UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 333-29903
AMMONIA HOLD, INC.
(Exact name of small business issuer as specified 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)
Registrant's telephone no., including area code: (501) 676-2994
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
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 X No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding as of March 31, 1999
Common Stock, $.001 par value 7,967,190
TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . 3
Balance Sheets -- March 31, 1999 and June 30, 1998 . . . 4
Statements of Operations -- three and nine months ended
March 31, 1999 and 1998. . . . . . . . . . . . . . . . 6
Statements of Cash Flows -- nine months ended
March 31, 1999 and 1998. . . . . . . . . . . . . . . . 7
Notes to Financial Statements. . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis and
Results of Operations. . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 12
Item 2. Changes In Securities. . . . . . . . . . . . . . . . . . 12
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . 12
Item 4. Submission of Matters to a Vote of
Securities Holders . . . . . . . . . . . . . . . . . . 12
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 13
PART I
Item 1. Financial Statements
The following unaudited Financial Statements for the period
ended March 31, 1999, have been prepared by the Company.
AMMONIA HOLD, INC.
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999 and June 30, 1998
Ammonia Hold, Inc. and Subsidiaries
Balance Sheets
Assets
March 31, June 30,
1999 1998
(unaudited) (audited)
Current assets
Cash and Cash equivalents $ 161,355 $ 854,883
Accounts receivable net of
allowance for doubtful accounts
of $25,275 and $14,186, respectively 572,501 299,086
Prepaid expenses 54,631 30,213
Investments in Trading equities 1,051,711 1,646,575
Inventory 738,692 587,376
Other receivables and accrued interest 163,910 78,589
Total Current Assets $ 2,742,800 $ 3,496,722
PROPERTY, PLANT & EQUIPMENT
Depreciable assets - net of accumulated
depreciation 1,742,549 1,359,628
Land 251,212 246,212
Total Property, Plant and Equipment 1,993,761 1,605,840
OTHER ASSETS
Patents - net of accumulated
amortization of $256,391 and
$183,121, respectively 411,804 441,063
Investments 813,740 699,212
Total Other Assets 1,225,544 1,140,275
Total Assets $ 5,962,105 $ 6,242,837
(continued)
Ammonia Hold, Inc. and Subsidiaries
Balance Sheets
(continued)
Liabilities and Stockholders' Equity
March 31, June 30,
1999 1998
(unaudited) (audited)
CURRENT LIABILITIES
Accounts payable $ 131,971 $ 198,189
Accrued payroll taxes 5,212 -
Accrued expenses 22,761 23,020
Total Current Liabilities 159,944 221,209
STOCKHOLDERS' EQUITY
Series A convertible preferred stock,
$.001 par value; 25,000,000 shares
authorized; 3,000 shares issued and
outstanding at June 30, 1997 - -
Common Stock, par value $.001
authorized shares 100,000,000:7,967,190 &
7,967,190 shares issued and outstanding,
respectively 7,967 7,967
Addition paid in capital 10,096,457 10,096,457
Accumulated Deficit (4,010,818) (4,046,091)
Unrealized gain on trading securities 158,000 -
Less: Treasury stock at cost (449,445) (36,705)
Total Stockholders' Equity (Deficit) 5,802,161 6,021,628
Total Liabilities and Stockholders' Equity $ 5,962,105 $ 6,242,837
Ammonia Hold, Inc. and Subsidiaries
Statements of Operations
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
1999 1998 1999 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Total Revenues $ 693,698 $ 360,236 $ 1,750,222 $ 849,103
Cost of Sales 381,534 173,293 1,033,481 432,436
Gross Profit 312,164 186,943 716,741 416,667
General &
Administrative Expenses 410,766 149,585 1,076,879 424,372
Other Income 68,682 31,205 389,454 101,228
Other Comprehensive Income 158,000 - 158,000 -
Income (Loss)
Before Income Taxes 128,080 68,563 187,316 93,523
Provisions For Income Taxes - - - -
Net Income 128,080 68,563 187,316 93,523
Net (Loss) Per Share $ .016 $ .009 $ .024 $ .017
Weighted Average
Outstanding Shares 7,967,190 7,349,728 7,967,190 5,489,519
Ammonia Hold, Inc. and Subsidiaries
Statement of Cash Flows
For the Nine Months
Ended March 31,
1999 1998
Cash Flows form Operating Activities:
Net gain (loss) $ 187,316 $ 93,523
Non-cash items:
Depreciation 49,264 22,200
Amortization 29,259 23,797
Changes in current assets and liabilities:
(Increase) decrease in:
Accounts receivable (273,415) (195,362)
Prepaid expenses/deposits (24,418) 28,732
Inventories (151,316) (108,392)
Other receivables (85,321) -
Increase (decrease) in:
Accounts payable (66,218) 14,491
Accrued liabilities 4,953 2,077
Net Cash Provided (Used) by
Operating Activities (329,896) (118,934)
Cash Flows from Investing Activities
Purchase land (5,000) -
Purchase of equity and bonds 486,293 -
Purchase of property and equipment (432,185) (411,406)
Purchase Treasury stock (412,740) (22,220)
Net Cash Provided (Used) by
Investing Activities (363,632) (433,626)
Cash Flows from Financing Activities:
Issuance of Preferred Stock - -
Issuance of common stock - -
Net Cash Provided by
Financing Activities - -
Net increase (decrease) in cash (699,480) (552,560)
Cash and Cash Equivalents at
Beginning of Period 854,883 3,224,211
Cash and Cash Equivalents at
End of Period $ 161,355 $ 2,671,651
Supplemental Cash Flow Information:
Cash paid for interest $ - $ -
Cash paid for income taxes $ - $ -
Ammonia Hold, Inc. and Subsidiaries
March 31, 1999
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
GENERAL
Ammonia Hold, Inc. and Subsidiaries (the Company) has elected to
omit substantially all footnotes to the financial statements for the
nine months ended March 31, 1999 since there have been no material
changes (other than indicated in other footnotes) to the information
previously reported by the Company in their Annual Report filed of
Form 10-KSB for the Fiscal year ended June 30, 1998.
UNAUDITED INFORMATION
The information furnished herein was taken from the books and
records of the Company without audit. However, such information
reflects all adjustment which are, in the opinion of management,
necessary to properly reflect the results of the interim period
presented. The information presented is not necessarily indicative
of the results from operations expected for the full fiscal year.
Item 2. Management's Discussion and Analysis or Plan of Operation
The following table sets forth the percentage relationship to
sales of principal items contained in the Company's Statements of
Operations for the three month and nine month periods ended
March 31, 1999 and 1998. It should be noted that percentages
discussed throughout this analysis are stated on an approximate
basis.
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
(Unaudited) (Unaudited)
Total revenues . . . . . . . . . . . 100% 100% 100% 100%
Cost of sales. . . . . . . . . . . . 55 48 59 51
Gross profit . . . . . . . . . . . . 45 52 41 49
General and administrative
expenses . . . . . . . . . . . . . 59 42 61 50
Other income . . . . . . . . . . . . 33 9 31 12
Income before income taxes . . . . . 19 19 11 11
Provisions income taxes. . . . . . . - - - -
Net income . . . . . . . . . . . . . 19 19 11 11
Results of Operations
Total revenues for the three month period ended December 31,
1999 ("third quarter of fiscal 1999") increased 93% from the third
quarter of fiscal 1998, and increased 106% for the nine month
period ended March 31, 1999 ("first nine months of fiscal 1999")
compared to the 1998 period. These increases are primarily due to
increased distribution and new customer shipments. Cost of sales,
as a percentage of total revenues, increased to 55% for the third
quarter of fiscal 1999 from 48% for the third quarter of fiscal
1998, and increased to 59% for the first nine months of fiscal 1998
from 51% for the comparable 1998 period. These percentage increases
for the 1999 periods are the result of increased marketing costs
associated with new customers. Actual cost of sales increased 120%
for the third quarter of fiscal 1999 and increased 139% for the
first nine months of fiscal 1999 compared to the corresponding 1998
periods. These results are due to increased sales and increases in
marketing and promotional costs associated with securing new
accounts.
General and administrative expenses for the third quarter and
first nine months of fiscal 1999 increased 175% and 154%,
respectively, when compared to the corresponding 1998 periods. The
increases are primarily attributed to an increase in salaried
employees and costs associated with the acquisition of Super Dry
Industries, Inc. As a percentage of total revenues, general and
administrative expenses increased to 59% for the third quarter of
fiscal 1999 from 42% for the 1998 period, and increased to 61% for
the first nine months of fiscal 1999 compared to 50% for the 1998
period.
Other income increased to $68,682 for the third quarter of
fiscal 1999 from $31,205 for the comparable 1998 period, and also
increased to $389,454 for the first nine months of fiscal 1999 from
$101,228 for the 1998 period due to interest income from cash
balances and gains from investments. The Company also recognized
$158,000 in other comprehensive income during the third quarter of
fiscal 1999 due to recognition of the increased market value of the
Company's Pet Quarters.com investment. Net income for the third
quarter and first nine months of fiscal 1999 increased to $128,080
and $187,316, respectively, as compared with $68,563 and $93,523 for
the respective corresponding 1998 periods.
Liquidity and Capital Resources
Historically, the Company's working capital needs have been
satisfied by operations and financing activities through the sale
of securities. Working capital at March 31, 1999 was $2,582,856,
a 21% decrease from $3,275,513 at June 30, 1998. This decrease is
attributed to the $693,528 reduction (81%) in cash and cash
equivalents due to expansion of the Company's Lonoke, Arkansas
facility. Also, the Company expended $412,740 for the repurchase
of its own common stock pursuant to the Company's stock repurchase
program during the first nine months of fiscal 1999. Further
contributing to the decrease in working capital was the $594,864
decrease in investments in trading equities due to the liquidation
of certain equity investments. The decline in working capital was
partially offset by the $273,415 increase (91%) in accounts
receivable attributed to increased customer orders, and the $151,316
increase in inventory due to the need to maintain adequate levels
for an anticipated increase in orders. During this same period,
other receivables and accrued interest increased $85,321 (109%)
reflecting investments in bonds and other interest bearing assets.
Further, accounts payable decreased $66,218 (33%) due to payments
made to vendors in the normal course of business.
Net cash used by operating activities for the first nine months
of fiscal 1999 was $329,896 compared to net cash used of $118,934
for the comparable 1998 period. This is partially attributed to the
$273,415 increase in accounts receivable reflecting increased
customer orders, and the $151,316 increase in inventory. Net cash
used by investing activities was $363,632 for the first nine months
of fiscal 1999 compared to $433,626 for the same 1998 period
reflecting the Company's purchase of property and equipment and the
repurchase of its own common stock.
The Company anticipates meeting its working capital needs
during the remainder of the 1999 fiscal year partially with revenues
from operations and income from its investments. It is possible
that the Company may investigate the possibility of interim
financing to provide additional working capital and to increase
marketing activities related to the Company's products. Management
has not entered into any new arrangements or definitive agreements
for additional private placement of securities and/or a public
offering. If the Company's operations and investment income are not
adequate to fund its operations and it is unable to secure financing
from the sale of its securities or from private lenders, the Company
could experience a cash flow shortage which could curtail the
Company's operations.
As of March 31, 1999, the Company had total assets of
$5,962,105 and total stockholders' equity of $5,802,161. In
comparison, as of June 30, 1998, the Company had total assets of
$6,242,837 and total stockholders' equity of $6,021,628. This
decrease in total assets for the first nine months of fiscal 1999
is primarily due to the decreases in cash and in investments in
trading equities.
Inflation
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
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.
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, 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.
PART II
Item 1. Legal Proceedings
There are presently no other material pending legal proceedings
to which the Company or any of its subsidiaries is a party or to
which any of its property is subject and, to the best of its
knowledge, no such actions against the Company are contemplated or
threatened.
Item 2. Changes In Securities
This Item is not applicable to the Company.
Item 3. Defaults Upon Senior Securities
This Item is not applicable to the Company.
Item 4. Submission of Matters to a Vote of Security Holders
This Item is not applicable to the Company.
Item 5. Other Information
This Item is not applicable to the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedules
(b) Reports on Form 8-K
No report on Form 8-K was filed by the Company during the
three month period ended March 31, 1999.
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMMONIA HOLD, INC.
Date: May 24, 1999 By: /S/ Michael D. Parnell
MICHAEL D. PARNELL,
President and Director
Date: May 24, 1999 By: /S/ Dan N. Thompson
DAN N. THOMPSON, Secretary,
Treasurer, Chief
Financial Officer and
Director
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE AMMONIA HOLD, INC. FINANCIAL
STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-1-1998
<PERIOD-END> MAR-31-1999
<CASH> 161,355
<SECURITIES> 1,051,711
<RECEIVABLES> 597,776
<ALLOWANCES> 25,275
<INVENTORY> 738,692
<CURRENT-ASSETS> 2,742,800
<PP&E> 1,993,761
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,962,105
<CURRENT-LIABILITIES> 159,944
<BONDS> 0
0
0
<COMMON> 7,967
<OTHER-SE> 10,096,457
<TOTAL-LIABILITY-AND-EQUITY> 5,806,161
<SALES> 1,750,222
<TOTAL-REVENUES> 1,750,222
<CGS> 1,033,481
<TOTAL-COSTS> 1,076,879
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 187,316
<INCOME-TAX> 0
<INCOME-CONTINUING> 187,316
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 187,316
<EPS-BASIC> .024
<EPS-DILUTED> .024
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