan outlined in the definitive agreement signed
August 9, 2000.
NOTE 6 - PRIVATE PLACEMENT OF COMMON STOCK or PREFERRED STOCK
During the second quarter ended July 31, 2000, there was no issuance
of private placements of common stock. There were, however, several
transactions completed with common stock. The Company issued 500
shares of common stock as part of the judgement in the David Calkins'
legal suit. The Company also issued 21,625 shares of common stock as
part of a settlement between the company and a former officer. These
shares were for services rendered after the officer's departure form
the Company. The Company also issued 325,000 shares to two companies
hired to provide investor relation services and web site design. These
companies will provide service under a one-year contract.
17
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
July 31, 2000
(unaudited)
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company has sold two private placements that include a royalty
payment. The first private placement includes a $3 per ton per minimum
investment on 6,000 tons of zeolite mined and sold. Total royalties
paid per minimum investment will be $18,000. The company sold 91 units
of this private placement. The second private placement includes a $2
per ton per minimum investment on 10,000 tons of zeolite mined and
sold. Total royalties paid per minimum investment will be $20,000. The
Company sold 144 units of this private placement. The royalties will
be paid simultaneously ($5 per ton) to the shareholders
proportionately once the zeolite has been mined and sold. The Company
may increase the amount of the royalty payment to any holder of the
royalty right above the specified dollar per ton royalty, but in no
event will the total royalty payment exceed the maximum per
investment. The increase in the royalty amount paid would only
decrease the time limit in which the holder of a royalty right would
receive the total royalty amount. Royalty payments will be made
quarterly after the Company has made its quarterly financial statement
filing with the Securities and Exchange Commission and determined the
total tonnage that has been mined, milled and sold during the quarter.
During the second quarter, the Company's only legal proceeding was
concluded:
-American Absorbents Natural Products, Inc. v. Calkins
A former independent contractor hired to construct the Oregon
plant has placed a mechanics lien on the Oregon plant for alleged
unpaid claims and the Company has sued to remove the mechanics
liens since the claims are being contested. Calkins filed a
counter claim seeking damages in addition to his lien. Subsequent
to the end of the quarter, this case went to trial and the Court
found in favor of Calkins. The Company paid $18,077 in damages
and legal fees on July 10, 2000 as ordered by the judge in this
action. The Company also issued 500 shares of common stock to Mr.
Calkins as part of the judgement.
Also during the quarter, the Company reached a settlement with
David Redding that finalized any unresolved compensation and
outstanding options issues. The Company issued 21,625 shares of
common stock to David Redding for services rendered after his
resignation from the Company and David Redding agreed to return
100,000 stock options to the Company.
NOTE 8 - ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and revenues
and expenses during the reporting period. In these financial
statements, assets, liabilities and earnings involve extensive
reliance on management's estimates. Actual results could differ
from those estimates.
NOTE 9 - SUBSEQUENT EVENTS
On August 9, 2000, the board of directors approved the sale of
American Absorbents Natural Products, Inc. to Centre Capital Corp
of Fort Worth, Texas. The basic components of the agreement
include a capital infusion of $500,000, a combination of common
and preferred shares of Centre Capital and detachable warrants.
The agreement in its entirety can be read as an attachment to the
8-K filed August 24, 2000 reporting this event. As of the filing
date of this 10QSB, $220,000 had been received from Centre Capital
Corp.
18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND PLAN OF OPERATIONS.
The Company, per FASB statement No. 7, is properly accounted for and reported as
a development stage enterprise. The Company's efforts since entering its current
business have been devoted primarily to Company capitalization, acquisition of
mining properties, packaging and milling facility acquisitions and product and
market development.
RESULTS OF OPERATIONS
The Company is a development stage enterprise and has incurred losses in each of
its fiscal years ended January 31, 1998, 1999 and 2000 and for the quarters
ended July 31, 2000, and July 31, 1999. These losses are the result of the
continued operating expenses the Company incurs as it develops it niche in the
retail and industrial marketplaces. Revenues have been insufficient to cover
operating expenses or operational cash flow requirements.
A net loss of $59,215 was incurred in the three-month period ended July 31,
2000, compared to a net loss of $233,523 for the same quarter of the previous
year. For the six months ended July 31, 2000, the Company incurred a net loss of
$310,753 as compared to a net loss of $430,820 for the same period a year ago.
Revenue for the quarter ended July 31, 2000 increased to $68,937 from $8,398 for
the same quarter the previous year and for the first six months of 2001 and 2000
was $69,676 and $18,539 an increase of $51,137.
General and administrative expenses decreased by approximately $8,085 from
$215,322 to $207,237 during the three months ended July 31, 2000 as compared to
the same period of the previous year. Significant expenditures during the second
quarter included a charge of $23,630 for consulting services as well as an
additional charge of $8,078 for the Calkins' lawsuit. Personnel related expenses
decreased by approximately $8,900 from $86,763 for the period ended July 31,
1999 to $77,831 for the period ended July 31, 2000. Legal and accounting fees
decreased by approximately $30,000 due in part to the costs associated with the
stock buyback and other personnel related matters during the second quarter of
last year.
For the three months ended July 31, 2000, the Company realized gross profit
margins of 60% on revenues of $68,937. An 80,000-unit order of our absorbent
pillow line accounted for approximately $57,500 (80%) of total revenues for the
quarter. This order was the second order from our distributor that ordered
40,000 units which were shipped in January of this year. During the quarter
ended July 31, 2000, the Company also recognized a gain on the sale of the
Austin warehouse of $68,335.
The ratio of current assets to current liabilities (current ratio) was 0.51,
2.69, 0.77, and 0.47, respectively, for the fiscal years ended January 31, 2000,
1999, 1998 and 1997. The lower current ratio for the fiscal years ended January
31, 1998 and 1997, results from the classification as short-term debt of
$179,052 and $202,385, respectively, owed to Austin-Young, Inc., the previous
major stockholder of the Company. The lower ratio as of January 31, 2000 is also
reflective of the impact of over $407,000 in short-term debt as well as nearly
$400,000 in accounts payables and accrued expenses. Current ratios at July 31,
2000 and 1999 were .47 and .50, respectively. The decrease in the current ratio
is attributable to an additional $118,800 in long-term debt moving into current
liabilities as well as the balance of the line of credit which is scheduled to
mature in February of 2001. As of July 31, 2000 the outstanding balance on the
line of credit was $211,702.
19
LIQUIDITY AND FINANCIAL CONDITION
The Company has financed its operations to date primarily through the sale of
equity securities and borrowings from stockholders. The Company has been
unprofitable since its inception and has incurred net losses in each year,
including a net loss of $159,215 for quarter ended July 31, 2000. Revenues to
date have provided insufficient funding of working capital. During the quarter,
the Company's primary sources of funding were the $70,000 advanced from the line
of credit, the $57,520 received from the collection of outstanding receivables,
and approximately $35,000 from the sale of the warehouse. The Company is now
fully extended on the line of credit and will have to rely on funding from
Centre Capital per the definitive agreement signed August 9, 2000, private
placements, and other offerings for future operating and development costs. The
$118,800 principal payment on the $831,600 note to Austin-Young was made on
August 15, 2000 using the proceeds from the first installment of funds from
Centre Capital. Also subsequent to the end of the quarter, Centre Capital
provided an additional $100,000 in funding which allowed us to secure the
zeolite reserves for an additional year by making the $29,500 payment to the
Bureau of Land Management.
At July 31, 2000, the Company had $387,644 in accounts payable and accrued
expenses; a year ago at July 31, 1999, the Company had $220,755. Notes payable,
current and long-term totaled $1,038,888 at July 31, 2000, versus $1,210,368 at
July 31, 1999. Management believes it will be able to raise capital to provide
for operations and debt service. However, there can be no assurance that
additional financing will be available at all or, if available, such financing
would be obtainable on terms acceptable to the Company. If adequate financing is
not available, the Company may be required to curtail its operation
significantly or to obtain funds through entering collaborative agreements or
other arrangements on less favorable terms. The failure of the Company to raise
capital on acceptable terms would have a material adverse effect on the
Company's business, financial condition, and results of operations.
During the development stage the Company has paid for almost everything as it
was acquired including the build up in inventory levels. As a result, and now
that the milling facility is in production, the future cash flow of the Company
will benefit as the inventory is converted into sales with the implementation of
the marketing efforts.
During the development stage the Company incurred losses that reflect the
development stage activity of researching and test marketing its products. The
Company paid $91,700 to the Bureau of Land Management for the fiscal year ended
January 31, 1996 and $29,500 in the fiscal years ended January 31, 1997, 1998,
1999, and 2000. In the future, approximately $29,500 will be due to the Bureau
of Land Management in August of each year to satisfy claim maintenance fees on
existing claims.
The Company's need for warehouse space in Austin, Texas has diminished.
Therefore, the Company has been negotiating to sell the warehouse to its current
tenant. The sale of warehouse was completed on July 24, 2000. Proceeds from the
sale will be used to payoff the loan at Frost Bank which is secured by the
warehouse with any remaining funds used to continue operations.
The Company did not issue any stock for cash investments into the Company during
this quarter.
INFLATION
The Company does not expect inflation to have any material effect on its
revenues, costs or overall operation.
20
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
During the quarter ended July 31, 2000 there were no material pending or
threatened legal proceedings against the Company or, to the best of the
company's knowledge, its directors, officers, affiliates and owners of record or
beneficially of more than five percent of any class of voting securities of the
Company nor, to the best of the company's knowledge, was there any associate of
any such director, officer, affiliate or security-holder who is a party in any
action that is adverse to the Company or its subsidiary. (SEE NOTE 7 -
COMMITMENTS AND CONTINGENCIES, page 17)
ITEM 2. CHANGES IN SECURITIES.
During the quarter ended July 31, 2000, there were no material modifications to
instruments defining the rights of the holders of any class of registered
securities nor were the rights evidenced by any class of registered securities
materially limited or qualified by the issuance or modification of any class of
securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
During the quarter ended July 31, 2000, there was no material default in the
payment of principal, interest, sinking or purchase fund installments, or any
other material default not cured within 30 days, with respect to any
indebtedness of the Company exceeding five percent of the total assets of the
Company, nor was there any material arrearage in the payment of dividends with
respect to any class of preferred stock of the Company which is registered or
which ranks prior to any class of registered securities, or with respect to any
class of preferred stock of any significant subsidiary of the Company. (The
Company currently has no dividend policy.)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
During the quarter ended July 31, 2000, no matters were submitted to a vote of
security-holders.
ITEM 5. OTHER INFORMATION.
No reports were filed on Form 8-K during the quarter ended July 31, 2000.
However, On August 24, 2000, the Company filed an 8-K detailing the signing of a
definitive agreement with Centre Capital Corp. Centre Capital will acquire
American Absorbents Natural Products, Inc. for a combination of common stock,
preferred stock, and detachable warrants. Persons wanting additional information
may access the 8-K filing through edgar-online.com and on the Centre Capital
Corp website (cccx.net).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) (1) The following financial statements are included in Part I, Item 1:
(3) The following exhibits are included for the three months and quarters
ended April 30, 2000 and 1999:
Exhibit 1 - Computation of Earning (Loss) Per Share 24
Exhibit 2 - Subsidiary of the Registrant 25
All other exhibits are omitted since the required information is included in the
financial statements or notes thereto, or since the required information is
either not present, not present in sufficient amount or is not applicable.
(b) No reports were filed on Form 8-K during the quarter ended July 31,
2000.
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
By: /s/ Robert L. Bitterli
------------------------------------
Robert L. Bitterli, Chairman of the
Board and Chief Executive Officer
Date: September 14, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Company and in their
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Robert L. Bitterli Chief Executive September 14, 2000
- ----------------------- Officer and Chairman of the Board
Robert L. Bitterli (Principal Executive Officer)
/s/ David C. Scott President and Chief Financial Officer September 14, 2000
- ------------------- (Principal Accounting Officer)
David C. Scott
22