UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
For the Fiscal Year Ended June 30, 2000
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.
$1,974,727
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. $2,590,975 (Based on price of
$.375 on October 13, 2000 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 13, 2000
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 . . . . . . . . . . . . . . . 3
Item 2. Description of Property. . . . . . . . . . . . . . . . 7
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . 7
Item 4. Submission of Matter to a Vote of
Security Holders . . . . . . . . . . . . . . . . . . . 8
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters. . . . . . . . . . . . . . . . . . 8
Item 6. Management's Discussion and Analysis or
Plan of Operation. . . . . . . . . . . . . . . . . . . 19
Item 7. Financial Statements . . . . . . . . . . . . . . . . . 12
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . 24
PART III
Item 9. Directors, Executive Officers, Promoters and
Control persons; Compliance with Section 16(a)
of the Exchange Act. . . . . . . . . . . . . . . . . . 25
Item 10. Executive Compensation . . . . . . . . . . . . . . . . 26
Item 11. Security Ownership of Certain Beneficial
Owners and Management. . . . . . . . . . . . . . . . . 27
Item 12. Certain Relationships and Related Transactions . . . . 27
PART IV
Item 13. Exhibits and Reports on Form 8-K . . . . . . . . . . . 27
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
PART I
Item 1. Description of Business
Business Development
Ammonia Hold, Inc. ("AMHD" or the "Company"), a Utah
corporation, is engaged in the business of manufacturing and
marketing odor eliminating products used 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.
The Company manufactures products specifically designed to
control ammonia and other odors associated with animal urine and
feces using a patented process. Its 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 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.
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, 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. Odor Scentry is
added to pets' litter pan to remove common odors. Odor Scentry
also may 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.
Another product, "Barn Guard ," is a granular product
specifically intended for the equestrian market. It is
long-lasting, easy-to-use and eliminates odors in horse stalls and
other types of livestock pens. Barn Guard is non-toxic and
contains no perfumes or masking agents. "Odor Scentry Premium Cat
Litter" was developed for use in household litter pans. It 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. It 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 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.
The Company's principal executive offices are located at 10
Gunnebo Drive, Lonoke, Arkansas 72086, and its telephone number is
(501) 676-2994.
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.
Year 2000 Risks
The Year 2000 issue results from a computer industry-wide
practice of representing years with only two digits instead of
four. Beginning in the year 2000, date code fields need to accept
four digit entries to distinguish twenty-first century dates from
twentieth century dates (2000 or 1900). As a result, computer
systems and/or software used by many companies needed to be
upgraded to comply with such Year 2000 requirements. Through
September 30, 2000, the Company has not experienced any significant
problems associated with the Year 2000 issue nor has it been made
aware of or experienced date related problems with any third-party
software. Although it appears that the Year 2000 issue will not
have a significant adverse effect on the Company, it continues to
monitor the Year 2000 compliance of its internal systems.
Undetected errors in its internal systems that may be discovered in
the future could have a material adverse effect on its business,
operating results or financial condition.
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
There are no 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 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, 2000.
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 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)
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 1.31 .69
Third Quarter 1.3125 .66
Fourth Quarter .90625 .53125
___________________________
(1) Through June 30, 2000
As of June 30, 2000 there were approximately 1,101 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
In June 1999, the Financial Accounting Standards Board
("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. The
adoption of this statement had 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, 2000 and 1999. It should be noted that percentages
discussed throughout this analysis are stated on an approximate
basis.
Fiscal Years Ended
June 30,
2000 1999
Total net sales. . . . . . . . . . . . . . . . . . . 100% 100%
Cost of sales. . . . . . . . . . . . . . . . . . . . 58 53
Gross profit . . . . . . . . . . . . . . . . . . . . 42 47
Sales and marketing expenses . . . . . . . . . . . . 94 23
General and administrative expenses. . . . . . . . . 64 38
Depreciation and amortization. . . . . . . . . . . . 9 6
(Loss) from operations . . . . . . . . . . . . . . . 125 (20)
Other income . . . . . . . . . . . . . . . . . . . . 14 10
Unrealized gain from marketable securities . . . . . 6 26
Income (loss) before income taxes. . . . . . . . . . (105) 16
Provisions (benefit) for income taxes. . . . . . . . - -
Net income (loss). . . . . . . . . . . . . . . . . . (105) 16
For the Year Ended June 30, 2000 Compared to the Year Ended
June 30, 1999
Total sales, net of allowances and discounts, for the fiscal
year ended June 30, 2000 ("2000") decreased 31% from the fiscal
year ended June 30, 1999 ("1999") attributed to reduced orders due
to certain retail outlets discontinuing the Company's products.
Cost of sales (as a percentage of total revenues) increase to 58%
from 53% in 2000 . Actual cost of sales decreased 25% for 2000
reflecting the decrease in total sales.
Sales and marketing expenses increase 180% in 2000 due to
increased promotional costs and employee costs. As a percentage of
total revenues, sales and marketing expenses increased from 23% in
1999 to 94% in 2000 attributed to the increased promotional costs.
General and administrative expenses increased 18% for 2000
primarily due to increased facility size and employee costs. As a
percentage of total revenues, general and administrative expenses
decreased from 88% in 1999 to 61% in 2000 attributed to the
decrease in revenues.
Other income decreased 2% in 2000 primarily due to the 47%
decrease in interest received due to a smaller investment
portfolio, and the reduction in dividends from $22,528 in 1999 to
$0 in 2000, also due to the smaller investment portfolio. The
decrease was partially offset by the 20% increase in 2000 from
realized gains from the sale of trading equities. Also in 2000,
the Company reported an unrealized gain from marketable securities
of $126,641 reflecting an increase in market value of the Company's
holdings, compared to an unrealized gain of $746,156 in 1999. The
Company had a net loss of $2,069,050 in 2000 compared to net income
of $466,798 in 1999. This net loss in 2000 is primarily attributed
to the decrease in sales and increase in sales and marketing
expenses.
Net Operating Losses
The Company has accumulated approximately $3,500,000 of net
operating loss carryforwards as of June 30, 2000, which may be
offset against future taxable income through the year 2010 when the
carryforwards begin to 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, 2000 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, 2000 was $1,126,679, including cash of
$18,042, net accounts receivable of $967,766, inventory of $876,614
and investments in trading equities of $1,218,740. Also at June
30, 2000, the Company had total assets of $5,450,733 and total
stockholders' equity of $4,007,886. Net cash used by operating
activities for 2000 was $530,132 compared to $271,872 in 1999. The
2000 decrease in net profit was offset by the sale of investment
securities. The Company realized a net $536,993 from investing
activities in 2000 compared to $571,830 used in 1999, primarily
attributed to the sale of investment securities. Accounts
receivable increased $206,020 in 2000 due to increased sales in
grocery stores, and inventories increased $17,951. The Company did
not realize any cash from financing activities in 2000 or 1999.
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.
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, 2000 and 1999 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.
Crouch Bierwolf & Associates
Certified Public Accountants
1453 South Major Street
Salt Lake City, Utah 84115
(801) 363-1175 (FAX) (801) 363-0615
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Ammonia Hold, Inc. and Subsidiary
Salt Lake City, Utah
We have audited the accompanying consolidated balance sheet of
Ammonia Hold, Inc. and subsidiaries as of June 30, 2000 and the
related consolidated statement of operations, stockholders' equity
and cash flows for the years ended June 30, 2000 and 1999. 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,
2000 and the results of their operations and cash flows for the
years ended June 30, 2000 and 1999 in conformity with generally
accepted accounting principles.
Crouch, Bierwolf & Chisholm
October 12, 2000
Ammonia Hold, Inc. and Subsidiary
Balance Sheets
Assets
June 30,
2000
CURRENT ASSETS
Cash and Cash equivalents $ 18,042
Accounts receivable net of
allowance for doubtful accounts
of $25,275 967,766
Prepaid expenses 28,604
Investments in Trading equities 483,400
Inventory 876,614
Other receivables and accrued investment income 27,260
Notes receivable-current 167,840
Total Current Assets 2,569,526
PROPERTY, PLANT & EQUIPMENT
Depreciable assets - net of accumulated
depreciation 1,559,845
Land 281,212
Total Property, Plant and Equipment 1,841,057
OTHER ASSETS
Deposits -
Patents - net of accumulated
amortization of $300,145 and
$261,134, respectively 363,050
Investment in Stock 677,100
Total Other Assets 1,040,150
TOTAL ASSETS $ 5,450,733
(continued)
Ammonia Hold, Inc. and Subsidiary
Balance Sheets
(continued)
Liabilities and Stockholders' Equity
June 30,
2000
CURRENT LIABILITIES
Accounts payable $ 168,857
Accrued expenses 51,792
Margin account and overdraft 21,576
Notes payable 415,000
Accrued allowance for
coupons/grocery store allowances 785,622
Total Current Liabilities 1,442,847
STOCKHOLDERS' EQUITY
Common Stock, par value $.001
authorized shares 100,000,000:
7,638,190 shares issued and outstanding 7,638
Additional Paid-in Capital 9,648,591
Accumulated Deficit (5,648,343)
Total Stockholders' Equity (Deficit) 4,007,886
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,450,733
<PAGE>
Ammonia Hold, Inc. and Subsidiary
Consolidated Statements of Operations & Other Comprehensive Income
For the years ended June 30,
2000 1999
SALES - NET ALLOWANCE
AND DISCOUNTS $ 1,974,727 $ 2,865,837
COST OF SALES 1,145,394 1,519,614
GROSS PROFIT 829,333 1,346,223
Sales & Marketing 1,859,600 664,238
General & Administrative 1,266,016 1,070,483
Depreciation 133,874 131,496
Amortization 39,011 39,011
Loss From Operations (2,469,168) (559,005)
OTHER INCOME:
Interest 26,390 49,630
Dividends - 22,528
Realized gains from sale
of trading equities 235,655 197,194
Other 11,432 10,295
OTHER COMPREHENSIVE INCOME:
Unrealized gain/loss
from marketable securities 126,641 746,156
INCOME (LOSS) BEFORE
INCOME TAXES (2,069,050) 466,798
PROVISIONS (BENEFIT) FOR
INCOME TAXES - -
NET INCOME (LOSS) $(2,069,050) $ 466,798
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS $(2,069,050) $ 466,798
NET INCOME (LOSS) PER SHARE $ (0.27) $ .061
WEIGHTED AVERAGE
OUTSTANDING SHARES 7,638,190 7,638,967
FULLY DILUTED EARNINGS
(LOSS) PER SHARE $ (0.27) $ .061
FULLY DILUTED AVERAGE
OUTSTANDING SHARES 7,638,190 7,638,967
Ammonia Hold, Inc.
Consolidated Statements of Stockholders' Equity
Additional Retained
Common Stock Paid-in Earnings Treasury
Shares Amount Capital (Deficit) Stock
Balance on June 30, 1998 7,967,190 $7,967 $10,096,457 $(4,046,091) $(36,705)
Stock issued for services 1,000 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) -
Net income (loss) for the
year ended June 30, 2000 - - - (2,069,050) -
Balance on June 30, 2000 7,638,190 $7,638 $ 9,648,591 $(5,648,343) $ -
<PAGE>
Ammonia Hold, Inc. and Subsidiary
Statement of Cash Flows
For the Years
Ended June 30,
2000 1999
Cash Flows from Operating Activities:
Net gain (loss) $ (2,069,050) $ 466,798
Non-cash items:
Depreciation 133,874 131,496
Amortization 39,011 39,011
Comprehensive income (126,641) (746,156)
Stock issued for services - 1,250
Changes in current assets and liabilities:
(Increase) decrease in:
Accounts receivable (201,020) (467,660)
Equities 805,340 427,835
Prepaid expenses/deposits 50,186 (48,577)
Inventories (17,951) (271,287)
Other receivables 192,700 52,199
Increase (decrease) in:
Accounts payable (69,407) 40,075
Margin account (77,538) 99,114
Accrued liabilities 810,364 4,030
Net Cash Provided (Used) by Operating Activities (530,132) (271,872)
Cash Flows from Investing Activities
Purchase Facility - -
Purchase/Sale of equity and bonds 541,641 47,888
Purchase of property and equipment (4,648) (206,978)
Purchase Treasury stock - (412,740)
Net Cash Provided (Used) by Investing Activities 536,993 (571,830)
Cash Flows from Financing Activities:
Issuance of Preferred Stock - -
Issuance of common stock - -
Net Cash Provided by Financing Activities - -
Net increase (decrease) in cash 6,861 (843,702)
Cash and Cash Equivalents at Beginning of Period 11,181 854,883
Cash and Cash Equivalents at End of Period $ 18,042 $ 11,181
Supplemental Cash Flow Information:
Cash paid for interest $ - $ -
Cash paid for income taxes $ - $ -
Ammonia Hold, Inc. and Subsidiary
Notes to Consolidated Financial Statements
June 30, 2000
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, 2000 and 1999 include the accounts of AHI-Utah, its wholly owned
subsidiaries FiveStar and Super Dry.
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.
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 stock
on the Company's balance sheet is recorded as "Investment in Trading
Equities" and "Investments". (See Note 8)
Ammonia hold, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2000
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,
2000
Building $ 676,152
Equipment 1,659,655
Fixtures 47,596
Land 281,212
Total property, plant and equipment 2,664,615
Less: accumulated depreciation (823,558)
Net property, plant and equipment 1,841,057)
Depreciation expense was $133,874 and $131,496 for the years ended
June 30, 2000 and 1999, 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 $3,500,000 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, 2000
NOTE 2 - INVENTORIES
The Company uses the FIFO (first-in, first-out) method for inventory
valuation.
Inventories consist of the following at June 30, 2000:
2000
Raw materials $ 209,923
Work-in-progress 376,977
Finished goods 289,714
Total $ 876,614
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 $17,775 and $19,342 for the years ended
June 30, 2000 and 1999, respectively.
NOTE 4 - SALES TO PRINCIPAL CUSTOMER
The majority of the Company's sales (approximately 21% and 46% in
the years ended June 30, 2000 and 1999, respectively) were to a
principal customer, which is a national retail chain located in the
United States, of which $62,132 and $84,497 was receivable at June
30, 2000 and 1999.
NOTE 5 - STOCKHOLDERS' EQUITY TRANSACTIONS
During the year ended June 30, 1999, 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, 2000
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 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.
Ammonia Hold, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2000
NOTE 8-OTHER COMPREHENSIVE INCOME
Other Comprehensive Income includes unrealized gains from trading
securities. The Company owned the following at June 30, 2000:
Pet Quarters Stock $ 1,160,500
1,160,500
Less: current portion (483,400)
Other Assets-Investments $ 677,100
The Company owns a large block of stock in Pet Quarters, Inc.
(See Note 1). The restrictions on selling the stock was lifted
during the current fiscal year. The Company recorded income on
the sale of some of their Pet Quarters stock, and recorded "other
comprehensive income" to reflect the increase in price on stock
they had intended to sell. At year-end, the price of Pet
Quarters stock price dropped and the Company recorded a
"comprehensive loss" to reflect the reduction in price. The
Company plans on selling a portion of their holding in Pet
Quarters stock in the current period.
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 42
Executive Officer
and Director
Dan N. Thompson Secretary/Treasurer 1994 37
Chief Financial
Officer and Director
Robert S. Ligon Director 1994 78
Charles R. Nickle Director 1997 46
William H. Ketchum Director 1997 68
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, 2000 $75,000 $ -0- $ -0- $2,000
President, C.E.O. 1999 64,904 -0- -0- 1,500
1998 55,499 -0- -0- 1,000
__________________
Option/SAR Grants in Last Fiscal Year
Number of Percent of total
securities options/SARs
underlying granted to
Name and options/SARs employees in Exercise or base Expiration
Principal Position granted(#) fiscal year price ($/Sh.) date
Michael D. Parnell, 50,000* 25% $ 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, 2000, 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.
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
September 30, 2000.
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, 2000.
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 16, 2000
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 16, 2000
/S/ Michael D. Parnell
Michael D. Parnell
Vice President and
Director October 16, 2000
/S/ Dan N. Thompson Chief Accounting Officer
Dan N. Thompson Principal Financial Officer
October 16, 2000
/S/ Robert S. Ligon Director
Robert S. Ligon
October 16, 2000
/S/ Charles R. Nickle Director
Charles R. Nickle
October 16, 2000
/S/ William H. Ketchum Director
William H. Ketchum
