As filed with the Securities and Exchange Commission on September 30, 1997
Registration No. 333-29903
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2/A
(AMENDMENT NO. 2)
REGISTRATION STATEMENT
Under
The Securities Act of 1933
AMMONIA HOLD, INC.
(Name of registrant as specified in its charter)
Utah 75-2337459
(State or Jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10 Gunnebo Drive Michael D. Parnell
Lonoke, Arkansas 72086 10 Gunnebo Drive
(501) 676-2994 Lonoke, Arkansas 72086
(Address, including zip code, and telephone number, including area code
(501) 676-2994
of Registrant's principal executive offices)
Name, address, including zip code, and
telephone number, including area code, of
agent for service)
COPY TO:
Jehu Hand, Esq.
Hand & Hand
24901 Dana Point Harbor Drive, Suite 200
Dana Point, California 92629
(714) 489-2400
Facsimile (714) 489-0034
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after the effective date of this registration
statement.
If the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant
to Rule 415 under the Securities Act of 1933 other than securities offered only
in connection with dividend or
interest reinvestment plan, please check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box:
[ ]
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CALCULATION OF REGISTRATION FEE
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to Offering Price Aggregate Amount of
Securities to be Registered Be Registered Per Share(1) Offering Price Registration Fee
Common Stock issuable upon
conversion of Series A
<S> <C> <C> <C> <C> <C>
Convertible Preferred Stock(2)....... 923,075 $5.00 $ 4,615,375.00 $ 1,398.60
Common Stock offered by
selling shareholders(3).............. 317,757 $5.00 $ 1,588,785.00 $ 481.45
Common Stock, issuable upon
exercise of warrants(4)(5)........... 100,000 $5.00 $ 500,000.00 $ 151.52
Common Stock, issuable upon
exercise of options(5)(6)............ 100,000 $5.00 $ 500,000.00 $ 151.52
Common Stock, issuable upon
exercise of options(7)............... 100,000 $5.25 $ 525,000.00 $ 159.09
Common Stock, issuable upon
exercise of options(8)............... 100,000 $6.25 $ 625,000.00 $ 189.39
Common Stock, issuable upon
exercise of options(9)............... 100,000 $7.25 $ 725,000.00 $ 219.70
Common Stock, issuable upon
exercise of options(10).............. 100,000 $8.25 $ 825,000.00 $ 250.00
Total(11).............................. 1,840,832 $ 9,904,160 $ 3,001.27
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(1) Estimated solely for purposes of calculating the registration fee.
(2) Includes 923,075 shares issuable upon conversion of 3,000 shares
($3,000,000 aggregate principal amount) of Series A Convertible Preferred
Stock at 65% of the closing bid price of the Common Stock averaged over
the five trading days prior to the date of conversion. The maximum
offering price per share is based upon the closing price of the Common
Stock on June 19, 1997, or $5.00 since it is higher than the estimated
conversion price per share of the Series A Convertible Preferred Stock
(in accordance with Rule 457(g)).
(3) Includes 317,757 shares already issued and outstanding.
(4) Includes 100,000 shares issuable upon exercise of warrants to purchase
100,000 shares at $4.75.
(5) The maximum offering price per share is based upon the closing price of
the Common Stock on June 19, 1997, or $5.00 since it is higher
than the exercise price of the option (in accordance with Rule 457(g)).
(6)Includes 100,000 shares issuable upon exercise of options at $4.25 per share.
(7)Includes 100,000 shares issuable upon exercise of options at $5.25 per share.
(8)Includes 100,000 shares issuable upon exercise of options at $6.25 per share.
(9)Includes 100,000 shares issuable upon exercise of options at $7.25 per share.
(10)Includes 100,000 shares issuable upon exercise of options at $8.25 pershare.
(11)Includes in each case reoffers of the Common Stock offered hereby and shares
issuable pursuant to antidilution provisions pursuant to
Rule 416.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION
PROSPECTUS
AMMONIA HOLD, INC.
1,829,832 Shares of Common Stock
($.001 par value)
The estimated 1,829,832 shares (the "Shares") of Common Stock, par value
$.001 per share (the "Common Stock") of Ammonia Hold, Inc., a Utah corporation
(the "Company") are being offered by the selling stockholders (the "Selling
Stockholders") and include an estimated 923,075 shares issuable upon conversion
of $3,000,000 in principal amount of Series A Convertible Preferred Stock (the
"Series A Preferred"), 600,000 shares issuable upon exercise of warrants and
options, and 306,757 shares currently outstanding. The Company will not receive
any proceeds from the sale of Common Stock by the Selling Stockholders. The
Selling Stockholders may be deemed to be "underwriters" under Section 2(11) of
the Securities Act of 1933. See "Selling Stockholders." The expenses of the
offering, estimated at $30,000, will be paid by the Company.
The Common Stock currently trades on the Electronic Bulletin Board under
the symbol "AMHD" On June 19, 1997, the last sale price of the Common Stock as
reported on the Electronic Bulletin Board was $5.00 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PURCHASE OF THESE SECURITIES INVOLVES RISKS.
See "Risk Factors" on page 4.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
The date of this Prospectus is ___________, 1997
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No person has been authorized in connection with this offering to give any
information or to make any representation other than as contained in this
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any
securities covered by this Prospectus in any state or other jurisdiction to any
person to whom it is unlawful to make such offer or solicitation in such state
or jurisdiction. Neither the delivery of this Prospectus nor any sales made
hereunder shall, under any circumstances, create an implication that there has
been no change in the affairs of the Company since the date hereof.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement under the Securities Act
with respect to the securities offered hereby with the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549. This Prospectus, which is a part of the
Registration Statement, does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto, certain items of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement,
including all exhibits and schedules thereto, which may be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at its Regional Offices
located at 7 World Trade Center, New York, New York 10048, and at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 at
prescribed rates during regular business hours. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or document filed as an exhibit to the Registration Statement, each
such statement being qualified in its entirety by such reference. The Company
will provide, without charge upon oral or written request of any person, a copy
of any information incorporated by reference herein. Such request should be
directed to the Company at 10 Gunnebo Drive, Lonoke, Arkansas 72086, telephone
(501) 676-2994.
As of the date of this Prospectus, the Company became a reporting company
under the Exchange Act and in accordance therewith in the future will file
reports and other information with the Commission. All of such reports and other
information may be inspected and copied at the Commission's public reference
facilities described above. The Commission maintains a web site that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission. The address of such site
is http://www.sec.gov. In addition, the Company intends to provide its
shareholders with annual reports, including audited financial statements,
unaudited semi-annual reports and such other reports as the Company may
determine.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
more detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus.
The Company
Ammonia Hold, Inc. (the "Company") was organized on July 10, 1980 under
the laws of the State of Utah as Ewing Oil Mining Company to primarily engage in
the oil development business. The Company experienced periods of inactivity and
underwent several name changes until June 1994, at which time it acquired
Ammonia Hold, Inc., a Texas corporation ("AHI-Texas") engaged in the business of
developing products designed to stop the formation of ammonia and other odors
associated with animal waste. Subsequent to the acquisition, all of the
Company's activities have been related to the development, manufacturing and
marketing of odor eliminating products. For accounting purposes the acquisition
was treated as a recapitalization of AMHD-Texas with AMFD-Texas as the acquirer
(reverse acquisition). Following the acquisition, the Company changed its name
to Ammonia Hold, Inc. and became engaged in the business of manufacturing and
marketing odor eliminating products for use in connection with farm and domestic
animals.
The Company's executive offices are located at 10 Gunnebo Drive, Lonoke,
Arkansas 72086, and its telephone number is (501) 676-2994.
Securities Offered:....................................................
An estimated 1,829,832 shares of
Common Stock, $.001 par value per
share, including an estimated 923,075
shares issuable upon conversion of 3,000
shares of Series A Preferred Stock at a
conversion price per share of Preferred
Stock equal to $1,000 divided by 65% of
the average closing bid price of the
Common Stock on the five trading days
prior to conversion; 600,000 shares
issuable upon exercise of warrants and
options; and 306,757 shares currently
outstanding.
Risk Factors...........................................................
The securities offered hereby involve a
high degree of risk and immediate
substantial dilution and should not be
purchased by investors who cannot afford
the loss of their entire investment. See
Risk Factors."
Common Stock Outstanding(1) Before Offering:
........................... 4,559,415(1) shares
Common Stock Outstanding After Offering:
............................... 6,082,490 shares
NASD Electronic Bulletin Board......................................... AMHD
(1) Based on shares outstanding as of June 30, 1997. Does not include
40,000 shares offered which were issued
subsequent to June 30, 1997.
Risk Factors
The securities offered hereby are highly speculative and involve a high
degree of risk, including, but not necessarily limited to the risk factors
described below. Prospective purchasers should carefully consider the following
risk factors, among others, as well as the remainder of this Prospectus, prior
to making an investment in the securities of the Company.
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RISK FACTORS
An investment in the securities offered hereby is speculative in nature
and involves a high degree of risk. In addition to the other information in this
Prospectus, the following factors should be considered carefully in evaluating
the Company and its business.
Limited History of Business Operations; Sustainability of Past Results
The Company has limited operating history, having commenced operations
in 1990. As of June 30, 1997 the Company's cumulative losses were approximately
$1,150,000. The Company's revenues have grown from $677,576 in the year ended
June 30, 1996 to $1,110,490 in the year ended June 30, 1997. The Company's
growth has been dependent on a number of factors, such as the Company's
marketing efforts, growing awareness of a need for and availability of
odor-reducing products, and general economic conditions. In fiscal 1997, the
Company began marketing a new cat litter, and intends to expand marketing
efforts in this area. As a result of the increase in operating expenses caused
by this expansion and lower margins caused by entry in the cat litter market,
the Company expects to continue to report a loss from operations and to continue
to suffer negative operating results until sales increase sufficiently, of which
there can be no assurance. There can be no assurance that the Company will be
able to grow in future periods or sustain its historic rates of growth. As a
result, the Company believes that period to period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as an
indication of future performance.
Necessity to Develop Management Infrastructure to Meet Growth
The Company's growth to date has required and is expected to continue
to require, the full utilization of the Company's management, financial and
other resources. The Company's ability to manage growth effectively will depend
on its ability to improve and expand its operations, including its financial and
management information systems, and to recruit, train and manage executive staff
and employees. There can be no assurance that management will be able to manage
growth effectively, and the failure to effectively manage growth may have a
materially adverse effect on the Company's results of operations.
Dependence on WalMart
The Company is dependent upon one customer for a majority of its
revenues. This national retail chain, WalMart, accounted for 47% of the
Company's sales in the nine months ended March 31, 1997 and 46% in the year
ended June 30, 1996. The Company's dependence on WalMart could result in sales
declines or similar losses in the future if its relationship with WalMart is
interrupted for any reason. The Company believes that its dependence on WalMart
will decrease as sales to other customers grows, however, there can be no
assurance the Company will be successful in its plan.
Competitive Market for Pet and Odor Control Products
The market for pet and odor control products is highly competitive.
Many of the Company's competitors have established market share and have
substantially greater resources than the Company. Competitors may broaden their
product line, and potential competitors, may enter, or increase their focus on
odor control products, resulting in increased competition. The Company's future
success will depend on its ability to successful compete with several other
companies and on the acceptance of the Company's products.
There can be no assurance that the Company will be able to compete
successfully against current and future competitors or that competitive
pressures faced by the Company will not have a material adverse effect on the
Company.
Dependence on Management and Future Key Personnel
The Company is dependent upon Michael D. Parnell, President and Dan L.
Thompson, Chief Financial Officer and other key employees with respect to
administration and marketing. The Company has not entered into employment
agreements with either of the individuals and has not obtained key men life
insurance on their lives. The Company's future success also depends on its
ability to attract and retain other qualified personnel, for which competition
is intense. The loss of certain key employees or the Company's inability to
attract and retain other qualified employees could have a material adverse
effect on the Company's results of operations.
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Control by Officers and Directors
Directors and officers of the Company beneficially own 864,262 shares
of the Company's outstanding Common Stock, or approximately 19.0% of the
outstanding voting stock. As a result, the Company's officers and directors are
able to exert significant control over the Company, and to direct and control
the Company's operations, policies and business decisions.
Uncertainty of Protection Afforded by Patents and Proprietary Rights
The Company's products are based on certain U.S. patents and the
Company may in the future apply for additional patents related to its products.
There can be no assurance that any additional patent applications relating to
the Company's products or technology will result in patents being granted or
that, if granted, such patents will afford protection against competitors with
similar technology. The Company's principal patent was granted in 1989 and will
expire in 2006. There can be no assurance that the Company will have the
financial resources necessary to enforce any patent rights it may hold. Although
the Company is not aware of any infringement claim against it, in the event that
a future claim against the Company is successful, it may be necessary for the
Company to obtain licenses to such patents or to other such licenses on
commercially reasonable terms. Any disclosure of such technology or development
of substantially equivalent technology could result in increased competition
that might materially and adversely affect the Company's revenues and cost of
sales.
The Company attempts and will attempt to protect its proprietary
technology by relying on trade secret laws and non-disclosure and confidentially
agreements with its employees and contractors who have access to its proprietary
technology. Despite these protections, no assurance can be given that others
will not independently develop or obtain access to such technology or that the
Company's competitive position will not be adversely affected thereby. See
"Business - Patents and Trade Secrets".
Limited Public Market for Shares
Prior to the date hereof there has been limited public trading in the
Company's Common Stock. There exists no broad public market and there can be no
assurance that a broad public market for the Company's securities will develop
or, if it develops, that it will be sustained following this Offering. See
"Market Prices and Dividends." Currently, the Company's Common Stock is traded
on the over-the-counter market and is quoted on the Electronic Bulletin Board.
Although the Company has applied for a listing of the NASDAQ Small Cap Market,
there can be no assurance that such application will be approved.
Absence of History Dividends and No Likelihood of Dividends in the Foreseeable
Future
The Company has not paid any cash or other dividends or made
distributions on its Common Stock and the
Company does not anticipate paying cash dividends or making distributions in the
foreseeable future. See "Market
Prices and Dividends."
Possible "Penny Stock" Regulation
The Company's Common Stock is traded in the over-the-counter market and
is subject to the provisions of Section 15(g) and Rule 15-g(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), commonly referred to as
the "penny stock" rule. Section 15(g) sets forth certain requirements for
transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of
penny stock used in Rule 3a51-1 of the Exchange Act. That rule generally defines
a penny stock to be any equity security that has a market price of less than
$5.00 per share, unless the equity security is either registered and traded on a
national securities exchange meeting specified criteria; authorized for
quotation on the Nasdaq Stock Market; issued by a registered investment company;
or issued by an issuer having net tangible assets of no less than $2 million ($5
million if the issuer has been in continuous operation for less than three
years). The Company has applies for listing of the Common Stock on the NASDAQ
Small Cap Market, but there can be no assurance that the Company's application
will be approved. If the Common Stock is deemed to be a penny stock, trading in
its shares would be subject to additional sales practice requirements on
broker-dealers who sell penny stocks to persons other than established customers
and accredited investors, (defined generally as individuals with assets in
excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse, or other institutional investors).
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For transactions covered by these rules, broker-dealers must make a
suitability determination for the purchase of such securities and must have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the first transaction, of a
risk disclosure document relating to the penny stock market. A broker-dealer
also must disclose the commissions payable to both the broker-dealer an the
registered representative, and current quotations for the securities. Finally,
monthly statements must be sent disclosing recent price information for the
penny stocks held in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of broker-dealers to
trade and/or maintain a market in the Company's Common Stock and may affect the
ability of shareholders to sell their shares.
Shares Eligible For Future Sale
Upon sale of the 1,829,832 Shares offered hereby, the Company will have
outstanding 6,082,490 shares of Common Stock, of which all shares will be
unrestricted as to resale and will be eligible for sale in the public market
pursuant to Rule 144 under the Securities Act. Sales of substantial amounts of
the Common Stock of the Company in the public market could adversely affect
prevailing market prices.
Risks Associated with Forward-looking Statements
The Company's forward-looking statements include the plans and
objectives of management for future operations, including plans and objectives
relating to the Company's marketing of its products and future economic
performance of the Company. The forward-looking statements and associated risks
set forth in this Prospectus include or relate to: (i) the ability of the
Company to obtain a meaningful degree of consumer acceptance for its products
and future products, (ii) the ability of the Company to market its products and
future products on a national basis at competitive prices, (iii) the ability of
the Company to develop brand-name recognition for its products and future
products, (iv) the ability of the Company to develop and maintain an effective
sales network, (v) success of the Company in forecasting demand for its products
and future products, (vi) the ability of the Company to maintain pricing and
thereby maintain adequate profit margins, (vii) the ability of the Company to
achieve adequate intellectual property protection for the Company's products and
future products and (viii) the ability of the Company to obtain and retain
sufficient capital for its future operations.
The forward-looking statements herein are based on current expectations
that involve a number of risks and uncertainties. Such forward-looking
statements are based on assumptions that the Company will market and provide
products on a timely basis, that the Company will retain its principal customer,
that there will be no material adverse competitive or technological change in
conditions in the Company's business, that demand for the Company's products
will significantly increase, that the Company's President will remain employed
as such by the Company, that the Company's forecasts accurately anticipate
market demand, and that there will be no material adverse change in the
Company's operations or business or in governmental regulations affecting the
Company or its suppliers. The foregoing assumptions are based on judgments with
respect to, among other things, future economic, competitive and market
conditions, and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the Company's
control. Accordingly, although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, any such assumption
could prove to be inaccurate and therefore there can be no assurance that the
results contemplated in forward-looking statements will be realized. In
addition, as disclosed elsewhere in the "Risk Factors" section of this
Prospectus, there are a number of other risks inherent in the Company's business
and operations which could cause the Company's operating results to vary
markedly and adversely from prior results or the results contemplated by the
forward-looking statements. Growth in absolute and relative amounts of cost of
goods sold and selling, general and administrative expenses or the occurrence of
extraordinary events could cause actual results to vary materially from the
results contemplated by the forward-looking statements. Management decisions,
including budgeting, are subjective in many respects and periodic revisions must
be made to reflect actual conditions and business developments, the impact of
which may cause the Company to alter its marketing, capital investment and other
expenditures, which may also materially adversely affect the Company's results
of operations. In light of significant uncertainties inherent in the
forward-looking information included in this Prospectus, the inclusion of such
information should not be regarded as a representation by the Company or any
other person that the Company's objectives or plans will be achieved.
See "Management's Discussion and Analysis" and "Business."
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MARKET PRICES AND DIVIDENDS
The Company's Common Stock has traded on the Electronic Bulletin Board
sponsored by the National
Association of Securities Dealers, Inc. since the fourth calendar quarter of
1994.
The following table sets forth the range of high and low bid prices for
the Company's Common Stock for each quarterly period indicated below as reported
by the Electronic Bulletin Board. These prices reflect inter-dealer prices
without retail mark-up, mark-down or commissions and may not necessarily
represent actual transactions.
High Low
-------- ------
Calendar Quarters
1994
4th Quarter................................. $ 6.75 $ 5.75
1995
----
1st Quarter................................. $ 7.00 $ 6.50
2nd Quarter................................. 6.62 6.00
3rd Quarter................................. 6.37 5.50
4th Quarter................................. 6.62 5.50
1996
1st Quarter................................. $ 8.25 $ 5.25
2nd Quarter................................. 9.62 4.87
3rd Quarter................................. 7.62 5.50
4th Quarter................................. 8.18 4.37
1997
1st Quarter................................. $ 6.75 $4.62
2nd Quarter (1)............................. 5.625 3.50
(1) Through June 21, 1997
The approximate number of record holders of the Company's Common Stock
as of May 31, 1997 was 1,080.
The Company has never declared or paid any cash dividends on its Common
Stock nor does the Company anticipate that any such dividends will be paid in
the foreseeable future. The Company intends to retain any earnings it may
realize to finance operations and potential expansion of its business.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Overview
The Company's principal business is the development, manufacture and
marketing of odor control products based on its patented technology. Operations
commenced in 1990 when Ammonia Hold, Inc., a Texas corporation ("AHI Texas")
acquired the Company's principal patent, which relates to the manufacture of
monocalcium phosphate In June, 1994, the Company, which was then known as Key
Waste Management, Inc., a Utah corporation, acquired AHI Texas in exchange for
2,679,391 shares of Common Stock, or 71% of the Company's Common Stock after
giving effect to such issuance. For financial reporting purposes the acquisition
was accounted for as a purchase of the net liabilities of the Company by
AHI-Texas.
Results of Operations
Year Ended June 30, 1997 Compared to Year Ended June 30, 1996
Revenues increased from $677,576 in the year ended June 30, 1996
("Fiscal 1996") to $1,110,490 in the year ended June 30, 1997 ("Fiscal 1997"),
an increase of 64%. The increase in revenues was due to increased sales of
existing products, effected primarily by broadening the Company's distribution
base, and sales of the new cat litter product commencing in August, 1996. In
Fiscal 1997, sales to one principal customer, WalMart, accounted for 46% of
total revenues. Cost of sales increased in Fiscal 1997 to 72% of revenue
compared to 57% of revenues in Fiscal 1996. Almost all of the increase was due
to the lower margin on the Company's new cat litter product which was introduced
in August, 1996. The higher cost of sales on the new cat litter product was
caused not only by higher
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materials costs for the cat litter but more importantly by the more competitive
market for cat litter. In addition, in contrast to the Company's Odor Scentry
and similar products, which are concentrated additives, the cat litter product
is a complete ready to use product, is heavier and requires higher freight
costs. The Company expects this margin to improve slightly in the future if it
is able to obtain volume discounts on raw materials or obtain lower costs
suppliers, but expects that the lower margin will continue for the forseeable
future. This lower margin on cat litter was somewhat offset by a reduction in
prices for raw material for the remainder of the products due to change in
procurement.
General and administrative expenses increased to 114% of revenues in
Fiscal 1997 compared to 66% in Fiscal 1996. The increase was due to two factors.
First, the Company has incurred additional salaried and overhead costs from
adding staff and physical facilities in order to meet additional sales growth
and projected growth. In the beginning of the Fiscal 1997, the Company moved to
a newer and larger building, which it owns, from cramped rented quarters.
Second, the Company incurred several non-recurring charges in Fiscal 1997
including a consulting agreement for financial public relations services in
Fiscal 1997, resulting in a non-cash expense of $333,094. Other income in Fiscal
1997 of $62,426 was derived from interest income resulting from the amount of
cash on hand.
Year Ended June 30, 1996 Compared to Year Ended June 30, 1995
Revenues in the year ended June 30, 1996 ("Fiscal 1996") decreased only slightly
by 4%, compared to the year ended June 30, 1995. Cost of sales as a percentage
of sales increased in Fiscal 1996 to 57% of sales, compared to 52% in Fiscal
1995, primarily due to the use of a particular supplier for one of the
components of the Company's products who, in the view of management, overcharged
the Company. Selling expenses of $150,863 in Fiscal 1995 relate to a specific
individual hired for sales purposes who was subsequently terminated. General and
administrative expenses increased from $143,911 in Fiscal 1995 (20% of revenues)
to $446,060 in Fiscal 1996 primarily due to increased salaries and overhead.
Prior to Fiscal 1996 the Company operated with limited staff and in cramped
rented quarters due to limited financial resources.
Liquidity and Capital Resources
As of June 30, 1997, the Company had working capital of $3,830,397,
most of which was comprised of cash. In June 1997 the Company completed a
private offering of Series A Convertible Preferred Stock and received net
proceeds of approximately $2.6 million. The proceeds of the June 1997 offering
are being used to acquire additional manufacturing equipment of $400,000,
purchase of $250,000 in inventory, packaging equipment and supplies $260,000,
acquisition of additional land and building $460,000, research and development
$200,000, and the remainder for general and administrative expenses and working
capital. Management believes that the cash on hand, together with cash generated
from operations, will be sufficient to meet the Company's cash requirements
until at least June 30, 1998. The Company has no lines of credit available to it
at this time. Inflation has not had a significant impact on the Company's
results of operations.
BUSINESS
The Company is engaged in the business of manufacturing and marketing
odor eliminating products for use in connection with farm and domestic animals.
The Company's products are specifically designed to stop the formation of
ammonia and other odors associated with animal waste and provide safe, simple,
economical reduction of ammonia and associated vapor in poultry houses and other
areas where animal wastes are present. The Company markets its products to
farms, poultry houses, co-ops, large retail chains and grocery stores throughout
the United States and other countries including Canada, Japan, Mexico, Saudi
Arabia and England.
In 1995, the Company created a wholly owned subsidiary, Fivestar
Products Corporation, to import and acquire related products for sale and
distribution by way of television and mass merchandisers. Fivestar Products
Corporation has not engaged in material activity to date and the Company does
not intend to develop this business.
Business and Products
The Company manufactures products specifically designed to control
ammonia and other odors associated with animal urine and feces using a patented
process. The Company's line of products have the ability to counter the
formation of ammonia when urine and solid animal waste is exposed to free oxygen
in the air. The Company's patented process binds aluminum and phosphorus
together to hold nitrogen stable, thus halting the natural production
8
<PAGE>
of ammonia. The Company's products are designed for industrial use in poultry
production and livestock confinement areas and with household pets.
The Company's principal product is called "Ammonia HoldR," developed
after 15 years of research by the individual inventor and patented by him in
1989. Ammonia Hold is a granular light gray substance that uses a mono-calcium
phosphate base with a blend of trace materials and other inert ingredients.
Ammonia Hold counters the natural formation of ammonia when animal wastes are
exposed to free oxygen in the air. By chemically binding the hydrogen and
nitrogen in animal wastes, Ammonia Hold prevents the oxidation that creates
ammonia. Use of Ammonia Hold decreases ammonia levels. High atmospheric ammonia
levels have been shown by numerous independent studies to cause respiratory
tract damage in poultry, resulting in higher mortality and condemnation rates,
and decreasing feed efficiency.
The Company also markets a related product known as "Odor ScentryTM", a
variation of Ammonia Hold sold in smaller granular form or in aerosol form,
which uses the same process as Ammonia Hold to isolate the individual elements
that must combine to create ammonia. Odor ScentryTM, the Company's first
consumer product previously marketed under the name Odor Halt, is sold in pet
stores and pet departments of retail stores for home use in the elimination of
odors associated with pet litter pans for domesticated animals such as cats and
birds, gerbils, hamsters and rabbits. Users of Odor ScentryTM add the product to
their pets' litter pan to remove common odors. Odor ScentryTM is available in
natural-like scents of spice or citrus and may also be used to prevent odors
from forming in trash cans and in removing odors from cars and carpets where
undesirable odors have developed previously. Odor ScentryTM for Healthcare
Facilities is a related product formulated and packaged for the nursing home
industry. This product is used as a carpet deodorizer or mixed with water to
clean and deodorize.
A related product is "Odor Scentry Spray," an aerosol powder spray
variation for consumer use. This product can halt the natural production of
common household odors originating in garbage cans, diaper pails, and in
moisture-and-mildew-ridden areas. Odor Scentry Spray is also used to remove
odors from cars and carpets where undesirable smells have developed.
A new product recently introduced is "Barn GuardTM", a granular product
specifically intended for the equestrian market. Barn GuardTM is long-lasting,
easy-to-use and eliminates odors in horse stalls and all types of livestock
pens. It is non-toxic and contains no perfumes or masking agents. Another
recently developed product is "Odor Scentry Premium Cat Litter." This product
when used in household litter pans forms flushable clumps of both liquid and
solid waste which are both completely flushable in non-septic tank systems. Odor
Scentry Premium Cat Litter is all-natural, biodegradable, and almost completely
dust-free and is designed to prevent tracking by cats after using the litter
pan. Both Barn Guard and Odor Scentry Premium Cat Litter use the same process as
Ammonia Hold to isolate the individual chemical elements that must combine to
create ammonia.
The Company has recently announced the results of phase-one of a
biosolids composting test to determine the effects of the Ammonia Hold product
on sludge and waste management. CalRecovery, a waste management consulting and
engineering firm, recently completed the first phase of a two-phase study, which
on a research scale, demonstrated that the addition of the Ammonia Hold product
has the potential to accelerate the process of composting sludge, to increase
the retention of nitrogen, and to control the emission of ammonia during the
composting process. The Company is beginning a phase-two commercial scale test
of the product with various municipal sludge composting facilities. If the
performance of Ammonia Hold is confirmed during phase-two large-scale
performance testing, the product could be of interest to municipal wastewater
treatment facilities that are considering or are currently composting sludge as
a method of waste management. Possible benefits of Ammonia Hold application for
treatment facilities include reduction of composting costs and control of air
emissions and odor, with odor being the number one cause of complaints to health
and environmental regulatory agencies. Test results should be available during
1997. There can be no assurance that positive test results will lead to a new
commercially viable use for Ammonia Hold, or to what extent a commercial market
may exist.
Marketing
Management estimates that more than half of all households in the
United States have pets. Management further estimates that over six billion
broiler chickens, 280 million turkeys and 21 million ducks are produced in the
United States each year. In order to address this market, management has created
a marketing strategy combining the use of direct sales representatives and trade
and consumer advertising. This strategy targets not only the retail market
consisting of pet stores and pet departments of grocery and other retail stores,
but also the commercial and industrial animal markets. Major retailers of the
Company's products are WalMart, PETCO and Target.
9
<PAGE>
Presently, the Company uses the services of over fifty independent
sales representatives to cover its marketing area, primarily in the continental
United States. Management intends to increase its marketing force as business
demands warrant such expansion and the Company has sufficient funds available to
retain the appropriate personnel.
Patents
The Company's principal patent, Method for Producing Monocalcium
Phosphate and Products Produced therefrom, (U.S. Patent No. 4,838,922) was
issued in June 1989 and acquired in 1990 from the inventor, Billy J. Green by
the Company's predecessor for 5,000 shares of AHI-Texas common stock, $100,000
cash and a note payable in the amount of approximately $312,000. Of this amount,
$250,000 was later retired by the issuance of 50,000 shares of Company common
stock. The patent refers to an improved method of producing monocalcium
phosphate by mixing phosphoric acid with brown lime, a residue of the Arkansas
bauxite refinery process. The second patent, Animal Litter containing Magnesium
Montmorillonite (U.S. Patent No. 5,529,022) was granted in June 1996 and
acquired from Sanex Corporation by the Company in August 1996 for $250,000, paid
$50,000 in cash and the remainder by the issuance of 35,714 shares of Common
Stock valued at $5.60 per share. The officers and directors of Sanex are
Marjorie Burman-Nelson and Scott Burman. The purchase price for these patents
and the value attributable to the shares of common stock issued in the
transaction was based on arms-length negotiations between the parties.
Competition
Presently, there are several companies marketing products similar to
those produced and marketed by the Company including, without limitation,
Ammonia Control and Jones Hamilton for ammonia abatement additives and Clorox,
Oil DRI Corp and American Colloid for cat litter. Most of these companies are
larger than the Company with longer histories of operation and greater financial
and personnel resources. Also, most of these competitors have established some
market share in the market in which the Company will be competing. The ability
of the Company to penetrate these markets will depend on many factors including,
but not limited to, its ability to obtain sufficient capital to enhance and
broaden its marketing of its products, to develop new and improved products, to
obtain and retain necessary management and advisory personnel, and the
establishment of a comprehensive marketing plan.
Employees
Presently, the Company has six employees consisting of two management
persons, three production persons and one administrative person. The Company
does not currently offer its employees any bonus, profit sharing or deferred
compensation plan nor is there any employment contract with any employee.
Management intends to hire additional qualified personnel as business conditions
warrant. In addition to its full-time employees, the Company may use the
services of certain outside consultants and advisors as needed on a contract
basis. Management considers the relations between the Company and its employees
to be good.
Facilities
The Company's principal place of business and corporate offices are
located at 10 Gunnebo Drive, Lonoke, Arkansas 72086. The facilities consist of
approximately 15,000 square feet of manufacturing and warehouse space used for
the production of the Company's products and storage area for inventory and raw
materials. The building and land are held in fee without mortgage. The Company
also rents on a month to month basis, warehouse space for a mixing facility in
Lonoke for rent of $1,360. On August 5, 1997 the Company purchased ten acres of
land and 55,000 square foot office and manufacturing facility in Lonoke for cash
of $392,920, in order to meet expansion requirements.
Litigation
The Company is not a party to any material pending legal proceedings
and no such action by, or to the best of its knowledge, against the Company has
been threatened.
10
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information with respect to the
executive officers and directors of the Company. Each director holds such
position until the next annual meeting of the Company's shareholders and until
his respective successor has been elected and qualifies. Any of the Company's
officers may be removed with or without cause at any time by the Company's Board
of Directors.
Name Age Position with the Company
Michael D. Parnell 38 President, Chief Executive Officer
and Director
Dan N. Thompson 34 Secretary/Treasurer, Chief
Financial Officer and Director
Robert S. Ligon 75 Director
Eugene England 69 Director
Charles R. Nickle 43 Director
William H. Ketchum 65 Director
The business experience of each of the persons listed above during the
past five years is as follows. Unless otherwise indicated, reference to a
position held by each of the persons named held as of June 1994 was held in AHI
Texas and immediately prior thereto in the Company.
Michael D. Parnell has been President and Chief Executive Officer of
the Company since July 1, 1996. Mr. Parnell is a graduate of the University of
Arkansas with a degree in Agricultural Economics. He has over 15 years
experience in the investment banking business and for more than the past five
years has been a registered representative of Paine Webber until February 28,
1997. Mr. Parnell became a director in 1996.
Dan N. Thompson has been the Secretary/Treasurer and Chief Financial
Officer of the Company since July 1994. Mr. Thompson is a graduate of Texas A &
M with a degree in industrial distribution. He devotes approximately 10% of his
time to the Company. Mr. Thompson has been the Denver district sales manager for
the Trane Corporation from January 1996 to present, and prior thereto for more
than 5 years prior to the date of this Prospectus he was a sales representative
in Trane's Little Rock, Arkansas office.
Robert S. Ligon is a graduate from the University of Arkansas with a
degree in business administration.
In 1989, Mr. Ligon retired from Ligon Brothers, Inc., a heavy equipment
wholesaler. Mr. Ligon was President of
AHI-Texas from its inception to June 30, 1993 and has been a director since
inception.
Eugene England has been the President and owner of Aloha Systems
Landscaping Company in Tulsa, Oklahoma for more than 5 years. Mr. England was
one of the original investors in AHI-Texas at its inception and has been a
director since inception.
Charles R. Nickle is a graduate from the University of Arkansas with a
degree in civil engineering. Mr. Nickle has been Vice President of McGoodwin,
Williams and Yates, Inc. in Fayetteville, Arkansas for more than five years. His
professional experience includes project planning, design, and construction
management of water treatment facilities and distribution systems, drainage
facilities and wastewater treatment and collection facilities.
He has been a director since December 1996.
William H. Ketchum is a graduate from the University of Arkansas with a
degree in business administration and a masters in operational management. Mr.
Ketchum is a retired Naval Officer and is currently involved as a private
investor in real estate, cattle and farming operations, and the sanitation and
recycling business. He became a director in December 1996 in connection with the
purchase of certain real property from him by the Company in 1996. Prior to the
acquisition of the property Mr. Ketchum has no affiliation with the Company.
Executive Compensation
Michael D. Parnell became the president on July 1, 1996 at a salary of
$53,000 per year. In fiscal 1996 Matt Hoff was president at the same
compensation. No other executive officer received compensation in fiscal 1995 or
1996. During fiscal 1995 and 1996, no other compensation not otherwise referred
to herein was paid or awarded
11
<PAGE>
by the Company to the above persons, the aggregate amount of which compensation,
with respect to any such person, exceeded the lesser of $50,000 or 10% of the
annual salary reported above.
During the years ended June 30, 1995 and 1996, none of the named
officers or directors received or exercised any options. No options or other
long term compensation has been awarded.
There are no standard or other arrangements pursuant to which any
director of the Company is or was compensated during the Company's last fiscal
year for services as a director, for committee participation or special
assignments.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of the date
hereof with respect to any person who is known to the Company to be the
beneficial owner of more than 5% of any class of its voting securities and as to
each class of the Company's equity securities beneficially owned by its
directors and executive officers as a group:
<TABLE>
<CAPTION>
Number of Shares Percent Percent
Beneficially Before After
Name and Address(1)(2) Owned(1) Offering Offering
<S> <C> <C> <C>
Michael D. Parnell 468,046 10.3% 10.3%
Robert S. Ligon 248,210 5.4% 5.4%
Eugene England 80,379 1.8% 1.8%
Dan N. Thompson 8,711 * *
Charles R. Nickle 17,716 * *
William H. Ketchum 41,200 1.0% 1.0%
Matthew J. Hoff 249,000 5.5% 5.5%
Corporate Relations Group, Inc.(3) 599,000 11.8
1801 Lee Road, Suite 301
Winter Park, Florida 32789
Grace Holdings(4) 263,333 5.8% 5.8%
The Alliance House
East Bay Street
Nassau, Bahamas
All directors and Officers
as a group (6 persons) 864,262 19.0% 19.0%
</TABLE>
* less than 1%
(1) Unless otherwise noted below, the Company believes that all persons
named in the table have sole voting and investment power with respect
to all shares of Common Stock beneficially owned by them. For purposes
hereof, a person is deemed to be the beneficial owner of securities
that can be acquired by such person within 60 days from the date hereof
upon the exercise of warrants or options or the conversion of
convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that any such warrants, options or convertible
securities that are held by such person (but not those held by any
other person) and which are exercisable within 60 days from the date
hereof, have been exercised. The percentage of shares owned is based on
the current conversion price of the Preferred Stock on the date of this
Prospectus.
(2) Each of the officers and directors persons named in the above table may
receive correspondence addressed to him care of Ammonia Hold, Inc., 10
Gunnebo Drive, Lonoke, Arkansas 72086.
(3) The officers and directors of Corporate Relations Group, Inc.are Joe H.
Landis and Paul Sarluco. Includes 500,000
shares issuable upon exercise of options. See footnote 6 to the table
under the caption "Selling
Shareholders."
(4) The officers and directors of Grace Holdings are David Sheesky and
Pauline Creamy.
SELLING SHAREHOLDERS
The shares of Common Stock of the Company offered by the Selling
Stockholders (the "Shares") will be offered at market prices, as reflected on
the Electronic Bulletin Board, or on the Nasdaq Small Cap Market if the
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<PAGE>
Common Stock is then traded on Nasdaq. The shares include 306,757 shares
currently outstanding as well as shares being offered by the holders upon
conversion of the Series A Preferred and shares being issued upon exercise of
warrants and options. The aggregate number of shares offered for resale upon
conversion of the Series A Preferred will be based on the conversion rate in
effect at the time of conversion. It is anticipated that registered
broker-dealers will be allowed the commissions which are usual and customary in
open market transactions.
The number of shares of Common Stock issuable upon conversion of each
of the 3,000 shares of Series A Preferred, and the consequent number of shares
of Common Stock available for resale under this Prospectus, is based upon a
conversion ratio which is the lower of $1,000 divided by 65% of the closing bid
price of the Common Stock on NASDAQ averaged over the five trading days
immediately prior to the date of conversion, or $3.25. Based upon the bid price
on the date of this Prospectus, or $5.00, 307.69 shares of Common Stock would be
issuable per share of Series A Preferred. The Selling Stockholders do not own
any Common Stock except as registered hereby and will own no shares after the
completion of the offering. The relationship, if any, between the Company and
any Selling Stockholder is set forth below. The Selling Stockholders may be
deemed to be "underwriters" as defined in Section 2(11) of the Securities Act of
1933.
<TABLE>
<CAPTION>
Percent of
Number of Number of Common Stock
Series A Common Before
Name Preferred Shares Shares Offering
<S> <C> <C> <C>
Anderson Properties, Inc. 150 46,154 1.0
Avron Finance 200 61,538 1.3
BHD Corp. 190 58,462 1.3
C.A. Opportunidad, S.A.(1) -- 90,834 2.0
Dowda, Jimmy Dean 80 24,615 *
Fondo de Adquisiciones
y Inversiones Internacionales XL, SA(1) 76,923 1.7
FT Trading 100 30,769 *
Holstein, Matthew(2) 40 72,308 *
Holstein, Philip M.(2) 75 23,077 *
Castle Creek Valley Ranch
Defined Benefit Pension Plan(2) 50 15,385 *
Kraus, Russell G. 25 7,692 *
Knox, Bruce R. 50 15,385 *
Lenz, Frederick A. 80 24,615 *
Mitchell, John T. 40 12,308 *
Nostradamus, S.A. 425 130,769 2.8
Olympus Capital, Inc.(3) 25 7,692 *
Passy Holding 135 41,538 *
Pegasus Investment Holding Limited 175 53,846 1.2
Rida Holding 200 61,538 1.3
Securicorp, Inc. 60 18,462 *
Seidman, Barry 750 230,769 4.8
Skalko, James A.(4) 25 8,547 *
Veitia, Robert E.(4) 25 7,692 *
Sloves, Joseph 100 30,769 *
World Capital Funding(5) -- 140,000 3.0
Corporate Relations Group, Inc.(6) -- 599,000 11.3
TOTALS 3,000 1,829,832 25.3%
</TABLE>
*less than 1%
(1) The principal shareholder of CA Opportunidad, S.A. and Fondo de
Adquisiciones is Jose Antonio Gomez.
(2) The beneficiary of Castle Creek Valley Ranch Defined Benefit Pension
Plan is Philip M. Holstein, Jr.
Matthew Holstein is the son of Philip M. Holstein, Jr.
(3) James W. Spratt III is the principal shareholder of Olympus Capital,
Inc.
(4) Messrs. Skalko and Veitia are employees of Corporate Relations Group,
Inc.
13
<PAGE>
(5) Includes 99,000 shares already outstanding and up to 500,000 shares
issuable upon exercise of options at each of the following prices and
terms: 100,000 shares at $4.25 until May 22, 1998; 100,000 shares at
$5.25 until May 22, 1999; 100,000 shares at $6.25 until May 22, 2000;
100,000 shares at $7.25 until May 22, 2001; and 100,000 shares at $8.25
until May 22, 2002.
(6) Includes 100,000 shares issuable upon exercise of options at $4.75 per
share.
CERTAIN TRANSACTIONS
On February 28, 1996 a trust for the benefit of the mother of Michael
D. Parnell controlled by him loaned $68,000 to the Company repayable on demand
with 8% interest. The loan was repaid in fiscal 1996.
On April 1, 1996 the Company licensed the rights to exploit its
original patent to Grace Holdings, Ltd. for the nursery, home, and carpet
industries. Grace paid $160,000 as a license fee plus an agreement to pay
one-third of the profits to the Company. The license agreement was mutually
terminated in April 1997.
DESCRIPTION OF SECURITIES
Common Stock
The Company's Articles of Incorporation authorize the issuance of
25,000,000 shares of Common Stock, $.001 par value. The holders of the Common
Stock are entitled to one vote per share on all matters submitted to a vote of
shareholders. Subject to preferential rights that may be applicable to any
Preferred Stock which may be issued, holders of the Common Stock are entitled to
receive dividends, if and when declared by the Company's Board of Directors from
funds legally available for that purpose. See "Market Prices and Dividends." In
the event of a liquidation, dissolution or winding up of the Company, holders of
the Common Stock are entitled to share ratably in the assets available of the
Company, if any, remaining after the payment of all liabilities of the Company
and the liquidation preferences applicable to any outstanding Preferred Stock.
Holders of the Common Stock have no cumulative voting rights, no preemptive
rights and no conversion rights and there are no redemption or sinking fund
provisions with respect to the Common Stock. The outstanding Common Stock is
fully paid, validly issued and non-assessable. As of June 30, 1997, there were
4,559,415 shares of Common Stock outstanding.
The transfer agent for the Common Stock is Atlas Stock Transfer, 5899
South State Street, Salt Lake City, Utah 84107.
Preferred Stock
The Company's Articles of Incorporation authorize the issuance of
10,000,000
shares of preferred stock, $.001 par value, of which 3,000 shares of Series A
Preferred are outstanding. The Series A Preferred Stock is convertible into
shares of common stock (see "Selling Stockholders"). The holders of Series A
Preferred have a liquidation preference of $1,000 per share over the Common
Stock. Dividends on the Series A Preferred may be declared and paid if, when and
to the extent determined from time to time by the Company's Board of Directors,
provided that such dividends shall be declared with respect to the Series A
Preferred Stock on par with dividends declared with respect to the Company's
Common Stock. The Company does not expect to declare or pay such dividends in
the foreseeable future. The Company may issue additional preferred stock in the
future. The Company's Board of Directors has authority, without action by the
shareholders, to issue all or any portion of the authorized but unissued
preferred stock in one or more series and to determine the voting rights,
preferences as to dividends and liquidation, conversion rights, and other rights
of such series.
The Company considers it desirable to have preferred stock available to
provide increased flexibility in structuring possible future acquisitions and
financings and in meeting corporate needs which may arise. If opportunities
arise that would make desirable the issuance of preferred stock through either
public offering or private placements, the provisions for preferred stock in the
Company's Articles of Incorporation would avoid the possible delay and expense
of a shareholder's meeting, except as may be required by law or regulatory
authorities. Issuance of the preferred stock could result, however, in a series
of securities outstanding that will have certain preferences with respect to
dividends and liquidation over the Common Stock which would result in dilution
of the income per share and net book value of the Common Stock. Issuance of
additional Common Stock pursuant to any conversion right which may be attached
to the terms of any series of preferred stock may also result in dilution of the
net income per share and the net book value of the Common Stock. The specific
terms of any series of preferred stock will depend primarily on market
conditions, terms of a proposed acquisition or financing, and other factors
existing
14
<PAGE>
at the time of issuance. Therefore, it is not possible at this time to determine
in what respect a particular series of preferred stock will be superior to the
Company's Common Stock or any other series of preferred stock which the Company
may issue. The Board of Directors may issue additional preferred stock in future
financings.
The issuance of Preferred Stock could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. Further, certain provisions of Utah law could delay or
make more difficult a merger, tender offer or proxy contest involving the
Company. While such provisions are intended to enable the Board of Directors to
maximize stockholder value, they may have the effect of discouraging takeovers
which could be in the best interest of certain stockholders. There is no
assurance that such provisions will not have an adverse effect on the market
value of the Company's stock in the future.
The Company's Board of Directors has the authority to issue the
authorized shares of Preferred Stock in one or more series and to fix the
designations, relative powers, preferences, rights, qualifications, limitations
and restrictions of all shares of each such series, including without limitation
dividend rates, conversion rights, voting rights, redemption and sinking fund
provisions, liquidation preferences and the number of shares constituting each
such series, without any further vote or action by the stockholders. The
issuance of Preferred Stock could decrease the amount of earnings and assets
available for distribution to holders of Common Stock or adversely affect the
rights and powers, including voting rights, of the holders of Common Stock. The
issuance of Preferred Stock also could have the effect of delaying, deterring or
preventing a change in control of the Company without further action by the
shareholders.
LEGAL MATTERS
The legality of the Shares offered hereby will be passed upon for the
Company by Hand & Hand, a law corporation, Dana Point, California.
EXPERTS
The audited financial statements included in this Prospectus as of and
for the years ended June 30, 1997 and 1996 have been audited by Crouch, Bierwolf
& Chisholm, independent certified public accountants, to the extent and for the
periods set forth in their report thereon and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
15
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
Ammonia Hold, Inc.
We have audited the accompanying consolidated balance sheet of Ammonia Hold,
Inc. and subsidiary as of June 30, 1997 and 1996 and the related consolidated
statement of operations, stockholders' equity and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ammonia Hold, Inc.
and it's subsidiary as of June 30, 1997 and 1996 and the results of their
operations and cash flows for the years then ended in conformity with generally
accepted accounting principles.
Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
August 28, 1997
16
<PAGE>
<TABLE>
<CAPTION>
Ammonia Hold, Inc. and Subsidiary
Consolidated Balance Sheets
ASSETS
June 30,
1997 1996
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents (Note 1) $ 3,224,211 $ 349,494
Accounts receivable net of allowance
for doubtful accounts of $14,186
and $14,186 120,339 124,931
Prepaid expenses 29,950 3,508
Prepaid consulting fees (Note 1) 334,482 69,996
Inventory (Note 2) 198,915 160,628
Tax Benefit Receivable 5,000 --
Total Current Assets $ 3,912,897 $ 708,557
PROPERTY, PLANT AND EQUIPMENT
Depreciable assets - net of accumulated
depreciation (Note 1) $ 519,073 $ 36,757
Land 185,000 185,000
Total Property, Plant and Equipment $ 704,073 $ 221,757
OTHER ASSETS
Building fund (Note 1) $ -- $ 127,172
Patents - net of accumulated amortization
of $183,121 and $145,269 (Note 1) 480,074 266,831
Prepaid consulting fees -
non current portion (Note 1) 900 256,671
Deposits 16,200 --
Total Other Assets $ 497,174 $ 650,674
TOTAL ASSETS $ 5,114,144 $ 1,580,988
</TABLE>
(continued)
17
<PAGE>
<TABLE>
<CAPTION>
Ammonia Hold, Inc and Subsidiary
Consolidated Balance Sheets
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30,
1997 1996
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 85,200 $ 18,423
Accrued payroll taxes -- 4,602
Income tax payable (Note 1) -- 11,199
Total Current Liabilities $ 85,200 $ 34,224
STOCKHOLDERS' EQUITY
Series A Convertible Preferred Stock, 3,000 shares authorized, 3,000 shares
issued and outstanding
at June 30, 1997 $ 3 $ --
Common Stock, par value $.001 authorized shares 100,000,000; 4,559,415 and
3,867,278 shares issued and outstanding,
respectively 4,559 3,867
Paid in Capital - preferred 2,624,997
Paid in capital - common 5,152,703 1,808,395
Accumulated deficit (2,753,318) (265,498)
Total Stockholders' Equity 5,028,944 1,546,764
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,114,144 $ 1,580,988
</TABLE>
The accompanying notes are an integral part of these financial statements
18
<PAGE>
<TABLE>
<CAPTION>
Ammonia Hold, Inc. and Subsidiary
Consolidated Statements of Operations
For the Years Ended June 30,
1997 1996
<S> <C> <C>
SALES - NET ALLOWANCE AND DISCOUNTS $ 1,110,490 $ 677,576
LICENSING FEES -- 160,000
TOTAL REVENUES 1,110,490 837,576
COST OF SALES 798,874 384,403
GROSS PROFIT 311,616 453,173
GENERAL & ADMINISTRATIVE 1,266,862 446,060
OTHER INCOME 62,426 3,781
INCOME (LOSS) BEFORE INCOME TAXES (892,820) 10,894
PROVISION (BENEFIT) FOR INCOME TAXES (5,000) 2,200
NET INCOME (LOSS) (887,820) 8,694
DEEMED DIVIDEND (1,600,000)
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $(2,487,820) $ 8,694
NET INCOME (LOSS) PER SHARE (0.555) .002
WEIGHTED AVERAGE OUTSTANDING SHARES 4,485,803 3,478,178
</TABLE>
The accompanying notes are an integral part of these financial statements
19
<PAGE>
<TABLE>
<CAPTION>
Ammonia Hold, Inc. and Subsidiary
Consolidated Statements of Stockholders'
Equity From July 1, 1995 through June
30, 1997
Additional Additional Retained
Preferred Shares Paid-in Common Stock Paid-in Earnings
Shares Amount Capital Shares Amount Capital (Deficit)
<S> <C> <C> <C> <C>
Balance on June 30, 1995 3,399,078 3,399 773,863 (274,192)
Issued common stock for land 41,200 41 184,959 -
Issued common stock for consulting
services 117,000 117 349,883 -
Issued common stock for licensing
agreement and cash 200,000 200 499,800 -
Issued shares in exchange for the
cancellation of options 110,000 110 (110) -
Net income (loss) for the year
ended June 30, 1996 - - - 8,694
Balance on June 30, 1996 3,867,278 $ 3,867 $ 1,808,395 $ (265,498)
Issued common stock for patent 35,714 36 199,964 -
Issued common stock for cash 488,666 488 499,512 -
Issued common stock for cash 76,923 77 499,923 -
Issued common stock for cash 90,834 91 544,909 -
Issued preferred stock for cash 3,000 3 2,624,997 - - - -
Deemed Dividend (Note 7) (1,600,000) (1,600,000)
Net loss for the year
ended June 30, 1997 - - - (887,200)
Balance on June 30, 1997 3,000 $ 3 $ 2,624,997 4,559,415 $ 4,559 $ 5,152,703 $(2,753,318)
</TABLE>
The accompanying notes are an integral part of
these financial statements
20
<PAGE>
<TABLE>
<CAPTION>
Ammonia Hold, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Years Ended June 30,
1997 1996
Cash Flows from Operating Activities
<S> <C> <C>
Net gain (loss) $ (887,820) $ 8,694
Non-cash items:
Depreciation 44,426 9,000
Amortization 37,852 24,121
Bad debt expense 468 -
Consulting expense 257,004 23,333
Changes in current assets and liabilities:
(Increase) decrease in:
Accounts receivable 4,592 9,374
Prepaid expenses/deposits (360,924) (3,508)
Inventories (38,287) (88,666)
Increase(decrease) in:
Accounts payable 66,777 (18,167)
Income tax payable (16,199) 2,200
Accrued liabilities (4,602) (686)
Net Cash provided (Used) by
Operating Activities (896,713) (34,305)
Cash Flows from Investing Activities
Cash used for building costs (127,712)
Purchase of property and equipment (398,570) (17,400)
Net Cash Provided (Used) by
Investing Activities (398,570) (144,572)
Cash Flows from Financing Activities
Issuance of Preferred Stock 2,625,000 -
Issuance of common stock 1,545,000 500,000
Net Cash Provided (Used) by
Financing Activities 4,170,000 500,000
Increase in Cash 2,874,717 321,123
Cash and Cash Equivalents at
Beginning of Period 349,494 28,371
Cash and Cash Equivalents at
End of Period $ 3,224,211 $ 349,494
</TABLE>
(Continued)
21
<PAGE>
<TABLE>
<CAPTION>
Ammonia Hold, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(Continued)
For the Years Ended June 30,
1997 1996
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
<S> <C> <C>
Cash paid for interest $ - $ 720
Cash paid for income taxes -
NON CASH FINANCING ACTIVITIES
Issued stock for consulting services - 350,000
Issued stock for land - 185,000
Issued stock for licensing agreement - 160,000
Issued stock for patent 200,000 -
</TABLE>
The accompanying notes are an integral part of these
financial statements
22
<PAGE>
AMMONIA HOLD, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Ammonia Hold, Inc. (AHI-Utah) (formerly Key Waste
Management, Inc.) was incorporated in the state of Utah on July 10,
1980. On June 30, 1994, pursuant to a stock exchange agreement,
AHI-Utah acquired all of the stock of Ammonia Hold, Inc. (AHI-Texas), a
Texas corporation, in exchange for 2,679,391 shares of AHI-Utah which
represented 71% of the total outstanding shares. Because the shares
issued in the acquisition of AHI-Texas represented 71% of the then
outstanding shares of AHI-Utah, AHI-Texas was deemed, for financial
reporting purposes, to have acquired AHI-Utah. Accordingly, the
acquisition of AHI-Utah by AHI-Texas was accounted for as a purchase of
the net liabilities of AHI-Utah consisting principally of an
insignificant amount of accounts payable.
FiveStar Products Corporation (FiveStar) was incorporated in the state
of Utah on March 31, 1995. As of June 30, 1996, FiveStar had no
material activity.
Capitalization Changes - Immediately prior to the merger, the
shareholders of AHI-Utah approved a 20 for 1 reverse split. Common
stock issued and outstanding and additional paid-in capital have been
restated to reflect the reverse stock split. The shareholders also
authorized 10,000,000 shares of preferred stock $.001 par value, with
terms, rights and preferences to be determined by the Board of
Directors at the time of issuance. As of June 30, 1997, 3,000 preferred
shares had been issued for $2,625,000 in cash.
The principal business of the Company is the manufacture of monocalcium
phosphate and related products for sale to retailers mainly in the
United States. The Company sells its products to some international
customers (about 5% of total sales).
Principles of Consolidation - The consolidated financial statements as
of June 30, 1997 and 1996 include the accounts of AHI-Utah and its
wholly owned subsidiary FiveStar.
Collectively, these entities are referred to as the Company. All
significant intercompany transactions and accounts have been
eliminated.
Accounting Method - The Company's financial statements are prepared
using the accrual method of accounting.
Cash and Cash Equivalents - The Company considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents.
Inventories - Inventories are reported at the lower of cost or market
as determined on the first-in first-out (FIFO) method.
Prepaid Consulting Fees - The Company issued 117,000 shares of stock in
exchange for $350,000 of marketing services. At June 30, 1996
substantially all of the prepaid marketing expenses have been expensed.
In May 1997 the Company prepaid $405,000 in cash and options (see note
8) for a six month marketing contract. At June 30, 1997 prepaid
consulting fees included $334,482 from this contract.
Patent - Patent costs are capitalized as incurred and are amortized
over the remaining life of the patent. The Company considers the
estimated life of patents to be 17 years.
23
<PAGE>
AMMONIA HOLD, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Depreciable Property - Equipment is stated at cost. Major renewals and
betterments are capitalized while expenditures for maintenance and
repairs are charged to operations as incurred. Depreciation is computed
on the straight-line method over estimated useful lives of five to ten
years for manufacturing equipment and furniture and fixtures and thirty
years for buildings.
Property, Plant and Equipment consist of the following:
<TABLE>
<CAPTION>
June 30,
1997 1996
<S> <C> <C>
Building $ 292,603 $ --
Manufacturing equipment 271,034 68,537
Furniture and fixtures 32,279 1,637
Land 185,000 185,000
Total property, plant and equipment 780,916 254,174
Less: accumulated depreciation (76,843) (32,417)
Net Property and Equipment $ 704,073 $ 221,757
</TABLE>
Depreciation expense was $44,426 and $9,000 for the years ended June 30,
1997 and 1996, respectively.
Building Fund - This fund was set aside for the construction of
a new building. At June 30m, 1997 the building was complete and the
building was included in the cost of the building. The Company is using
this facility for packaging, warehousing and office space.
Net (Loss) Income Per Common Share - The computation of net (loss) per
common share is based on the weighted average number of common shares
outstanding during the period.
Provision for Income Taxes - Deferred income taxes arise from timing
differences between financial reporting and tax reporting income and
expenses. Deferred taxes are classified as current or noncurrent,
depending on the classification of the assets and liabilities to which
they relate. Deferred taxes arising from timing differences that are not
related to an asset or liability are classified as current or
noncurrent, depending on the period in which the timing differences are
expected to reverse.
The principal timing difference is the net operating loss carry back
that will allow the Company to recover approximately $5,000 of tax paid
over the last three years.
24
<PAGE>
AMMONIA HOLD, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The deferred tax asset and the provision for income taxes is calculated
as follows at June 30, 1997:
June 30, 1997
Current provision for income taxes:
Federal $ -
State -
Deferred (5,000)
Total provision for income taxes $ 5,000
Deferred tax asset arising from:
NOL carry back $ 5,000
Deferred tax asset $ 5,000
The Company has a June 30 year end for income tax reporting purposes.
The Company has approximately $1,528,318 that may be offset against
future taxable income. These NOL carryforwards begin to expire in 2009.
Only $5,000 of tax benefit has been reported in the financial statements
because the Company believes there is a 50% or greater chance that the
carryforward will expire unused.
Use of Estimates in the Preparation of Financial Statements - 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 2 - INVENTORIES
The Company uses the FIFO (first-in, first-out) method for inventory
valuation. Inventories consist of the following at June 30, 1997 and
1996:
<TABLE>
<CAPTION>
1997 1995
<S> <C> <C>
Raw materials $ 16,851 $ 11,845
Work-in-progress 61,664 53,987
Finished goods 120,400 94,796
------------ -----------
Total $ 198,915 $ 160,628
- -------- ============ ===========
</TABLE>
25
<PAGE>
AMMONIA HOLD, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company borrowed $68,000 from a major shareholder of the Company
and has repaid the entire amount of the loan as of June 30, 1997. The
note was dated February 28, 1996 and had an interest rate of 8%. The
note was due on demand.
NOTE 4 - OPERATING LEASES
The Company rents office and warehouse space on a month-to-month basis
with monthly rental payments of approximately $1,360. Total rent
expense amounted to $18,329 and $17,842 for the years ended June
30, 1997 and 1996, respectively.
NOTE 5 - SALES TO PRINCIPAL CUSTOMER
The majority of the Company's sales (approximately 46% in the years
ended June 30, 1997 and 1996) were to a principal customer, which is
a national retail chain located in the United States, of which
$42,077 and $67,231 was receivable at June 30, 1997 and 1996.
NOTE 6 - STOCKHOLDERS' EQUITY TRANSACTIONS
During the year ended June 30, 1996 the Company had the following stock
transactions:
1. The Company issued 41,200 shares of common stock in exchange
for land.
2. The Company issued 117,000 shares of common stock and options
to purchase 500,000 shares at a price between $3.00 and $6.00 over the next five
years in exchange for $350,000 in consulting services. The term of the contract
was one year. The options were subsequently cancelled for stock.
3. The Company issued 200,000 shares of common stock in exchange
for a licensing agreement and $500,000.
4. The Company issued 110,000 shares of common stock in exchange
for the cancellation of previously issued options in the consulting agreement.
During the year ended June 30, 1997 the Company had the following stock
transactions:
1. The Company issued 35,714 shares of common stock in exchange
for a patent. The patent was valued at $200,000.
2. The Company issued 488,666 shares of common stock for $500,000
in cash.
3. The Company issued 76,923 shares of common stock for $500,000
in cash.
4. The Company issued 90,834 shares of common stock for $545,000
in cash. The price at which stock was issued differed due to
differences in separate negotiated agreements and changes in
trading volumes.
26
<PAGE>
AMMONIA HOLD, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 7 - PREFERRED STOCK
1. On June 5, 1997 the Company issued 3,000 shares of Series A
Convertible Preferred Stock. These shares have a par value
of $.001 and are entitled to receive dividends as if they
were converted to common stock (see conversion rights below).
Upon liquidation, dissolution or winding up, these shares
are entitled to a liquidation preference of $1,000 per
share.
Each share is convertible, at the option of the holder at any
time, into common stock as follows:
$1,000 dividend by the lower of (1) sixty-five percent (65%)
of the market price of the common stock (determined by the
closing bid price averaged over the five preceding days prior
to conversion) or (2) $3.515625, adjusted for stock splits or
dividends.
The Company has recorded a deemed dividend related to the issuance of the
preferred stock. This deemed dividend is due to the large discount between the
conversion price and the market price of the common stock on the date of
issuance. The deemed dividend is calculated at $1,600,000 which represents the
amount of common stock the preferred shareholders could have converted to (65%
divided by $3,000,000) on the day of issuance less the $3,000,000 received.
Retained earnings and additional paid in capital have been adjusted to reflect
this dividend.
NOTE 8 - WARRANTS AND OPTIONS:
The Company has the following options outstanding at June 30, 1997.
<TABLE>
<CAPTION>
Amount Price Duration
<S> <C> <C>
100,000 Shares $ 4.25 Until May 22, 1998
100,000 Shares 4.75 Until May 22, 2002
100,000 Shares 5.25 Until May 22, 1999
100,000 Shares 6.25 Until May 22, 2000
100,000 Shares 7.25 Until May 22, 2001
100,000 Shares 8.25 Until May 22, 2002
</TABLE>
NOTE 9 - SUBSEQUENT EVENTS
On August 5, 1997 the company closed on the purchase of ten acres of land and
a 55,000 square foot manufacturing/office facility. The purchase
price was $392,920.
27
<PAGE>
No dealer, salesman or other person is authorized to give any
information or to make any representations not contained in this Prospectus in
connection with the offer made hereby, and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell or a solicitation
to an offer to buy the securities offered hereby to any person in any state or
other jurisdiction in which such offer or solicitation would be unlawful.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that the information contained herein
is correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
Page
Additional Information...................... 2
Prospectus Summary.......................... 3
Risk Factors................................ 4
Market Prices and Dividends................. 7
Management's Discussion and Analysis........ 7
Business.................................... 8
Management.................................. 10
Principal Shareholders...................... 11
Selling Shareholders........................ 12
Certain Transactions........................ 13
Description of Securities................... 14
Legal Matters............................... 15
Experts..................................... 15
<PAGE>
AMMONIA HOLD, INC.
PART II
Item 24. Indemnification of Directors and Officers.
The Company has adopted provisions in its articles of incorporation and
bylaws that limit the liability of its directors and provide for indemnification
of its directors and officers to the full extent permitted under the Utah
General Corporation Law. Under the Company's articles of incorporation, and as
permitted under the Utah General Corporation Law, directors are not liable to
the Company or its stockholders for monetary damages arising from a breach of
their fiduciary duty of care as directors. Such provisions do not, however,
relieve liability for breach of a director's duty of loyalty to the Company or
its stockholders, liability for acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, liability for transactions
in which the director derived as improper personal benefit or liability for the
payment of a dividend in violation of Utah law. Further, the provisions do not
relieve a director's liability for violation of, or otherwise relieve the
Company or its directors from the necessity of complying with, federal or state
securities laws or affect the availability of equitable remedies such as
injunctive relief or recision.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding that may result in a claim for indemnification by any director or
officer.
Item 25. Other Expenses of Issuance and Distribution.
Filing fee under the Securities Act of 1933 $ 2,930.39
Printing and engraving(1) 1,000.00
Legal Fees(1) 20,000.00
Accounting Fees(1) 3,000.00
Miscellaneous(1) 3,069.61
TOTAL $ 30,000.00
(1) Estimates
Item 26. Recent Sales of Unregistered Securities.
The Company issued 2,679,391 shares of Common Stock to the 34
shareholders of Ammonia Hold, Inc., a Texas corporation ("AHI-Texas") in
exchange for all of their shares of AHI-Texas. Concurrently, the Company issued
50,000 additional shares to Billy Green, the original inventor of the Ammonia
Hold process, in payment of $250,000 owed to Mr. Green for the patent, and paid
cash for the remaining $27,375 owed to him. This transaction is believed to be
exempt from the registration requirements of the Securities Act of 1933, as
amended, by virtue of Section 4(2) thereof covering transactions not involving
any public offering. No underwriter was involved. As a condition precedent to
each sale, the respective purchaser was required to execute an investment letter
and consent to the imprinting of a restrictive legend on each stock certificate
received from the Company.
On February 7, 1996, the Company issued 20,600 shares to each of
Marguerite Ketchum and William H. Ketchum for land in Lonoke, Arkansas valued at
$185,000. This transaction is believed to be exempt from the registration
requirements of the Securities Act of 1933, as amended, by virtue of Section
4(2) thereof covering transactions not involving any public offering. No
underwriter was involved. As a condition precedent to each sale, the respective
purchaser was required to execute an investment letter and consent to the
imprinting of a restrictive legend on each stock certificate received from the
Company.
1
<PAGE>
On February 16, 1996 the Company issued 200,000 shares of restricted
Common Stock to Grace Holdings under Regulation S for a licensing agreement and
$500,000, and issued 117,000 shares and options to purchase additional shares to
Corporate Relations Group for consulting services. This transaction is believed
to be exempt from the registration requirements of the Securities Act of 1933,
as amended, by virtue of Section 4(2) thereof covering transactions not
involving any public offering. No underwriter was involved. As a condition
precedent to each sale, the respective purchaser was required to execute an
investment letter and consent to the imprinting of a restrictive legend on each
stock certificate received from the Company.
On June 20, 1996 the Company issued 110,000 shares to Corporate
Relations Group, Inc. in exchange for the cancellation of the options given in
the consulting agreement. This transaction is believed to be exempt from the
registration requirements of the Securities Act of 1933, as amended, by virtue
of Section 4(2) thereof covering transactions not involving any public offering.
No underwriter was involved. As a condition precedent to each sale, the
respective purchaser was required to execute an investment letter and consent to
the imprinting of a restrictive legend on each stock certificate received from
the Company.
In July 1996 the Company sold 488,666 shares in an offering made under
Rule 504 of Regulation to one purchaser. A Form D was filed with the Securities
and Exchange Commission on July 12, 1996. Net proceeds were $500,000. This
transaction is also believed to be exempt from the registration requirements of
the Securities Act of 1933, as amended, by virtue of Section 4(2) thereof
covering transactions not involving any public offering. No underwriter was
involved. As a condition precedent to each sale, the respective purchaser was
required to execute an investment letter and consent to the imprinting of a
restrictive legend on each stock certificate received from the Company.
In August 1996 the Company issued 167,757 shares to two purchasers for
cash of $1,046,000. This transaction is believed to be exempt from the
registration requirements of the Securities Act of 1933, as amended, by virtue
of Section 4(2) thereof covering transactions not involving any public offering.
No underwriter was involved. As a condition precedent to each sale, the
respective purchaser was required to execute an investment letter and consent to
the imprinting of a restrictive legend on each stock certificate received from
the Company.
On March 24, 1997 the Company issued 35,714 shares of Common Stock,
valued at $5.60 per share to Sanex Corp. as partial payment for the purchase of
U.S. Patent No. 5,529,022. The value of the Shares was determined based on
arms-length negotiation. This transaction is believed to be exempt from the
registration requirements of the Securities Act of 1933, as amended, by virtue
of Section 4(2) thereof covering transactions not involving any public offering.
No underwriter was involved. As a condition precedent to each sale, the
respective purchaser was required to execute an investment letter and consent to
the imprinting of a restrictive legend on each stock certificate received from
the Company.
On June 5, 1997 the Company issued 3,000 shares of Series A Convertible
Preferred Stock to twenty-two purchasers in an offering made under Section 4(2).
Each purchaser executed a subscription agreement and consented to the imprinting
of a restrictive legend on the stock certificates. In connection with the
offering, a placement agent World Capital Funding, Inc., received as a finder's
fee 40,000 shares of Common Stock and Warrants to purchase 100,000 additional
shares. This transaction is believed to be exempt from the registration
requirements of the Securities Act of 1933, as amended, by virtue of Section
4(2) thereof covering transactions not involving any public offering. No
underwriter was involved. As a condition precedent to each sale, the respective
purchaser was required to execute an investment letter and consent to the
imprinting of a restrictive legend on each stock certificate received from the
Company.
In connection with a Lead Generation/Corporate Relations Agreement with
Corporate Relations Group, Inc. ("CRG") dated May 22, 1997, the Company granted
to CRG Options to purchase 500,000 shares. The number and exercise terms of the
options were negotiated between CRG and the Company. This transaction is
believed to be exempt from the registration requirements of the Securities Act
of 1933, as amended, by virtue of Section 4(2) thereof covering transactions not
involving any public offering. No underwriter was involved. As a condition
precedent to each sale, the respective purchaser was required to execute an
investment letter and consent to the imprinting of a restrictive legend on each
stock certificate received from the Company.
2
<PAGE>
Item 27. Exhibits
3. Certificate of Incorporation and Bylaws
3.1. Restated Articles of Incorporation(1)
3.2 Bylaws(1)
4. Instruments defining rights of holders, including indentures.
4.1 Option Agreement as memorialized in Exhibit B of
Corporation Relations Group, Inc.
agreement.(1)
5. Opinion of Hand & Hand as to legality of securities being
registered.(2)
10. Material Contracts
10.1 Licensing Agreement dated April 1, 1996 between the
Company and Grace Holdings(1)
21. Subsidiaries of the small business issuer(1)
23. Consents of Experts and Counsel
23.1 Consent of Crouch, Bierwolf and Chisholm Accountancy
Corporation(3)
23.2 Consent of Hand & Hand included in Exhibit 5 hereto
24. Powers of Attorney
24.1 Powers of Attorney are included on signature page(1)
(1) Filed with original filing.
(2) Filed with amendment no. 1.
(3) Filed herewith.
All other Exhibits called for by Rule 601 of Regulation S-B are not
applicable to this filing.
Item 17. Undertakings.
(a) The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(I) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii)
Reflect in the prospectus any facts or events which, individually or together
represent a fundamental change in the information in the registration statement;
(iii)
Include any material or changed information the plan of distribution.
3
<PAGE>
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities as at that time to be the initial
bona fide offering thereof.
(3) File a post effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
(d) To provide to the underwriter at the Closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as may be required by the underwriter to permit prompt delivery to each
purchaser.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel that matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(f) The undersigned small business issuer hereby undertakes that
it will:
(1) For purposes of determining any liability under the
Securities Act that the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be a part of this
registration statement as of the time the Commission declared it effective.
(2) For the purpose of determining any liability under the
Securities Act, that each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities offered in the
registration statement, and that offering of the securities at that time as the
initial bona fide offering of those securities.
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Lonoke,
State of Arkansas on September 30, 1997.
AMMONIA HOLD, INC.
By: /s/ Michael D. Parnell
Michael D. Parnell
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on September 30, 1997.
By: /s/ Michael D. Parnell President and Director
Michael D. Parnell (principal executive officer)
By: * Secretary, Treasurer, Chief Financial Officer and
Dan N. Thompson Director (principal accounting and financial officer)
By: * Director
Robert S. Ligon
By: * Director
Eugene England
By: * Director
Charles R. Nickle
By: * Director
William H. Ketchum
*By: /s/ Michael D. Parnell
Michael D. Parnell, attorney-in-fact
5
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANT
We hereby consent to the use in this Prospectus constituting part of
the Registration Statement Number of our report dated August 28, 1997 relating
to the consolidated financial statements of Ammonia Hold, Inc. We also consent
to the reference to us under the caption "Experts."
CROUCH, BIERWOLF & CHISHOLM
Salt Lake City, Utah
September 30, 1997
