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 quarterly period ended March 31, 2000
[ ] 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 000-22855
AMERICAN SOIL TECHNOLOGIES, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 95-4627685
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
215 N. Marengo, Suite 110, Pasadena, CA 91101
---------------------------------------------
(Address of principal executive offices)
(619) 521-8547
---------------------------
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
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 [X] No [ ]
As of May 8, 2000, the number of shares of Common Stock issued and outstanding
was 8,776,358.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Independent Accountants' Review Report 3
Balance Sheets - March 31, 2000 and 1999 4
Statement of Operations - For the nine months
and three months ended March 31, 2000 and 1999 5
Statement of Cash Flows - For the nine months
and three months ended March 31, 2000 and 1999 6
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 17
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
[James C. Marshall, CPA, PC Letterhead]
INDEPENDENT AUDITOR'S REVIEW REPORT
To the Board of Directors
AMERICAN SOIL TECHNOLOGIES, INC.
We have reviewed the accompanying balance sheets of American Soil Technologies,
Inc. and the related statements of operations, and cash flows as of March 31,
2000 and 1999, and for the nine months and three months period then ended. These
financial statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of American Soil Technologies, Inc. as of December
31, 1999 and 1998, and the related statements of operations, stockholders'
equity, and cash flows for the years then ended; and in our report dated
February 18, 2000, we expressed an unqualified opinion on those financial
statements.
/s/ James C. Marshall, CPA, PC
Scottsdale, Arizona
May 9, 2000
3
<PAGE>
American Soil Technologies, Inc
(formerly Soil Wash Technologies, Inc.)
Balance Sheets
(unaudited)
March 31,
---------------------------
2000 1999
----------- -----------
Assets
Current Assets:
Cash and cash equivalents $ 438,628 $ 2,781
Accounts and notes receivable 302,343 580,287
Receivable from stockholder 117,200 117,200
Inventory 160,676 109,124
Deposits and prepaid expenses 140,379 29,064
----------- -----------
Total Current Assets 1,159,226 838,456
Property, plant and equipment, net of
accumulated depreciation 734,499 746,293
Patents, licenses and rights 750,069
Deferred tax asset 2,020,900 1,944,300
Other assets 33,242 26,304
----------- -----------
Total Assets $ 4,697,936 $ 3,535,401
=========== ===========
Liabilities and Stockholders Equity
Current Liabilities:
Accounts payable $ 88,556 $ 61,183
Accrued expenses 18,381 29,948
Deferred income 15,855 37,104
Short term loans payable 76,918
Payable to stockholder 60,000
----------- -----------
Total Current Liabilities 259,710 128,235
Reserve for remediation 50,000 50,000
Debentures payable 825,000
Payables to stockholders 299,671
----------- -----------
Total Liabilities 1,134,710 477,906
Stockholders' Equity:
Common stock 8,723 5,507
Additional paid in capital 6,678,276 6,053,939
Retained earnings (deficit) (3,123,773) (3,001,951)
----------- -----------
Total Stockholders' Equity 3,563,226 3,057,495
----------- -----------
Total Liabilities and Stockholders' Equity $ 4,697,936 $ 3,535,401
=========== ===========
See accompanying notes to these financial statements.
4
<PAGE>
American Soil Technologies, Inc
(formerly Soil Wash Technologies, Inc.)
Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
For the nine months ended For the three months ended
March 31, March 31,
--------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Soil and water treatment $ 1,358,869 $ 1,578,499 $ 225,221 $ 426,617
Hauling and miscellaneous Sales 92,035 95,301 55,605 25,308
----------- ----------- ----------- -----------
Gross Revenue 1,450,904 1,673,800 310,826 451,925
Cost of Operations
Materials and supplies 394,058 462,497 6,345 303,864
Labor and payroll costs 256,122 246,853 51,939 15,471
Facility costs 118,504 168,993 19,642 8,634
Equipment and maintenance 199,955 151,929 93,076 43,636
Miscellaneous and operating costs 3,380 29,061 3,070 37
----------- ----------- ----------- -----------
Total Cost of Operations 972,019 1,059,333 174,072 371,272
----------- ----------- ----------- -----------
Gross Profit 478,885 614,467 136,754 80,653
Sales and marketing 200,335 122,323 40,701 27,769
Depreciation and amortization 87,639 125,024 19,102 36,630
General and administrative 412,329 553,406 162,784 145,048
Interest expense 9,283 1,118 8,579 628
----------- ----------- ----------- -----------
Total Selling and
Administrative Expense 709,586 801,871 231,166 210,075
----------- ----------- ----------- -----------
Loss before benefit for income taxes (230,701) (187,404) (94,412) (129,422)
Benefit for income taxes 89,700 72,900 36,700 50,300
----------- ----------- ----------- -----------
Net Income (Loss) $ (141,001) $ (114,504) $ (57,712) $ (79,122)
=========== =========== =========== ===========
Loss per common share
- basic $ (0.02) $ (0.02) $ (0.01) $ (0.01)
=========== =========== =========== ===========
- diluted $ (0.02) $ (0.02) $ (0.01) $ (0.01
=========== =========== =========== ===========
Weighted average common shares
outstanding
- basic 6,571,462 5,507,420 8,722,931 5,507,420
=========== =========== =========== ===========
- diluted 6,684,099 5,507,420 8,835,568 5,507,420
=========== =========== =========== ===========
</TABLE>
See accompanying notes to these financial statements.
5
<PAGE>
American Soil Technologies, Inc
(formerly Soil Wash Technologies, Inc.)
Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
For the nine months ended For the three months ended
March 31, March 31,
------------------------ ---------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash Flow From Operating Activities:
Net Income (Loss) $(141,001) $(114,504) $ (57,712) $ (79,122)
Items Not Requiring Cash:
Amortization and depreciation 87,639 125,024 19,102 36,630
Allowance for doubtful accounts 18,116
Benefit of income tax credit (89,700) (72,800) (36,700) (50,300)
--------- --------- --------- ---------
Cash Flow (Used) by Operations (124,946) (62,280) (75,310) (92,792)
Adjustments To Reconcile Net Income (Loss)
to Net Cash Used by Operating Activities:
(Increase)/decrease in accounts receivable 450,522 61,912 (117,809) (124,020)
(Increase) in inventory (70,683) (187,851) (18,298) (64,002)
(Increase)/decrease in deposits and
prepaid expenses 3,477 185,957 (39,053) 118,806
(Increase)/decrease in other assets 10,222 (396) 10,222
(Decrease)/increase in accounts payable (68,455) 24,819 (190,710) 39,292
(Decrease)/increase in accrued expenses (88,213) (131,218) 8,542 (68,549)
(Decrease)/increase in deferred income (405,202) (295,118) 14,062 (667)
--------- --------- --------- ---------
Total Adjustments (168,332) (341,895) (333,044) (99,140)
Net Cash Flow Used by Operating Activities (293,278) (404,175) (408,354) (191,932)
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
For the nine months ended For the three months ended
March 31, March 31,
------------------------ -------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash Flow Used by Investing Activities:
Addition of property, plant and equipment (50,297) (84,001) (22,372) (16,678)
--------- --------- --------- ---------
Total Cash Used By Investing Activities (50,297) (84,001) (22,372) (16,678)
Cash Flow From Financing Activities:
Repayment of stockholder advances (146,890)
Advances from Stockholders 299,671 152,781
Issuance of Convertible debentures 825,000 825,000
--------- --------- --------- ---------
Total Cash Flow Provided By
Financing Activities 678,110 299,671 825,000 152,781
--------- --------- --------- ---------
Net increase/(decrease) in cash and
cash equivalents 334,535 (188,505) 394,274 (55,829)
Cash at beginning of period 104,093 191,376 44,354 58,610
--------- --------- --------- ---------
Cash at end of period $ 438,628 $ 2,871 $ 438,628 $ 2,781
========= ========= ========= =========
</TABLE>
See accompanying notes to these financial statements.
7
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
(FORMERLY SOIL WASH TECHNOLOGIES, INC.)
NOTES TO FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
NOTE 1 - THE COMPANY
American Soil Technologies, Inc., formerly Soil Wash Technologies, Inc., (the
"Company") was incorporated in California on September 22, 1993. Effective
December 31, 1999 the Company completed the reverse acquisition and acquisition
described herein and changed its name from Soil Wash Technologies, Inc. to
American Soil Technologies, Inc. and changed its state of domicile to Nevada.
During 1999 and 1998 the Company operated as Soil Wash Technologies, Inc.
Note 2- Summary of significant accounting policies
The summary of significant accounting policies is presented to assist in
understanding the Company's financial statements. The financial statements and
notes are representations of the Company's management. Management is responsible
for their integrity. These accounting policies conform to generally accepted
accounting principles and have been consistently applied in the preparation of
the financial statements.
LINE OF BUSINESS
The Company is primarily engaged in nonhazardous soil and water remediation for
commercial business.
REVENUE RECOGNITION
Revenue is generally recognized upon tons processed and freight upon shipment to
the customer or upon completion of the services and is fully earned.
ACCOUNTS RECEIVABLE
The Company provides allowances against accounts receivable to maintain
sufficient reserves to cover anticipated losses.
INVENTORY
Inventory is stated at the lower of cost or market, generally being determined
on a first-in, first-out basis. Inventory consists of materials consumed in the
soil and water remediation process.
8
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
(FORMERLY SOIL WASH TECHNOLOGIES, INC.)
NOTES TO FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
PROPERTY, PLANT AND EQUIPMENT
Depreciation has been provided on the same basis for tax and financial
accounting purposes using the straight-line, accelerated and declining balance
methods. The estimated useful lives of the assets are as follows:
Production equipment 7-10 years
Office equipment, furniture and fixtures 5-10 years
Vehicles 3 years
Leasehold improvements 3-10 years
PATENTS, LICENSES AND RIGHTS
The company is amortizing the patents acquired in the December 31, 1999
acquisition over a straight-line method over seventeen years.
INCOME TAXES
The Company provides for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." SFAS 109
requires the recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between the financial statement
carrying amounts and the tax basis of assets and liabilities.
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Depreciation and amortization for the nine months ended March 31, 2000 and 1999
is $87,639 and $125,024, respectively.
Property plant and equipment consist of the following:
March 31, March 31,
2000 1999
----------- -----------
Production equipment $ 923,587 $ 854,747
Office equipment, furniture and fixtures 59,544 53,045
Vehicles 95,872 46,332
Leasehold improvements 528,793 520,003
----------- -----------
1,607,796 1,474,127
Less accumulated depreciation and amortization (873,297) (727,834)
----------- -----------
$ 734,499 $ 746,293
=========== ===========
9
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
(FORMERLY SOIL WASH TECHNOLOGIES, INC.)
NOTES TO FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
NOTE 4 - CONVERTIBLE DEBENTURES
In the quarter ended March 31, 2000, the Company authorized the issuance of an
aggregate of $1,325,000 of convertible debentures with interest payable
quarterly at 10 percent per annum. The stock is convertible to stock of the
Company at a rate of one share for each three dollars converted. The debentures
mature in the first calendar quarter of 2002. All of the debentures are
subscribed and at March 31, 2000 the outstanding balance of the debt is
$825,000. If all debt is converted the Company would issue 441,667 shares and
based on the current outstanding balance 275,000 would be issued if the holders
elect to convert.
NOTE 5 - RELATED PARTY DEBT
The notes payable stockholders and other payables to stockholders are due to
significant shareholders of the Company and their affiliates. Repayments the
nine months ended March 31, 2000 was $146,890. The ending balances at March 31,
2000 and 1999, were $60,000 and $299,671, respectively. Interest expense for the
periods was $740, and $1,118, respectively.
NOTE 6 - COMMITMENT AND CONTINGENCIES
The Company has contractual obligations for ongoing remediation work for
businesses in its geographical area.
The Company has various operating lease obligations which monthly payments. The
Company has month to month leases for its plant sites and equipment. During the
nine months ended March 31, 2000 and 1999 the aggregate lease payments were
$191,000 and $236,000, respectively. The Company expects the leases to continue
or be replaced and that the ongoing lease costs will approximate the current
levels.
In conjunction with the lease of the land associated with the operating
facilities, the Company is obligated to remediate the property to its original
condition. The Company has provided a reserve to restore the property. At March
31, 2000 and 1999 the Company has reserved $50,000 and $50,000 to defray the
final cost of at lease termination. The lease is month to month and can be
terminated by either party with notice to the other.
NOTE 7 - INCOME TAXES
At March 31, 2000 and 1999, the Company has approximately $4,953,000 and
$4,832,000 of net operating losses available to offset future income tax
liability. The reserve for remediation is not deductible for tax purposes until
paid and therefore the Company will have a deduction of the amount actually paid
in the future. There is no certainty as to the timing of such recognition nor
that the Company will be able to fully utilized these differences.
10
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
(FORMERLY SOIL WASH TECHNOLOGIES, INC.)
NOTES TO FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
NOTE 7 - INCOME TAXES (continued)
The components of deferred tax assets and liabilities are as follows:
March 31, March 31,
2000 1999
---------- ----------
Tax effects of reserves for doubtful accounts
and remediation $ 49,200 $ 19,500
Tax effects of carryforward benefits:
Net operating loss carryforwards 1,971,700 1,924,800
---------- ----------
Tax effects of carryforwards
Tax effects of future taxable differences and
carryforwards 2,020,900 1,944,300
---------- ----------
Net deferred tax asset $2,020,900 $1,944,300
========== ==========
Realization of the net deferred tax assets is dependent on generating sufficient
taxable income prior to their expiration. Tax effects are based on a 8.8% state
and 34.0% federal income tax rates for a net combined rate of 39.8%. The
realized net operating losses expire over the next 20 years, as follows:
Expiration Amount
---------- ------
2008 $ 130,000
2009 1,074,000
2010 1,058,000
2011 1,016,000
2012 915,000
2018 510,000
2019 156,000
2020 94,000
----------
Total $4,953,000
==========
Management believes that it is more likely than not that the Company will
realize the benefits of the deferred tax credits before each expires through
2020, therefore, no valuation reserve has been provided for this against the
asset.
11
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
(FORMERLY SOIL WASH TECHNOLOGIES, INC.)
NOTES TO FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
NOTE 8 - COMMON STOCK
At March 31, 2000, the Company has 8,722,931 share outstanding after the
issuance of 3,215,511 on December 31, 1999 for the acquisitions described herein
and 5,507,420 shares outstanding as a result of the stock split at December 31,
1999. At December 31, 1999, in conjunction with the acquisitions, the Company
has 25,000,000 shares authorized and the outstanding shares were increased by a
stock split of 45.90 for 1 to the original stockholders of the Company and
changed the par value per share to $0.001. In accordance with SFAS 128, this
split has been retroactively recorded as of July 1, 1998. Additionally, the
capitalization of notes and advances payable to shareholders has retroactively
been capitalized in the amount of $5,451,129 as part of that same transaction.
NOTE 9 - LOSS PER COMMON SHARE
Loss per share of common stock has been computed based on the weighted average
number of shares outstanding. As of March 31, 2000 and 1999, the weighted
average number of shares outstanding after giving effect to the stock split in
1999 was 6,571,462 and 5,507,420, respectively. The dilutive effect of the
debentures outstanding increased the weighted average share to 6,684,099 at
March 31, 2000, resulted in the same loss per share as the basic loss per share.
NOTE 10 - REORGANIZATION AND ACQUISITION
On November 24, 1999, the Company entered into an exchange agreement for the
reverse acquisition of New Directions Manufacturing, Inc. ("New Directions")
wherein New Directions would acquire the assets of the Company and change its
name to American Soil Technologies, Inc. This exchange agreement was effective
as of the close of business on December 31, 1999. Under the agreement, New
Directions would sell to one of its directors the operating subsidiary in
exchange for the cancellation of options and the shareholders of New Directions
would receive one share of the Company for each fifteen shares of New
Directions. The existing officers and directors of New Directions resigned and
officers and directors nominated by the Company were appointed. The Company's
financial year end was changed to June 30.
In addition, effective as of the close of business on December 31, 1999, the
Company acquired in exchange for 2,360,323 shares of stock all of the assets and
certain liabilities of Polymers, Plus L.L.C. ("Polymers"). The Company acquired
the operating assets of the Polymers, including its licenses, patents and
contracts.
12
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
(FORMERLY SOIL WASH TECHNOLOGIES, INC.)
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - REORGANIZATION AND ACQUISITION (continued)
The purchase method of accounting was performed on New Directions and the assets
and liabilities of Polymers based on the fair market value at the transaction
date. The valuation of of New Directions and Polymers, including transaction
costs estimated at $100,000 was $627,553 A summary of the assets and liabilities
acquired, at December 31, 1999 were as follows
Assets:
Cash $ 8,672
Inventory 25,380
Deposits and prepaid expenses 3,973
Property, plant and equipment 60,980
Patents, licenses and rights 761,269
Other assets 5,925
---------
Total Assets 866,199
Liabilities:
Current liabilities (211,742)
Long-term liabilities (26,904)
---------
Fair value of acquisitions $ 627,553
=========
In conjunction with these acquisitions, the Company issued and aggregate of
3,215,511 shares of its common stock to shareholders of New Directions and to
Polymers and to consultants and promoters.
As a result of the closing of these acquisitions on December 31, 1999, the
accompanying financial statements do not include the results of operations of
the acquired entities for any period. The unaudited pro forma financial data
does not purport to represent what the Company's results from continuing
operations would actually have been had the transactions in fact occurred as of
an earlier date, or project the results for any future date or period.
March 31
-----------------------------
Pro Forma (unaudited) 2000 1999
----------- -----------
Revenue $ 1,466,631 $ 1,733,553
Cost of goods sold 1,002,560 1,095,714
----------- -----------
Gross profit 464,071 637,839
Expenses
Selling, general and administrative (769,200) (874,918)
Interest expense (10,979) (2,334)
----------- -----------
Loss from Operations (316,108) (239,413)
Tax Benefit 89,700 72,900
----------- -----------
Net income (Loss) $ (226,408) $ (166,513)
=========== ===========
Loss per share $ (0.03) $ (0.02)
=========== ===========
Weighted average number of shares 8,722,931 8,722,931
=========== ===========
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Caution Regarding Forward-Looking Information
This quarterly report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the Company
or management as well as assumptions made by and information currently available
to the Company or management. When used in this document, the words
"anticipate," "believe," "estimate," "expect" and "intend" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current view of
the Company regarding future events and are subject to certain risks,
uncertainties and assumptions, including the risks and uncertainties noted.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected or
intended. In each instance, forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein.
14
<PAGE>
OVERVIEW
During the quarter ended March 31, 2000, the Company's efforts were directed
toward securing interim financing through issuance of debentures, opening
regional sales offices, hiring regional managers and key top executives,
completing a series of Agriblend product installations and corporate
presentations, and consolidating the administrative and management functions of
the Agriblend and Soil Wash Divisions.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2000 AND 1999
The Company had revenues during the quarter ended March 31, 2000 of $310,826,
which consisted of a Technology Licensing Agreement of $33,000, Agriblend
product installations of $62,804, and revenues from soil wash operations of
$129,417. Cost of revenue for the quarter ended March 31, 2000 was $174,072,
leaving a gross profit of $136,754. Losses from the Soil Wash Division can be
largely attributed to postponement of delivery of contaminated soil under
contract from major developments in downtown San Diego. Losses from the
Agriblend Division can largely be attributed to start-up costs related to hiring
personnel and establishing branch offices and to promotional costs associated
with sales and marketing.
RESULTS OF OPERATIONS - NINE MONTHS ENDED MARCH 31, 2000 AND 1999
Revenues for the nine months ended March 31, 2000 were lower as a result of the
postponement of delivery of contaminated soil under contract from major
developments in downtown San Diego in the third quarter. The operations for the
first two quarters reflect only the operations of the Company prior to the
Agriblend acquisition.
15
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $438,628 and $2,781 at March 31, 2000 and
1999, respectively. Net cash used by operations was $408,354 for the quarter
ended March 31, 2000 compared to $191,932 for the comparable quarter ended March
31, 1999. In preparing for distribution of its products in foreign countries,
the Company expended approximately $30,000 for patent registrations and related
legal work.
During the quarter ended March 31, 2000, the Company raised $1,325,000 from
private placement of Debentures, of which $825,000 had been funded at March 31,
2000 and the balance is due by fiscal year end June 30, 2000. As a result of
these proceeds, the Company has working capital (current assets less current
liabilities) of $899,516 as of March 31, 2000 compared to working capital of
$189,080 as of December 31, 1999.
To date, the Company has financed its operations principally through the sale of
Debentures. The Company believes that it has sufficient cash to continue its
operations through December 31, 2000, and anticipates that cash generated from
projected sales and an anticipated private placement during the quarter ending
June 30, 2000 will enable it to fulfill its projected operational budget for the
fiscal year 2001. There can be no assurance, however, that the Company can
obtain sufficient capital on acceptable terms, if at all. Failure to obtain such
capital likely would affect adversely the Company's ability to continue as a
going concern, or at a minimum negatively impact the Company's ability to timely
meet its business objectives.
The Company's working capital and other capital requirements during the next
fiscal year and thereafter will vary based on a number of factors, including: 1)
the sales revenue generated by the Agriblend Division; 2) the level of sales and
marketing activities related to domestic sales from the Agriblend Division; 3)
the level of distributor support related to development of international sales
associated with the Agriblend Division and; 4) continuing delivery of
contaminated soil to and revenue from the Soil Wash Division.
There can be no assurance that additional public or private financing, including
debt or equity financing, will be available as needed, or, if available, on
terms favorable to the Company. Any additional equity financing may be dilutive
to shareholders and such additional equity securities may have rights,
preferences or privileges that are senior to those of the Company's existing
common stock. Furthermore, debt financing, if available, will require payment of
interest and may involve restrictive covenants that could impose limitations on
the operating flexibility of the Company. The failure of the Company to
successfully obtain additional future funding may jeopardize the Company's
ability to continue its business and operations.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
To the best knowledge of management, there is no material litigation
pending or threatened against the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the quarter the Company sold or committed to sell convertible
debentures with an aggregate face amount of $1,325,000 due in the first quarter
of 2002. The debentures have an interest rate of ten percent per annum, payable
quarterly. The debentures are convertible into common stock of the Company at a
rate of one share for every three dollars of debentures surrendered. At March
31, 2000 there was $825,000 of debentures outstanding. If all of the debentures
are funded, the holders will have the right to exchange the debentures for a
total of 441,667 shares. If no additional amounts are funded the holders of the
$825,000 will have the right to exchange their holdings for 275,000 shares.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
1. The following Exhibits are filed herein:
4.1 Convertible Debenture - Lump Sum Contribution (Form)
4.2 Convertible Debenture - Incremental (Form)
27.1 Financial Data Schedule
2. Reports on Form 8-K filed:
On January 14, 2000, the Company filed a Form 8-K disclosing its exchange
transaction with New Directions Manufacturing, Inc., stock split, and change in
officers.
On March 13, 2000, the Company filed an Amendment to its Form 8-K of
January 14, 2000, filing the required financial statements for its transaction
with New Directions Manufacturing, Inc.
17
<PAGE>
SIGNATURES
In accordance with the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, duly authorized.
AMERICAN SOIL TECHNOLOGIES, INC.
DATED: May 15, 2000 By: /s/ Neil C. Kitchen
------------------------------------
Neil C. Kitchen, President, Chief
Executive Officer
By: /s/ Sean Lee
------------------------------------
Sean Lee, Chief Financial Officer
18
THE SECURITIES REPRESENTED BY THIS DOCUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY
STATE OR OTHER COUNTRY, AND MAY NOT BE OFFERED, SOLD TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE LAWS, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAW IS AVAILABLE.
AMERICAN SOIL TECHNOLOGIES, INC.
CONVERTIBLE DEBENTURE
No. 3
Total Principal Amount: $250,000 February 1, 2000
FOR VALUE RECEIVED, the undersigned, AMERICAN SOIL TECHNOLOGIES, INC., a
Nevada corporation (the "Company"), hereby promises to pay to the order of
___________________________, a corporation, (the "Holder"), in lawful money of
the United States of America, and in immediately payable funds, the principal
sum of two hundred fifty thousand dollars ($250,000), with interest thereon,
both before and after default until paid, at the rate of ten percent (10%) per
annum, upon the terms and conditions set forth herein.
1. MATURITY DATE/INTEREST PAYMENTS. The Company shall pay to the Holder
quarterly interest payments in cash with the first payment due on May 1, 2000.
Upon conversion of this Debenture as allowed in this Agreement, all accumulated
but unpaid interest shall be extinguished. This Debenture shall mature and all
principal and accrued interest shall be fully due and payable by the Company to
Holder on February 1, 2002 (the "Maturity Date"). Interest shall be computed on
the actual days in a year and the actual number of days elapsed. Holder shall
fund this Debenture immediately upon execution of this Debenture.
2. CONVERTIBILITY. This Debenture may be converted by the Holder at any
time beginning upon execution of this Debenture and ending upon the Maturity
Date at a conversion rate of one (1) share of Company Common Stock (the
"Shares") per three dollar ($3.00) principal amount of this Debenture. No
accrued interest will be paid upon conversion. The Shares to be issued upon
conversion shall not be subject to any liens, security interests, pledges,
encumbrances, charges, restrictions, demands or claims of any other party
whatsoever. Company shall use its best efforts to expeditiously file with and
have declared effective by the Securities and Exchange Commission a registration
statement in an appropriate form to register the Shares issuable upon conversion
of this debenture to ensure that Company will have freely tradable Shares
available to Holder in the event Holder elects to convert this Debenture to
Shares. After conversion, Holder herein agrees not to sell in excess of 8,000
Shares, on a non-cumulative basis, of Shares during any calendar month through
brokerage transactions.
3. PREPAYMENT. The Company may prepay this Debenture prior to the Maturity
Date and prior to the receipt of a conversion election, in whole or in part, at
any time.
<PAGE>
4. TRANSFERABILITY. This Debenture shall be freely transferable by the
Holder provided such transfer is in compliance with applicable federal and state
securities laws.
5. DEFAULT. In the event of the Company's failure to pay the principal and
interest due hereunder within ten (10) days following the Maturity Date, Holder
shall have the option, by written notice to the Company, to declare the unpaid
principal amount due to Holder, together with all accrued interest thereon,
immediately due and payable. In the event Company fails to cure the default
within twenty (20) days of the receipt of the written notice by Holder, Holder
may pursue any legal remedy available to Holder.
6. NOTICES. Notices to be given hereunder shall be in writing and shall be
deemed to have been sufficiently given if delivered personally or sent by
overnight courier or messenger or sent by registered or certified mail (air mail
if overseas), return receipt requested, or by telex, facsimile transmission,
telegram or similar means of communication. Notice shall be deemed to have been
received on the date of personal delivery, telex, facsimile transmission,
telegram or similar means of communication, or if sent by overnight courier or
messenger, shall be deemed to have been received on the next delivery day after
deposit with the courier or messenger, or if sent by certified or registered
mail, return receipt requested, shall be deemed to have been received on the
fifth business day after the date of mailing. The Parties shall give written
notice of any change of address to each other.
7. INVESTOR STATUS. By providing the principal amount(s) set forth in this
Debenture, Holder acknowledges and certifies that this Debenture represents a
highly speculative investment and that Holder's personal financial situation is
such that (i) Holder can afford to hold the Debenture for an indefinite period
of time and to sustain a complete loss of this investment, and (ii) Holder has
adequate means of providing for Holder's current needs and possible
contingencies and has no need for liquidity in this investment in the Company.
By virtue of Holder's knowledge and experience in financial and business
matters, Holder is capable of evaluating the merits and risks of an investment
in the securities.
Holder, if a corporation, partnership, trust or other form of business
entity, (i) is authorized and otherwise duly qualified to purchase and hold the
Debenture, (ii) has obtained such additional tax and other advice that it has
deemed necessary, and (iii) has not been formed for the specific purpose of
acquiring the Debenture.
Holder consents to the affixing by the Company of such legends on
certificates representing the securities as any applicable federal or state
securities law may require from time to time. Holder further acknowledges and
certifies that in evaluating the suitability of an investment in the Company,
Holder has relied on Holder's own independent investigations and has not relied
upon any representations or other information (whether oral or written) from the
Company, and its officers, directors, agents, employees or representatives.
Holder acknowledges that in making the decision to invest in the Company, Holder
has, prior to any purchase of the securities, been given the information on the
Company, its business, and its financials, had access and opportunity to examine
this offer, and had an opportunity to ask questions of, and to receive answers
from, the Company or any person acting on its behalf concerning the terms and
conditions of this offering. Holder has been furnished with access to all
publicly available materials relating to the business, finances, and operations
of the Company and material relating to the offer and sale of the securities
which have been requested. Holder has received complete and satisfactory answers
to any such inquiries. Holder acknowledges that Holder has not received any
formal disclosure document regarding this investment, and Holder is an
accredited investor as defined in Rule 501 of Regulation D of the Securities Act
of 1933, as amended.
2
<PAGE>
8. GOVERNING LAW. This Debenture shall be governed by and construed and
interpreted in accordance with the laws of the state of California applicable to
contracts made and to be performed entirely therein, without giving effect to
the rules and conflicts of law.
9. ATTORNEYS FEES. In the event of default by the Company requiring the
Holder or any assignee thereof to refer this Debenture to an attorney for
collection, the Company agrees to pay all reasonable costs and expenses incurred
in attempting or effecting collection hereunder, including reasonable attorney's
fees, whether or not suit is instituted.
10. MODIFICATION. This Debenture may be modified or amended only by an
agreement in writing signed by the party against whom the agreement is sought to
be enforced.
11. CONFORMITY WITH LAW. All agreements between the Company and Holder are
expressly limited, so that in no event or contingency whatsoever, whether by
reason of the advancement of the proceeds of this Debenture, acceleration of
maturity of the unpaid principal balance, or otherwise, shall the amount paid or
agreed to be paid to Holder of this Debenture for the use, forbearance, or
detention of the money to be advanced under this Debenture exceed the highest
lawful rate permissible under applicable usury laws. If, under any circumstances
whatsoever, fulfillment of any provision of this Debenture or any other
agreement pertaining hereto, after timely performance of such provision is due,
shall involve transcending the limit of validity prescribed by law which a court
of competent jurisdiction deems applicable, then, ipso facto, the obligations to
be fulfilled shall be reduced to the limit of such validity, and if, under any
circumstances whatsoever, Holder shall ever receive as interest an amount that
exceeds the highest lawful rate, the amount that would be excessive interest
shall be applied to the reduction of the unpaid principal balance under this
Debenture and not to the payment of interest, or, if such excessive interest
exceeds the unpaid balance of principal under this Debenture, such excess shall
be refunded to Company. This provision shall control every other provision of
all agreements between Company and Holder.
IN WITNESS WHEREOF, the Company and Holder have executed this Debenture as
of February 1, 2000.
The Company
AMERICAN SOIL TECHNOLOGIES, INC.,
a Nevada corporation
BY:
-------------------------------------
ITS:
-------------------------------------
The Holder
BY:
-------------------------------------
ITS:
-------------------------------------
3
THE SECURITIES REPRESENTED BY THIS DOCUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY
STATE OR OTHER COUNTRY, AND MAY NOT BE OFFERED, SOLD TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE LAWS, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAW IS AVAILABLE.
AMERICAN SOIL TECHNOLOGIES, INC.
CONVERTIBLE DEBENTURE
No. 1
Total Principal Amount: $250,000 February 1, 2000
FOR VALUE RECEIVED, the undersigned, AMERICAN SOILS TECHNOLOGY, INC., a
Nevada corporation (the "Company"), hereby promises to pay to the order of
___________________________, an individual, or assigns (the "Holder"), in lawful
money of the United States of America, and in immediately payable funds, the
principal sum of two hundred fifty thousand dollars ($250,000), with interest
thereon, both before and after default until paid, at the rate of ten percent
(10%) per annum, upon the terms and conditions set forth herein.
1. MATURITY DATE/INTEREST PAYMENTS. The Company shall pay to the Holder
quarterly interest payments in cash with the first payment due on May 1, 2000.
Upon conversion of this Debenture as allowed in this Agreement, all accumulated
but unpaid interest shall be extinguished. This Debenture shall mature and all
principal and accrued interest shall be fully due and payable by the Company to
Holder on February 1, 2002 (the "Maturity Date"). Interest shall be computed on
the actual days in a year and the actual number of days elapsed. Holder shall
fund this Debenture in the incremental amounts and on the dates specified in
Schedule A.
2. CONVERTIBILITY. This Debenture may be converted by the Holder at any
time beginning upon execution of this Debenture and ending upon the Maturity
Date at a conversion rate of one (1) share of Company Common Stock (the
"Shares") per three dollars ($3.00) principal amount of this Debenture. No
accrued interest will be paid upon conversion. The Shares to be issued upon
conversion shall not be subject to any liens, security interests, pledges,
encumbrances, charges, restrictions, demands or claims of any other party
whatsoever. Company shall use its best efforts to expeditiously file with and
have declared effective by the Securities and Exchange Commission a registration
statement in an appropriate form to register the Shares issuable upon conversion
of this Debenture to ensure that Company will have freely tradable stock
available to Holder in the event Holder elects to convert this Debenture to
Shares. After conversion, Holder herein agrees not to sell in excess of 8,000
Shares, on a non-cumulative basis, during any calendar month through brokerage
transactions.
3. PREPAYMENT. The Company may prepay this Debenture prior to the Maturity
Date and prior to the receipt of a conversion election, in whole or in part, at
any time.
4. TRANSFERABILITY. This Debenture shall be freely transferable by the
Holder provided such transfer is in compliance with applicable federal and state
securities laws.
5. TERMINATION. Holder may terminate funding this Debenture immediately
upon the occurrence of any of the following events:
a. Bankruptcy or insolvency of the Company;
<PAGE>
b. Serious violations (SEC, Reporting, or other) that would adversely
affect the Company's publicly traded stock; or
c. A prohibition against selling Company product(s) (polymer) in the United
States.
6. DEFAULT. In the event of the Company's failure to pay the principal and
interest due hereunder within ten (10) days following the Maturity Date, Holder
shall have the option, by written notice to the Company, to declare the unpaid
principal amount due to Holder, together with all accrued interest thereon,
immediately due and payable. In the event Company fails to cure the default
within twenty (20) days of the date of receipt of the written notice by Holder,
Holder may pursue any legal remedy available to Holder.
7. NOTICES. Notices to be given hereunder shall be in writing and shall be
deemed to have been sufficiently given if delivered personally or sent by
overnight courier or messenger or sent by registered or certified mail (air mail
if overseas), return receipt requested, or by telex, facsimile transmission,
telegram or similar means of communication. Notice shall be deemed to have been
received on the date of personal delivery, telex, facsimile transmission,
telegram or similar means of communication, or if sent by overnight courier or
messenger, shall be deemed to have been received on the next delivery day after
deposit with the courier or messenger, or if sent by certified or registered
mail, return receipt requested, shall be deemed to have been received on the
fifth business day after the date of mailing. The Parties shall give written
notice of any change of address to each other.
8. INVESTOR STATUS. By providing the principal amount(s) set forth in this
Debenture, Holder acknowledges and certifies that this Debenture represents a
highly speculative investment and that Holder's personal financial situation is
such that (i) Holder can afford to hold the Debenture for an indefinite period
of time and to sustain a complete loss of this investment, and (ii) Holder has
adequate means of providing for Holder's current needs and possible
contingencies and has no need for liquidity in this investment in the Company.
By virtue of Holder's knowledge and experience in financial and business
matters, Holder is capable of evaluating the merits and risks of an investment
in the securities.
Holder, if a corporation, partnership, trust or other form of business
entity, (i) is authorized and otherwise duly qualified to purchase and hold the
Debenture, (ii) has obtained such additional tax and other advice that it has
deemed necessary, and (iii) has not been formed for the specific purpose of
acquiring the Debenture.
Holder consents to the affixing by the Company of such legends on
certificates representing the securities as any applicable federal or state
securities law may require from time to time. Holder further acknowledges and
certifies that in evaluating the suitability of an investment in the Company,
Holder has relied on Holder's own independent investigations and has not relied
upon any representations or other information (whether oral or written) from the
Company, and its officers, directors, agents, employees or representatives.
Holder acknowledges that in making the decision to invest in the Company, Holder
has, prior to any purchase of the securities, been given the information on the
Company, its business, and its financials, had access and opportunity to examine
this offer, and had an opportunity to ask questions of, and to receive answers
from, the Company or any person acting on its behalf concerning the terms and
conditions of this offering. Holder has been furnished with access to all
publicly available materials relating to the business, finances, and operations
of the Company and material relating to the offer and sale of the securities
which have been requested. Holder has received complete and satisfactory answers
to any such inquiries. Holder acknowledges that Holder has not received any
formal disclosure document regarding this investment, and Holder is an
accredited investor as defined in Rule 501 of Regulation D of the Securities Act
of 1933, as amended.
2
<PAGE>
9. GOVERNING LAW. This Debenture shall be governed by and construed and
interpreted in accordance with the laws of the state of California applicable to
contracts made and to be performed entirely therein, without giving effect to
the rules and conflicts of law.
10. ATTORNEYS FEES. In the event of default by the Company requiring the
Holder or any assignee thereof to refer this Debenture to an attorney for
collection, the Company agrees to pay all reasonable costs and expenses incurred
in attempting or effecting collection hereunder, including reasonable attorney's
fees, whether or not suit is instituted.
11. MODIFICATION. This Debenture may be modified or amended only by an
agreement in writing signed by the party against whom the agreement is sought to
be enforced.
12. CONFORMITY WITH LAW. All agreements between the Company and Holder are
expressly limited, so that in no event or contingency whatsoever, whether by
reason of the advancement of the proceeds of this Debenture, acceleration of
maturity of the unpaid principal balance, or otherwise, shall the amount paid or
agreed to be paid to Holder of this Debenture for the use, forbearance, or
detention of the money to be advanced under this Debenture exceed the highest
lawful rate permissible under applicable usury laws. If, under any circumstances
whatsoever, fulfillment of any provision of this Debenture or any other
agreement pertaining hereto, after timely performance of such provision is due,
shall involve transcending the limit of validity prescribed by law which a court
of competent jurisdiction deems applicable, then, ipso facto, the obligations to
be fulfilled shall be reduced to the limit of such validity, and if, under any
circumstances whatsoever, Holder shall ever receive as interest an amount that
exceeds the highest lawful rate, the amount that would be excessive interest
shall be applied to the reduction of the unpaid principal balance under this
Debenture and not to the payment of interest, or, if such excessive interest
exceeds the unpaid balance of principal under this Debenture, such excess shall
be refunded to Company. This provision shall control every other provision of
all agreements between Company and Holder.
IN WITNESS WHEREOF, the Company and Holder have executed this Debenture as
of February 1, 2000.
The Company
AMERICAN SOIL TECHNOLOGIES, INC.,
a Nevada corporation
BY:
-------------------------------------
ITS:
-------------------------------------
The Holder
BY:
-------------------------------------
ITS:
-------------------------------------
3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR 9 MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS
ENTIRITY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 438,628
<SECURITIES> 0
<RECEIVABLES> 378,843
<ALLOWANCES> 76,500
<INVENTORY> 160,676
<CURRENT-ASSETS> 1,159,226
<PP&E> 1,607,796
<DEPRECIATION> 873,297
<TOTAL-ASSETS> 4,697,936
<CURRENT-LIABILITIES> 259,710
<BONDS> 825,000
0
0
<COMMON> 8,723
<OTHER-SE> 6,678,276
<TOTAL-LIABILITY-AND-EQUITY> 4,697,936
<SALES> 1,359,869
<TOTAL-REVENUES> 1,450,904
<CGS> 972,019
<TOTAL-COSTS> 700,303
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,283
<INCOME-PRETAX> (230,701)
<INCOME-TAX> (89,700)
<INCOME-CONTINUING> (141,001)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (141,001)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
