UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
Annual Report Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
For the Fiscal Year Ended June 30, 1999
Transition Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Commission File Number 333-29903
AMMONIA HOLD, INC.
(Name of small business issuer in its charter)
Utah 75-2337459
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Gunnebo Drive, Lonoke, Arkansas 72086
(Address of principal executive offices) (Zip Code)
Issuer's telephone no.: (501) 676-2994
Securities registered pursuant to Section 12(b) of the Exchange
Act: None
Securities registered pursuant to Section 12(g) of the Exchange
Act: Common
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes No
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form,
and no disclosure will be contained, to the best of the
Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB.
State the issuer's revenues for its most recent fiscal year.
$2,865,837
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the
stock was sold, or the average bid and ask prices of such stock
as of a specified date within 60 days. $7,945,659 (Based on
price of $1.15 on October 14, 1999 and 6,909,269 shares held by
non-affiliates)
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
date.
Class Outstanding as
of October 14, 1999
Common Stock, Par Value 7,638,190
$.001 per share
DOCUMENTS INCORPORATED BY REFERENCE
NONE
Transitional Small Business Disclosure Format. Yes No
AMMONIA HOLD, INC.
TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business . . . . . . . . . . . . . . . 1
Item 2. Description of Property. . . . . . . . . . . . . . . . 6
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . 6
Item 4. Submission of Matter to a Vote of
Security Holders . . . . . . . . . . . . . . . . . . . 6
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters. . . . . . . . . . . . . . . . . . 6
Item 6. Management's Discussion and Analysis or
Plan of Operation. . . . . . . . . . . . . . . . . . . 8
Item 7. Financial Statements . . . . . . . . . . . . . . . . . 13
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . 26
PART III
Item 9. Directors, Executive Officers, Promoters and
Control persons; Compliance with Section 16(a)
of the Exchange Act. . . . . . . . . . . . . . . . . . 26
Item 10. Executive Compensation . . . . . . . . . . . . . . . . 27
Item 11. Security Ownership of Certain Beneficial
Owners and Management. . . . . . . . . . . . . . . . . 28
Item 12. Certain Relationships and Related Transactions 29
PART IV
Item 13. Exhibits and Reports on Form 8-K . . . . . . . . . . . 30
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
-i-
PART I
Item 1. Description of Business
History
Ammonia Hold, Inc. ("AMHD" or the "Company") was
incorporated on July 10, 1980 under the laws of the State of Utah
as Ewing Oil Mining Company and initially engaged in the oil
development business. The Company subsequently ceased its
original business activity and thereafter primarily investigated
and sought new business opportunities.
In June 1994, the Company acquired Ammonia Hold, Inc., a
Texas corporation ("AMHD-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 AMHD-Texas as the acquirer
(reverse acquisition). Also in June 1994, the Company changed
its name to Ammonia Hold, Inc.
The Company's principal executive offices are located at 10
Gunnebo Drive, Lonoke, Arkansas 72086, and its telephone number
is (501) 676-2994.
Business Development
The Company is engaged in the business of manufacturing and
marketing odor eliminating products for use in connection with
farm and domestic animals and municipal biosolid facilities. 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
and Mexico.
In 1995, the Company created a wholly owned subsidiary,
Fivestar Products Corporation, to import and acquire related
products for sale and distribution by way of television and mass
merchandisers. Fivestar Products Corporation has not engaged in
material activity to date and the Company does not intend to
develop this business.
The Company manufactures products specifically designed to
control ammonia and other odors associated with animal urine and
feces using a patented process. The Company's line of products
have the ability to counter the formation of ammonia when urine
and solid animal waste is exposed to free oxygen in the air. The
Company's patented process binds the nitrogen present in animal
waste and municipal biosolids, 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 Hold,"
developed after 15 years of research by the individual inventor
and patented by him in 1989. Ammonia Hold is a granular light
gray substance that uses a mono-calcium phosphate base with a
blend of trace materials and other inert ingredients. Ammonia
Hold counters the natural formation of ammonia when animal wastes
are exposed to free oxygen in the air. Use of Ammonia Hold
decreases ammonia levels. High atmospheric ammonia levels have
been shown by numerous independent studies to cause respiratory
tract damage in poultry, resulting in higher mortality and
condemnation rates,
and decreasing feed efficiency.
The Company also markets a related product known as "Odor
Scentry ", 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 Scentry , 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 Scentry add the product to their
pets' litter pan to remove common odors. Odor Scentry 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 Scentry 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 Guard ", a
granular product specifically intended for the equestrian
market. Barn Guard is long-lasting, easy-to-use and
eliminates odors in horse stalls and all types of livestock
pens. It is non-toxic and contains no perfumes or masking
agents. Another
recently developed product is "Odor Scentry Premium Cat
Litter." This product when used in household litter pans forms
flushable clumps of both liquid and solid waste which are both
completely flushable in non-septic tank systems. Odor Scentry
Premium Cat Litter is all-natural, biodegradable, and almost
completely dust-free and is designed to prevent tracking by
cats after using the litter pan. Both Barn Guard and Odor Scentry
Premium Cat Litter use the same process as Ammonia Hold to
isolate the individual chemical elements that must combine to
create ammonia.
The Company has received the results of Phase I and Phase II
testing of biosolids composting tests to determine the effects
of the Ammonia Hold product on municipal biosolids and waste
management. CalRecovery, a waste management consulting and
engineering firm, completed the two-phase study. On a research
scale and a commercial scale, the tests demonstrated that the
addition of the Ammonia Hold will accelerate the process of
composting sludge, increase the retention of nitrogen, and
control the emission of ammonia during the composting process.
The product could be of interest to municipal wastewater
treatment facilities that are considering or are currently
composting sludge as a method of waste management. Possible
benefits of Ammonia Hold application for treatment facilities
include reduction of composting costs and control of air
emissions and odor, with odor being the number one cause of
complaints to health and environmental regulatory agencies.
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.
In May 1998, the Company acquired Super Dry Industries, Inc.
("Super Dry") in exchange for cash and shares of the Company's
common stock. Super Dry, a Mississippi corporation located in
Shuqualak, Mississippi, is engaged in the manufacture and
distribution of "Litter Purrferred," a patented cat litter, and
other oil and grease absorbent products. Super Dry also owns a
production and packaging facility in Shuqualak, associated
mineral reserves and certain patents and trademarks. As a result
of the acquisition of Super Dry, the Company expects to increase
its manufacturing capacity and to use Super Dry's mineral
reserves in the production of the Company's products.
Marketing
Management estimates that more than half of all households
in the United States have pets. Management further estimates
that over six billion broiler chickens, 280 million turkeys and
21 million ducks are produced in the United States each year. In
order to address this market, management has created a marketing
strategy combining the use of direct sales representatives and
trade and consumer advertising. This strategy targets not
only the retail market consisting of pet stores and pet
departments of grocery and other retail stores, but also the
commercial and industrial animal markets. Major retailers of
the Company's products are WalMart, PETCO, Kmart and several
large grocery chains throughout the United States.
Presently, the Company employs three sales persons and also
uses the services of independent sales representatives to
cover its marketing area, primarily in the continental United
States. Management intends to increase its marketing force as
business demands warrant such expansion and the Company has
sufficient funds available to retain the appropriate personnel.
Patents
The Company's principal patent, Method for Producing
Monocalcium Phosphate and Products Produced therefrom, (U.S.
Patent No. 4,838,922) was issued in June 1989 and acquired in
1990 from the inventor, Billy J. Green by the Company's
predecessor for 5,000 shares of AHI-Texas common stock, $100,000
cash and a note payable in the amount of approximately $312,000.
Of this amount, $250,000 was later retired by the issuance of
50,000 shares of Company common stock. The patent refers to
an improved method of producing monocalcium phosphate. The
second patent, Animal Litter containing Magnesium
Montmorillonite (U.S. Patent No. 5,529,022) was granted in
June 1996 and acquired from Sanex Corporation by the Company in
August 1996 for $250,000, paid $50,000 in cash and the remainder
by the issuance of 35,714 shares of Common Stock valued at
$5.60 per share. The officers and directors of Sanex are
Marjorie Burman-Nelson and Scott Burman. The purchase price
for these patents and the value attributable to the shares
of common stock issued in the transaction was based on
arms-length negotiations between the parties.
Pursuant to the Company's acquisition of Super Dry, it
acquired Super Dry's U.S. Patent No.5,469,809" (granted November
28, 1995), Non Dusting Clumping Animal Litter, related to a
process for creating cat litter. Super Dry acquired the patent
by assignment on August 11, 1995, at which time the patent was
pending, from its inventor C. Douglass Coleman. The Company also
acquired Super Dry's trademark registrations for "Litter
Purrferred" and "Super Dry."
Competition
Presently, there are several companies marketing products
similar to those produced and marketed by the Company
including, without limitation, General Chemical Corporation and
Jones Hamilton for ammonia abatement additives and Clorox, Oil
DRI Corp and American Colloid for cat litter. Most of these
companies are larger than the Company with longer histories of
operation and greater financial and personnel resources. Also,
most of these competitors have established some market share in
the market in which the Company will be competing. The ability
of the Company to penetrate these markets will depend on many
factors including, but not limited to, its ability to obtain
sufficient capital to enhance and broaden its marketing of its
products, to develop new and improved products, to obtain and
retain necessary management and advisory personnel, and the
establishment of a comprehensive marketing plan.
Employees
Presently, the Company has twenty-seven employees consisting
of four management persons, sixteen production persons and four
administrative persons and three sales representatives. The
Company does not currently offer its employees any bonus,
profit sharing or deferred compensation plan. The Company has
entered into an employment contract with its President, Michael
Parnell.
Management intends to hire additional qualified personnel as
business conditions warrant. In addition to its full-time
employees, the Company may use the services of certain
outside consultants and advisors as needed on a contract
basis. Management considers the relations between the Company
and its employees to be good.
Facilities
The Company's principal place of business and corporate
offices are located at 10 Gunnebo Drive, Lonoke, Arkansas 72086.
The facilities are in good condition and consist of approximately
30,000 square feet of manufacturing and warehouse space used for
the production of the Company's products and storage area for
inventory and raw materials. The building and land are held in
fee without mortgage. The Company also rents on a month to month
basis, warehouse space for a mixing facility in Little Rock,
Arkansas for rent of $1,360. On August 5, 1997 the Company
purchased ten acres of land and 55,000 square foot office and
manufacturing facility in Lonoke for cash of $392,920, in order
to meet expansion requirements. This property was subsequently
exchanged for a fifteen percent (15%) interest (1,777,500 shares
of common stock) in Pet Quarters.com, Inc.
Upon the Company's acquisition of Super Dry, it acquired
title to Super Dry's production and packaging facility located in
Shuqualak, Mississippi. The facility is held in fee without
mortgage. The Company intends to continue using the facility to
manufacture Super Dry products and for other uses.
Research and Development
The Company has not allocated specific funds for conducting
research and development activities. Due to the nature of the
Company's business, funds will be allocated for research and
development as needed.
Item 2. Description of Property
The information required by this Item is contained in Item 1
above, under the heading "Facilities."
Item 3. Legal Proceedings
On September 27, 1999, the Securities and Exchange
Commission (the "Commission") filed a Complaint in the United
States District Court for the Middle District of Florida (Orlando
Division), entitled United States Securities and Exchange
Commission v. Corporate Relations Group, Inc., et al. Among the
defendants named in the Complaint are the Company and its
President, Michael Parnell. The Complaint alleges that the
Company and Mr. Parnell violated Sections 5 and 17(a) of the
Securities Act of 1933, as amended, and Section 10(b) of the
Securities Exchange Act of 1934, as amended, and Rule 10b-5
promulgated thereunder. The Complaint further alleges that the
Company and Mr. Parnell made sales of unregistered securities and
reported revenues derived from certain stock sales as revenue
from a licensing agreement.
The Company is actively pursuing a resolution to the action,
including the possibility of a negotiated settlement with the
Commission. The Company has not had sufficient time to fully
investigate the action to determine what possible material
effects, if any, it may have on the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's
Securities Holders during the fourth quarter of the Company's
fiscal year ending June 30, 1999.
PART II
Item 5. Market for Common Equity and Related Stockholder
Matters
The Company's Common Stock is eligible to be traded in the
over-the-counter market and quotations are published on the OTC
Bulletin Board under the symbol "AMHD," and in the National
Quotation Bureau, Inc. ("NQB") "pink sheets" under Ammonia Hold,
Inc. Inclusion on the OTC Bulletin Board permits price
quotations for the Company's shares to be published by such
service.
The following table sets forth the range of high and low bid
prices of the Company's shares for each quarterly period for the
past two fiscal years starting July 1, 1996, as reported by the
NQB. These prices represent prices between dealers, do not
include retail markups, markdowns or commissions and do not
represent actual transactions.
Fiscal Year High Low
(Starting July 1)
1997
First Quarter $ 8.00 $ 5.25
Second Quarter 8.62 4.06
Third Quarter 6.75 4.56
Fourth Quarter 5.62 3.44
1998
First Quarter 5.00 2.94
Second Quarter 3.75 1.44
Third Quarter 3.09 1.06
Fourth Quarter 2.94 1.72
1999
First Quarter 2.12 1.47
Second Quarter 1.62 1.00
Third Quarter 1.53 1.06
Fourth Quarter 2.18 1.06
2000
First Quarter 1.96 1.00
Second Quarter(1) 1.31 .93
___________________________
(1) Through October 14, 1999
As of October 14, 1999 there were approximately 1,133
holders of record of the Company's Common Stock, which figure
does not take into account those shareholders whose certificates
are held in the name of broker-dealers.
Dividend Policy
The Company has not declared or paid cash dividends or made
distributions in the past on its common stock, and the Company does
not anticipate that it will pay cash dividends or make
distributions in the foreseeable future. The Company currently
intends to retain and invest future earnings to finance its
operations.
On June 5, 1997 the Company issued 3,000 shares of Series A
Convertible Preferred Stock, par value $.001 per share. Shares of
the Preferred Stock were entitled to receive dividends as if they
were converted to Common Stock pursuant to the terms set forth
below. Upon liquidation, dissolution, or winding up, these shares
would be entitled to a liquidation preference of $1,000 per share.
Each share of Preferred Stock was convertible, at the option
of the holder at any time, into common stock as follows:
$1,000 divided by the lower of (1) sixty-five percent (65%) of
the market price of the common stock (determined by the
closing bid price averaged over the five preceding days prior
to conversion), or (2) $3.515625, adjusted for stock splits or
dividends.
The Company recorded a deemed dividend related to the issuance
of the preferred stock. This deemed dividend is due to the large
discount between the conversion price and the market price of
common stock on the day of issuance. The deemed dividend is
calculated at $1,600,000 which represents the amount of common
stock the preferred shareholders could have converted to (65%
divided by $3,000,000) on the day of issuance less the $3,000,000
received. Retained earnings and additional paid in capital have
been adjusted to reflect the dividend.
During the fiscal year ended June 30, 1998, all of the
preferred shareholders converted their shares of Preferred Stock
into an aggregate 2,979,413 share of common stock.
Recent Sales of Unregistered Securities
In April 1999, the Company issued 1,000 shares of its Common
Stock to two individuals, 500 shares each, in consideration for
marketing and promotional services provided to the Company. The
shares were issued in a private, isolated transaction. In
completing the transaction, the Company relied upon the exemption
from registration under the Securities Act of 1933, as amended,
provided by Section 4(2) of such Act.
Item 6. Management's Discussion and Analysis or Plan of Operation
The following information should be read in conjunction with
the consolidated financial statements and notes thereto appearing
elsewhere in this Form 10-KSB.
Recent Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") has issued
Statement of Financial Accounting Standard ("SFAS") No. 128,
"Earnings Per Share" and Statement of Financial Accounting
Standards No. 129 "Disclosures of Information About an Entity's
Capital Structure." SFAS No. 128 provides a different method of
calculating earnings per share than is currently used in accordance
with Accounting Principles Board Opinion No. 15, "Earnings Per
Share." SFAS No. 128 provides for the calculation of "Basic" and
"Dilutive" earnings per share. Basic earnings per share includes
no dilution and is computed by dividing income available to common
shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects
the potential dilution of securities that could share in the
earnings of an entity, similar to fully diluted earnings per share.
SFAS No. 129 establishes standards for disclosing information about
an entity's capital structure. SFAS No. 128 and SFAS No. 129 are
effective for financial statements issued for periods ending after
December 15, 1997. Their implementation is not expected to have a
material effect on the financial statements.
The FASB has also issued SFAS No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 130 establishes
standards for reporting and display of comprehensive income, its
components and accumulated balances. Comprehensive income is
defined to include all changes in equity except those resulting
from investments by owners and distributions to owners. Among
other disclosures, SFAS No. 130 requires that all items that are
required to be recognized under current accounting standards as
components of comprehensive income be reported in a financial
statement that displays with the same prominence as other financial
statements. SFAS No. 131 supersedes SFAS No. 14 "Financial
Reporting for Segments of a Business Enterprise." SFAS No. 131
establishes standards on the way that public companies report
financial information about operating segments in annual financial
statements and requires reporting of selected information about
operating segments in interim financial statements issued to the
public. It also establishes standards for disclosure regarding
products and services, geographic areas and major customers. SFAS
No. 131 defines operating segments as components of a company about
which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance.
SFAS 130 and 131 are effective for financial statements for
periods beginning after December 15, 1997 and requires comparative
information for earlier years to be restated. Management believes
the adoption of this statement will have no material impact on the
Company's financial statements.
The FASB has also issued SFAS No 132. "Employers' Disclosures
about Pensions and other Postretirement Benefits," which
standardizes the disclosure requirements for pensions and other
Postretirement benefits and requires additional information on
changes in the benefit obligations and fair values of plan assets
that will facilitate financial analysis. SFAS No. 132 is effective
for years beginning after December 15, 1997 and requires
comparative information for earlier years to be restated, unless
such information is not readily available. Management believes the
adoption of this statement will have no material impact on the
Company's financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" which requires
companies to record derivatives as assets or liabilities, measured
at fair market value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on
the use of the derivative and whether it qualifies for hedge
accounting. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving
offsetting changes in fair value or cash flows. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. Management believes the adoption of this statement
will have no material impact on the Company's financial statements.
Results of Operations
The following table sets forth the percentage relationship
to total net sales of principal items contained in the Company's
Statements of Operations for the two most recent fiscal years
ended June 30, 1999, and 1998. It should be noted that
percentages discussed throughout this analysis are stated on an
approximate basis.
Fiscal Years Ended
June 30,
1999 1998
Total net sales. . . . . . . . . . . . . . . . . 100% 100%
Cost of sales. . . . . . . . . . . . . . . . . . 53 53
Gross profit . . . . . . . . . . . . . . . . . . 47 47
General and administrative expenses. . . . . . . 61 88
Depreciation and amortization. . . . . . . . . . 6 10
(Loss) from operations . . . . . . . . . . . . . (20) (51)
Other income . . . . . . . . . . . . . . . . . . 10 58
Unrealized gain from marketable securities 26 -
Income (loss) before income taxes. . . . . . . . 16 7
Provisions (benefit) for income taxes. . . . . . - -
Net income (loss). . . . . . . . . . . . . . . . 16 7
For the Year Ended June 30, 1999 Compared to the Year Ended
June 30, 1998
Total sales, net of allowances and discounts, for the fiscal
year ended June 30, 1999 ("1999") increased 153% from the fiscal
year ended June 30, 1998 ("1998") due to the increase in product
shipped and new customer orders. Cost of sales (as a percentage
of total revenues) remained constant at 53%. Actual cost of
sales increased 151% for 1999 reflecting the increase in total
sales.
General and administrative expenses increased 73% for 1999
primarily due promotional and marketing costs associated with new
customers. As a percentage of total revenues, general and
administrative expenses decreased from 88% in 1998 to 61% in 1999
attributed to the increase in revenues.
Other income decreased 57% in 1999 due to a 62% decrease in
interest received related to a smaller investment portfolio.
Also in 1999, the Company reported an unrealized gain from
marketable securities of $746,156 reflecting an increase in
market value of the Company's holdings. The Company earned net
income of $466,798 in 1999 compared to net income of $81,427 in
1998. This increase is primarily attributed to the unrealized
gain from marketable securities.
Net Operating Losses
The Company has accumulated approximately $1,446,000 of net
operating loss carryforwards as of June 30, 1999, which may be
offset against future taxable income through the year 2009 when
the carryforwards expire. The use of these losses to reduce
future income taxes will depend on the generation of sufficient
taxable income prior to the expiration of the net operating loss
carryforwards. In the event of certain changes in control of the
Company, there will be an annual limitation on the amount of net
operating loss carryforwards which can be used. No tax benefit
has been reported in the financial statements for the year ended
June 30, 1999 because the potential tax benefits of the loss
carryforward is offset by valuation allowance of the same amount.
Liquidity and Capital Resources
Historically, the Company's working capital needs have been
satisfied by sales revenues and from the sale of securities.
Working capital at June 30, 1999 was $2,907,492, including cash
of $11,181 and investments in trading equities of $1,218,740.
Also at June 30, 1999, the Company had total assets of $6,441,364
and total stockholders' equity of $6,076,364. Net cash used by
operating activities for 1999 was $271,872 compared to $271,846
in 1998. The 1999 increase in net profit was mostly offset by
increases in accounts receivable and inventories. The Company
used a net $571,830 for investing activities in 1999 compared to
$2,097,482 in 1998, primarily attributed to the purchase of
securities in 1998. Accounts receivable increased $467,660 in
1999 due to increased sales, and inventories increased $271,287
due to the build-up in inventories in anticipation of increase
demand from existing and new customers. The Company did not
realize any cash from financing activities in 1999 or 1998.
The Company anticipates meeting its working capital needs
during 2000 fiscal year primarily with revenues from operations.
The Company believes that it has adequate cash reserves to meet
any routine contingency during 2000. Management does not
presently foresee a need for additional financing activities in
2000 unless the Company undertakes expansion or makes additional
acquisitions. Management has no definitive plans for expansions
or additional acquisitions.
Year 2000
Year 2000 issues may arise if computer programs have been
written using two digits (rather than four) to define the
applicable year. In such case, programs that have time-sensitive
logic may recognize a date using "00" as the year 1900 rather
than the year 2000, which could result in miscalculations or
system failures.
AMHD has completed its assessment of the Year 2000 issue and
believes that any costs of addressing the issue will not have a
material adverse impact on AMHD's financial position. AMHD
believes that its existing computer systems and software will not
need to be upgraded to mitigate the Year 2000 issues. AMHD has
not incurred any costs associated with its assessment of the Year
2000 problem. In the event that Year 2000 issues impact AMHD's
accounting operations and other operations aided by its computer
system, AMHD believes, as part of a contingency plan, that it has
adequate personnel to perform those functions manually until such
time that any Year 2000 issues are resolved.
AMHD believes that third parties with whom it has material
relationships will not materially be affected by the Year 2000
issues as those third parties are relatively small entities which
do not rely heavily on information technology ("IT") systems and
non-IT systems for their operations. However, if AMHD and third
parties upon which it relies are unable to address any Year 2000
issues in a timely manner, it could result in a material
financial risk to AMHD, including loss of revenue and substantial
unanticipated costs. Accordingly, AMHD plans to devote all
resources required to resolve any significant Year 2000 issues in
a timely manner.
In the opinion of management, inflation has not had a
material effect on the operations of the Company.
Risk Factors and Cautionary Statements
Forward-looking statements in this report are made pursuant
to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. The Company wishes to advise
readers that actual results may differ substantially from such
forward-looking statements. Forward-looking statements involve
risks and uncertainties that could cause actual results to differ
materially from those expressed in or implied by the statements,
including, but not limited to, the following: Changing economic
conditions, interest rate trends, continued acceptance of the
Company's products in the marketplace, competitive factors, and
other risks detailed in the Company's periodic report filings
with the Securities and Exchange Commission.
Item 7. Financial Statements
The Company's financial statements as of and for the fiscal
years ended June 30, 1999 and 1998 have all been examined to the
extent indicated in their report by Crouch Bierwolf & Chisholm,
independent certified public accountants, and have been prepared
in accordance with generally accepted accounting principles and
pursuant to Regulation S-B as promulgated by the Securities and
Exchange Commission. The aforementioned financial statements are
included herein in response to Item 7 of this Form 10-KSB.
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 subsidiaries as of June 30, 1999 and the
related consolidated statement of operations, stockholders' equity
and cash flows for the years ended June 30, 1999 and 1998. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Ammonia Hold, Inc. and it's subsidiaries as of June 30,
1999 and the results of their operations and cash flows for the
years ended June 30, 1999 and 1998 in conformity with generally
accepted accounting principles.
Crouch, Bierwolf & Chisholm
September 30, 1999
Ammonia Hold, Inc. and Subsidiaries
Consolidated Balance Sheets
ASSETS
June 30,
1999
CURRENT ASSETS
Cash and cash equivalents (Note 1) $ 11,181
Accounts receivable net of
allowance for doubtful accounts
of $25,275 766,746
Prepaid expenses 28,790
Investments in Trading equities (Note 1) 1,218,740
Inventory 858,663
Other receivables and accrued investment income 26,390
Notes receivable-current 361,410
Total Current Assets 3,271,920
PROPERTY, PLANT
AND EQUIPMENT
Depreciable assets - net of accumulated
depreciation (Note 1) 1,689,071
Land 281,212
Total Property, Plant and
Equipment 1,970,283
OTHER ASSETS
Deposits 50,000
Patents - net of accumulated
amortization of $261,134 (Note 1) 402,061
Investment 747,100
Total Other Assets 1,199,161
TOTAL ASSETS $ 6,441,364
(continued)
Ammonia Hold, Inc. and Subsidiaries
Consolidated Balance Sheets
(continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30,
1999
CURRENT LIABILITIES
Accounts payable $ 238,264
Accrued expenses 27,050
Margin account and overdraft 99,114
Total Current Liabilities 364,428
STOCKHOLDERS' EQUITY
Series A Convertible Preferred
Stock. 3,000 shares authorized
0 shares issued and outstanding
at June 30, 1999 -
Common Stock, par value $.001
authorized shares 100,000,000:
7,638,190 shares Issued and outstanding 7,638
Paid in Capital 9,648,591
Accumulated deficit
Less: Treasury stock at cost (3,579,293)
Total Stockholders' Equity 6,076,936
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 6,441,364
Ammonia Hold, Inc. and Subsidiaries
Consolidated Statements of Operations
For the years ended June 30,
1999 1998
SALES - NET ALLOWANCE
AND DISCOUNTS $ 2,865,837 $ 1,134,189
COST OF SALES 1,519,614 605,707
GROSS PROFIT 1,346,223 528,482
General & Administrative 1,734,721 1,002,177
Depreciation 131,496 69,116
Amortization 39,011 39,011
Loss From Operations (559,005) (581,822)
OTHER INCOME:
Interest 49,630 131,896
Dividends 22,528 4,000
Realized gains from sale of trading equities 197,194 495,704
Other 10,295 31,649
OTHER COMPREHENSIVE INCOME:
Unrealized gain/loss
from marketable securities 746,156 -
INCOME (LOSS) BEFORE
INCOME TAXES 466,798 81,427
PROVISIONS (BENEFIT) FOR
INCOME TAXES - -
NET INCOME (LOSS) $ 466,798 $ 81,427
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS $ 466,798 $ 81,427
NET INCOME (LOSS) PER SHARE $ .061 $ 0.014
WEIGHTED AVERAGE OUTSTANDING SHARES 7,638,967 6,006,323
FULLY DILUTED EARNINGS (LOSS) PER SHARE $ $ 0.011
FULLY DILUTED AVERAGE OUTSTANDING
SHARES 7,610,364
Ammonia Hold, Inc.
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Additional Additional Retained
Preferred Shares Paid-in Common Stock Paid-in Earnings Treasury
Shares Amount Capital Shares Amount Capital (Deficit) Stock
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance on June 30, 1997 3,000 $ 3 $2,624,997 4,559,415 $ 4,559 $ 6,568,503 $(4,127,518) $ -
Preferred stock converted to
common stock (3,000) (3) (2,624,997) 2,979,413 2,980 2,622,020 - -
Issued common stock to
acquire subsidiary - - - 403,362 403 856,740 - -
Issued common stock to cancel
options - - - 25,000 25 49,194 - -
Treasury stock at cost - - - - - - - (36,705)
Net income (loss) for the year
ended June 30, 1998 - - - - - - 81,427 -
Balance on June 30, 1998 - - - 7,967,190 7,967 10,096,457 (4,046,091) (36,705)
Stock issued for services - - - 100 1 1,249 - -
Treasury stock at cost - - - - - - - (412,740)
Cancel Treasury stock - - - (330,000) (330) (449,115) - 449,445
Net income (loss) for the year
ended June 30, 1999 - - - - - - 466,798 -
Balance on June 30, 1999 - $ - $ - 7,638,190 $7,638 $9,648,591 $(3,579,293) $ -
</TABLE>
Ammonia Hold, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the years ended June 30,
1999 1998
Cash Flows from Operating Activities
Net gain (loss) $ 466,798 $ 81,427
Non-cash items:
Depreciation 131,496 62,116
Amortization 39,011 39,011
Bad debt expense - 4,500
Comprehensive income (746,156) -
Stock issued to cancel options - 49,219
Stock received from building sale - (495,704)
Stock issued for services 1,250 -
Changes in current assets and liabilities:
(Increase) decrease in:
Accounts receivable (467,660) (252,336)
Trading Equities 427,835 -
Prepaid expenses/deposits (48,577) 351,319
Inventories (271,287) (259,512)
Other receivables 52,199 -
Increase (decrease) in:
Accounts payable 40,075 125,094
Margin account 99,114 -
Accrued liabilities 4,030 23,020
Net Cash provided (Used) by Operating
Activities (271,872) (271,846)
Cash Flows from Investing Activities
Purchase Facility (392,920)
Purchase/Sale of equity & bonds 47,888 (1,457,037)
Purchase of property and equipment (206,978) (72,525)
Acquisition of subsidiary - (175,000)
Purchase treasury stock (412,740) -
Net Cash Provided (Used) by
Investing Activities (571,830) (2,097,482)
Cash Flows from Financing Activities
Issuance of Preferred Stock - -
Issuance of common stock - -
Net Cash Provided (Used) by Financing Activities - -
Increase (Decrease) in Cash (843,702) (2,369,328)
Cash and Cash Equivalents at Beginning of Period 854,883 3,224,211
Cash and Cash Equivalents at End of Period $ 11,181 $ 854,883
(Continued)
<PAGE>
Ammonia Hold, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Continued)
For the years ended June 30,
1999 1998
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
Cash paid for interest $ - $ 29
Cash paid for income taxes - -
NON CASH FINANCING
ACTIVITIES:
Issued stock for subsidiary $ - $ 857,143
Issued stock for patent - $ -
AMMONIA HOLD, INC. AND Subsidiaries
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.) was incorporated in the state of Utah on July 10, 1980. On June 30,
1994, pursuant to a stock exchange agreement, AHI-Utah acquired all of the
stock of Ammonia Hold, Inc. (AHI-Texas), a Texas corporation, in exchange for
2,679,391 shares of AHI-Utah which represented 71% of the total outstanding
shares. Because the shares issued in the acquisition of AHI-Texas represented
71% of the then outstanding shares of AHI-Utah, AHI-Texas was deemed, for
financial reporting purposes, to have acquired AHI-Utah. Accordingly, the
acquisition of AHI-Utah by AHI-Texas was accounted for as a purchase of the
net liabilities of AHI-Utah consisting principally of an insignificant amount
of accounts payable.
FiveStar Products Corporation (FiveStar) was incorporated in the state of Utah
on March 31, 1995. FiveStar had no material activity.
Super Dry Industries, Inc. (a Mississippi corporation) (Super Dry) was
incorporated on January 20, 1992. Effective May 1, 1998 Ammonia Hold, Inc.
acquired all of the issued and outstanding shares of Super Dry in exchange for
$175,000 cash, and $600,000 worth of Ammonia Hold restricted common stock.
The number of shares issued was determined by multiplying the stock price at
closing by .70 then dividing the result into 600,000. The total number of
restricted common stock was 403,362.
Acquisition of Subsidiary - On May 1, 1998, the Company acquired 100% of the
common stock of Super Dry Industries, Inc. for $175,000 in cash and 403,362
shares of restricted common stock in Ammonia Hold. The stock was valued at
$857,143 or $2.15 per share. The acquisition was recorded as a purchase for
financial accounting purposes.
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 25,000,000 shares of
preferred stock $.001 par value, with terms, rights and preferences to be
determined by the Board of Directors at the time of issuance. As of June 30,
1997, 3,000 preferred shares have been issued for $2,625,000 in cash.
The principal business of the Company is the manufacture of monocalcium
phosphate and related products for sale to retailers mainly in the United
States. The company sells its products to some international customers (about
5% of total sales).
Principles of Consolidation - The consolidated financial statements as of June
30, 1998 and 1997 include the accounts of AHI-Utah, its wholly owned
subsidiary FiveStar, and the activity of Super Dry from May 1, 1998 to June
30, 1998.
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 - During fiscal 1996, the Company issued 117,000
shares of stock to an unrelated party in an exchange for $643,500 of prepaid
marketing services. At December 31, 1996, substantially all of the prepaid
marketing expenses had been expensed. In May 1997, the Company prepaid
$405,000 in cash and options (see note 8) for a six month marketing contract.
At June 30, 1997 prepaid consulting fees included $334,482 from this contract.
Patent - Patent costs are capitalized as incurred and are amortized over the
remaining life of the patent. The company considers the estimated life of
patents to be 17 years.
Purchase and Sale of Property - On August 5, 1997, the Company purchased ten
acres of land and a 55,000 square foot manufacturing/office facility for
$392,920. The facility was rented until November, 1997. During November
1997, the Company sold the building for $888,750 worth of restricted common
stock of Pet Quarter Inc. (1,777,500 shares). The shares were valued at fifty
cents per share. The property was appraised at $975,000. The restricted
stock is recorded as "Investment in Trading Equities" for the portion that can
be sold within one year, and "Investments" for the rest of the securities.
(See Note 8)
Ammonia hold, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Depreciable Property- Property, plant and equipment is stated at cost. Major
renewals and betterments are capitalized while expenditures for maintenance and
repairs are charged to operations as incurred. Depreciation is computed on the
straight-line method over estimated useful lives of five to ten years for
equipment and fixtures and thirty years for buildings.
Property, Plant and Equipment consist of the following:
June 30,
1999
Building $ 676,152
Equipment 1,655,007
Fixtures 47,596
Land 281,212
Total property, plant and equipment 2,659,967
Less: accumulated depreciation (689,684)
Net property, plant and equipment $ 1,970,283
Depreciation expense was $131,496 and $62,116 for the years ended June
30, 1999 and 1998, respectively.
Net Income (Loss) Per Share - The computation of net income (loss) per
common share is based on the weighted average number of common shares
outstanding during the period. Fully diluted earnings per share
includes the assumed conversion of preferred stock into common stock
at the beginning of the period.
Provision for Income Taxes - Deferred income taxes arise from timing
differences between financial reporting and tax reporting income and
expenses. Deferred taxes are classified as current or noncurrent,
depending on the classification of the assets and liabilities to which
they relate. Deferred taxes arising from timing differences that are
not related to an asset or liability are classified as current or
noncurrent, depending on the periods in which the timing differences
are expected to reverse.
Super Dry was an S corporation prior to its acquisition by Ammonia
Hold. As such, the past operating losses are not available for use by
the Company as they were reported on the individual tax returns of the
previous shareholders.
The Company has a June 30 year end for income tax reporting
purposes. The Company has approximately $1,446,000 of net
operating losses that may be offset against future taxable income.
These NOL carryforwards begin to expire in 2009. The Company
believes there is a 50% or greater chance that the remaining
carryforward will expire unused, therefore, no provision for tax
benefit has been recorded.
Use of Estimates in the Preparation of Financial Statements - The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts of assets
and liabilities, disclosure of contingent assets and liabilities
at the date of the financial statements, and revenues and expenses
during the reporting period. In these financial statements,
assets, liabilities and earnings involve extensive reliance on
management's estimates. Actual results could differ form those
estimates.
Ammonia Hold, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 1999
NOTE 2 - INVENTORIES
The company uses the FIFO (first-in, first-out) method for inventory
valuation.
Inventories consist of the following at June 30, 1999:
1999
Raw materials $ 216,124
Work-in-progress 337,841
Finished goods 304,698
Total $ 858,663
NOTE 3 - OPERATING LEASES
The Company rents office and warehouse space on a month-to-month
basis with monthly rental payments of approximately $1,360. Total
rent expense amounted to $19,342 and $15,233 for the years ended
June 30, 1999 and 1998, respectively.
NOTE 4 - SALES TO PRINCIPAL CUSTOMER
The majority of the Company's sales (approximately 46% in the years
ended June 30, 1999 and 1998) were to a principal customer, which is
a national retail chain located in the United States, of which
$84,497 and $86,878 was receivable at June 30, 1999 and 1998.
NOTE 5 - STOCKHOLDERS' EQUITY TRANSACTIONS
During the year ended June 30, 1997, the Company had the following
stock transactions:
1. The Company issued 35,714 shares of common stock in exchange
for a patent. The patent was valued at $200,000.
2. The Company issued 488,666 shares of common stock in exchange
for $500,000 in cash.
3. The Company issued 76,923 shares of common stock in exchange
for $500,000 in cash.
4. The Company issued 90,834 shares of common stock in exchange
for $545,000 in cash.
The price at which stock was issued differed due to differences in
separately negotiated agreements and changes in trading volumes.
During the year ended June 30, 1998, the Company had the following
stock transactions:
1. All of the preferred stockholders converted their preferred
stock for common stock during the year (See Note 7).
2.The Company issued 403,362 shares of common stock (along with
cash) to acquire Super Dry Industries, Inc. (See Note 1)
3.The Company issued 25,000 shares of restricted common stock to
cancel options to purchase 500,000 shares of common stock (see Note 7).
The Company recorded an expense of $49,219 to reflect the market price
of the common stock at the time of the transaction.
During 1999, the Company purchased and retired 330,000 shares of
their common stock.
Ammonia Hold, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 1999
NOTE 6-PREFERRED STOCK
On June 5, 1997 the Company issued 3,000 shares of Series A
Convertible Preferred Stock. These shares have a par value of
$.001 and are entitled to receive dividends as if they were
converted to Common Stock (see conversion rights below). Upon
liquidation, dissolution, or winding up, these shares are
entitled to a liquidation preference of $1,000 per share.
Each share is convertible, at the option of the holder at any
time, into common stock as follows:
$1,000 divided by the lower of (1)sixty-five percent
(65%) of the market price of the common stock
(determined by the closing bid price averaged over the
five preceding days prior to conversion) or
(2)$3.515625, adjusted for stock splits or dividends.
The Company has recorded a deemed dividend related to the
issuance of the preferred stock. This deemed dividend is due
to the large discount between the conversion price and the
market price of common stock on the day of issuance. The
deemed dividend is calculated at $1,600,000 which represents
the amount of common stock the preferred shareholders could
have converted to (65% divided by $3,000,000) on the day of
issuance less the $3,000,000 received. Retained earnings and
additional paid in capital have been adjusted to reflect the
dividend.
During the year ended June 30, 1999, all of the preferred
shareholders converted their shares of preferred stock for
common stock.
NOTE 7-WARRANTS AND OPTIONS:
The Company has the following options outstanding at June 30, 1997.
Amount Price Expiration
100,000 Shares $ 4.25 May 22, 1998
100,000 Shares 4.75 May 22, 2002
100,000 Shares 5.25 May 22, 1999
100,000 Shares 6.25 May 22, 2000
100,000 Shares 7.25 May 22, 2001
100,000 Shares 8.25 May 22, 2002
These options were cancelled by issuing 25,000 shares of common
stock (See Note 6).
On May 14, 1998, the Company entered into an agreement with a
marketing firm in which the marketing firm will market the
Company's products to wholesalers and retailers. In
connection with this agreement the Company granted options to
purchase an aggregate of 1,100,000 shares of the Company's
common stock for the purchase price of $2.6875 per share, or
$1.30 per share.
The first 550,000 shares are exercisable if the aggregate sales
of company products for which the marketing firm is
responsible reaches $5,000,000 within 18 months of May 14,
1998. These options are exercisable at $1.30 per share.
The second 550,000 shares are exercisable if the aggregate
sales of company products for which the marketing firm is
responsible reaches $10,000,000 within 3 years of May 14,
1998. These options are exercisable at $2.6875 per share.
If the first option is not exercisable because sales did not
reach $5,000,000 but the sales within 3 years does reach
$10,000,000 then the initial 550,000 shares will be
exercisable.
Ammonia Hold, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 1999
NOTE 7-WARRANTS AND OPTIONS (continued)
The Board of Directors (consisting of 5 members) were granted
stock purchase warrants entitling them to each purchase
50,000 shares of stock at $1.06, which was the closing price
of the Company's stock on the date of issuance (February 26,
1999). The warrants become exercisable when the Company
attains net sales of $3,000,000 in a 12 month period. The
warrants expire February 26, 2004.
The corporate president and CEO was granted stock purchase
options to purchase 100,000 shares of common stock if the
Company attains net sales of $3,000,000 in a twelve month
period. The price is the market price on the date the
Company attains the $3,000,000 in net sales. If the Company
attains $5,000,000 net sales in a 12 month period the CEO
will receive an additional option to purchase 200,000 shares
of stock at the market price at the date in which the Company
reaches the $5,000,000 net sales. The option expire 5 years
after issuance
NOTE 8-OTHER COMPREHENSIVE INCOME
Other Comprehensive Income includes unrealized gains from trading
securities. The Company owned the following at June 30, 1999:
Publicly Traded Securities $ 200,940
Pet Quarters Stock 1,764,900
1,965,840
Less: current portion (1,218,740)
Other Assets-Investments $ 747,100
The Company owns a large block of stock in Pet Quarters,
Inc. (See Note 1). The Company is limited as to the
number of shares it can sell in any quarter. Therefore,
only a portion of the shares, (290,800 shares) have been
included in "Other Comprehensive Income" and valued at
the current market price at June 30, 1999. The
remainder of the shares are carried at cost ($.50) as
"Other Assets-Investments".
NOTE 9-CONTINGENCIES AND COMMITMENTS
On September 27, 1999, the Securities and Exchange commission
(the "Commission") filed a complaint in the United
States District Court for the Middle District of Florida
(Orlando Division), entitled United States Securities
and Exchange Commission v. Corporate Relations Group,
Inc., et al. Among the defendants named in the
Complaint are the Company and its President, Michael
Parnell. The Complaint alleges that the Company and
Mr. Parnell violated Sections 5 and 17 (a) of the
Securities Act of 1933, as amended, and Rule 10b-5
promulgated thereunder. The Complaint further alleges
that the Company and Mr. Parnell made sales of
unregistered securities and reported revenues derived
from certain stock sales as revenue from a licensing
agreement.
The Company is actively pursuing a resolution to the
action, including the possibility of a negotiated
settlement with the Commission. The Company has not had
sufficient time to fully investigate the action to
determine what possible material effects, if any, it may
have on the Company.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
This Item is not Applicable.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the
Exchange Act
The following table sets forth the names, ages, and offices
held with the Company by it's directors and executive officers:
Name Position Director Since Age
Michael D. Parnell President, Chief 1996 41
Executive Officer
and Director
Dan N. Thompson Secretary/Treasurer 1994 36
Chief Financial
Officer and Director
Robert S. Ligon Director 1994 77
Charles R. Nickle Director 1997 45
William H. Ketchum Director 1997 67
All directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected
and qualified. There are no agreements with respect to the
election of directors. The Company pays each director $500 per
quarter for service on the Board of Directors. On February 26,
1999, each director received an option to purchase up to 50,000
shares of the Company's common stock at an exercise price of
$1.06 per share, for a period of five years. In order for a
director to exercise his warrant, the Company must achieve net
sales of $3,000,000 for any continuous twelve month period.
Any non-employee director of the Company is reimbursed for
expenses incurred for attendance at meetings of the Board of
Directors and any committee of the Board of Directors. The
Executive Committee of the Board of Directors, to the extent
permitted under Utah law, exercises all of the power and
authority of the Board of Directors in the management of the
business and affairs of the Company between meetings of the Board
of Directors. Each executive officer serves at the discretion of
the Board of Directors.
The business experience of each of the persons listed above
during the past five years is as follows:
Michael D. Parnell is the President and Chief Executive
Officer of the Company. Mr. Parnell is a graduate of the
University of Arkansas with a degree in Agricultural Economics.
He has over 17 years experience in the investment banking
business was associated with Paine Webber until 1997. Mr.
Parnell has been associated with the Company since its inception
and became President and a director in 1996.
Dan N. Thompson is the Secretary / Treasurer and Chief
Financial Officer of the Company. Mr. Thompson is a graduate of
Texas A & M with a degree in industrial distribution. Mr.
Thompson is currently the Denver district sales manager for the
Trane Corporation.
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 the original President of AHI-Texas.
Charles R. Nickle is a graduate from the University of
Arkansas with a degree in civil engineering. Mr. Nickle is
currently Vice President of McGoodwin, Williams and Yates, Inc.
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.
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 in real estate, cattle and
farming operations.
Item 10. Executive Compensation
The Company does not have a bonus, profit sharing, or
deferred compensation plan for the benefit of its employees,
officers or directors. The Company does pay each director $500
per quarter as a directors' fee. On March 1, 1999, the Company
entered into an employment agreement with its President, Michael
D. Parnell. Mr. Parnell's agreement is for a term of five years
with a base annual salary of $75,000. The agreement provides for
salary increases to $100,000 per annum when the Company realizes
net sales of $3,000,000 for any continuous twelve month period,
and to $150,000 per annum when net sales reach $5,000,000. In
addition, Mr. Parnell will receive stock purchase options to
acquire 100,000 shares when net sales reach $3,000,000 for any
continuous twelve month period, options to purchase 200,000
shares when net sales reach $5,000,000. Mr. Parnell also
receives insurance, vacation and other typical benefits.
Cash Compensation
The following table sets forth all cash compensation paid by
the Company for services rendered to the Company for the fiscal
years ended June 30, 1997, 1998 and 1999, to the Company's Chief
Executive Officer. No executive officer of the Company has
earned a salary greater than $100,000 annually for any of the
periods depicted.
Summary Compensation Table
Other All
Annual Other
Name and Fiscal Compen- Compen-
Principal Position Year Salary Bonus sation sation
Michael D. Parnell, 1999 $64,904 $ -0- $ -0- $1,500
President, C.E.O. 1998 55,499 -0- -0- 1,000
1997 53,999 -0- -0- -0-
Mathew Hoff(1) 1997 53,999 -0- -0- -0-
President, C.E.O
__________________
(2) President and C.E.O. of the Company until 1997
Option/SAR Grants in Last Fiscal Year
Number of Percent of total
securities options/SARs
underlying granted to
Name and options/SARs employees in Exercise or base Expiration
Principal Position granted(#) fiscal year price ($/Sh.) date
Michael D. Parnell, 50,000* 20% $ 1.06 2/26/2004
President, C.E.O.
__________________
* Options become exercisable only when the Company has
attained net sales of $3,000,000 for any continuous
twelve month period.
Item 11. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth information, to the best
knowledge of the Company as September 30, 1999, with respect to
each person known by the Company to own beneficially more than 5%
of the Company's outstanding common stock, each director and all
directors and officers as a group.
<PAGE>
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class(1)
Michael D. Parnell* 478,508 6.3%
10 Gunnebo Drive
Lonoke, AR 72086
Dan N. Thompson* 3,353 .04%
10 Gunnebo Drive
Lonoke, AR 72086
Robert S. Ligon* 198,210 2.6%
10 Gunnebo Drive
Lonoke, AR 72086
Charles R. Nickle* 25,000 .3%
10 Gunnebo Drive
Lonoke, AR 72086
William H. Ketchum* 23,850 .3%
10 Gunnebo Drive
Lonoke, AR 72086
All directors and executive 728,921 10.1%
officers as a group
(5 persons in group)
* Director and/or executive officer
Note: Unless otherwise indicated in the footnotes below, the
Company has been advised that each person above has
sole voting power over the shares indicated above.
(1) Based upon 7.638,190 shares of common stock outstanding on
October 14, 1999.
Item 12. Certain Relationships and Related Transactions
During the Company's last two fiscal years, there have been
no transactions between the Company and any officer, director,
nominee for election as director, or any shareholder owning
greater than five percent (5%) of the Company's outstanding
shares, nor any member of the above referenced individuals'
immediate family.
PART V
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Exhibit Name
*3.1 Articles of Incorporation and all amendments thereto
*3.2 By-Laws
*4.1 Instrument defining rights of holders
*10.1 Licensing Agreement dated April 1, 1996 with Grace Holdings
*21.1 Subsidiaries
27 Financial Data Schedules
* Previously filed as Exhibit to Form SB-2.
(b) The Company did not file any reports on Form 8-K for
the three month period ended June 30, 1999.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange
Act, the Registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
AMMONIA HOLD, INC.
BY: /S/ Michael D. Parnell
Michael D. Parnell,
President and C.E.O.
Dated: October 15, 1999
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Signature Title Date
President, C.E.O. and
Director October 15, 1999
/S/ Michael D. Parnell
Michael D. Parnell
Vice President and
Director October 15, 1999
/S/ Dan N. Thompson Chief Accounting Officer
Dan N. Thompson Principal Financial Officer
October 15, 1999
/S/ Robert S. Ligon Director
Robert S. Ligon
October 15, 1999
/S/ Charles R. Nickle Director
Charles R. Nickle
October 15, 1999
/S/ William H. Ketchum Director
William H. Ketchum
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE AMMONIA HOLD, INC. FINANCIAL
STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-1-1998
<PERIOD-END> JUN-30-1999
<CASH> 11,181
<SECURITIES> 1,218,740
<RECEIVABLES> 792,021
<ALLOWANCES> 25,275
<INVENTORY> 858,663
<CURRENT-ASSETS> 3,271,920
<PP&E> 2,251,495
<DEPRECIATION> 281,212
<TOTAL-ASSETS> 6,441,364
<CURRENT-LIABILITIES> 364,428
<BONDS> 0
0
0
<COMMON> 7,638
<OTHER-SE> 9,648,591
<TOTAL-LIABILITY-AND-EQUITY> 6,441,364
<SALES> 2,865,837
<TOTAL-REVENUES> 2,865,837
<CGS> 1,519,614
<TOTAL-COSTS> 1,905,228
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 466,798
<INCOME-TAX> 0
<INCOME-CONTINUING> 466,798
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 466,798
<EPS-BASIC> .061
<EPS-DILUTED> .061
</TABLE>
