As filed with the Securities and Exchange Commission on June 24, 1997
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-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, (501) 676-2994
including area code of Registrant's (Name, address, including zip code, and
principal executive offices) 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
<S> <C> <C> <C> <C>
Common Stock issuable upon
conversion of Series A
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 100,000shares issuable upon exercise of options at $8.25 per share.
(11) Includes in each case reoffers of the Common Stock offered hereby and
shares issuable pursuant to antidilution provisions pursuant to
Rule 416.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION
PROSPECTUS
AMMONIA HOLD, INC.
1,840,832 Shares of Common Stock
($.001 par value)
The estimated 1,840,832 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 317,757 shares currently outstanding. The Company will not receive
any proceeds from the sale of Common Stock by the Selling Stockholders. 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."
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 products are designed to stop the formation of ammonia
and other odors associated with animal waste.
The Company's office is located at 10 Gunnebo Drive, Lonoke, Arkansas
72086, and its telephone number is (501) 676-2994.
Securities Offered:............ An estimated 1,840,832 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 317,757 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(1) shares
NASD Electronic Bulletin Board......................................... AMHD
(1) Based on shares outstanding as of March 31, 1997. Does not include
40,000 shares offered which were
issued subsequent to March 31, 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 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 March 31, 1997 the Company's cumulative losses were approximately
$791,000. The Company's revenues have grown significantly since June 1996. 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. The Company has enjoyed
limited competition to date in the emerging market for animal odor control
products, and an increase in competition or the loss of additional customers
could have an adverse effect on the Company's revenues and profitability. In
fiscal 1997, the Company began marketing a new cat litter, and intends to expand
marketing efforts in this area. Revenues expanded significantly in the first
nine months of 1997, but the Company reported a loss of $660,122 for the nine
months ended March 31, 1997. As a result of the increase in operating expenses
caused by this expansion and other factors, 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.
Management of 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 One Customer
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.
Competition
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 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
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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.
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".
Dilution
Purchasers in this Offering will incur immediate and substantial
dilution in that the net tangible book value
of each outstanding share of Common Stock immediately after the Offering will be
significantly less than the offering
price of the shares of Common Stock included in the Shares offered hereby.
See "Dilution."
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 Dividends
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
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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).
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.
Risks Associated with Forward-looking Statements
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act") and the Company
intends that such forward-looking statements be subject to the safe harbors for
such statements under such sections. 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 planned national marketing
campaign 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
Nine Months Ended March 31, 1997 Compared to Nine Months Ended March 31, 1996
Revenues increased from $534,95 in the nine months ended March 31, 1996
("Interim 1996") to $905,521 in the nine months ended March 31, 1997 ("Interim
1997"), an increase of 69%. The increase in revenues was due to increased sales
of existing products primarily by broadening its distribution base, and sales of
the new cat litter product. In interim 1997, sales to one principal customer,
WalMart, accounted for 47% of total revenues. Cost of sales increased in
Interim 1997 to 77% of revenue compared to 49% of revenues in Interim 1996. The
principal reason for the increase was the lower margin on the Company's new cat
litter product. The Company expects this margin to improve in the future if it
is able to obtain volume discounts on raw materials. This lower margin was
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primarily offset by a reduction in prices for raw material due to change in
procurement. General and administrative expenses increased to 101% of revenues
in Interim 1997 compared to 82% in Interim 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 1997 Interim Period, 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 Interim
1997 including the write off of a five-year consulting agreement in the Interim
period, resulting in a non-cash expense of $333,094.
Other income in Interim 1997 of $48,977 was derived from interest income
resulting from the amount of cash on hqnd.
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 revenues increased in Fiscal 1996 to 57% of revenues, 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 March 31, 1997, the Company had working capital of $1,457,256,
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 expected to be 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.
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 offers an innovative line of products, each with the
ability to counter the formation of ammonia when urine and solid animal waster
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 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 and patented 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 resulting in decreases in the mortality and condemnation rates
and increases feed efficiency.
8
<PAGE>
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 completely sand and 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 elements that must
combine to create ammonia.
The Company has recently announced the results of phase-one of a
biosolids composing 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 composing sludge, to increase the
retention of nitrogen, and to control the emission of ammonia during the
composing process. The Company is beginning a phase-two commercial scale test of
the product with various municipal sludge composing 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 composing sludge as a
method of waste management. Possible benefits of Ammonia Hold application for
treatment facilities include reduction of composing 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
an aggressive 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 Wal-Mart, PETCO and Target.
Presently, the Company uses the services of over fifty independent
sales representatives to cover its marketing area. The Company is using
television and mass merchandising to market its various other products through
its wholly owned subsidiary. 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 by the Company's predecessor.
The patent refers to an improved method of producing monocalcium phosphate by
mixing phosphoric acid with
9
<PAGE>
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 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.
Competition
Presently, there are several companies marketing products similar to
those produced and marketed by the Company. 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 a 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 building and land are held in fee without mortgage. The Company
intends to purchase additional land and manufacturing building in the Lonoke
area in the immediate future. The Company also rends on a month to month basis,
warehouse space for a mixing facility in Lonoke for rent of $1,360. 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.
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.
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.
10
<PAGE>
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 Compamy.
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 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%
11
<PAGE>
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 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) Includes 500,000 shares issuable upon exercise of options.
See footnote 6 to the table under the caption
"Selling Shareholders."
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 Common
Stock is then traded on Nasdaq. The shares include 317,757 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, or 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.
12
<PAGE>
<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 13,192 *
Spratt, James W. III(3) -- 5,500 *
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 1,840,832 25.5%
</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) Mr. Spratt is the principal shareholder of Olympus Capital, Inc.
(4) Messrs. Skalko and Veitia are employees of Corporate Relations Group,
Inc. For Mr. Skalko, includes 5,500 shares already outstanding and
8,547 shares issuable upon conversion of Series A Preferred Stock.
(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
Micheal 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 1/3 of
the profits to the Company. The license agreement was mutually terminated in
April 1997.
13
<PAGE>
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 March 31, 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 3,000
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 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
14
<PAGE>
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, 1996 and 1995 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, 1996 and 1995 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. The financial statements
as of March 31, 1997 and 1996 were not audited by us and, accordingly, we do not
express an opinion on them.
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, 1996 and 1995 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, 1996
16
<TABLE>
<CAPTION>
Ammonia Hold, Inc.
Balance Sheets
ASSETS
March 31, June 30,
1997 1996 1995
(unaudited)
CURRENT ASSETS
<S> <C> <C> <C>
Cash and cash equivalents (Note 1) $ 1,280,093 $ 349,494 $ 28,371
Accounts receivable net of allowance
for doubtful accounts of $14,186, $14,186
and $1,000, respectively 150,428 124,931 134,305
Prepaid expenses - 3,508 -
Prepaid consulting fees (Note 1) - 69,996 -
Inventory (Note 2) 162,775 160,628 71,962
---------------- ---------------- ----------------
Total Current Assets 1,593,296 708,557 234,638
-------------------- ---------------- ---------------- ----------------
PROPERTY, PLANT AND EQUIPMENT
Building 291,103 - -
----------------------------------
Equipment - net of accumulated
depreciation (Note 1) 208,950 36,757 28,358
Land 185,000 185,000 -
---------------- ---------------- -------------
Total Property, Plant and Equipment 685,053 221,757 319,310
---------------- ---------------- ----------------
OTHER ASSETS
Deposits 1,500 - -
----------------------------------
Building fund (Note 1) - 127,172 -
Patents - net of accumulated
amortization (Note 1) 490,430 266,831 290,952
Prepaid consulting fees -
non current portion (Note 1) - 256,671 -
---------------- ---------------- -------------
Total Other Assets 491,930 650,674 -
---------------------- ---------------- ---------------- -------------
TOTAL ASSETS $ 2,770,279 $ 1,580,988 $ 553,948
-------------------------------- ================ ================ ================
(Continued)
17
<PAGE>
Ammonia Hold, Inc.
Balance Sheets
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, June 30,
1997 1996 1995
(unaudited)
CURRENT LIABILITIES
Accounts payable $ 134,632 $ 18,423 $ 36,590
Accrued payroll taxes 1,308 4,602 5,288
Income tax payable (Note 1) 100 11,199 9,000
---------------- ---------------- ----------------
Total Current Liabilities 136,040 34,224 50,878
--------------- ---------------- ---------------- ----------------
STOCKHOLDERS' EQUITY
Common stock, par value $.001, authorized shares 100,000,000; 4,559,415,
3,867,378 and 3,399,078 shares issued and outstanding
respectively 4,559 3,867 3,399
Paid in capital 3,552,703 1,808,395 773,863
Accumulated deficit - - (274,192)
Retained earnings (923,023) (265,498) -
---------------- ---------------- -------------
Total Stockholders' Equity 2,634,239 1,546,764 503,070
-------------- ---------------- ---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 2,770,279 $ 1,580,988 $ 553,948
------------------------------------- ================ ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements
18
<PAGE>
<TABLE>
<CAPTION>
Ammonia Hold, Inc.
Statements of Operations
For the Nine Months Ended March 31, For the Years Ended June 30,
------------------------------------------------------ ----------------------------
1997 1996 1996 1995
---------------- ---------------- ---------------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 905,521 $ 534,951 $ 677,576 $ 704,523
LICENSING FEES - - 160,000 -
--------------- ---------------- ---------------- -------------
TOTAL REVENUES 905,521 534,951 837,576 704,523
---------------------------------------------- ---------------- ---------------- ----------------
COST OF SALES 703,401 262,152 384,403 366,546
----------------------------------------------- ---------------- ---------------- ----------------
GROSS PROFIT 202,120 272,799 453,173 337,977
------------------------------------------------ ---------------- ---------------- ----------------
SELLING EXPENSES - - - 150,863
----------------------------
GENERAL & ADMINISTRATIVE 908,522 438,315 446,060 143,911
---------------- ---------------- ---------------- ----------------
OTHER INCOME 48,977 64 3,781 -
------------------------------------------------ ---------------- ---------------- -------------
INCOME (LOSS) BEFORE INCOME
TAXES (657,425) (165,452) 10,894 43,203
------------------------------------------------------ ---------------- ---------------- ----------------
PROVISION FOR INCOME TAXES 100 100 2,200 9,000
---------------- ---------------- ---------------- ----------------
NET INCOME (LOSS) $ (657,525) $ (165,552) $ 8,694 $ 34,203
---------------------------================ ================ ================ ================
NET INCOME (LOSS) PER SHARE $ (0.145) $ (0.049) $ .002 $ .01
================================= ================ ================ ================
WEIGHTED AVERAGE
OUTSTANDING SHARES 4,525,506 3,399,078 3,478,178 3,399,078
========================================= ================ ================ ================
</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, 1994 through March
31, 1997
Retained
Common Stock Paid-in Earnings
Shares Amount Capital (Deficit)
<S> <C> <C> <C> <C>
Balance on July 1, 1994 3,399,078 $ 3,399 $ 773,863 $ (308,395)
------------------------------------- ---------------- ---------------- ----------------
Net income for the year ended
June 30, 1995 - - - 34,203
---------------- ---------------- ---------------- ----------------
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 3,867,378 $ 3,867 $ 1,808,395 $ (265,498)
--------------------
Issued shares for patent 35,714 36 199,964 -
Issued shares for cash 488,666 488 499,512 -
Issued shares for cash 76,923 77 499,923 -
Issued shares for cash 90,834 91 545,909 -
Net income for the nine months
ended March 31, 1997 (unaudited) - - - (657,525)
Balance,
March 31, 1997 4,559,415 $ 4,559 $ 3,552,703 $ (923,023)
================ ================ ================ ================
</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 Nine Months Ended March 31, For the Years Ended June 30,
------------------------------------------------------ -------------------------------
1997 1996 1996 1995
---------------- ---------------- ---------------- --------
(unaudited) (unaudited)
Cash Flows from Operating Activities
<S> <C> <C> <C> <C>
Net gain (loss) $ (657,525) $ (165,552) $ 8,694 $ 34,203
Non-cash items:
Depreciation 31,419 6,750 9,000 6,999
Amortization 32,026 18,091 24,121 24,191
Bad dept expense - 43,765 - 4,069
Consulting expense - - 23,333 -
Changes in current assets and liabilities:
(Increase) decrease in:
Accounts receivable (25,497) (5,184) 9,374 (79,370)
Prepaid expenses/deposits 330,175 (5,338) (3,508) 5,956
Inventories (2,147) 12,730 (88,666) (4,639)
Increase(decrease) in:
Overdrafts on bank - 11,117 - -
Accounts payable 116,209 38,958 (18,167) (5,802)
Income tax payable (11,099) 2,642 2,200 -
Accrued liabilities (3,294) 2,262 (686) 14,288
---------------- ---------------- ---------------- ----------------
Net Cash provided (Used) by
Operating Activities (189,733) (39,759) (34,305) (105)
----------------------------------- ---------------- ---------------- ----------------
Cash Flows from Investing Activities
Cash used for building costs (163,930) - (127,172) -
Cash used in purchase of patent (50,000) - - -
Purchase of property and equipment (210,738) (56,612) (17,400) (9,927)
---------------- ---------------- ---------------- ----------------
Net Cash Provided (Used) by
Investing Activities (424,668) (56,612) (144,572) (9,927)
---------------- ---------------- ---------------- ----------------
Cash Flows from Financing Activities
Cash received on note payable - 68,000 - -
Cash paid on note payable - - - -
Issuance of common stock 1,545,000 - 500,000 -
---------------- ---------------- ---------------- -------------
Net Cash Provided (Used) by
Financing Activities 1,545,000 68,000 500,000 -
----------------------------------- ---------------- ---------------- -------------
Increase in Cash 930,599 (28,371) 321,123 (10,032)
------------------------
Cash and Cash Equivalents at
Beginning of Period 349,494 28,371 28,371 38,403
---------------- ---------------- ---------------- ----------------
Cash and Cash Equivalents at
End of Period $ 1,280,093 $ - $ 349,494 $ 28,371
------------------------------================ ================ ================ ================
</TABLE>
(Continued)
21
<PAGE>
<TABLE>
<CAPTION>
Ammonia Hold, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(Continued)
For the Nine Months Ended March 31, For the Years Ended June 30,
------------------------------------------------------ ------------
1997 1996 1996 1995
---------------- ---------------- ---------------- --------
(unaudited) (unaudited)
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
<S> <C> <C> <C> <C>
Cash paid for interest $ - $ - $ 720 $ -
Cash paid for income taxes 100 - - 900
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
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Ammonia Hold, Inc. (AHI-Utah) (formerly Key Waste
management, Inc., a development stage company) 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 represent 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 not
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, 1996, no preferred
shares have been issued.
The principal business of the Company is the manufacture of monocalcium
phosphate and related products for sale to retailers mainly in the
United States.
Principles of Consolidation - The consolidated financial statements as
of June 30, 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. The original term of this
agreement was one year as reported in the March, 1996 audit, but has
since been changed to five years.
Patent - Patent costs are capitalized as incurred and are amortized
over the remaining life of the patent which is 17 years.
23
<PAGE>
AMMONIA HOLD, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Equipment - 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.
Property and Equipment consist of the following:
<TABLE>
<CAPTION>
June 30,
1996 1995
<S> <C> <C>
Manufacturing equipment $ 68,537 $ 51,887
Furniture and fixtures 1,637 888
---------------- ----------------
Total property and equipment 70,174 52,774
Less: accumulated depreciation (33,417) (24,417 )
------- -------
Net Property and Equipment $36,757 $28,358
======= =======
</TABLE>
Depreciation expense was $9,000 and $6,999 for the year ended June 30,
1996 and 1995, respectively.
Building Fund - This amount is monies set aside for the construction of
a new building in progress at year end. At the audit report date, for
June 30, 1996 financial statements the building was substantially
completed. The monies in the construction totaled $127,172. The Company
will use this facility for packaging, warehousing and office space.
Building - The Company completed construction of the building listed as
building fund in the report for the June 30, 1996 financial statements.
The Company will use this facility for packaging, warehousing and office
space. No depreciation on the building occurred until after the building
is completed which is January of 1997. The cost of construction on the
building totaled $291,103.
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.
Income Taxes - The Company adopted Statement of Financial Accounting
Standards No. 109 "Accounting
for Income Taxes" in the fiscal year ended June 30, 1994.
Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes" requires an asset and liability approach for financial
accounting and reporting for income tax purposes. This statement
recognizes (a) the amount of taxes payable or refundable for the current
year and (b) deferred tax liabilities and assets for future tax
consequences of events that have been recognized in the financial
statements or tax returns.
Deferred income taxes result from temporary differences in the
recognition of accounting transactions for tax and financial reporting
purposes. There were no material temporary differences as of June 30,
1996, accordingly, no deferred tax liabilities or assets have been
recognized for temporary differences as of June 30, 1996 and 1995.
24
<PAGE>
AMMONIA HOLD, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
AHI-Utah had cumulative net operating loss carryforwards of
approximately $267,000 and $331,000 at June 30, 1996 and 1995 expiring
at various times through 2009. Since a change of ownership over 50% (see
Note 1) occurred on June 30, 1994 and the resulting operations of
AHI-Texas are not a continuation of the AHI-Utah operations, the net
operating loss from AHI-Utah can not offset the income from AHI-Texas.
Accordingly, the potential tax benefits of the net operating loss
carryforwards have been offset by valuation reserves of the same amount.
AHI-Texas was an S corporation for federal income tax purposes until
June 30, 1994, and as such, the past net operating losses will not be
available for use by the Company as they were reported on the individual
tax returns of the shareholders.
The Company has a June 30 year end for income tax reporting purposes.
The taxes payable at June 30, 1996 consisted of federal tax of $1,650
and state tax of $550 for the June 30, 1996 tax year and $8,999 from a
prior period. The accrued income tax payable at June 30, 1995 consisted
of federal tax of $6,500 and state tax of $2,500.
Unaudited Interim Financial Information
The interim financial statements are unaudited, but, in the opinion of
the management of the Company, contain all adjustments, consisting of
only normal recurring accruals, necessary to present fairly the
financial position at March 31, 1997, the results of operations for the
nine months ended March 31, 1997 and March 31, 1996, and the cash flows
for the nine months ended March 31, 1997 and March 31, 1996. The results
of operations for the nine months ended March 31, 1997 are not
necessarily indicative of the results of operations to be expected for
the full year ending June 30, 1997.
NOTE 2 - INVENTORIES
Inventories consist of the following at June 30, 1996 and 1995:
1996 1995
---------------- ----------
Raw materials $ 11,845 $ 5,265
Work-in-progress 53,987 45,984
Finished goods 94,796 20,713
------------ -----------
Total $ 160,628 $ 71,962
================ ===========
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. The note was dated February
28, 1996, had an interest rate of 8% and was due on demand.
25
<PAGE>
AMMONIA HOLD, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE 4 - OPERATING LEASES
The Company rents office and warehouse space on a month-to-month basis
with monthly rental payments of $1,360. Total rent expense amounted
$17,842 for the year ended June 30, 1996.
NOTE 5 - SALES TO PRINCIPAL CUSTOMER
During the year ended June 30, 1996, and the nine months ended March
31, 1997, the majority of the Company's sales (approximately 46% and
47%, respectively) were to a principal customer, which is a national
retail chain located in the United States, of which $148,149, $34,215
and $67,231 was receivable at March 31, 1997, June 30, 1996 and
1995, respectively.
NOTE 6 - STOCKHOLDERS' EQUITY 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 in exchange
for $350,000 in consulting
services. The term of the contract is 5 years.
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, however, the consulting fees were
written off during the six months ended December 31, 1996
(Note 7).
During the period ended March 31, 1996:
5. On August 9, 1996, the Company purchased a patent from Sanex,
Inc. for the process of packing
used in its products. The Company paid $50,000 and issued
35,714 shares of restricted common
stock valued at $5.60 per share. The value of the patent was
$250,000.
6. The Company issued 488,666 shares of restricted common stock
for $500,000 in cash.
7. The Company issued 76,923 shares of restricted common stock
for $500,000 in cash.
8. The Company issued 90,834 shares of restricted common stock
for $545,000 in cash.
NOTE 7 - PREPAID CONSULTING FEES
The Company issued 117,000 shares of stock in exchange for $350,000 of marketing
services. The original term of the agreement was one year as reported in the
March, 1996 audit, then was changed to five years at June 30, 1996. At December
31, 1996 an examination by management determined the consulting services will
provide no future economic benefit, accordingly, the current and long-term
portion reported on June 30, 1996 were expensed in the period ending March 31,
1997.
26
<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.
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.
On February 16, 1996 the Company issued 200,000 shares of restricted
Common Stock to Banque SCS under Regulation S for a licensing agreement and
$500,000, and issued 117,000 shares and options to purchase additional shares to
Banque SCS for consulting services.
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.
1
<PAGE>
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. In August
1996 the Company issued 167,757 shares to two purchasers for cash of $1,046,000.
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.
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.
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.
All of the transactions referred to above are 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
or involve no "offer" or "sale." 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. Articles of Incorporation(1)
3.2 Bylaws(1)
3.3 Articles of Amendment to Articles of Incorporation
authorizing Series A Convertible Preferred
Stock.(1)
4. Instruments defining rights of holders, including indentures.
4.1 Option Agreement as memorialized in Exhibit B of Corporate
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(9)
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 herewith.
(2) To be filed by amendment.
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)
3
<PAGE>
Include any material or changed information the plan of distribution.
(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 San Juan
Capistrano, State of California on June 18, 1997.
AMMONIA HOLD, INC.
By: /s/ Michael D. Parnell
Michael D. Parnell
President
The undersigned officer and/or director of Ammonia Hold, a Utah
corporation (the "Corporation"), hereby constitutes and appoints Michael D.
Parnell and Dan N. Thompson, and each of them, with full power of substitution
and resubstitution, as attorney to sign for the undersigned in any and all
capacities this Registration Statement and any and all amendments thereto, and
any and all applications or other documents to be filed pertaining to this
Registration Statement with the Securities and Exchange Commission or with any
states or other jurisdictions in which registration is necessary to provide for
notice or sale of all or part of the securities to be registered pursuant to
this Registration Statement and with full power and authority to do and perform
any and all acts and things whatsoever required and necessary to be done in the
premises, as fully to all intents and purposes as the undersigned could do if
personally present. The undersigned hereby ratifies and confirms all that said
attorney-in-fact and agent, or any of his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof and incorporate such changes as
any of the said attorneys-in-fact deems appropriate.
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 June 18, 1997.
By: /s/ Michael D. Parnell President and Director
Michael D. Parnell (principal executive officer)
By: /s/ Dan N. Thompson Secretary, Treasurer, Chief Financial Officer and
Dan N. Thompson Director (principal accounting and financial officer)
By: /s/ Robert S. Ligon Director
Robert S. Ligon
By: /s/ Eugene England Director
Eugene England
By: /s/ Charles R. Nickle Director
Charles R. Nickle
By: /s/ William H. Ketchum Director
William H. Ketchum
5
RESTATED
ARTICLES OF INCORPORATION
OF
AMMONIA HOLD, INC.
Acting pursuant to the authority of Section 16-10a-1007 of the Utah
Business Corporation Act, Ammonia Hold, Inc., a Utah corporation (the
"Corporation") hereby adopts these Restated Articles of Incorporation. These
Restated Articles of Incorporation do not effect any amendment in the Articles
of Incorporation and were adopted by the vote of the Board of Directors.
Shareholder action was no required under Section 16- 10a-1007.
The Aricles of Incorporation are hereby restated in their entirety to
read as follows:
ARTICLE I
NAME
The name of the corporation is Ammonia Hold, Inc.
ARTICLE II
DURATION
The period of its duration is perpetual.
ARTICLE III
PURPOSES OF THE CORPORATION
The primary purpose and specific business of the corporation shall be
to negotiate drilling contracts and to act as driller for the drilling of oil,
gas, and minerals exploration drill holes, and to otherwise involve itself in
the exploration for and development of energy and other natural resources.
The Corporation may engage in any and all lawful activities, whether
related to its primary purpose or not, and shall have and exercise all of the
powers conferred by the laws of Utah upon corporations formed under the laws
thereof, even though not directly connected with or incident to the objectives
hereinbefore set forth, and the foregoing shall not be held to limit or restrict
the powers of this corporation in any manner, and these Articles shall be
construed liberally, both as to objectives and purposes.
ARTICLE IV
AUTHORIZED SHARES
The aggregate number of shares the Corporation shall have authority to
issue is 25,000,000 shares of common stock with a par value of $.001 per share.
All shares of common stock shall have
<PAGE>
equal rights and preferences and shall have unlimited voting rights as provided
in the Utah Revised Business Corporation Act. The Corporation shall also have
the authority to issue 10,000,000 shares of preferred stock with a part value of
$.001 per share, with terms, rights and preferences to be determined by the
Board of Directors at the time of issuance.
1. Creation of Series A Convertible Preferred Stock. There is hereby
created a series of preferred stock consisting of 3,000 shares and designated as
the Series A Convertible Preferred Stock, having the voting powers, preferences,
relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth below.
2. Dividend Provisions. The holders of shares of Series A Convertible
Preferred Stocks shall be entitled to receive, when and as declared by the Board
of Directors out of any funds at the time legally available therefor, dividends
at a par with holders of Common Stock as if the Series A Convertible Preferred
Stock has been converted into Common Stock on the record date for the payment of
dividend. Dividends shall be waived with respect to any shares of Series A
Convertible Preferred Stock which are converted prior to any dividend payment
date. Each share of Series A Convertible Preferred Stock shall rank on a parity
with each other share of Series A Convertible Preferred Stock with respect to
dividends.
3. Redemption Provisions. The Series A Convertible
Preferred Stock shall have no redemption rights.
4. Liquidation Provisions. In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the Series A
Convertible Preferred Stock shall be entitled to receive an amount equal to
$1,000.00 per share. After the full preferential liquidation amount has been
paid to, or determined and set apart for, all other series of Preferred Stock
hereafter authorized and issued, if any, the remaining assets of the Corporation
available for distribution to shareholders shall be distributed ratably to the
holders of the common stock. In the event the assets of the Corporation
available for distribution to its shareholders are insufficient to pay the full
preferential liquidation amount per share required to be paid the Corporation's
Series A Convertible Preferred Stock, the entire amount of assets of the
Corporation available for distribution to shareholders shall be paid up to their
respective full liquidation amounts first to the Series A Convertible Preferred
Stock, then to any other series of Preferred Stock hereafter authorized and
issued, all of which amounts shall be distributed ratably among holders of each
such series of Preferred Stock, and the common stock shall receive nothing. A
reorganization or any other consolidation or merger of the Corporation with or
into any other corporation, or any other sale of all or substantially all of the
assets of the Corporation, shall not be deemed to be a liquidation, dissolution
or winding up of the Corporation within the meaning of this Section 4, and the
Series A Convertible Preferred Stock shall be entitled only to (i)
<PAGE>
the right provided in any agreement or plan governing the reorganization or
other consolidation, merger or sale of assets transaction, (ii) the rights
contained in the Utah General Corporation Law and (iii) the rights contained in
other Sections hereof.
5. Conversion Provisions. The holders of shares of Series
A Convertible Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):
(a) Right to Convert.
(1) Each share of Series A Convertible Preferred
Stock (the "Preferred Shares") shall be convertible, at the
option of its holder, at any time, into a number of shares of
common stock of the Company at the initial conversion rate
(the "Conversion Rate") defined below.
The initial Conversion Rate, subject to the
adjustments described below, shall be a number of shares of
common stock (rounded to the nearest whole number) equal to
$1,000 divided by the lower of (i) Sixty Five Percent (65%) of
the Market Price of the common stock or (ii) $3.515625,
increased proportionately for any reverse stock split and
decreased proportionately for any forward stock split or stock
dividend. For purposes of this Section 5(a)(1), Market Price
shall be the closing bid price of the Common Stock on the
Conversion Date, as reported by the Electronic Bulletin Board
sponsored by the National Association of Securities Dealers or
the closing bid price on the NASDAQ Small Cap Market, if the
Common Stock is then trading on NASDAQ, averaged over the five
trading days prior to the date of conversion.
The Holder shall notify the Corporation, by facsimile
notice to the Corporation at (501) 676-5274, copy by overnight
courier at 10 Gunnelo Drive, Lonoke, Arkansas 72086 of the
Holder's intent to convert (the "Notice of Conversion") in the
form set forth in Section 5(a)(3) hereof, executed by the
holder of the Preferred Share(s) evidencing such holder's
intention to convert these Preferred Share(s) or a specified
portion (as above provided) hereof, and accompanied, if
required by the Company, by proper assignment hereof in blank.
Such conversion shall be effectuated by surrendering the
Preferred Shares to be converted (with a copy, by facsimile or
courier, to the Company) to the Company's registrar and
transfer agent Atlas Stock transfer, 5899 South State Street,
Salt Lake City, Utah 84107 ("Transfer Agent"). The date on
which notice of conversion (the "Conversion Date") is given
shall be the date on which the holder has delivered to the
Company, by facsimile or hand delivery, of the Notice of
Conversion duly executed to the Company. The Company shall
cause
<PAGE>
the Transfer Agent to complete the issuance of Common Shares
within five (5) calendar days of receipt of such conversion
form, provided that the Company or its agent has received the
Series A Convertible Preferred Stock certificates which are
the subject of the conversion on or prior to such fifth
calendar day. In the event the Company does not comply with
the foregoing sentence the Conversion Rate shall be adjusted
pursuant to Section 5(b)(3) below and such additional shares
shall be issued immediately.
(2) No less than 25 (or multiple thereof) shares of
Series A Convertible Preferred Stock may be converted at any
one time. No fractional shares of common stock shall be issued
upon conversion of the Series A Convertible Preferred Stock,
in lieu of fractional shares, the number of shares issuable
will be rounded to the nearest whole share.
(3) The form of Conversion Certificate shall read
substantially as follows:
The undersigned holder ( the "Holder") is
surrendering to Ammonia Hold, Inc., a Utah corporation (the
"Company"), one or more certificates representing shares of
Series A Convertible Preferred Stock of the Company (the
"Preferred Stock") in connection with the conversion of all or
a portion of the Preferred Stock into shares of Common Stock,
$.001 par value per share, of the Company (the "Common Stock")
as set forth below.
1. The Holder understands that the Preferred Stock
were issued by the Company pursuant to the exemption from
registration under the United States Securities Act of 1933,
as amended (the "Securities Act"), provided by Regulation D
promulgated thereunder.
2. The Holder represents and warrants that all offers
and sales of the Common Stock issued to the Holder upon such
conversion of the Preferred Stock shall be made (a) pursuant
to an effective registration statement under the Securities
Act, (b) in compliance with Rule 144, or (c) pursuant to some
other exemption from registration.
Number of Shares of Preferred Stock being converted:
Applicable Conversion Price:
Number of Shares of Common Stock Issuable:
Date of conversion:
Delivery Instructions for certificates of Common Stock and for
new certificates representing any remaining shares of
Preferred Stock:
NAME OF HOLDER:
<PAGE>
(Signature of Holder)
(b) Adjustments to Conversion Rate.
(1) Reclassification, Exchange and Substitution. If
the common stock issuable on conversion of the Series A
Convertible Preferred Stock shall be changed into the same or
a different number of shares of any other class or classes of
stock, whether by capital reorganization, reclassification,
reverse stock split or forward stock split or stock dividend
or otherwise (other than a subdivision or combination of
shares provided for above), the holders of the Series A
Convertible Preferred Stock shall, upon its conversion, be
entitled to receive, in lieu of the common stock which the
holders would have become entitled to receive but for such
change, a number of shares of such other class or classes of
stock that would have been subject to receipt by the holders
if they had exercised their rights of conversion of the Series
A Convertible Preferred Stock immediately before that change.
(2) Reorganizations, Mergers, Consolidations or Sale
of Assets. If at any time there shall be a capital
reorganization of the Corporation's common stock (other than a
subdivision, combination, reclassification or exchange of
shares provided for elsewhere in this Section (b) or merger of
the Corporation into another corporation, or the sale of the
Corporation's properties and assets as, or substantially as,
an entirety to any other person), then, as a part of such
reorganization, merger or sale, lawful provision shall be made
so that the holders of the Series A Convertible Preferred
Stock shall thereafter be entitled to receive upon conversion
of the Series A Convertible Preferred Stock, the number of
shares of stock or other securities or property of the
Corporation, or of the successor corporation resulting from
such merger, to which holders of the common stock deliverable
upon conversion of the Series A Convertible Preferred Stock
would have been entitled on such capital reorganization,
merger or sale if the Series A Convertible Preferred Stock had
been converted immediately before that capital reorganization,
merger or sale to the end that the provisions of this
paragraph (b)(3) (including adjustment of the Conversion Rate
then in effect and number of shares purchasable upon
conversion of the Series A Convertible Preferred Stock) shall
be applicable after that event as nearly equivalently as may
be practicable.
<PAGE>
(3) In the event (a) the Company does not file a registration
statement under the Securities Act of 1933 covering the Common
Stock issuable upon conversion of the Series A Convertible
Preferred Stock within 30 days of June 5, 1997 (the "Closing
Date"), (b) the registration statement is not declared
effective within 120 days of the Closing Date or (c) the
Company does not issue the Common Shares within the time
limits set forth in the penultimate sentence of Section
5(a)(1), Conversion Rate shall be adjusted to increase the
number of shares of common stock assessable by 5%. The
foregoing adjustments are cumulative and not exclusive.
(c) No Impairment. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, merger, dissolution, or any other
voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying
out of all the provision of this Section 5 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Convertible Preferred
Stock against impairment.
(d) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate for any shares of
Series A Convertible Preferred Stock, the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of Series
A Convertible Preferred Stock effected thereby a certificate setting
forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Series A
Convertible Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Rate at the time in effect, and
(iii) the number of shares of common stock and the amount, if any, of
other property which at the time would be received upon the conversion
of such holder's shares of Series A Convertible Preferred Stock.
(e) Notices of Record Date. In the event of the establishment
by the Corporation of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend) or other
distribution, the Corporation shall mail to each holder of Series A
Preferred Stock at least twenty (20) days prior to the date specified
therein, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or
<PAGE>
distribution and the amount and character of such dividend or
distribution.
(f) Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of common stock solely
for the purpose of effecting the conversion of the shares of
the Series A Convertible Preferred Stock such number of its
shares of common stock as shall from time to time be
sufficient to effect the conversion of all then outstanding
shares of the Series A Preferred Stock; and if at any time the
number of authorized but unissued shares of common stock shall
not be sufficient to effect the conversion of all then
outstanding shares of the Preferred Stock, the Corporation
will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued
shares of common stock to such number of shares as shall be
sufficient for such purpose.
(g) Notices. Any notices required by the provisions of this
Paragraph (e) to be given to the holders of shares of Series A
Convertible Preferred Stock shall be deemed given if deposited in the
United States mail, postage prepaid, and addressed to each holder of
record at its address appearing on the books of the Corporation.
6. Voting Provisions. Except as otherwise expressly
provided or required by law, the Series A Convertible
Preferred Stock shall have no voting rights.
ARTICLE V
COMMENCEMENT OF BUSINESS
The Corporation shall not commence business until at least one-thousand
dollars ($1,000.00) has been received by it as consideration for the issuance of
shares.
ARTICLE VI
REGULATIONS RESPECTING INTERNAL AFFAIRS
Section 1. Capital Stock. The capital stock of this corporation shall
be non-assessable. The Articles of Incorporation may be amended to provide for
assessment of the capital stock in the manner provided by law upon the
affirmative vote of three fourths (3/4) of the issued and outstanding capital
stock of the corporation at any meeting of the stockholders of the corporation.
Section 2. Amendment of Articles. Except as provided in Section 1
above, the Articles of Incorporation of this corporation may be amended in the
manner provided by law of not less than fifty-two percent (52%) of the capital
stock issued and outstanding.
<PAGE>
Section 3. Annual Meeting of Stockholders. Unless otherwise provided by
the by-laws, the annual meeting of the stockholders shall be on the First day of
September of each year at the hour of 10:00 a.m., at the office of the
corporation located at 1931 South Eleventh East, Sale Lake City, Utah 84105. No
notice need be given to the stockholders of the annual meeting.
At the annual meeting directors shall be elected, reports of the
affairs of the corporation shall be considered, and any other business may be
transacted which is within the power of the shareholders, except that action
shall not be taken on any of the following proposals unless written notice of
the general nature of the business or proposal has been given as in the case of
a special meeting, even though notice of regular or annual meetings is otherwise
dispensed with:
(a) A proposal to sell, lease, convey, exchange, transfer, or otherwise
dispose of all or substantially all of the property or assets of the
corporation, except that the Board of Directors may authorize any mortgage, deed
of trust, pledge, or other hypothecation of all or any part of the corporation's
property, real or personal, for the purpose of securing the payment or
performance of any contract, note, bond, or obligation. No vote or consent of
shareholders shall be necessary to authorize such action by the Board of
Directors.
(b) A proposal to merge or consolidate with another
corporation domestic or foreign.
(c) A proposal to reduce the stated capital of the
corporation.
(d) A proposal to amend the Articles.
(e) A proposal to wind up and dissolve the corporation.
(f) A proposal to adopt a plan of distribution of shares, securities,
or any consideration other than money in the process of winding up.
Section 4. Special Meetings. Special meetings of the shareholders, for
any purpose whatsoever, may be called at any time by the president, the Board of
Directors, one or more shareholders holding not less than one-tenth (1/10) of
the voting power of the corporation, or such other officers or persons as the
by-laws authorize.
Section 5. Notice of Meetings. Except in the case of regular or annual
meetings, notice of which has been dispensed with by the by-laws or these
Articles, notice of all meetings of the shareholders shall be given in writing
to the shareholders entitled to vote by the Secretary or any Assistant Secretary
or other person charged with that duty, or in the case of his neglect or
refusal, by and Director or Shareholder.
<PAGE>
Notice of any meeting of shareholders shall specify the place, the day,
the hour of the meeting, and in the case of special meeting, the general nature
of the business to be transacted and shall be sent to each shareholder of record
not less than seven days before the meeting.
Section 6. Voting. Each stockholder shall be entitled to one
vote for each share of stock owned by him, which he may cast in
person or by written proxy.
Section 7. Officers and Directors. All corporate powers shall be
exercised by or under authority of, and the business and affairs of the
corporation shall be controlled by the Board of Directors which shall consist of
not less than three nor more than fifteen members. Directors need not be
stockholders. Directors shall be elected at the annual meeting of the
stockholders and shall hold office for a period of one year, or until their
successors have been duly elected and qualified. Any Director may hold any other
office in the Corporation. Unless the by-laws provide otherwise, a majority of
the members of the Board of Directors shall constitute a quorum to transact the
business of the corporation and to exercise its corporate powers. Should a
vacancy occur for any reason, including an increase in the number of members,
the remaining directors may appoint a successor to hold office during the
unexpired term.
Section 8. Resolutions. A resolution in writing and signed by all of
the members of the Board of Directors shall be and constitute action by the
Board of Directors and shall have the same fore and effect as though such
resolution had been adopted at a duly convened meeting of the Board of
Directors, and it shall be the duty of the Secretary of the Corporation to
record each such resolution in the minutes of the corporation under the proper
date.
Section 9. Meetings and Notice. Unless the by-laws provide otherwise,
all meetings of the Board of Directors shall be called by the President, or if
he is absent or is unable or refuse to act, by any Vice President or any two
Directors. Except in the case of a regular meting, notice of which has been
dispensed with by the by-laws, written notice of the time and place of the
meetings of the Board of Directors shall be delivered personally to each
director, or sent to each director by mail or by other form or written
communication at least seven (7) days before the meeting.
Section 10. By-Laws. The initial by-laws of the corporation shall be
adopted by its Board of Directors. Thereafter by-laws may be adopted, amended,
or repealed either by the shareholders or by the Board of Directors, except that
no by-law adopted or amended by the shareholders shall be altered or repealed by
the Board of Directors; no by-law shall be adopted by the Directors which shall
require more than a majority of the votes cast to constitute action by the
shareholders, except where higher percentages are required by law.
<PAGE>
Section 11. Initial Board of Directors. The number of Directors
constituting the initial Board of Directors is three, and the names and
addresses of the incorporators hereof, and the persons who are to serve as
directors until the first annual meeting of shareholders, or until their
successors are elected and shall qualify are:
F. Alonzo Badger Cameron Mosher Thomas E. Stamos
694 East 1900 South 1276 Nathaniel Drive 5891 Sagewood Drive
Bountiful, Utah 84010 Pleasant Grove, Utah 84062 Murray, Utah 84107
Section 12. Other Contingencies. For any and all
contingencies or situations not provided for in these Articles,
this corporation will be governed by the provisions of the Utah
Business Corporation Act and related statutes.
Section 13. Preemptive Rights. The shareholders of this corporation
shall have no preemptive rights to acquire unissued or treasury shares or
securities convertible into such shares or carrying a right to subscribe to or
acquire shares or stock of this corporation.
ARTICLE VII
NON LIABILITY
The private property of the shareholders of this corporation shall not
be liable for the obligations of the corporation.
"Section 13. Preemptive Rights. The shareholders of this
corporation shall have no preemptive rights to acquire unissued or
treasury shares or securities convertible into such shares or
carrying a right to subscribe to or acquire shares or stock of this
corporation."
ARTICLE VIII
REGISTERED AGENT
The address of the initial registered office of the corporation is
Nineteen Thirty-One South Eleventh East, Salt Lake City, Utah 84105, and the
name of its initial registered agent at such address is
F. ALONSO BADGER
ARTICLE IX
ACTION WITHOUT MEETING OF SHAREHOLDERS
To the maximum extent permitted by the Utah Revised Business
Corporation Act, any action which may be taken at any annual or special meeting
of shareholders, except for the election of directors, may be taken without a
meeting and without prior notice if one or more consents in writing setting
forth the action to take, shall be signed by the holders of outstanding shares
having not less than the minimum number of votes that would be necessary
<PAGE>
to authorize or take the action at a meeting at which all shares entitled to
vote thereon were present and voted.
ARTICLE X
LIMITATION OF LIABILITY
To the fullest extent permitted by the Utah Revised Business
Corporation Act or any other applicable law as now in effect or as it may
hereafter be amended, a director of this Corporation shall not be personally
liable to the Corporation or its shareholders for monetary damages for any
action taken or any failure to take any action, as a director. Neither any
amendment nor appeal of this Article X, nor the adoption of any provision in
these Articles of Incorporation inconsistent with this Article X, shall
eliminate or reduce the effect of this Article X in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Article X,
would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
IN WITNESS WHEREOF, the Company has caused these Articles of Amendment
to the Articles of Incorporation to be duly executed by its President and
attested to by its Secretary this ____ day of June, 1997.
AMMONIA HOLD, INC.
Michael D. Parnell, President
Dan N. Thompson, Secretary
<PAGE>
BY-LAWS
FOR
AMMONIA HOLD, INC.
ARTICLE I
OFFICES - BOOKS AND RECORDS
Section 1.1 Offices. The Board of Directors shall fix the location of
the principal executive office of the corporation at any place within or without
the State of Utah where the corporation is qualified to do business.
Section 1.2 Books and Records. The corporation shall keep at its
principal executive office the following books and records and any shareholder
of record, upon written demand stating the purpose thereof, shall have the right
to examine, in person, or by agent or attorney, at any reasonable time or times,
for any proper purpose, the same and to make extracts therefrom:
(a) Its books and records of account.
(b) Its minutes of meetings of the Board of Directors and
any committees
thereof.
(c) Its minutes of meetings of the shareholders.
(d) Its record of shareholders which shall give their names
and addresses and the number and class of the shares held by each.
(e) Copies of its Articles of Incorporation and By-Laws
as originally executed
and adopted together with all subsequent amendments thereto.
Section 1.3 Financial Statements. Upon the written request of any
shareholder of the corporation, the corporation shall mail to such shareholder
its most recent annual or quarterly financial statements showing in reasonable
detail its assets and liabilities and the results of its operation unless the
shareholder has already received the same. Neither the corporation nor any
director, officer,employee or agent of the corporation shall be liable to the
shareholder or anyone to whom the shareholder discloses the financial statement
or any information contained therein for any error or omission therein whether
caused without fault, by negligence or by gross negligence, unless (1) the error
or omission is material, (2) the director, officer, employee or agent in
question knew of the error or omission and intended for the shareholder or other
person to rely thereon to this detriment, (3) the shareholder or other persons
did reasonably rely thereon, and in addition, (4) he is otherwise liable under
applicable law.
<PAGE>
ARTICLE II
BY-LAWS
Section 2.1 Amendments. These By-Laws may be altered, amended or
repealed and new By-Laws adopted by the majority approval of the shareholders or
the Board of Directors. Any such action shall be subject to repeal or change by
action of the shareholders, but the alteration, amendment, repeal, change or new
By_law (and the repeal of the old By-Law) shall be valid and effective and no
director, officer, shareholder, employee or agent of the corporation shall incur
any liability by reason of any action taken or omitted in reliance on the same.
The power of the shareholders to repeal or change any alteration, amendment,
repeal or new By-Law shall not extend to any original By-Law of the corporation
so long as it is not altered, amended or repealed, but only to action by the
Board thereafter. There shall be no time limit on its exercise.
Section 2.2 By_law Provisions Additional and Supplemental to Provision
of Law. All restrictions, limitations, requirements and other provisions of
these By-Laws shall be construed, insofar as possible, as supplemental and
additional to all provisions of law applicable to the subject matter thereof and
shall be fully complied with in addition to the said provision of law unless
such compliance shall be illegal.
Section 2.3 By-Law Provisions Contrary to or Inconsistent with
Provisions of Law. Any article, section, subsection, subdivision, sentence,
clause of phrase or these By-laws which upon being construed in the manner
provided in Section 2.2 hereof, shall be contrary to or inconsistent with any
applicable provision of law, shall not apply so long as said provisions of law
shall remain i effect, but such result shall not affect the validity or
applicability of any other portions of these By-Laws, it being hereby declared
that these By-Laws would have been adopted and each article, section,
subsection, subdivision, sentence, clause or phrase thereof, irrespective of the
fact that any or more articles, sections subsections, subdivisions, sentences,
clauses or phrases is or are illegal.
ARTICLE III
MEETINGS OF SHAREHOLDERS
Section 3.1 Place of Meetings. All meetings of the shareholders, annual
or special, however called, shall be held at the registered office of the
corporation unless the Board of Directors designates another place. The Board of
Directors may designate any place for any meeting, either within or without the
State of Utah.
Section 3.2 Annual Meeting. An annual meeting of the shareholders shall
be held on the first Monday in the month of September (unless that day is a
legal holiday), and then on the next succeeding day, that is not a legal
holiday) at 10:00 a.m., the local time of the place of the meeting in effect on
the date of the meeting.
Section 3.3 Special Meeting. Special meetings of the shareholders may
be called by the Chairman of the Board, the President, the Board of Directors or
the holders of not less than one-tenth of all the shares entitled to vote at the
meeting.
<PAGE>
Section 3.4 Notice of Shareholders; Meetings. Written or printed notice
stating the place, day and hour of the meeting and, in the case of a special
meting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten (10), nor more than fifty days before the date of
the meeting, either personally or by mail, by or at the direction of the
President, the Secretary, or the officer or persons calling such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States Mail addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation with postage thereon prepaid.
Section 3.5 Waiver of Notice. Any shareholder may waive notice of any
meeting of shareholders, (however called or noticed, whether or not called or
noticed and whether before, during or after the meeting) by signing a written
waiver of notice or a consent to the holding of such meeting, or in approval of
the minutes thereof. Attendance at a meeting, in person or by proxy, shall
constitute waiver of all defects of call or notice regardless of whether waiver,
consent or approval is signed or any objections are made. All such waivers,
consents, or approvals shall be made a part of the minutes of the meeting.
Section 3.6 Fixing Record Date for Meetings. The stock transfer books
of the corporation shall not be closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of the shareholder
but, in lieu thereof, the date on which notice is given in accordance with
Section 3.4 above shall be the record date for those purposes. Such date shall
not be more than fifty (50) nor less than ten (10) days before the date of the
meeting. When a determination of shareholders entitled to vote at any meeting of
shareholders has been made under this section, such determination shall apply in
any adjournment thereof.
Section 3.7 Voting List. The officer or agent having charge of the
stock transfer books for shares of a corporation shall make, at least ten (10)
days before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each,
which list, for a period of ten (10) days prior to the meeting, shall be kept on
file at the registered office of the corporation and shall be subject to
inspection y any shareholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any shareholder during the whole time of
the meeting. The original stock transfer books shall be prima facie evidence as
to who are the shareholders entitled to examine such list or transfer books or
to vote at any meeting of shareholders.
Failure to comply with the requirements of this section shall not
affect the validity of any action taken at such meeting.
Section 3.8 Quorum of Shareholders, Vote. A majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If a quorum is present, the affirmative vote of
the majority of the shares represented at the meeting and entitled to vote on
the subject shall be the act of the shareholders, unless the vote of a greater
number or voting by classes is required by the Utah Revised Business Corporation
Act or the Articles of Incorporation. Shares shall not be counted to make up a
quorum for a meeting if
<PAGE>
voting of them at the meeting has been enjoined or for any reason they cannot be
lawfully voted at the meeting. The shareholders present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
Section 3.9 Voting of Shares. Each outstanding share regardless of
class shall be entitled to one vote on each matter submitted to vote at a
meeting of shareholders, except to the extent that the voting rights of the
shares of any class or classes are limited or denied by the Articles of
Incorporation.
Neither treasury shares nor shares held by another corporation if a
majority of the shares entitled to vote for the election of directors of such
other corporation is held by the corporation, shall be voted at any meeting or
counted in determining the total number of outstanding shares at any given time.
Section 3.10 Proxies. A shareholder may vote either in person or by
proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. No proxy shall be valid after eleven (11) months from the date
of its execution, unless otherwise provided in the proxy. Any shareholder giving
a written consent, or his proxy, or his transferee or personal representative,
or their respective proxies, may revoke the same prior to the time that written
consents of the number of shares required to authorize the proposed action may
have been filed with the Secretary of the corporation, but may not do so
thereafter.
Section 3.11 Elections of Directors. At each election for directors
every shareholder entitled to vote at such election shall have the right to
vote, in person or by proxy, the number of shares owned by him for as many
persons as there are directors to be elected and for whose election he has a
right to vote. The candidates receiving the highest number of votes up to the
number of directors to be elected shall be declared elected. Elections for
directors need not be by ballot except upon demand made by a shareholder at the
election and before the voting begins.
Section 3.12 Adjournment. Any shareholders' meeting, whether or not a
quorum is present, may be adjourned from time to time by the vote of a majority
of the shares, the holders of which are either present in person or represented
by proxy thereat, but, except as provided in Section 3.8 hereof, in the absence
of a quorum no other business may be transacted at such meeting. When a meeting
is adjourned for thirty (30) days or more, notice of the adjourned meeting shall
be given as in the case of an original special meeting. Save as aforesaid, it
shall not be necessary to given any notice of the time and place of the
adjourned meeting or of the business to be transacted thereat other than by
announcement at the meeting at which such adjournment is taken.
ARTICLE IV
DIRECTORS
Section 4.1 Exercise of Corporate Power. The business
and affairs of the corporation
shall be managed by the Board of Directors.
<PAGE>
Section 4.2 Qualifications. Directors need not be
residents of the State of Utah or
shareholders of the corporation. They need have no other qualifications.
Section 4.3 Compensation. The Board of Directors shall have authority
to fix the compensation of directors. Such compensation so fixed shall be
reported to the shareholders. Any compensation so fixed shall be for services as
a Director only, and a Director who serves the corporation in any other capacity
may receive a separate compensation therefor.
Section 4.4 Number. The total number of Directors of
the corporation shall be no less
than three (3) and not more than nine (9).
Section 4.5 Term. The term of each Director shall begin immediately on
his election and shall continue until the date set under these By-Laws for the
next annual meeting of the shareholders. Each Director shall hold office for the
term for which he is elected and until his successor shall have been elected and
qualified.
Section 4.6 Elections. At each annual meeting the shareholders shall
elect Directors, provided that if for any reason said annual meeting or an
adjournment thereof is not held or the Directors are not elected thereat, then
the Directors may be elected at any special meeting of the shareholders called
and held for that purpose.
Section 4.7 Vacancies. A vacancy or vacancies in the Board of Directors
shall exist in case of the death, resignation or removal of any Directors, or if
the authorized number of Directors is increased, or if the shareholders fail, at
any annual or special meeting at which any Director is elected, to elect the
full authorized number of Directors to be voted for at that meeting. Also, the
Board of Directors may declare vacant the office of the a Director is he is
found to be of unsound mind by an order of a court of competent jurisdiction or
convicted of a felony or misdemeanor involving moral turpitude or if, within
sixty (60) days after notice of his election, he doe snot accept the office
either in writing or by attending a meeting of the Board of Directors. Any
vacancy occurring may be filled by the affirmative vote of a majority of the
remaining Directors (or a sole remaining Director) although less than a quorum.
A Director elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in office, or if there was no predecessor, until the date set
under these By-Laws for the next annual meeting and until his successor is
elected. Any vacancy created y reason of the removal of one or more Directors by
the shareholders may be filled by election of the shareholders at the meeting at
which the Director or Directors are removed.
Section 4.8 Removal. The shareholders may remove one or more directors
with or without cause. A director may be removed by the shareholders only at a
meeting called for the purpose of removing the director and the meeting notice
must state that the purpose, or one of the purposes, of the meeting is removal
of the director.
Section 4.9 Regular Meetings. A regular meeting of the
Board of Directors shall be
held without further notice than this By-Law immediately after, and at the same
place as, the
annual meeting of shareholders. The Board of Directors may provide, by
resolution, the time and
<PAGE>
place, either within or without the State of Utah, for the holding of additional
regular meetings without other notice than such resolution.
Section 4.10 Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the President or any two
Directors. The person or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or without the State of Utah
as the place for holding any special meeting of the Board of Directors called by
them.
Section 4.11 Notice of Special Meetings. Notice of any special meeting
shall be given at least three (3) days previously thereto by written notice
delivered personally or mailed to each Director at his business address, or by
telegram. If mailed, such notice shall be deemed to be delivered to the
telegraph company. Any Director may waive notice of any meeting. The attendance
of a Director at a meeting shall constitute a waiver of notice of such meeting,
except where a Director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
Section 4.12 Quorum. A majority of the number of Directors fixed by
these By-Laws shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, but if less than such majority is present at
a meeting, a majority of the Directors present may adjourn the meeting from time
to time without further notice.
Section 4.13 Manner of Acting. The act of the majority
of the Directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors.
Section 4.14 Presumption of Assent. a Director of the corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as the
Secretary of the meeting before the adjournment thereof or shall forward such
dissent by certified or registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right of dissent shall
not apply to a Director who voted in favor of such action.
Section 4.15 Committees. The Board of Directors by resolution adopted
by the majority of the number of Directors fixed by the By-Laws may designate a
committee or committees consisting of not less than two (2) directors which
committee of committees, to the extent provided in such resolution, shall have
and may exercise all the authority therein provided; but the designation of such
committee or committees and the delegation thereto of authority shall not
operate to relieve the Board of Directors, or any member thereof, of any
responsibility imposed upon it or him by Law.
<PAGE>
ARTICLE V
OFFICERS
Section 5.1 Election and Qualification. The officers of this
corporation shall consist of a President, one or more Vice Presidents, a
Secretary and a Treasurer, each of whom shall be elected by the Board of
Directors at the meeting of the Board of Directors next following the annual
meeting of the shareholders (or at any meeting if an office is vacant) and such
other officers, including a Chairman of the Board of Directors, and assistant
officers and agents, as the Board of Directors shall deem necessary, who shall
be elected and shall hold their offices for such terms as the Board of Directors
may prescribe. Any two or more offices may be held by the same person except
those of President and Secretary. Any Vice President, Assistant Treasurer or
Assistant Secretary, respectively, may exercise any of the powers of the
President, the Treasurer, or the Secretary, respectively, as directed by the
Board of Directors and shall perform such other duties as are imposed upon him
by the By-Laws or the Board of Directors.
Section 5.2 Term of Office and Compensation. The term of office and
salary of each of said officers and the manner and time of the payment of such
salaries shall be fixed and determined by the Board of Directors and may be
altered by said Board from time to time at its pleasure.
Section 5.3 Removal and Vacancies. Any officer of the corporation may
be removed by the Board of Directors at any meeting whenever in its judgment the
best interests of the corporation will be served thereby, but such removal shall
be without prejudice to be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Election or
appointment of an officer of agent shall not of itself create contract rights.
If any vacancy occurs in any office of the corporation, the Board of Directors
may elect a successor to fill such vacancy for the remainder of the unexpired
term and until his successor is fully chosen and qualified.
ARTICLE VI
CHAIRMAN OF THE BOARD
Section 6.1 Powers and Duties. The Chairman of the Board of Directors,
if there be one, shall have the power to preside at all meetings of the Board of
Directors and shall have such other powers and shall be subject to such other
duties as the Board of Directors may from time to time prescribe.
ARTICLE VII
PRESIDENT
Section 7.1 Powers and Duties. The powers and duties
of the President are:
-----------------
(a) The act as the chief executive officer of the corporation
and, subject to the control of the Board of Directors, to have general
supervision, direction and control of the business and affairs of the
corporation.
<PAGE>
(b) To preside at all meetings of the shareholders and, in the
absence of the Chairman of the Board, or if there be non, at all meetings of the
Board of Directors.
(c) To call meetings of the shareholders and also of the Board
of Directors to be held at such times and, subject to the limitations prescribed
by law or by these By-Laws, at such places as he shall deem proper.
(d) To affix the signature of the corporation to all deeds,
conveyances, mortgages, leases, obligations, bonds, certificates and other
papers and instruments in writing which have been authorized by the Board of
Directors or which, int he judgment of the President, should be executed on
behalf of the corporation and do not require such authorization, to sign
certificates for shares of stock of the corporation and, subject to the
direction of the Board of Directors, to have general charge of the property of
the corporation and to supervise and control all officers, agents and employees
of the corporation.
Section 7.2 President Pro Tem. If neither the Chairman of the Board,
the President, nor the Vice President is present at any meeting of the Board of
Directors, a President Pro Tem may be chosen to preside and act at such meeting.
If neither the President nor the Vice President is present at any meetings of
the shareholders, a President Pro Tem may be chosen to preside at such meeting.
ARTICLE VIII
VICE-PRESIDENT
Section 8.1 Powers and Duties. In case of the absence, disability or
death of the President, the Vice President, or one of the Vice Presidents, shall
exercise all his powers and perform all his duties. If there is more than one
Vice President, the order in which the Vice Presidents shall succeed to the
powers and duties of the President shall be as fixed by the Board of Directors.
The Vice President or Vice Presidents shall have such other powers and perform
such other duties as may be granted or prescribed by the Board of Directors.
ARTICLE IX
SECRETARY
Section 9.1 Powers and Duties. The powers and duties of
the Secretary are:
-----------------
(a) To keep a book of minutes at the principal office of the
corporation or such other place as the Board of Directors may order, or all
meetings of its Directors and shareholders with the time and place of holding,
whether regular or special, and, if special, how authorized, the notice thereof
given, the names of those present at Directors; meetings, the number of shares
present or represented at shareholders' meeting and the proceedings thereof.
(b) To keep the seal of the corporation and to affix the
same to all instruments
which may require it.
<PAGE>
(c) To keep or cause to be kept at the principal office of the
corporation, or at the office of the transfer agent or agents, a share register,
or duplicate share registers, showing the names of the shareholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for shares, and the number and date of cancellation of every
certificate surrendered for cancellation.
(d) To keep or cause to be kept at the registered office of
the corporation the books and records required by Sections 1.3(b), (c), (d) and
(e) above.
(e) To keep a supply of certificates for shares of the
corporation, to fill in all certificates issued, and to make a proper record of
each such issuance; provided, that so long as the corporation shall have one or
more duly appointed and acting transfer agents of the shares, or any class or
series of shares, of the corporation, such duties with respect to such shares
shall be performed by such transfer agent or transfer agents.
(f) To transfer upon the share books of the corporation any
and all shares of the corporation; provided, that so long as the corporation
shall have on or more duly appointed and acting transfer agents of the shares,
or any class or series of shares, of the corporation, such duties with respect
to such shares shall be performed by such transfer agent or transfer agents, and
the method of transfer of each certificate shall be subject to the reasonable
regulations of the transfer agent to which the certificate is presented for
transfer, and also if the corporation then has one or more duly appointed and
acting registrars, to the reasonable regulations of the registrar to which the
new certificate is presented for registration; and provided, further, that no
certificate for shares of stock shall be issued or delivered or, if issued or
delivered, shall have any validity whatsoever until and unless it has been
signed or authenticated in the manner provided in Section 11.4 hereof.
(g) To make service and publication of all notices that may be
necessary or proper, and without command or direction from anyone. In case of
the absence, disability, refusal or neglect of the Secretary to make service or
publication of any notices, then such notices may be served and/or published by
the President or a Vice President, or by any person thereunto authorized by
either of them or by the Board of Directors or by the holders of a majority of
the outstanding shares of the corporation.
(h) To prepare the voting lists required by Section 3.7
above.
(i) Generally to do and perform all such duties as
pertain to his office and as
may be required by the Board of Directors.
ARTICLE X
TREASURER
Section 10.1 Powers and Duties. The powers and duties of
the Treasurer are:
-----------------
(a) To supervise and control the keeping and maintaining
of adequate and
correct accounts of the corporation's properties and business transaction,
including accounts of
<PAGE>
its assets, liabilities, receipts, disbursements, gains, losses, capital,
surplus and shares. Any surplus, including earned surplus, paid-in surplus and
surplus arising from a reduction of stated capital, shall be classified
according to source and shown in a separate account. The books of account shall
at all reasonable times be open to inspection by any Direction and by any
shareholder as provided in Section 1.3 above.
(b) To keep or cause to be kept at a registered office of the
corporation the books and records required by Section 1.3(a) above.
(c) To have the custody of all funds, securities, evidences of
indebtedness and other valuable documents of the corporation and, at his
discretion, to cause any or all thereof to be deposited for the account of the
corporation with such depository as may be designated from time to time by the
Board of Directors.
(d) To receive or cause to be received, and to give or cause
to be given, receipts and acquittances for monies paid in for the account of the
corporation.
(e) To disburse, or cause to be disbursed, all funds of the
corporation as may be directed by the Board of Directors, taking proper vouchers
for such disbursements.
(f) To render to the President and to the Board of Directors,
whenever they may require, accounts of all transactions as Treasurer of the
financial condition of the corporation.
(g) Generally to do and perform all such duties as
pertain to his office and as
may be required by the Board of Directors.
ARTICLE XI
SUNDRY PROVISIONS
Section 11.1 Instruments in Writing. All checks, drafts, demands for
money and notes of the corporation, and all written contracts of the
corporation, shall be signed by such officer or officers, agent or agents, as
the Board of Directors may from time to time by resolution designate. No
officer, agent, or employee of the corporation shall have power to bind the
corporation by contract or otherwise unless authorized to do so by these By-Laws
or by the Board of Directors.
Section 11.2 Fiscal Year. The fiscal year of this
corporation shall be July 1 through
-----------
June 30.
Section 11.3 Shares Held by the Corporation. Shares in other
corporations standing in the name of this corporation may be voted or
represented and all rights incident thereto may be exercised on behalf of this
corporation by any officer of this corporation authorized so to do by resolution
of the Board of Directors.
<PAGE>
Section 11.4 Certificate of Stock. There shall be issued to each holder
of fully paid shares of the capital stock of the corporation a certificate or
certificates for such shares. Every such certificate shall be either (a) signed
by the President or a Vice President and the Secretary or an Assistant Secretary
of the corporation and countersigned by a transfer agent of the corporation (if
the corporation shall then have a transfer agent) and registered by the
registrar of the shares of capital stock of the corporation (if the corporation
shall then have a registrar; or (b) authenticated by facsimiles of the signature
of the President and Secretary or an Assistant Secretary and countersigned by a
transfer agent of the corporation and registered by a registrar of the shares of
the capital stock of the corporation.
Section 11.5 Lost Certificates. Where the owner of any certificates for
shares of the capital stock of the corporation claims that the certificate has
been lost, destroyed or wrongfully taken, a new certificate shall be issued in
place of the original certificate if the owner (a) so requests before the
corporation has notice that the original certificate has been acquired by a bona
fide purchaser, and (b) files with the corporation an indemnity bond in such
form and in such amount as shall be approved by the President or a Vice
President of the corporation, and (c) satisfies any other reasonable
requirements imposed by the corporation. The Board of Directors may adopt such
other provisions and restrictions with reference to lost certificates, not
inconsistent with applicable laws, as it shall in its discretion deem
appropriate.
Adopted this ______ day of ____________________, 1994.
PRESIDENT
ATTEST:
SECRETARY
CERTIFICATE OF SECRETARY
KNOWN ALL MEN BY THESE PRESENTS: That the undersigned does hereby
certify that the undersigned is the Secretary of the aforesaid corporation, duly
organized and existing under and by virtue of the laws of the State of Utah;
that the above and foregoing By-Laws of said corporation were duly and regularly
adopted as such by the Board of Directors of said corporation by unanimous
consent.
DATED this ____ day of _______________, 1994.
SECRETARY
<PAGE>
EXHIBIT "B"
PAYMENT AGREEMENT
made by and between
AMMONIA HOLD, INC.
and
CORPORATE RELATIONS GROUP, INC.
THIS AGREEMENT is made this 22nd day of May, 1997, will serve as confirmation of
payment terms for services
to be provided AMMONIA HOLD, INC. ("CLIENT") whereby CORPORATE RELATIONS GROUP,
INC. ("CRG")
has agreed to perform said services as defined in the
"Lead Generations/Corporate Relations Agreement."
TERMS
A. CLIENT will pay to CRG, FOUR HUNDRED FIVE THOUSAND DOLLARS
($405,000 U.S. cy).
B. This Agreement is subject to compliance with the rules of the
Exchanges on which Client is listed and registered.
C. It is understood and agreed by the Parties that the above compensation
in U.S. currency, or free
trading shares of the Company, should be paid timely upon execution of
this Agreement. CRG will
retain the option, but is not compelled to begin its performance under
this Agreement prior to the
payment of such compensation in U.S. currency or free trading shares.
D. In the event of termination of the Agreement by Client, CRG shall be
fully released and forever discharged by Client from any further
obligations or liabilities with respect to the "Lead
Generation/Corporate Relations Agreement" and any results therefrom,
save and except liabilities arising from CRG's own negligence during
the term of this Agreement. Concurrently, Client shall be fully
released and forever discharged by CRG from any and all obligations of
further payments or liabilities with respect to the "Lead
Generation/Corporate Relations Agreement." This release in no way
affects Point #7, Page 2 of the "Lead Generation/Corporate Relations
Agreement."
E. Shares shall be made free trading through the registration that is
mutually agreed upon by the Company's
attorney and CRG's attorney.
F. Company shall issue options to CRG as outlined below.
<TABLE>
<CAPTION>
Amount Price Duration
<S> <C> <C>
100,000 shares at $4.25 One (1) year from the date of this Agreement
100,000 shares at $5.25 Two (2) years from the date of this Agreement
100,000 shares at $6.25 Three (3) years from the date of this Agreement
100,000 shares at $7.25 Five (5) years from the date of this Agreement
100,000 shares at $8.25 Five (5) years from the date of this Agreement
</TABLE>
G.The Client further agrees to issue immediately at no cost to CRG 100,000
Common Shares of 144 restricted
stock; (1) the shares shall be returned in full if the Client completes
the appropriate registration allowing
CRG to exercise its options within a period of 120 days from the
signing of this contract. (2) Should the
Company fail to affect the appropriate registration within the
aforementioned time, the Company and CRG
agree that CRG shall be entitled to keep all 100,000 shares of 144
Restricted stock and then the shares will
become the property of CRG and be considered additional payment of this
agreement. It is further agreed
that CRG will have piggyback registration rights to register the
aforementioned stock on any future
registration at the Company's expenses.
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
CORPORATE RELATIONS GROUP, INC.
BY: BY:
Roberto E. Veitia, President James W. Spratt III, Consultant
AMMONIA HOLD, INC.
BY:
Mike Parnell, President
LICENSE AGREEMENT
THIS AGREEMENT made this 1st day of April, 1996 by and between AMMONIA
HOLD, INC., a Utah corporation having its principal place of business at 900
South Shackleford Road, Little Rock, arkansas, 72211 (hereinafter called "AHI"),
AND
GRACE HOLDINGS LTD., a Bahamas corporation having its principal place of
business at Alliance House, East Bay Street, P.O. Box N-1724, Nassau Bahamas
(hereinafter called "GHL"),
WITNESSETH:
WHEREAS, AHI is the owner of all right, title and interest in and to the
invention, patent
and know-how relating to the invention "A METHOD TO MANUFACTURE MONOCALCIUM
PHOSPHATE AND PRODUCTS PRODUCED THEREFROM". UNITED STATES PATENT
NO. 4 838 922 ISSUED 13 JUNE 1989 (hereinafter "AMMONIA HOLD"); and
WHEREAS, GHL is desirous of obtaining technical assistance and a
license under the rights of AHI.
NOW, THEREFORE, in consideration of the mutual promise covenants and
intending to be legally bound, the parties agree as follows:
ARTICLE I - DEFINITIONS
Section 1.1 The term "LICENSED PATENT" means United States Patent
Number 4 838 922 issued June 13, 1989 and any and all divisions, continuations,
continuations-in-part, counterparts, reissues or re-examinations thereof USA or
foreign, and any patents issued on them.
Section 1.2 The term 'LICENSED PRODUCT" means the product which is
covered, or which use is covered by the claims of the patent or whose use is
covered by the claims of the patent of which utilize license know-how. This term
shall include but not be limited to products known as Ammonia Hold and Odor
Scentry.
Section 1.3 The term "LICENSED KNOW-HOW" means proprietary information
of AHI.
ARTICLE II - LICENSED GRANT
Section 2.1 For the sum of one hundred sixty thousand dollars
($160,000.00) paid by GHL, AHI grants and GHL accepts an exclusive,
nontransferable license to sell LICENSED PRODUCTS to nursing home industries and
carpet industries throughout the world. AHI also grants and GHL accepts the
rights to sublicense customers of GHL to use LICENSED PRODUCTS to resell
LICENSED PRODUCTS at GHL's discretion.
<PAGE>
ARTICLE II - ROYALTIES
Section 3.1 No royalties are assessed under the terms of this
agreement; however, AHI agrees and GHL accepts the rights of AHI to assess and
receive royalties for all "NEW PRODUCTS" and/or applications developed by AHI.
ARTICLE IV - PAYMENTS
Section 4.1 For the license and right granted under Section 2, AHI
shall pay GHL for sales of "Licensed Products" to industries stated in Section
2.1 at the rate on one third, (1/3), of the profit generated by such sales.
Payment for licensed products shipped under this agreement will be due within 30
days after the first day of the month following payment by customer.
ARTICLE V - REPRESENTATIONS AND WARRANTIES
Section 5.1 Nothing in or under this agreement shall be construed as a
warranty or representation by either party as to the utility, validity, or scope
of any of the patents or LICENSED KNOW-HOW, nor a warranty or representation
that anything made, used, sold, or practiced under this agreement is or will be
free from infringement of patents.
ARTICLE VI - TERM
Section 6.1 The license and right granted under Section 2 shall extend
through the expiration date of the patent unless otherwise terminated as set
forth herein.
Section 6.2 The license and the right granted in Section 2 terminates
automatically in any of the following circumstances:
(a) In the event that GHL is ordered or adjudged bankrupt or undertakes
a corporate reorganization under the bankruptcy act or is placed in the hands or
a receiver or enters into a composition with its creditors or makes an
unauthorized assignment for the benefit of creditors;
(b) In the event that GHL is dissolved or that a sale of substantially
all of its assets is made or that this agreement is attempted to be assigned by
GHL without the prior consent of AHI;
(c) In the event that substantially all of the assets of GHL are seized
or attached in conjunction with any action against it by a third party.
ARTICLE VII - CONFIDENTIALITY AND USE
Section 7.1 GHL shall maintain in confidence 'LICENSED KNOW-HOW"
disclosed to GHL.
<PAGE>
ARTICLE VIII - MARKING
Section 8.1 AHI shall conspicuously mark and require resellers to mark
licensed product with the statement 'THE PURCHASER ACCEPTS THE CONTENTS PACKAGED
OR INVOICED HEREWITH WITH THE UNDERSTANDING THAT PURCHASER IS LICENSED UNDER
PATENT NO. 4 838 922 TO USE, OR RESALE SUCH CONTENTS FOR USE.
Section 8.2 GHL shall take reasonable measure to assure that LICENSED
PRODUCT is used in all fields of the nursing home industry and carpet industry.
ARTICLE IX - MISCELLANEOUS
Section 9.1 Integration. This agreement shall constitute the entire
agreement between the parties with respect to licensing GHL to market LICENSED
PRODUCT. This agreement may not be modified in any manner except by an
instrument in writing signed by duly authorized representatives of AHI and GHL.
Section 9.2 Assignment and Sublicense. GHL may not assign this
agreement nor any of its rights granted in this agreement without AHI's prior
written consent. GHL may sublicense only to the extent expressly provided in
Section 2.
Section 9.3 Indemnification. AHI shall incur all liability whatsoever
for any kind of, and all injury, including death, loss or damage of any kind or
nature, direct or indirect, suffered by person or property arising or resulting
from, or in any way caused by or attributable to the use of practice of the
LICENSED PATENT or LICENSED KNOW-HOW under this agreement. In accordance with
the aforesaid AHI hereby indemnifies and saves GHL harmless of and from any and
all damages, liabilities, suits, cost of suits arising from the aforesaid
liability of AHI and resulting in damages or losses suffered by GHL pursuant
thereto.
IN WITNESS WHEREOF, the parties have executed this agreement by the
signatures of duly authorized representatives as of this first date written
above.
WITNESS: AMMONIA HOLD, INC.
By:
WITNESS: GRACE HOLDING, LTD.
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, 1996 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
June 18, 1997
