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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
AMERICAN SOIL TECHNOLOGIES, INC.
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(Name of Small Business Company as Specified in Its Charter as Amended)
Nevada 2879 86-0671974
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(State of (Primary Standard (IRS Employer
Incorporation) Industrial Classification No.) Identification No.)
215 N. Marengo, Suite 110
Pasadena, California, 91101
626-793-2435
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(Address and telephone number of company's principal executive office
and principal place of business)
Neil C. Kitchen
President and Chief Executive Officer
American SoilTechnologies, Inc.
215 N. Marengo, Suite 110
Pasadena, California, 91101
626-793-2435
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(Name, address and telephone number of agent for service)
Copies to:
Carl P. Ranno, Esq.
2816 East Windrose Dr.
Phoenix, Arizona 85032
602-493-0369
Fax 602-493-5119
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC
From time to time after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(C)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If the delivery of the prospectus is expected to made pursuant to Rule 434,
check the following box [ ]
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CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
Title of
Each Class of Proposed Maximum Proposed Maximum
Securities to Amount to be Offering Price Aggregate Amount of
be Offered Registered Per Unit(1) Offering Price Registration Fee
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Common Stock $.0001 par value 86,893 $2.18 $ 189,427 $ 47.36
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Common Stock $.0001 par value
underlying stock option 200,000 $2.18(2) $ 436,000 $109.00
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Common Stock $.0001 par value
underlying convertible debentures 441,672 $2.18(3) $ 962,845 $240.72
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Total 728,565 $1,588,272 $397.08
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457 (c) and based upon the average of the
bid and asked prices for the common stock on December 26, 2000, as reported
by the NASD OTC Bulletin Board.
(2) Represents the common stock issuable upon exercise of an option found in a
consulting agreement.
(3) Represents the common stock issuable upon conversion of the company's
convertible debentures.
The company hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the company shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
INVESTORS AS IDENTIFIED IN THIS PROSPECTUS MAY NOT SELL THE RESTRICTED COMMON
SHARES NOR SECURITIES UNDERLYING THE CONVERTIBLE DEBENTURES AND OPTION UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, OF
WHICH THIS PROSPECTUS IS A PART, IS DECLARED EFFECTIVE. THIS PROSPECTUS SHALL
NOT CONSTITUTE AN OFFER TO SELL THESE SECURITIES OR THE SOLICITATION OF AN OFFER
TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE WHERE THE
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITY LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED DECEMBER 29, 2000
PROSPECTUS
AMERICAN SOIL TECHNOLOGIES, INC.
728,565 shares of Common Stock
($0.0001 par value)
THE OFFERING
This offering relates to the possible sale, from time to time, by certain
stockholders of American Soil Technologies, Inc. of up to 728,565 shares of
common stock of American Soil Technologies, Inc.
MARKET FOR THE SHARES
The common stock of American Soil Technologies, Inc is traded on the
over-the-counter electronic bulletin board also known as the OTC Bulletin Board,
under the symbol "SOYL". According to the OTC Bulletin Board, the closing bid
and ask price for the common stock of the company on December 26, 2000 was $2.06
and $2.19 per share respectively.
THIS INVESTMENT IN OUR COMMON STOCK INVOLVES RISK. YOU SHOULD PURCHASE
SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING ON
PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS ISTRUTHFUL OR COMPLETE. ANY REPRESENTATIONS TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS ____________, 2001
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Reliance should only be on the information contained in this document or
that which we have referred to you. The company has not authorized anyone to
provide you with information that is different. The information contained in
this document may only be accurate on the date of the document and delivery of
this prospectus and any sale made by this prospectus does not imply that there
have not been changes in the affairs of the company since the date of this
prospectus. This prospectus does not constitute an offer or solicitation by
anyone in any state in which such offer, solicitation or sale is not authorized
or in which the person making such offer, solicitation or sale is not qualified
to do so or to any one to whom it is unlawful to make such offer, solicitation
or sale.
TABLE OF CONTENTS
Page
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Prospectus Summary ..................................................... 1
Summary Financial Information........................................... 3
Risk Factors ........................................................... 4
Use of Proceeds ........................................................ 9
Market for Common Stock and Related Shareholder Matters ................ 9
Dividend Policy ........................................................ 10
Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................. 11
Business of American Soil Technologies ................................. 17
Description of Properties .............................................. 23
Legal Proceedings....................................................... 23
Management ............................................................. 24
Executive Compensation ................................................. 25
Employment and Related Agreements ...................................... 26
Certain Relationships and Related Transactions ......................... 26
Security Ownership of Certain Beneficial Owners and Management ......... 27
Selling Shareholders ................................................... 28
Plan of Distribution ................................................... 29
Description of Securities .............................................. 30
Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure .............................................. 31
Legal Matters .......................................................... 31
Experts ................................................................ 31
Financial Statements ................................................... 32
Until March __, 2001, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
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PROSPECTUS SUMMARY
THIS SUMMARY CONTAINS SELECTED INFORMATION CONTAINED IN OTHER PARTS OF THIS
PROSPECTUS. YOU SHOULD READ THE ENTIRE PROSPECTUS.
AMERICAN SOIL TECHNOLOGIES, INC.
OFFICES
The company's office and principal place of business is located at 215 N.
Marengo, Suite 110, Pasadena, California, 91101, and our telephone number is 626
793 2435.
OUR BUSINESS
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 a reverse merger and an acquisition
fully described herein and changed its name from Soil Wash Technologies, Inc. to
American Soil Technologies, Inc. and changed its state of domicile to Nevada
(see "Management's Discussion and Analysis of Financial Condition and Results of
Operations" as well as BUSINESS OF AMERICAN SOIL TECHNOLOGIES, INC.)
American Soil Technologies, Inc. develops, manufactures and markets
leading-edge technology that decreases the need for water in dry land farming,
irrigated farming and other plant growing environments. Our products also
increase crop yield and reduce the environmental damage caused by common farming
practices. This segment of our business is known as the Agriblend division and
the product has been named Agriblend Plus which is a patented blend of polymers
and minerals. Our product is commonly known as an absorbent polymer. A polymer
is a chemical compound of large molecules formed by smaller but similar
molecules. In addition, the company holds exclusive rights to a soil washing
technology that removes petroleum products from contaminated soil and recycles
the soil for commercial use. The company also owns and operates a commercial,
non-hazardous soil and water remediation facility in San Diego, California. It
is the only fully permitted, permanent soil washing facility for the treatment
of non-hazardous impacted soil and water in Southern California. The hydrocarbon
contaminants treated at this facility range from gasoline to crude oil. Its
clients include, among others, the United States Navy, the City of San Diego,
Shell Oil Company, General Dynamics and major environmental consulting firms. We
call this our Soil Wash division.
OUR OBJECTIVE
Our objective is to globally enhance the production of agricultural and
horticultural crops and the quality of our environment by marketing and
developing super absorbent polymer products, unique water management services
and to engineer and deploy innovative environmental cleanup systems.
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COMPETITION
The absence of competition in this new field of super absorbent polymer
products is due to the relatively recent introduction of this simple concept.
While major direct competition is not an issue, product acceptance is a key
challenge.
Our Soil Wash Facility is the only facility in San Diego County that is
permitted to receive and treat hydrocarbon-contaminated soil and water. The
Candelaria Indian Reservation is its competition in the region and is limited
because there is approximately ten dollars per ton additional cost required to
transport the soil outside our market area.
The company likely will face intense competition from other soil
remediation companies and, to an even greater degree, from competing soil
enhancement companies.
OUR CURRENT FINANCIAL AND CASH FLOW POSITION
The company has sustained losses for the past two fiscal years ending June
30. The loss has continued into our first quarter of this fiscal year, which
ended on September 30, 2000. Our Soil Wash division generates the vast majority
of the revenues. Our cash flow position at the end of our fiscal year was
$124,352 and $62,194 at the end of our first quarter. The company used $912,300
for operations during our fiscal year ending June 30, 2000 and $207,166 during
our first quarter. As of September 30, 2000, the assets exceed the liabilities
of the company by $2,899,539.
SELLING SHAREHOLDERS
A list, which discloses all the shares being registered and the people or
entities that own them appear in the "Selling Shareholders" section of this
prospectus.
THE OFFERING
Shares of common stock outstanding
and fully diluted as of December 20, 2000 8,859,762
Common shares offered by the selling shareholders 728,565
RISK FACTORS
An investment in our common stock involves risks. You should invest in our stock
only if you are able to afford a total loss of your investment. For more
information regarding these risks, please read the detailed discussion found in
"Risk Factors".
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OUR TRADING SYMBOL
The shares of our company are traded on the Over the Counter Bulletin Board
symbol SOYL.
SUMMARY FINANCIAL INFORMATION
The following sets forth, for the quarters and fiscal years indicated, selected
financial information for the company as presented in our Financial Statements
Year Ended June 30,
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2000 1999
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(audited) (audited)
Statement of Operations Data
Revenue $ 1,961,325 $ 2,274,062
(Net Loss) (416,498) (94,826)
(Net Loss) per share $ (.06) $ (.02)
Balance Sheet Data
Total Assets $ 4,683,964 $ 3,139,455
Total Current Liabilities $ 417,290 206,601
Accumulated Deficit (3,425,890) (3,009,392)
Stockholders Equity $ 3,151,410 $ 2,932,854
Three Months Ended September 30,
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2000 1999
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(unaudited) (unaudited)
Statement of Operations Data
Revenue $ 209,818 $ 222,475
Net Loss $ (251,872) $ (3,795)
Net loss per share $ (0.03) $ 0.00
Balance Sheet Data
Total Assets $ 4,670,082 $ 3,479,399
Total Liabilities $ 1,770,543 $ 550,340
Retained Earnings $(3,677,761) $(3,013,187)
Total Stockholders Equity $ 2,899,539 $ 2,929,059
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RISK FACTORS
THE SHARES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK AND ARE
VERY SPECULATIVE. THE PEOPLE PURCHASING THESE SHARES SHOULD ONLY DO SO IF THEY
CAN AFFORD A COMPLETE LOSS OF THEIR INVESTMENT. BEFORE INVESTING IN AMERICAN
SOIL TECHNOLOGIES, YOU SHOULD CAREFULLY REVIEW AND CONSIDER THE FOLLOWING RISK
FACTORS AND THE OTHER INFORMATION FOUND IN THIS PROSPECTUS.
THE COMPANY WILL NEED TO RAISE ADDITIONAL CAPITAL TO CONTINUE AS A GOING
CONCERN.
The company's auditors have indicated uncertainty concerning the company's
ability to continue as a going concern. The company has focused its efforts on
developing its business in the agricultural and horticultural soil amendment
sector and on operation of its hydrocarbon contaminated soil washing facility.
The company will be required to raise additional capital to establish adequate
manufacturing, marketing, sales, licensing and customer support operations.
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 stock. 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
funding may jeopardize the company's ability to continue its business and
operations. For more details see "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
LACK OF MARKET ACCEPTANCE OF OUR POLYMER TECHNOLOGY
The patented polymer technology has not been fully utilized in any
particular agricultural or horticultural market. Market acceptance of the
company's products will depend in large part upon the company's ability to
demonstrate the technical and operational advantages and cost effectiveness of
its products as compared to alternative, competing products and services. Our
success is also dependent on our ability to train customers in the proper use
and application of our products. There can be no assurance that the company's
products will achieve a level of market acceptance that will be profitable for
the company.
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THE COMPANY IS REQUIRED TO COMPLY WITH ENVIRONMENTAL LAWS AND REGULATIONS
The company is subject to federal, state and local laws and regulations
governing the use, manufacture, storage, handling and disposal of hazardous
materials and waste products. The company maintains a supply of several
hazardous materials at its soil washing facility. While the company currently
meets these environmental requirements, there is no assurance that future laws
and regulations could impose a significant increase in compliance costs. In the
event of an accident, the company could be held liable for any resulting damages
that result and the liability could exceed its resources. In addition, operation
of the company's soil washing equipment requires permits to treat the
hydrocarbon-contaminated soil. The time it takes to have permits issued may
delay the implementation and installation of the company's soil washing
services.
THE COMPANY MAY ENCOUNTER INTENSE COMPETITION
The company likely will face intense competition from other soil
remediation companies and, to an even greater degree, from competing soil
amendment companies. All of our anticipated competitors will probably have
longer operating histories, greater name recognition and larger installed
customer bases. It is also probable that they would have significantly more
financial resources, R&D facilities and manufacturing and marketing experience
than the company. There can be no assurance that developments by the company's
current or potential competitors will not render the company's proposed products
or services obsolete. In addition, the company expects to face competition from
new entrants into its targeted industry segments. The company anticipates that
demand for products and services based on the polymer technology will grow and
new markets will be exploited. As this occurs, the company expects competition
to become more intense, as current and future competitors begin to offer an
increasing number of diversified products and services. The company believes
that it has certain technical and patent advantages over some of its
competitors, maintaining such advantages will require a continued high level of
investment by the company in R&D, marketing, sales and customer support. There
can be no assurance that the company will have sufficient resources to maintain
its R&D, marketing, sales and customer support efforts on a competitive basis,
or that the company will be able to make the technological advances necessary to
maintain a competitive advantage with respect to its products and services.
Increased competition could result in price reductions, fewer product orders,
obsolete technology and reduced operating margins, any of which could materially
and adversely affect the company's business, financial condition and results of
operations.
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THE COMPANY IS STILL IN A STARTUP PHASE
There can be no assurance that the company will be successful with any of
its products and services based on its patented polymer technology or its
proprietary soil washing technology. There can be no assurance that the company
can manage the related manufacturing, marketing, sales, licensing and customer
support operations in a profitable manner. In particular, the company's
prospects must be considered in light of the problems encountered by any company
in a startup phase. These problems could be product development and formulation,
testing, quality control, production, inventory management, sales, marketing and
unanticipated additional costs. Any one of these problems could have a material
adverse effect on the company's operations.
THE COMPANY HAS LIMITED SERVICE AND MANUFACTURING FACILITIES
The company's future performance will depend to a substantial degree upon
the company's ability to profitably manufacture, market and deliver the products
and services based on its patented polymer technology. In this regard, the
company has contracted with a third-party blending and packaging production
facility for the manufacture of its patented polymer soil amendment products.
However, the company has no guarantee that the facility's capacity will be
sufficient to meet the demand for the company's products in terms of quality and
delivery. If the facility cannot meet the company's demands, there can be no
assurance that the company will ever achieve significant revenues or profitable
operations.
THE COMPANY IS DEPENDENT ON KEY PERSONNEL
The company's success and execution of its business strategy will depend
significantly upon the continuing contributions of, and on its ability to
attract, train and retain qualified personnel. In this regard, the company is
particularly dependent upon the services of Neil C. Kitchen, its President and
Chief Executive Officer, Sean Lee, its Executive Vice President of Marketing,
Ron Salestrom, its Vice President of Research and Development and patent holder
of the polymer technology, and Johnny Dickinson, its National Sales Manager. The
loss of the services of one or more of the company's key employees and the
failure to attract, train and retain additional qualified personnel in a timely
manner could have a material adverse effect on the company's business.
6
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THE COMPANY RELIES ON AND WILL CONTINUE TO DEVELOP PATENTS, TRADE SECRETS,
TRADEMARKS AND COPYRIGHT PROTECTION. HOWEVER, THE COMPANY CAN NOT GIVE
ASSURANCES THAT ITS PRESENT TECHNOLOGY DOES NOT INFRINGE ON OTHER PATENTS.
The company believes that technological leadership in Soil Amendment
Technology will be achieved through additional factors such as the technological
and creative skills of its personnel. Nevertheless, the company's ability to
compete effectively depends in part on its ability to develop and maintain
proprietary aspects of its technology, such as those patents currently licensed
by the company. There can be no assurance, however, that any future patents will
be granted or that any patents will be valid or provide meaningful protection
for the company's product innovations. In addition, the laws of some foreign
countries do not protect the company's intellectual property rights to the same
extent as do the laws of the United States. Furthermore, there can be no
assurance that competitors will not independently develop similar products,
"reverse engineer" the company's products, or, if patents are issued to the
company, design around such patents. The company also relies upon a combination
of copyright, trademark, trade secrets, intellectual property laws
confidentiality and license agreements to protect its proprietary rights. There
can be no assurance that the steps taken by the company will be invalidated or
circumvented, or that the rights granted thereunder will provide a competitive
advantage to the company. There can be no assurance that it that our products do
not infringe on any intellectual property or other proprietary right of third
parties.
THE COMPANY'S FUTURE IS DEPENDENT, TO A LARGE DEGREE, ON TECHNOLOGICAL
DEVELOPMENTS IN ITS FIELD.
The markets for the company's products and services based on the polymer
technology are generally characterized by rapid technological change and are
highly competitive with respect to timely innovations. Accordingly, the company
believes that its ability to succeed in the sale of its products and services
will depend significantly upon the technological quality of its products and
services relative to those of its competitors, and its ability to continue to
timely develop and introduce new and enhanced products and services at
competitive prices. In particular, the company's future success is dependent
upon its polymer soil amendment product lines, each of which is new and has not
achieved market acceptance. In order to develop such new products and services,
the company will depend upon its research and development and on input from
existing customers that previously utilized the polymer technology in
agricultural applications. There can be no assurance that the company's
customers will provide the company with timely access to such information or
that the company will be able to develop and market its new products and
services successfully or respond effectively to technological changes or new
product and services of its competitors. There can be no assurance that the
company will be able to develop the required technologies, products and services
on a cost-effective and timely basis, and any inability to do so could have a
material adverse effect on its future operations.
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THE COMPANY COULD BE EXPOSED TO PRODUCT LIABILITY CLAIMS IF IT PRODUCTS SHOULD
FAIL
The marketing of products based on the patented polymer technology and
services associated with remediating hydrocarbon-contaminated soil entail
liability risks in the event of product failure or claim of harm caused by
product operation. While the company is not aware of any claim against it based
upon the use or failure of its products, end users of any of the company's
proposed products and services could assert claims against the company. The
company maintains product liability insurance against any such claims however,
there can be no assurance that such insurance will be sufficient to cover all
potential liabilities, or that the company will be able to continue to obtain
insurance coverage in an amount that the company believes to be adequate. In the
event of a successful suit against the company, lack or insufficiency of
insurance coverage would have a material adverse effect on the company's
financial condition and operations.
A FEW SHAREHOLDERS, BECAUSE OF THE CONCENTRATION OF STOCK OWNERSHIP, WOULD BE
ABLE TO EXERCISE CONSIDERABLE INFLUENCE OVER ALL MATTERS REQUIRING SHAREHOLDER
APPROVAL
The company's existing directors, executive officers, and their respective
affiliates are the beneficial owners of approximately 66.1% of the outstanding
shares of our common stock and common stock. As a result, the company's existing
directors, executive officers, principal shareholders and their respective
affiliates, if acting together, would be able to exercise significant influence
over all matters requiring shareholder approval, including the election of
directors and the approval of significant corporate transactions. Such
concentration of ownership may also have the effect of delaying or preventing a
change in control of the company. These shareholders may have interests that
differ from other shareholders of the company, particularly in the context of
potentially beneficial acquisitions of the company. For example, to the extent
that these shareholders are employees of the company, they may be less inclined
to vote for acquisitions of the company involving termination of their
employment or diminution of their responsibilities or compensation.
THE SHARES OF THE COMPANY'S STOCK WHICH WILL BECOME IMMEDIATELY ELIGIBLE FOR
PUBLIC SALE UPON THE EFFECTIVENESS OF THIS REGISTRATION STATEMENT COULD HAVE A
NEGATIVE IMPACT ON THE PRICE OF OUR STOCK
Upon approval of this registration statement by the SEC, there will be
732,661 shares of our stock immediately eligible for resale in the public
market. This amount includes 200,000 options, which could be exercised. A
simultaneous offer to sell a significant number of these shares into the public
market would create a depressive effect on the trading price of our stock. These
sales would not only have a negative impact on our shareholders but could also
make it more difficult for the company to raise future equity at a price the
company deems appropriate.
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BECAUSE OUR STOCK IS CLASSIFIED AS "PENNY STOCK", INVESTORS MAY EXPERIENCE
DELAYS AND OTHER DIFFICULTIES IN THEIR ATTEMPTS TO TRADE IN OUR STOCK
Trading in our stock is subject to the "Penny Stock Rules" which require
brokers to provide additional disclosure in connection with any trades of "penny
stock". The broker must deliver, prior to the trade, a disclosure describing the
penny stock market and the risks associated with that market. The "penny stock"
regulations could limit the ability of brokers to sell and purchasers to buy the
shares offered in this prospectus. The company's stock will be subjected to the
"Penny Stock" rules until its market price reaches a minimum $5.00 per share,
subject to certain exceptions. Our stock is traded and quoted on the Over the
Counter Bulletin Board which could cause some difficulty in disposing of the
stock and getting accurate quotes on its market price.
USE OF PROCEEDS
New shares of the company's common stock will not be offered as a result of
this prospectus other than options as described below. In March 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 as long term
debt. The debentures are 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 the
outstanding balance of the debt as of September 30, 2000 is $1,150,000. The
company will issue 441,672 common shares in that the holders have elect to
convert the debt. The company has paid interest expense. Additionally, 78,489
shares of common stock issued to consultants for services rendered are being
registered as well as, 8,404 shares to settle an arbitration matter. One
consultant has an option to purchase 200,000 shares of the common stock of the
company for a period of two years after the effective date of this registration
statement. The underlying shares are being registered. The options are priced in
50,000 share increments at 25%, 50%, 75% and 100% above a strike price of $5.00.
If all the option shares are purchased, it would generate $1,285,500 in equity
funding for the company. The company has no assurance that the shares underlying
the options will be purchased. All of the funds representing the debt received
by the company have been used as working capital. The funds generated, if any,
from the sale of the options will also be used for working capital.
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock is currently quoted on the Over-The-Counter
Bulletin Board under the Symbol "SOYL." The Company's Common Stock was quoted on
the Over-the-Counter Bulletin Board under the symbol "NDMI" until January 2000.
The following quotations are inter-dealer quotations from market makers of the
Company's stock. At certain times the actual closing or opening quotations may
not represent actual trades that took place.
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Set forth below is the trading history of the Company's Common Stock
without retail mark up, mark-down or commissions:
High Low
1999 ---- ---
Quarter ended
March 31 0.2344 0.1875
June 30 0.2031 0.1562
September 30 0.1562 0.1562
December 31 0.2031 0.1406
2000
Quarter ended
March 31 13.00 0.1875
June 30 8.00 3.8125
September 30 4.75 4.37
Second Quarter to December 21 4.75 1.375
Except for 295,961 free trading shares, all shares issued by the Company
are "restricted securities" within the meaning of Rule 144 under the 1933 Act.
Ordinarily, under Rule 144, a person holding restricted securities for a period
of one year may, every three months, sell in ordinary brokerage transactions or
in transactions directly with a market maker an amount equal to the greater of
one percent of the Company's then-outstanding Common Stock or the average weekly
trading volume during the four calendar weeks prior to such sale. Future sales
of such shares and sales of shares purchased by holders of options or warrants
could have an adverse effect on the market price of the Common Stock.
HOLDERS
As of December 20, 2000 there were 140 shareholders who currently hold
certificated securities (approximately 97 of these shareholders hold restricted
securities) and approximately 98 shareholders currently listed in the Depository
Trust Company as holding shares in brokerage accounts. The company estimates
that it has a total of approximately 238 shareholders.
DIVIDEND POLICY
The company has not paid any dividends on its common stock. The company
currently intends to retain any earnings for use in its business, and therefore
does not anticipate paying cash dividends in the foreseeable future.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the company's financial statements, including the notes thereto, appearing
elsewhere in this prospectus.
OVERVIEW
American Soil Technologies, Inc. began business as Soil Wash Technologies,
Inc. in September 1993 to develop and provide non-hazardous soil remediation
services to businesses and developers in southern California. On December 31,
1999, the Company acquired the patents and operating rights to certain polymer
based soil enhancements designed to increase production and reduce costs to the
agriculture industry. Effective December 31, 1999 the Company completed a
reverse merger with a fully reporting and trading public company known as New
Directions Manufacturing, Inc. and changed its name to American Soil
Technologies, Inc. and changed its state of domicile to Nevada. The shareholders
also agreed to a reverse split the issued common shares at a ratio of 15 old
shares to 1 new share.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following consolidated financial information should be read in
conjunction with "Management's Discussion and Analysis" and the financial
statements, of 1999 and 2000, including the notes to the statements. We believe
that the unaudited statements contain all normal recurring adjustments necessary
to present a fair presentation of our financial information. The financial
results of the first quarter ended September 30, 2000 should not be indicative
of the results that may occur for the entire fiscal year ending June 30, 2001.
Year Ended June 30,
-------------------------------
2000 1999
----------- -----------
(audited) (audited)
Statement of Operations Data
Revenue $ 1,961,325 $ 2,274,062
(Net Loss) (416,498) (94,826)
(Net Loss) per share $ (.06) $ (.02)
Balance Sheet Data
Total Assets $ 4,683,964 $ 3,139,455
Total Current Liabilities $ 417,290 206,601
Accumulated Deficit (3,425,890) (3,009,392)
Stockholders Equity $ 3,151,410 $ 2,932,854
Three Months Ended September 30,
-------------------------------
2000 1999
----------- -----------
(unaudited) (unaudited)
Statement of Operations Data
Revenue $ 209,818 $ 222,475
Net Loss $ (251,872) $ (3,795)
Net loss per share $ (0.03) $ 0.00
Balance Sheet Data
Total Assets $ 4,670,082 $ 3,479,399
Total Liabilities $ 1,770,543 $ 550,340
Retained Earnings $(3,677,761) $(3,013,187)
Total Stockholders Equity $ 2,899,539 $ 2,929,059
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FISCAL YEAR ENDED JUNE 30, 2000 (AUDITED) COMPARED TO FISCAL YEAR ENDED
JUNE 30, 1999 (AUDITED)
RESULTS OF OPERATIONS
For the reasons detailed below, the company experienced losses of $416,498
($0.06 per share) in fiscal year ended June 30, 2000 and $94,826 ($0.02) in
fiscal year ended June 30, 1999. The company expects that as a result of its
efforts during the last half of fiscal year 2000 and the first quarter of fiscal
2001 to develop strategic alliances, marketing agreements, and distribution
networks, sales volume in subsequent periods should increase. Since these
arrangements are new and untested, it is uncertain whether these actions will be
sufficient to produce net operating income for the fiscal year 2001. However,
given the gross margins on the Agriblend Division and anticipated increased
volume of the Soil Wash Division, future-operating results should be improved.
Revenues for the year ended June 30, 2000 were $1,961,325 compared to
$2,274,062 for the same period in 1999. Revenue from the Soil Wash Division
decreased from $2,274,062 to $1,793,417 as a result of delays in the development
and redevelopment of major real estate projects in San Diego County. The
economic and environmental issues that delayed these projects have been resolved
and the Company anticipates recovering these decreased revenues as the projects
accelerate. The Company's Soil Wash Division is the dominant facility of its
kind in the San Diego, California area. Since its acquisition on December 31,
1999, the Agriblend Division has contributed $166,878 to revenues for the year
ended June 30, 2000. The company was engaged in the development and contracting
with representatives during this period and did not have these representatives
in place at the start of the national growing season. The Agriblend Division
expects growth in sales during the next twelve months as a result of its
contractual arrangements with distributors and agents.
Cost of goods sold for the Soil Wash Division decreased from $1,418,647 for
the fiscal year ended June 30, 1999 to $1,321,160 for the fiscal year ended June
30, 2000, while representing an increase as a percentage of sales from 62% to
67%. Primarily this increase is due to increased costs of materials and repair
and maintenance of equipment to improve efficiency, production and costs
savings. Management expects that the gross profit percentages will return to the
pre-2000 levels with an increase in volume. Included in the June 30, 2000 fiscal
year are the six months of results of the Agriblend Division's cost of sales of
$30,518, reflecting a gross profit percentage of approximately 82%. The
management of Agriblend expects to maintain its gross profit percentage
representing material costs with a decrease caused by the increased delivery
costs associated with a national distribution process. Additionally, it is
expected that the related cost of sales, included in operating expenses, will
increase in proportion to sales based on the company's planned methods of sales
and distribution.
The company believes that adequate supplies of raw materials are available
to meet its current and anticipated requirements without disruption of its
delivery chain. The company intends to add additional storage and distribution
facilities to the Agriblend Division as necessary to accommodate increases in
sales, provide for timely delivery and maintain an efficient supply process.
Operating expenses increased 29% over the same period in 1999. These
increases are due to the company's efforts in putting in place sales
representatives, employees and agents for the Agriblend Division to expand its
sales base, legal fees related to expanding its patent rights, and increased
costs, including employees, of operating a multi-site, multi-disciplined
business. These increases began in the second quarter as the company explored
the acquisition related to the Agriblend business, and increased during the
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third and fourth quarters as the company was establishing its base sales
network. On an annual basis, the company expects that these costs will increase
based on a full year of operations of the Agriblend Division but the
relationship as a percentage of sales should decline as the expected sales
volume increases annually. Likewise, on an annual basis the administrative costs
are expected to increase as a full year of operations are experienced for the
two divisions and costs associated with public companies are incurred. Interest
expense is expected to increase in the next year as a result of the interest on
the convertible debentures is incurred for a full year rather than approximately
one quarter and the balance of the debentures are funded and interest is paid on
the increased balance.
INCOME TAXES
The company has recognized an income tax benefit of its current and prior
operating losses based on the company's expectation that it will realize
sufficient income in the future, the next twenty years, to utilize the benefits
of the net operating loss carryforward and therefore reduced cash outlay for
taxes in future periods.
SEASONALITY
The Soil Wash Division does not experience seasonal fluctuation. The
efforts of the Agriblend Division in the United States have focused on the
southern states and therefore generally experience year round growing cycles,
with the sale of the Agriblend product preceding the growing cycle of various
crops. International sales have not been sufficient enough or the geographic
distribution of sales concentrated enough to determine if a seasonal trend
exists although the initial indication is that the company's markets will become
diverse and therefore not indicate significant seasonal variations. As the
company expands into the residential and commercial markets nationally, it is
expected that the company will experience some seasonal declines in sales during
the fall and winter quarters in less temperate climates.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $124,352 and $35,682 at June 30, 2000 and
1999, respectively. Net cash used by operations was $912,300 for the year ended
June 30, 2000 compared to net cash provided by operations of $5,379 for the
comparable year ended June 30, 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 third and fourth
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quarters ended June 30, 2000, the company raised $1,325,000 from a private
placement of Convertible Debentures, of which $1,000,000 had been funded at June
30, 2000 and the balance is due by the second quarter of fiscal year end June
30, 2001. As a result of these proceeds, the Company has working capital
(current assets less current liabilities) of $670,833 as of June 30, 2000
compared to working capital of $304,666 as of June 30, 1999.
To date, the company has financed its operations principally through the
sales activities of the Soil Wash Division and the placement of Convertible
Debentures. The company believes that it has and will have sufficient cash flow
to continue its operations through June 30, 2001. The Company will consider both
the public and private sale of securities and or debt instruments for expansion
of its operations if such expansion would benefit the overall growth and income
objectives of the company. Should sales growth not materialize, the company may
look to these public and private sources of financing. There can be no
assurance, however, that the company can obtain sufficient capital on acceptable
terms, if at all. Under such conditions, 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.
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THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
RESULTS OF OPERATIONS
The company experienced a net loss of $251,872 ($0.03 per share) for the
three months ended September 30, 2000 as compared to a net loss of $3,795 for
the three months ended September 30, 1999.
Revenues for the three months ended September 30, 2000 were $209,818
compared to $222,475 for the same period in 1999. Revenue from the Soil Wash
Division for the three months ended September 30, 2000 were $202,798 compared to
$209,818 for the same period in 1999. Revenue from the Agriblend Division for
the three months ended September 30, 2000 were $7,020 compared to its revenue
prior to the acquisition by the company during the same period in 1999 of
$14,231.
Cost of goods sold for the Soil Wash Division increased from $132,843 for
the three months ended September 30, 1999 to $238,325 for the three months ended
September 30, 2000, while representing an increase as a percentage of sales from
60% to 120%. Cost of goods sold for the Agriblend Division decreased from $7,353
for the three months ended September 30, 1999 to $4,258 for the three months
ended September 30, 2000, while representing an increase as a percentage of
sales from 52% to 61% of the preacquisition activity for the 1999 period.
The company believes that adequate supplies of raw materials are available
to meet its current and anticipated requirements without disruption of its
delivery chain. The company intends to add additional storage and distribution
facilities to the Agriblend Division as necessary to accommodate increases in
sales, provide for timely delivery and maintain an efficient supply process.
Operating expenses increased 305% over the same period in 1999. These
increases are due to the company's efforts in putting in place sales
representatives, employees and agents for the Agriblend Division to expand its
sales base, legal fees related to expanding its patent rights, and increased
costs, including employees, of operating a multi-site, multi-disciplined
business. These increases began in the second quarter as the company explored
the acquisition related to the Agriblend business, and increased during the
third and fourth quarters as the company was establishing its base sales
network. On an annual basis, the company expects that these costs will increase
based on a full year of operations of the Agriblend Division but the
relationship, as a percentage of sales should decline as the expected sales
volume increases annually. Likewise, on an annual basis the administrative costs
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are expected to increase as a full year of operations are experienced for the
two divisions and costs associated with public companies are incurred. Interest
expense is expected to increase in the next year as a result of the interest on
the convertible debentures is incurred for a full year rather than approximately
one quarter and the balance of the debentures are funded and interest is paid on
the increased balance.
INCOME TAX
The company has recognized an income tax benefit of its current and prior
operating losses based on the company's expectation that it will realize
sufficient income in the future, the next twenty years, to utilize the benefits
of the net operating loss carryforward and therefore reduced cash outlay for
taxes in future periods.
SEASONALITY
The Soil Wash Division does not experience seasonal fluctuation. The
efforts of the Agriblend Division in the United States have focused on the
southern states and therefore generally experience year round growing cycles,
with the sale of the Agriblend product preceding the growing cycle of various
crops. International sales have not been sufficient enough or the geographic
distribution of sales concentrated enough to determine if a seasonal trend
exists although the initial indication is that the company's markets will become
diverse and therefore not indicate significant seasonal variations. As the
Company expands into the residential and commercial markets nationally, it is
expected that the Company will experience some seasonal declines in sales during
the fall and winter quarters in less temperate climates.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $184,765 and $218,179 at September 30,
2000 and 1999, respectively. Net cash used by operations was $207,166 for the
three months ended September 30, 2000 compared to net cash provided by
operations of $74,287 for the comparable period in 1999. To date, the company
has financed its operations principally through the sales activities of the Soil
Wash Division and the placement of Convertible Debentures. The company believes
that it has and will have sufficient cash flow to continue its operations
through June 30, 2001. The company will consider both the public and private
sale of securities and or debt instruments for expansion of its operations if
such expansion would benefit the overall growth and income objectives of the
company. Should sales growth not materialize, the company may look to these
public and private sources of financing. There can be no assurance, however,
that the company can obtain sufficient capital on acceptable terms, if at all.
Under such conditions, failure to obtain such capital likely would adversely
affect 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.
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AVAILABLE INFORMATION
The company is subject to the reporting requirements of the Securities
Exchange Act of 1934 ("the Exchange Act"). We have filed this Registration
Statement, which includes this prospectus and exhibits, electronically with the
Securities Exchange Commission under the Securities Act of 1933 as amended (the
Act). This prospectus omits certain information contained in the Registration
Statement on file with the Commission pursuant to the Act and the rules and
regulations of the Commission. This Registration Statement, including the
exhibits, may be reviewed and copied at the public reference facilities
maintained by the Commission located at 450 Fifth Street, N.W., Washington D.C.
20549. Copies of the Registration Statement and the exhibits can be obtained by
mail, for a proscribed fee, from the Public Reference Branch of the Commission
at 450 Fifth Street, N.W. Washington D.C. 20549. The Commission also maintains
an Internet site that contains reports, proxy and information statements, and
other information regarding our filings including this Registration Statement
and its exhibits that were file electronically with the Commission at
http://www.sec.gov. All the filings of our company may be reviewed at said
Internet site. The company also maintains an Internet site at
www.soilwashtech.com.
BUSINESS OF AMERICAN SOIL TECHNOLOGIES, INC.
HISTORY AND PRODUCTS
American Soil Technologies, Inc. was founded in 1999 as a Nevada
corporation. The company was formed by merging the assets and liabilities of
Soil Wash Technologies, Inc. and selective assets and liabilities of Polymers
Plus, L.L.C.
Polymers Plus was organized in November 1995 as a Limited Liability Company
in the state of Arizona. The polymer product line is patented and trademarked
under the name Agriblend Plus for agriculture use and HB Plus(R) for turf,
gardens, and landscaping use. Our products decrease the need for water in dry
land farming, irrigated farming and other plant growing environments. Our
products also increase crop yield and reduce the environmental damage caused by
common farming practices. This segment of our business is known as the Agriblend
division and the product, Agriblend Plus, is a patented blend of polymers and
minerals. Our product is commonly known as an absorbent polymer. A polymer is a
chemical compound of large molecules formed by smaller but similar molecules.
Each polymer product line will be blended and packaged to unique specifications
by the company's custom blending/packaging subcontractors. The majority of
revenues generated by this division will be from the sale of its Agriblend Plus
formulation to major agricultural distributors. The company owns and operates a
commercial non-hazardous soil and water remediation facility at 9310 Friars Rd.,
in San Diego, CA. This consists of approximately 900 sq. ft. of office trailer
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space; approximately 650 sq. ft. of tool and equipment storage; and,
approximately 1.5 acres of untreated/treated soil storage area and an oil and a
water processing equipment area. The facility has been in operation since
1994.Effective December 31, 1999 the Company completed a reverse merger with a
fully reporting and trading public company known as New Directions
Manufacturing, Inc. At that time, the company changed its name to American Soil
Technologies, Inc. and changed its state of domicile to Nevada. Our objective is
to globally enhance the production of agricultural and horticultural crops and
the quality of our environment by marketing and developing super absorbent
polymer products, unique water management services and to engineer and deploy
innovative environmental cleanup systems. Our office and principal place of
business is 215 North Marengo Avenue, Suite 110, Pasadena, California 91101 and
our telephone number is (626) 793 2435.
TARGET MARKETS AND DISTRIBUTION
Our targeted market, the hydrocarbon contaminated soil market is largely
dependent on real estate development activity. Property transfers trigger site
investigations that lead to soil cleanup opportunities. Major real estate
developers in the San Diego region include the Port Authority, San Diego Gas &
Electric, The Downtown Redevelopment District, and various private and public
development entities. The military also generates a substantial amount of
contaminated soil each year. Major Real Estate development in the San Diego
region is expected to remain robust for the next several years.
There are many regional site development opportunities for soil wash
facilities throughout the United States. The key factors that Soil Wash
Technologies will consider in evaluating the market potential in a specific
region include:
* The volume of contaminated soil that is anticipated to be removed from
a region.
* The competition in the region (this includes treatment facilities and
landfills).
* The size of the market area.
* The cost of transportation to the nearest alternative treatment or
disposal facility.
* Treatment site availability (zoning, Conditional Use Permits, land
cost, etc.).
* Local acceptance of soil treatment in the targeted area.
* Regulatory requirements.
* Regulatory enforcement (aggressive environmental enforcement, or
generator friendly enforcement).
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Other than our facility in San Diego County, our soil washing technology is
currently licensed in the United Kingdom and Ireland to Site Remediation
Services Limited (Kings House, 14 Orchard Street, Bristol, BS1 5EH). Other
licensing agreements are being negotiated with major corporations in Japan and
Germany. The Soil Wash Technologies division has also entered into a letter of
intent with the Lewis Corporation under which Lewis will provide engineering,
fabrication, and marketing services to help fully develop the company's
licensing program.
Sales from Soil Wash Technologies will continue to be generated from
current operation of its soil wash facility in San Diego County, from onsite
cleanup opportunities; and, from licensing its technology for use by others.
Agriblend's agricultural market niche is primarily business-to-business
sale of cross linked linear polymer products to major agricultural and
horticultural distributors and end users. The cross linked polymer products are
unique and the Company's patents protect them in a market that is virtually
untapped.
There is a total of approximately 480 million acres of cropland in the
U.S., of which approximately 11% (52.8 million acres) is irrigated. Less than
1/10 of 1% of the producing acres utilize polymers. This limited market
penetration is primarily due to lack of consumer knowledge of the use of cross
linked polymers; the poor performance of cross linked polymers used as water
reservoirs; and, the lack of University verification of data that is supportive
of the benefits to be derived from polymers. However, due to recent private and
university funded studies, testimonials by farmers using our product and ten
years of research and marketing by on super absorbent polymers, the use of cross
linked polymers is rapidly gaining acceptance.
According to sources within Western Farms Services, sales of linear and
cross linked polymers are estimated to grow to $100,000,000 per year within the
next three to five years in the Central Valley of California. Approximately 70%
of these sales will stem from the sale of cross linked polymer. The USDA reports
that there are over 300,000 acres of tomatoes under cultivation in California.
Western Farms Services documented, in a two-year study that using our products
in conjunction with a linear polymer increased tomato crop yield by 78%. This
niche represents a $30 million per year market or approximately .03% of a
potential billion-dollar market in the western United States. Major Agri-Product
Marketing companies generate billions in revenue from the sale of granular
herbicides and pesticides that are applied to the soil. All of these granular
products (which represent over $10 billion in annual sales in the United States)
have a common shortcoming, they do not remain in the weed/seed germination zone
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long enough to achieve more than 75% efficiency. Use of Agriblend Plus in
conjunction with the application of granular herbicides and pesticides results
in approximately 90% to 95% efficiency. Accordingly, manufacturers and
distributors of granular herbicides and pesticides can gain a competitive edge
in their respective marketplace by using Agriblend Plus
The Western Farm Services study described above was funded by the American
Cyanamid Corporation to determine if Agriblend Plus would improve the efficiency
of its linear polymer. Pristine(R) (this product is marketed by several
different companies, including our company, under various trade names).
Pristine(R) used in tandem with Agriblend Plus resulted in a reduction of up to
35% of the volume of applied irrigation water, a significant reduction in the
amount of cultivation required and, as reported above, a dramatic increase in
yield.
Hybrid seed companies are in a similar position as are granular herbicide
and pesticide companies. They are constantly seeking ways to improve the
performance of their respective products. Agriblend Plus in the soil
significantly improves the rate of germination and sprout emergence. For
example, studies conducted by Colorado State University show that using
Agriblend Plus in the soil increased the rate of germination sufficiently to
reduce the required amount of seed planted by 30% while, at the same time,
increasing the yield by approximately 18% in the production of alfalfa.
Our Agriblend division will utilize our in-house sales and marketing group
as well as key national and international distributors to sell our products.
COMPETITION
AGRIBLEND DIVISION
Agriblend's division market analysis indicates that its patented products,
Agriblend Plus and HB-Plus(R), command a market niche in which the Company
stands alone. There are no comparable or cost effective alternative products
available.
The absence of participants in this new field is due to the relatively
recent introduction of a simple, but revolutionary, concept: using cross linked
polymer as a semi permeable moisture barrier rather than as a water reservoir in
the soil. Almost all research completed over the past 25 years has been directed
at using large hydrated grains of cross linked polymer (the reservoir approach)
to store water and nutrients in the soil. Agriblend Plus creates a
semi-permeable moisture barrier that allows the soil to hold many times the
volume of water and nutrients, at significantly less cost, than any other
product or methodology on the market today.
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While major direct competition is not an issue, product acceptance is a key
challenge.
The company anticipates that demand for products and services based on the
polymer technology will grow and new markets will be exploited. As this occurs,
the company expects competition to become more intense, as current and future
competitors begin to offer an increasing number of diversified products and
services
SOIL WASH TECHNOLOGIES
The company likely will face intense competition, in the future, from other
soil remediation companies. However, at this time, our Mission Valley Soil Wash
Facility is the only facility in San Diego County that is permitted (Regional
Water Quality Control Board) to receive and treat hydrocarbon contaminated soil
and water (Air Quality Control District). Its principal competition in the
region, the Candelaria Indian Reservation, is limited because there is
approximately ten dollars per ton (transportation cost differential) additional
cost required to transport the soil outside our market area. Candelaria operates
on sovereign "Indian Land" and is not regulated by any government agency. Hence,
most environmental engineering firms will not use Candelaria even though
Candelaria's gate fees can be as low as $15 per ton (our gate fee is generally
$35 per ton). Candelaria's market is limited to waste generators that care only
about price. However, most environmental firms and major corporations are
concerned about price, but are willing to pay extra for the financial and
regulatory security offered by our company. Therefore, our niche in the San
Diego region is almost exclusive.
RAW MATERIALS
The Agriblend division will purchase raw materials components on a
just-in-time schedule until revenues allow for economies of scale thereby
increasing margins. Inventory will normally be maintained at a minimum
requirement of 20 tons of Agriblend and 3 tons of HB Plus(R).
Soil Wash Technologies purchases process chemicals on an as needed
schedule. Polymer presently is purchased in 60-pound bags at a cost of $1.50 per
pound. Approximately four bags of polymer per day ($360.00) are used in the soil
wash process. It is anticipated that polymer costs can be reduced by as much as
50% by the third quarter of Year-1 resulting from the bulk purchasing power that
American Soil Technologies will enjoy. Our principal suppliers for the Agriblend
division are GSA Resources, Floerger, Ciba Specialties and Stockehousen. The
principal suppliers for the Soil Wash division are Shepard Brothers, Aqua Ben
and Brandt.
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PATENTS, TRADEMARKS AND LICENSES
The company entered into an exclusive licensing agreement with Ron
Salestrom the former owner of Polymer Plus and patent holder of US Patents
5,649,495 and 5,868,087. The agreement granted our company the exclusive rights
to both patents for their term and requires a royalty payment to Mr. Salestrom
of 1.5% of the net sales received by the company.
COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS
The Soil Wash Division handles hazardous materials such as gasoline,
diesel, and other materials commonly used in similar businesses that utilize
motorized heavy equipment. In addition, polymer, surfactant, and other chemicals
are used in the soil washing process. Material Safety Data Sheets are on file
for each hazardous material and chemical with which Company employees may come
in contact. The Company operates its Mission Valley Soil Recycling Facility
pursuant to its Health and Safety Plan, Respiratory Protection Plan, and
Operations Plan and believes it is in compliance with all applicable local,
state, and federal requirements.
The Agriblend Division provides Material Safety Data Sheets on all
components of its Agriblend product line and complies with labeling requirement
for its products. The Company complies with Environmental Protection Agency
regulations applicable to monomer content in its polymer additives (maximum of
200 mg/kg).
The Company believes that its operations currently comply in all material
respects with applicable federal, state and local laws, rules, regulations and
ordinances regarding the discharge of materials into the environment. The
Company does not believe that such compliance will have a material impact on its
capital expenditures, future earnings and competitive position. No material
capital expenditures for environmental control equipment are presently planned.
RESEARCH AND DEVELOPMENT EXPENDITURES
The Company expends amounts on research and development for both the Soil
Wash Division and the Agriblend Division. Research and development efforts
during the two years ended June 30, 2000 for the Soil Wash Division and the six
months ended June 30, 2000 were directed at refinements of the current products
and expansion of the applications of the Agriblend products. The aggregate
estimated expenditures for research and development during the years ended June
30, 2000 and 1999 were less than $50,000 and $15,000, respectively.
EMPLOYEES
The company has 19 full-time employees. The company hires independent
contractors on an "as needed" basis only. The company has no collective
bargaining agreements with its employees. The company believes that its employee
relationships are satisfactory.
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DESCRIPTION OF PROPERTIES
We lease approximately 2,600 square feet located at 215 N. Marengo,
Suite110 in Pasadena, California, which includes office and storage space. It is
the company's headquarters. The lease expires August 2, 2002 and requires
monthly payments of approximately $3,394.
The Soil Wash Division's Mission Valley Facility is a two acre leasehold
located at 9310 Friars Road in San Diego, California. The Company maintains a
900 square feet office trailer and approximately 650 square feet of tool and
equipment storage at the facility. The lease expires at the end of January 2001
and requires monthly payments of approximately $4,000. The Lessor has informed
company management that he is developing the property and the company's lease
will not be renewed. The company is making an offer on another site. If the
company acquires the site, it will have only a few months to get it permitted
and to complete construction of improvements at the site. If the company is
unable to complete this task on time (i.e., before the end of the year), this
would interrupt the company's soil washing business. The company has other
options that include moving the equipment on to a 30,000-ton project in San
Diego, California while the company develops a new fixed facility. Management of
the company is working diligently on this issue.
The Agriblend Division leases approximately 432 square feet of office space
located in Phoenix, Arizona. The lease expires in March 2001 and requires
monthly payments of approximately $1,008. The company rents storage space in
Wilcox, Arizona (approximately $350 per month), office and storage space in
Lubbock, Texas (approximately $125 per month) and it rents office and storage
space in Bakersfield, California (approximately $150 per month).
LEGAL PROCEEDINGS
Polymers Plus and the company have been named in an arbitration brought by
Blaine Vice in which the claimant alleges damages of approximately $50,000. This
controversy has been settled. Mr. Vice will disclose to the company all those
customers he has contacted on behalf of what is now the Agriblend division and
the company will issue to him $20,000 worth of stock, with a per share value
equal to the closing price of the stock on October 26, 2000. All claims against
the company will be dismissed. The company will issue 8,404 shares. The company
is being indemnified by Mr. Salestrom in that the issues presented in this
arbitration were not disclosed to the company prior to the company's purchase of
certain assets of Polymers Plus.
The company's management feels that, to the best of its knowledge, there is
no other material litigation matters pending or threatened against it.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and ages of the current directors
and executive officers of the company and the principal offices and positions
with the Company held by each person. The executive officers of the company are
elected annually by the Board of Directors. Each year, the stockholders elect
the board of directors. The executive officers serve terms of one year or until
their death, resignation or removal by the Board of Directors. There was no
arrangement or understanding between any executive officer and any other person
pursuant to which any person was elected as an executive officer.
Name Age Position
---- --- --------
Neil C. Kitchen 54 President, Chief Executive Officer, Director
Sean Lee 60 Chief Financial Officer
Louie Visco 85 Director, Board Chairman
Dick Stevens 73 Director
Ken Lew 43 Director, Secretary
Scott Baker 44 Director
Mr. Neil C. Kitchen, President, Chief Executive Officer, Director, has over
20 years experience in business management in the environmental sector including
management of companies involved in general engineering, toxicology, and
environmental cleanup. Prior to joining Soil Wash Technologies, Inc. in 1994, he
was Vice President of a publicly held environmental cleanup company with annual
sales of over 20 million. He holds a BS in Business Management from San Diego
State University and a class "A" General Engineering license with Hazardous
Material Certification from the State of California.
Mr. Sean Lee, Chief Financial Officer, joined the Agriblend Division of
American Soil Technologies in January 2000. Prior to that, beginning in 1998, he
was President and CEO of New Directions Manufacturing Inc. He served as founder
and president of Infopak from January 1990 until its sale to Dimensional Visions
in 1996. Mr. Lee also served as CEO of Grace Home Centers, Home Base, and
Builders Express.
Mr. Louie Visco, Director, has served as Chairman of the Board of the
company since 1999. He is principal owner of the Benz Group, a privately held
holding company founded in 1934. Mr. Visco founded Universal By-Products, Inc.,
the first publicly held solid waste company in the United States. The company
was acquired by Waste Management Inc., the world's largest waste management
company, in 1972. Over the past 50 years, Mr. Visco has served as Chairman of
the Board of privately and publicly held companies.
Mr. Dick Stevens, Director, is a principal owner of the Benz Group and has
served as its President since 1982. Mr. Stevens has served as a Director of
several corporations and was Western Regional President of Waste Management
Corporation from 1972 to 1973. He was appointed to serve a term on the State of
California Solid Waste Management Board from 1983 to 1987.
24
<PAGE>
Mr. Ken Lew, Director, Company Secretary, has served as a Director of the
Company since 1999. He holds an MBA in Business Finance, a BA in Cell Biology,
and a B. Sc. in Chemistry from the University of Washington. Mr. Lew has
produced and edited two financial books and has written numerous technical
publications dealing with chemical interactions associated with polymer and
non-polymer substrates.
Mr. Scott Baker, Director, has practiced law in Arizona for the past 19
years. He graduated from the University of Arizona with a BS in business in 1978
and obtained his JD from the University of Arizona in 1981. As a general
practitioner he has appeared before the U.S. District Tax Court and the U.S.
District Court.
There are currently no committees on the Board of Directors.
EXECUTIVE COMPENSATION
The following sets forth the annual compensation of the company's Chief
Executive Officer for the fiscal year ended June 30, 2000. No officer or
employee of the company receives annual compensation of more than $100,000.
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------
Annual Compensation Awards Payouts
----------------------------------- ------------- ---------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Year Salary($) Bonus($) Compensation($) Awards($) Options/SARs(#) Payouts($) Compensations($)
---- --------- -------- --------------- --------- --------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Neil C. Kitchen 2000 $79,484 0 0 0 -- 0 0
</TABLE>
There were no options or grants during or at fiscal year end 2000.
COMPENSATION OF DIRECTORS
Directors of the Company do not receive any cash compensation, but are
entitled to reimbursement of their reasonable expenses incurred in attending
directors' meetings.
25
<PAGE>
EMPLOYMENT AND RELATED AGREEMENTS
The company has an Employment Agreement with Mr. Ron Salestrom, patent
holder of patents underlying the Agriblend product line. The term of the
Agreement is from January 1, 2000 through December 31, 2002 and is automatically
renewed unless either party wishes to terminate. Mr. Salestrom's salary under
the Agreement is $75,000 per year and he is entitled to all benefits established
by the company that are accorded to "similarly situated employees of the
company.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The laws of the State of Nevada and the company's Bylaws, as amended,
provide for indemnification of the company's directors, officers and agents for
liabilities and expenses that they may occur in said capacities. Generally,
directors and officers are indemnified with respect to actions taken in good
faith in a manner reasonably believed to be in, or not opposed to, the best
interest of the company, and with respect to any criminal action or proceeding
that the indemnitee had no reasonable cause to believe was unlawful.
The company has been advised that in the opinion of the Securities and
Exchange Commission, indemnification for liabilities arising under the Act is
against public policy as expressed in the Act and is, therefore, unenforceable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following Officers and/or Directors have Debenture Agreements with the
Company:
Neil C. Kitchen, CEO/President, Director $25,000 Debenture convertible at
$3.00 per share with interest at 10%, maturing on February 1, 2002.
Richard Stevens, Director, as a Trustee and beneficiary for the Stevens
Family Revocable Family Trust the holder of a $250,000 Debenture convertible at
$3.00 per share with interest at 10%, maturing on February 1, 2002.
Louie Visco, Director, as majority owner of FLD Corporation the holder of a
$250,000 Debenture convertible at $3.00 per share with interest at 10%, maturing
on February 1, 2002.
26
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the company's Common Stock as of the date of this prospectus by:
(i) each stockholder known by the company to be the beneficial owner of more
than five percent of the outstanding Common Stock, (ii) each director of the
company and (iii) all directors and officers as a group. The percentages shown
are based on the 8,791,358 shares of common stock outstanding as of the date of
this prospectus.
All those named in the following table can be contacted through American
Soil Technologies, Inc. 215 North Marengo Avenue, Suite 110, Pasadena CA, 91101
Percentage
Name Number of Shares(1) Beneficially Owned
---- ------------------- ------------------
Neil C. Kitchen(2) 1,385,189 15.7%
Sean Lee 103,370 1.2%
Louie Visco(3) 4,213,899(3) 48.0%
Dick Stevens(4) 83,334 *
Ken Lew 72,000 *
Scott Baker 129,818 1.5%
The Benz Group(3) 4,130,565 47.0%
Ron and Kathy Salestrom 1,132,954 12.9%
All officers and directors
as a group (6 persons) 6,004,610 68.3%
----------
* Less than one percent
1 Except as otherwise indicated, the company believes that the beneficial
owners of Common Stock listed above, based on information furnished by such
owners, have sole investment and voting power with respect to such shares,
subject to community property laws where applicable. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect to
securities. Shares of Common Stock subject to options, warrants, conversion
privileges or other rights currently exercisable, or exercisable within 60
days, are deemed outstanding for purposes of computing the percentage of the
person holding such options or warrants, but are not deemed outstanding for
purposes of computing the percentage of any other person.
2 Mr. Kitchen has purchased a debenture convertible into 8,3334 common shares
of the company at $3.00 per share. He may convert at any time and the
debenture is due on February 1, 2002. The underlying shares are included as
Mr. Kitchens' and are being registered with this Registration Statement.
3. The FLD Corporation has purchased a debenture convertible into 83,3334 common
shares of the company at $3.00 per share. Mr. Visco controls FLD. FLD may
convert at any time and the debenture is due on February 1, 2002. The
underlying shares are included in Mr. Visco's count and are being registered
with this Registration Statement. The amount of shares also includes
4,130,565 shares held in the name of The Benz Group, a company in which Mr.
Visco owns a majority interest.
4. The Stevens Family Revocable Trust has purchased a debenture convertible into
83,3334 common shares of the company at $3.00 per share. Mr. Stevens is a
trustee and beneficiary of the trust. The debenture is due on February 1,
2002 and may be converted at any time. The underlying shares are included in
Mr. Stevens' count and are being registered with this Registration Statement.
27
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth the number of shares of common stock the selling
shareholders may offer for sale from time to time. The office or material
position held by a selling shareholder now or within the past three years is
indicated. The percentage owned after the offering is not indicated unless it
exceeds 1% of the class of shares.
<TABLE>
<CAPTION>
Shares of Common
Amount of Beneficial Stock Beneficially
Ownership Shares of Common Owned After this
Name Prior to this offering Stock Being Offered Offering(2)
of Selling ---------------------- Pursuant to this -------------------
Shareholder Number Percent Prospectus(1) Number Percent
----------- ------ ------- ------------- ------ -------
<S> <C> <C> <C> <C> <C>
Neil Kitchen (2) 1,376,855 15.7 8,334 1,385,189 14.8
President/CEO
Louie Visco (2) 4,130,565 47.0 83,334 4,213,899 45.0
Director
Richard Stevens (2) 0 83,334 83,334
Director
Atlantic Information 5,000 5,000
Services (3)
Continental Capital and Equity Corp. (5) 250,000 250,000 2.6
Saricino Trust (2) 8,334 8,334
Jacqueline Gray (2) 8,334 8,334
Calder Brothers, Inc. (2) 83,334 83,334
Corporate Architects, Inc.(2) 308,000 3.5 83,334 391,334 4.1
David Ellman (2) 83,334 83,334
Hunter Wise Financial Group, LLC (3) 15,000 15,000
Carl P. Ranno (3) 7,500 7,500
Attorney at Law
Vice, Inc (4) 8,404 8,404
Howard Curtis (3) 989 989
--------
Total 728,565
========
</TABLE>
----------
(1) All of these shares are currently restricted under Rule 144 of the Act.
(2) Indicates common shares issuable upon conversion of the convertible
debentures.
(3) Indicates common shares issued, in lieu of cash, for consulting and legal
services rendered.
(4) Indicates 8,404 common shares issued to settle arbitration.
(5) Indicates 50,000 common shares issued for consulting services rendered in
lieu of cash and 200,000 options to be exercised over a period of two (2)
years, in 50,000 share increments, from the effective date of this
Registration Statement.
28
<PAGE>
PLAN OF DISTRIBUTION
The securities are not being offered through an underwriter. The shares may
be offered for sale, from time to time, by the security holders their assigns,
successors or pledgees. The sales may be offered pursuant to this prospectus on
any stock exchange, trading facility or market wherein said securities are
traded. They may also be sold in a private transaction. All sales may be for a
fixed or negotiated price. The security holder may sell our securities in any of
the numerous transactions permitted by applicable law. Some of those methods of
sale include: ordinary broker transactions, block trades, direct sales to a
broker dealer as a principal or a partial sale through a broker-dealer at a
specific price. The selling shareholder may also sell our shares under the
Securities Act Rule 144 and not under this prospectus, if they meet the criteria
and conform to said rule.
The selling shareholders may utilize the services of a broker-dealer to
participate in the sale of the subject securities, which may include sales of
the securities to other broker-dealers. The broker-dealer may receive
commissions or discounts from the seller on the sale or sometimes from the
purchaser if they act as an agent for the purchaser. It is anticipated that the
commissions or discounts shall be customary for these types of transactions.
Under the Securities Act, the selling shareholders and the broker-dealers
involved in the sale of our securities may be "underwriters" within the meaning
of Section 2(11) of the Act, and any commissions received by these
broker-dealers or agents and any profits on the resale of the shares purchased
by them may be considered underwriting compensation under the Act.
Under the Exchange Act and its applicable regulations, any person engaged
in the distribution of the shares offered by this prospectus may not
simultaneously engage in market making activities with respect to the common
stock of our company during the applicable "cooling off" periods prior to the
commencement of such distribution. The selling shareholders will also be subject
to applicable provisions of the Exchange Act and its rules and regulations,
including without limitation, Rules 10b-6 and 10b-7, which provisions may limit
the timing of sales and purchases of common stock by selling shareholders.
The company will pay all fees and costs associated with the registration of
these shares, however, it will not pay any commissions, discounts, underwriters
fees or fees for dealers or agents.
29
<PAGE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the American Soil Technologies currently
consists of 25,000,000 shares of common stock, par value $.001 per share.
Our company's transfer agent is Atlas Stock Transfer Corporation,5899 South
State Street, Salt Lake City, Utah 84107.
The following summary of the capital stock of the company as set forth in
the following statements is not complete. These statements are subject to and
qualified in their entirety by the detailed provisions found in the company's
Articles of Incorporation with amendments and the company Bylaws.
There are 8,859,762 shares of common stock outstanding, as of the date of
this prospectus.
Holders of common stock are entitled to one vote per each share standing in
his/her name on the books of the company as to those matters properly before the
shareholders. There are no cumulative voting rights and a simple majority
controls. The holders of common stock will share ratably in dividends, if any,
as declared by the Board of Directors in its discretion from funds or stock
legally available. Common stock holders are entitled to share pro-rata on all
the company's assets after the payment of all liabilities, in the event of
dissolution. All of the outstanding shares of common stock are fully paid and
non-assessable and all the shares of common stock offered hereby will also be
fully paid and non assessable.
OPTIONS
As of the date of this prospectus and under the terms of a contract dated
February 17, 2000, there are 200,000 options issued and outstanding to
Continental Capital and Equity Corporation. They are exercisable within two
years from the effective date of this registration statement in 50,000
increments with a strike price in excess of $5.00 which was the closing bid
price on February 17, 2000. Each increment is to be exercised at a 125, 150, 175
and 200% of $5.00. The exercise price for each 50,000 share increment would be
$6.25, $7.50, $8.75 and $10.00.
30
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
DISMISSAL OF PRINCIPAL ACCOUNTANTS
The Company dismissed Evers & Company, Certified Public Accountants ("Evers
& Company") as its principal accountants on January 3, 2000. The principal
accountant's report on the financial statements for either of the past two years
contained no adverse opinion or a disclaimer of opinion, nor was qualified nor
modified as to uncertainty, audit scope, or accounting principles other than a
going concern opinion. The decision to change principal accountants of the
Company was approved by the Board of Directors of the Company.
During the Company's two most recent fiscal years and any subsequent
interim period preceding such dismissal, there were no disagreements with the
former accountants on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure. There is nothing
further to report under Item 304(a)(1) or (iv)(B) through (E).
The Company engaged James C. Marshall, CPA, P.C., Scottsdale, Arizona on
January 3, 2000 as its principal accountants. Neither the Company nor anyone on
its behalf has consulted James C. Marshall, CPA, P.C., during the two most
recent past fiscal years regarding any matter for which reporting is required
under Regulation S-B, Item 304(a)(2)(i) or (ii) and the related instructions.
The decision to engage James C. Marshall, CPA, P.C. was approved by the Board of
Directors.
LEGAL MATTERS
Carl P. Ranno, Phoenix, Arizona, will pass upon the validity of the
securities offered hereby for American Soil Technologies, Inc..
EXPERTS
The financial statements of American Soil Technologies, Inc for the fiscal
years ended June 30, 1999 and June 30, 2000, included herein and elsewhere in
this registration statement, have been included herein and in the registration
statement in reliance on the report of James C. Marshall, CPA, P.C., appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
31
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
Page
----
YEARS ENDED JUNE 30, 1999 AND JUNE 30, 2000
Independent Auditors' Report ............................................. F-1
CONSOLIDATED FINANCIAL STATEMENTS (Audited)
Balance Sheets ......................................................... F-2
Statements of Operations ............................................... F-3
Statements of Stockholders Equity ...................................... F-4
Statements of Cash Flows ............................................... F-5
Notes to Financial Statements .......................................... F-6
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (Unaudited)
Balance Sheets ......................................................... F-12
Statements of Operations ............................................... F-13
Statements of Stockholders Equity ...................................... F-14
Statements of Cash Flows ............................................... F-15
Notes to Financial Statements .......................................... F-16
32
<PAGE>
Report of Independent Accountants
To the Board of Directors
American Soil Technologies, Inc.
Pasadena, California
We have audited the accompanying balance sheets of American Soil Technologies,
Inc. as of June 30, 2000 and 1999, and the related statements of operations,
stockholders' equity (deficit) and cash flows for the two years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 financial statements referred to above present fairly, in
all material respects, the financial position of American Soil Technologies,
Inc. as of June 30, 2000 and 1999, and the results of operations and its cash
flows for the two years then ended in conformity with generally accepted
accounting principles.
/s/ James C. Marshall, CPA, P.C.
Scottsdale, Arizona
September 25, 2000
F-1
<PAGE>
American Soil Technologies, Inc.
Balance Sheets
June 30,
--------------------------
2000 1999
----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 124,352 $ 35,682
Accounts and notes receivable 521,080 261,234
Deposits and prepaid expenses 140,379 138,405
Inventory 302,312 75,946
----------- -----------
TOTAL CURRENT ASSETS 1,088,123 511,267
Property, plant and equipment, net of
accumulated depreciation (Note 3) 697,778 670,649
Patents, net of amortization (Note 3) 659,060
Deferred income tax asset (Note 6) 2,207,000 1,931,200
Other assets 32,003 26,339
----------- -----------
TOTAL ASSETS $ 4,683,964 $ 3,139,455
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 365,311 $ 195,201
Accrued expenses 9,839 9,607
Short term portion of long term debt 4,860
Deferred income 37,280 1,793
----------- -----------
TOTAL CURRENT LIABILITIES 417,290 206,601
Deferred compensation 29,577
Reserve for remediation 50,000 50,000
Long Term portion of notes payable 35,687
Convertible debentures (Note 4) 1,000,000
----------- -----------
TOTAL LIABILITIES 1,532,554 206,601
Commitments and Contingencies (Note 5)
STOCKHOLDERS' EQUITY
Common stock (Notes 7 and 9) 8,730 5,507
Additional paid-in capital 6,568,570 5,936,739
Accumulated deficit (3,425,890) (3,009,392)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 3,151,410 2,932,854
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,683,964 $ 3,139,455
=========== ===========
See accompanying notes to these financial statements.
F-2
<PAGE>
American Soil Technologies, Inc.
Statements of Operations
For the years ended June 30,
---------------------------
2000 1999
----------- -----------
REVENUE
Soil, water treatment and agri revenue $ 1,837,694 $ 2,178,502
Hauling and miscellaneous sales 89,631 95,560
Other revenue 34,000
----------- -----------
GROSS REVENUE 1,961,325 2,274,062
COST OF OPERATIONS
Materials and supplies 554,489 464,417
Labor and payroll costs 349,660 435,760
Facility costs 153,347 295,064
Equipment and maintenance 287,467 194,082
Miscellaneous operating costs 6,715 29,324
----------- -----------
TOTAL COST OF OPERATIONS 1,351,678 1,418,647
GROSS INCOME 609,647 855,415
Sales and marketing costs 245,106 133,651
Depreciation and amortization 135,686 157,448
General and administrative costs 906,701 717,724
Interest expense 16,859 1,118
----------- -----------
SALES AND ADMINISTRATIVE COSTS 1,304,352 1,009,941
----------- -----------
LOSS FROM OPERATIONS (694,705) (154,526)
Interest income 2,407
----------- -----------
2,407
----------- -----------
Net loss before provision for income taxes (692,298) (154,526)
Income tax credit 275,800 59,700
----------- -----------
NET (LOSS) $ (416,498) $ (94,826)
=========== ===========
Basic loss per common share (Note 8) $ (.06) $ (.02)
=========== ===========
Weighted average shares outstanding 7,117,051 5,507,420
=========== ===========
See accompanying notes to these financial statements.
F-3
<PAGE>
American Soil Technologies, Inc.
Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional
-------------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1998 5,507,420 $ 5,507 $ 5,936,739 $(2,914,566) $ 3,027,680
Net loss (94,826) (94,826)
----------- ----------- ----------- ----------- -----------
Balance at June 30, 1999 5,507,420 5,507 5,936,739 (3,009,392) 2,932,854
Stock acquisitions 3,215,511 3,216 624,338 627,554
Exercise of stock option 7,500 7 7,493 7,500
Net loss (416,498) (416,498)
----------- ----------- ----------- ----------- -----------
8,730,431 $ 8,730 $ 6,568,570 $(3,425,890) $ 3,151,410
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes these financial statements
F-4
<PAGE>
American Soil Technologies, Inc.
Statement of Cash Flow
<TABLE>
<CAPTION>
For the years ended June 30,
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
NET LOSS $ (416,498) $ (94,826)
Items not requiring cash
Deferred compensation 29,577
Amortization and depreciation 135,686 157,448
Allowance for doubtful accounts 58,384
Benefit on income tax credit (275,800) (59,700)
----------- -----------
Cash Flow used by Operations (527,035) 61,306
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
USED BY OPERATING ACTIVITIES
CHANGES IN ASSETS AND LIABILITIES
(Increase) in accounts receivable (259,846) (40,476)
Decrease in deposits and prepaid expenses 1,999 56,545
(Increase) in inventory (133,456) (44,747)
(Increase)/decrease in other assets 261 (431)
(Decrease)/increase in accounts payable (29,942) 19,151
(Decrease)/increase in accrued expenses 232 (46,804)
Increase in deferred income 35,487 835
----------- -----------
Total Adjustments (385,265) (55,927)
----------- -----------
Net Cash Flow Provided/(Used) by
Operating Activities (912,300) 5,379
CASH FLOW USED BY INVESTING ACTIVITIES:
Addition of property, plant and equipment (6,530) (75,319)
----------- -----------
Total Cash Flow Used by investing activities (6,530) (75,319)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Exercise of stock option 7,500
Issuance of debentures 1,000,000
----------- -----------
Total Cash Flow from Financing Activities 1,007,500
----------- -----------
Net increase/(decrease) in cash 88,670 (69,940)
Cash at beginning of period 35,682 105,622
----------- -----------
Cash at end of period $ 124,352 $ 35,682
=========== ===========
</TABLE>
See accompanying notes to these financial statements.
F-5
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
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.
Until January 1, 2000 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 non-hazardous soil and water remediation for
commercial business and as of January 1, 2000 the production and sale of soil
enhancement products of the agricultural community.
REVENUE RECOGNITION
For remediation products revenue is recognized upon completion of the processing
cycle and freight upon shipment by the independent trucking company or upon
completion of the services and is fully earned. Revenue is recognized from the
soil enhancement products upon sale and shipment, or if the sale includes
installation, upon completion of the installation process.
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, and finished products and raw materials for
sale by the agricultural division
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
F-6
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
(NOTES TO FINANCIAL STATEMENTS
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
PATENTS
Patents acquired in the purchase transaction are being amortized over their
estimated useful lives of seventeen years on a straight-line basis.
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 AND PATENTS
Depreciation and amortization of property, plant and equipment for the years
ended June 30, 2000 and 1999 is $115,529 and $157,448, respectively.
Property plant and equipment consist of the following:
June 30, June 30,
1999 1998
---------- ----------
Production equipment $ 920,051 $ 846,158
Office equipment, furniture and fixtures 65,480 53,045
Vehicles 95,872 46,332
Leasehold improvements 528,793 520,003
---------- ----------
1,610,196 1,465,538
Less accumulated depreciation and amortization (912,418) (796,889)
---------- ----------
$ 697,778 $ 670,649
========== ==========
Amortization of capitalized patent costs since acquisition, December 31, 2000,
for the six months ended June 30, 2000 was $20,157.
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 June 30, 2000 the outstanding balance of the debt is
$1,000,000. If all debt is converted the Company would issue 441,667 and based
on the current outstanding balance 333,333 would be issued if the holders elect
to convert. Interest expense for the year ended June 30, 2000 was $16,028.
F-7
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - 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
years ended June 30, 2000 and 1999 the aggregate lease payments were $248,219
and $226,921, respectively. The Company expects the leases to continue or be
replaced and that the ongoing lease costs will approximate that of 2000.
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 June
30, 2000 and 1999 the Company has reserved $50,000 and $50,000, respectively, to
defray the final cost of lease termination. The lease is month to month and can
be terminated by either party with notice to the other.
NOTE 6 - INCOME TAXES
At June 30, 2000 and 1999, the Company has approximately $5,417,000 and
$4,723,000 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.
The components of deferred tax assets and liabilities are as follows:
June 30, June 30,
2000 1999
---------- ----------
Tax effects of reserves for doubtful accounts,
deferred compensation and remediation $ 60,000 $ 42,200
Tax effects of carryforward benefits:
Net operating loss carryforwards 2,147,000 1,889,000
---------- ----------
Tax effects of carryforwards
Tax effects of future taxable differences and
carryforwards 2,207,000 1,931,200
---------- ----------
Net deferred tax asset $2,207,000 $1,931,200
========== ==========
F-8
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - INCOME TAXES (continued)
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 558,000
----------
Total $5,417,000
==========
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.
NOTE 7 - COMMON STOCK
At June 30, 2000, the Company has 8,730,431 after the issuance of 3,215,511 on
December 31, 1999 for the acquisitions described herein, 5,507,420 shares
outstanding as a result of the stock split at December 31, 1999 and exercise by
the holder of 7,500 shares in May, 2000. The Company has 25,000,000 shares
authorized. The outstanding shares were increased by a stock split of 45.90 for
1 to the original stockholders of the Company and the Company 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.
F-9
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - LOSS PER COMMON SHARE
Loss per share of common stock has been computed based on the weighted average
number of shares outstanding. As of June 30, 2000 and 1999, the weighted average
number of shares outstanding after giving effect to the stock split was
7,117,051 and 5,507,420, respectively. There were no dilutive items outstanding,
therefore, basic and diluted loss per share are the same.
NOTE 9 - 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.
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 the operating assets
of the Polymers Plus, L.L.C. ("Polymers") including its licenses, patents and
contracts.
The purchase method of accounting was performed on New Directions and the assets
and liabilities of Polymers based on the fair market value oat 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:
Inventory $ 25,380
Deposits and prepaid expenses 3,973
Property, plant and equipment 66,870
Patents, licenses and rights 676,435
Other assets 5,925
---------
Total Assets 778,583
Liabilities:
Current liabilities (110,483)
Long-term liabilities (40,547)
---------
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.
F-10
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - REORGANIZATION AND ACQUISITION (continued)
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.
June 30, June 30,
Pro Forma (unaudited) 2000 1999
----------- -----------
Revenue $ 2,018,363 $ 2,401,814
Cost of goods sold 1,381,091 1,489,725
----------- -----------
Gross profit 637,272 912,089
Expenses
Selling, general and administrative (1,450,809) (1,172,124)
Interest expense (20,066) (3,532)
----------- -----------
Loss from Operations (833,603) (263,567)
Tax Benefit 275,800 59,700
----------- -----------
Net income (Loss) $ (557,803) $ (203,867)
=========== ===========
Loss per share $ (0.07) $ (0.03)
=========== ===========
Weighted average number of shares 8,724,806 8,722,931
=========== ===========
F-11
<PAGE>
American Soil Technologies, Inc.
Balance Sheets
(Unaudited)
September 30,
--------------------------
ASSETS 2000 1999
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 62,194 $ 127,030
Accounts and notes receivable 459,309 569,275
Deposits and prepaid expenses 140,379 11,894
Inventory 278,245 120,173
----------- -----------
TOTAL CURRENT ASSETS 940,127 828,372
Property, plant and equipment, net of
accumulated depreciation 674,881 691,488
Patents, net of amortization 649,251
Deferred income tax asset 2,374,000 1,933,200
Other assets 31,823 26,339
----------- -----------
TOTAL ASSETS $ 4,670,082 $ 3,479,399
=========== ===========
LIABILITIES and STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 164,725 $ 130,694
Accrued expenses 9,839 47,042
Deferred income 325,855 322,604
----------- -----------
TOTAL CURRENT PAYABLE 500,419 500,340
Deferred compensation 29,577
Reserve for remediation 50,000 50,000
Notes payable stockholders 40,547
Debentures payable 1,150,000
----------- -----------
TOTAL LIABILITIES 1,770,543 550,340
STOCKHOLDERS' EQUITY
Common stock 8,730 5,507
Additional paid-in capital 6,568,570 5,936,739
Retained earnings (deficit) (3,677,761) (3,013,187)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 2,899,539 2,929,059
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,670,082 $ 3,479,399
=========== ===========
See accompanying notes to these financial statements.
F-12
<PAGE>
American Soil Technologies, Inc.
Statements of Operations
(Unaudited)
For the Three Months Ended
September 30,
---------------------------
2000 1999
----------- -----------
REVENUE:
Soil and water treatment $ 184,765 $ 218,179
Hauling and miscellaneous sales 14,143 4,296
Other revenue 10,910
----------- -----------
GROSS REVENUE 209,818 222,475
COST OF OPERATIONS:
Materials and supplies 69,381 55,180
Labor and payroll costs 73,237 59,437
Facility costs 67,107
Equipment and maintenance 30,646 15,923
Miscellaneous operating costs 2,212 2,303
----------- -----------
TOTAL COST OF OPERATIONS 242,583 132,843
----------- -----------
GROSS INCOME (32,765) 89,632
Sales and marketing costs 43,760 16,764
Depreciation and amortization 37,879 12,100
General and administrative costs 275,755 65,942
Interest expense 26,970 621
Research and development 1,958
----------- -----------
SALES AND ADMINISTRATIVE COSTS 386,322 95,427
----------- -----------
(419,087) (5,795)
Interest income 215
----------- -----------
Net loss before provision for income taxes (418,872) (5,795)
Income tax credit 167,000 2,000
----------- -----------
NET (LOSS) $ (251,872) $ (3,795)
=========== ===========
Basic loss per common share (Note 8) $ (0.03) $ 0.00
=========== ===========
Weighted average shares outstanding 8,730,431 5,507,420
=========== ===========
See accompanying notes to these financial statements.
F-13
<PAGE>
American Soil Technologies, Inc.
Statement of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
------------------------ Paid-in Accumulated
Shares Amount Capital Deficit Total
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1999 5,507,420 $ 5,507 $ 5,936,739 $(3,009,392) $ 2,932,854
Net loss for the quarter (3,795) (3,795)
----------- -----------
Balance at September 30, 1999 5,507,420 $ 5,507 $ 5,936,739 $(3,013,187) $ 2,929,059
=========== =========== =========== =========== ===========
Balance At June 30, 2000 8,730,431 $ 8,730 $ 6,568,570 $(3,425,889) $ 3,151,411
Net loss for the quarter (251,872) (251,872)
----------- -----------
Balance at September 30, 2000 8,730,431 $ 8,730 $ 6,568,570 $(3,677,761) $ 2,899,539
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to these financial statements.
F-14
<PAGE>
American Soil Technologies, Inc.
Statements of Cash Flow
(Unaudited)
For the Three Months Ended
September 30,
---------------------------
2000 1999
----------- -----------
CASH FLOW FROM OPERATING ACTIVITIES:
NET LOSS $(251,872) $ (3,795)
Items not requiring cash
Amortization and depreciation 37,879 12,100
Benefit on income tax credit (167,000) (2,000)
--------- ---------
Cash flow provided/(used) by operations (380,993) 6,305
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH USED BY OPERATING ACTIVITIES
CHANGES IN ASSETS AND LIABILITIES:
(Increase)/decrease in accounts receivable 61,771 (308,041)
(Increase)/decrease in inventory 24,067 (44,227)
Decrease in other assets 126,511
(Decrease) in accounts payable (200,586) (64,507)
Increase in accrued expenses 37,435
Increase in deferred income 288,575 320,811
--------- ---------
Total Adjustments 173,827 67,982
--------- ---------
Net cash flow provided/(used) by
operating activities (207,166) 74,287
CASH FLOW USED BY INVESTING ACTIVITIES:
Addition of property, plant & equipment (4,992) (32,939)
--------- ---------
Total cash flow used by investing activities (4,992) (32,939)
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of debentures 150,000
Advances from stockholders 50,000
--------- ---------
Total cash flow from financing activities 150,000 50,000
--------- ---------
Net increase/(decrease) in cash (62,158) 91,348
Cash at beginning of period 124,352 35,682
--------- ---------
Cash at end of period $ 62,194 $ 127,030
========= =========
See accompanying notes to these financial statements.
F-15
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(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.
Until January 1, 2000 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 non-hazardous soil and water remediation for
commercial business and as of January 1, 2000 the production and sale of soil
enhancement products of the agricultural community.
REVENUE RECOGNITION
For remediation products revenue is recognized upon completion of the processing
cycle and freight upon shipment by the independent trucking company or upon
completion of the services and is fully earned. Revenue is recognized from the
soil enhancement products upon sale and shipment, or if the sale includes
installation, upon completion of the installation process.
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, and finished products and raw materials for
sale by the agricultural division
F-16
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(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
Patents acquired in the purchase transaction are being amortized over their
estimated useful lives of seventeen years on a straight-line basis.
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 AND PATENTS
Depreciation and amortization of property, plant and equipment for the three
months ended September 30, 2000 and 1999 is $27,890 and $12,100, respectively.
Property plant and equipment consist of the following:
September 30, September 30,
2000 1999
----------- -----------
Production equipment $ 920,051 $ 890,015
Office equipment, furniture and fixtures 70,473 53,045
Vehicles 95,872 46,332
Leasehold improvements 528,793 528,793
----------- -----------
1,615,189 1,518,185
Less accumulated depreciation and amortization (940,308) (826,697)
----------- -----------
$ 674,881 $ 691,488
=========== ===========
F-17
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Amortization of capitalized patent costs for the three months ended September
30, 2000 was $9,989.
NOTE 4 - CONVERTIBLE DEBENTURES
In March, 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 September
30, 2000 the outstanding balance of the debt is $1,150,000. If all debt is
converted the Company would issue 441,667 and based on the current outstanding
balance 383,333 would be issued if the holders elect to convert. Interest
expense for the quarter ended September 30, 2000 was $16,028.
NOTE 5 - 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
quarters ended September 30, 2000 and 1999 the aggregate lease payments were
$67,736 and $23,535, respectively. The Company expects the leases to continue or
be replaced and that the ongoing lease costs will approximate that of 2000.
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
September 30, 2000 and 1999 the Company has reserved $50,000 and $50,000,
respectively, to defray the final cost of lease termination. The lease is month
to month and can be terminated by either party with notice to the other.
NOTE 6 - INCOME TAXES
At September 30, 2000 and 1999, the Company has approximately $5,836,000 and
$4,729,000 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.
F-18
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 - INCOME TAXES (continued)
The components of deferred tax assets and liabilities are as follows:
September 30, September 30,
2000 1999
---------- ----------
Tax effects of reserves for doubtful accounts,
deferred compensation and remediation $ 60,000 $ 42,200
Tax effects of carryforward benefits:
Net operating loss carryforwards 2,314,000 1,892,000
---------- ----------
Tax effects of carryforwards
Tax effects of future taxable differences and
carryforwards 2,364,000 1,933,200
---------- ----------
Net deferred tax asset $2,364,000 $1,933,200
========== ==========
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 558,000
2021 419,000
----------
Total $5,836,000
==========
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
2021, therefore, no valuation reserve has been provided for this against the
asset.
NOTE 7 - COMMON STOCK
At September 30, 2000, the Company has 8,730,431 after the issuance of 3,215,511
on December 31, 1999 for the acquisitions described herein, 5,507,420 shares
outstanding as a result of the stock split at December 31, 1999 and exercise by
the holder of 7,500 shares in May, 2000. The Company has 25,000,000 shares
authorized. The outstanding shares were increased by a stock split of 45.90 for
1 to the original stockholders of the Company and the Company 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.
F-19
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - LOSS PER COMMON SHARE
Loss per share of common stock has been computed based on the weighted average
number of shares outstanding. As of September 30, 2000 and 1999, the weighted
average number of shares outstanding after giving effect to the stock split was
8,730,431 and 5,507,420, respectively. There were no dilutive items outstanding,
therefore, basic and diluted loss per share are the same.
NOTE 9 - 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.
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 the operating assets
of the Polymers Plus, L.L.C. ("Polymers") including its licenses, patents and
contracts.
The purchase method of accounting was performed on New Directions and the assets
and liabilities of Polymers based on the fair market value oat the transaction
date. The valuation 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
Inventory $ 25,380
Deposits and prepaid expenses 3,973
Property, plant and equipment 66,870
Patents, licenses and rights 676,435
Other assets 5,925
---------
Total Assets 778,583
Liabilities
Current liabilities (110,483)
Long-term liabilities (40,547)
---------
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.
F-20
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9 - REORGANIZATION AND ACQUISITION (continued)
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.
September 30,
Pro Forma (unaudited) 1999
-----------
Revenue $ 236,706
Cost of goods sold 140,196
-----------
Gross profit 96,510
Expenses
Selling, general and administrative (137,187)
Interest expense (621)
-----------
Loss from Operations (41,298)
Tax Benefit 16,000
-----------
Net income (Loss) $ (25,298)
===========
Loss per share $ (0.01)
===========
Weighted average number of shares 8,724,806
===========
F-21
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to the Nevada Revised Statutes sec. 78.751, a Nevada Corporation
has the power to indemnify its Directors, Officers, Employees and Agents. The
company is authorized by its Articles of Incorporation and its Bylaws , to
indemnify its officers, directors, employees and agents of the company against
expenses incurred by him or her in connection with any action, suit, or
proceeding to which such person is named a party by reason of having acted or
served in such capacity. Even officers, directors, employees and agents of the
company who was found liable for misconduct or negligence in the performance of
his or her duties may obtain such indemnification if, in considering all the
circumstances of the case, a court of competent jurisdiction determines such
person is fairly and reasonably entitled to indemnification. No such person
shall be indemnified against, or be reimbursed for, any expense or payments
incurred in connection with any claim or liability established to have arisen
out of his or her own willful misconduct or gross negligence. As to
indemnification for liabilities arising under the Securities Act of 1933 (the"
Act"), the company has been advised that in the opinion of the Securities and
Exchange Commission, indemnification for liabilities arising under the Act is
against public policy as expressed in the Act and is therefore unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth the estimated expenses in connection with this offering
as described in this Registration Statement.
SEC Registration Fee $ 419.30
Printing Fees 700.00*
Legal Fees and Expenses 16,350.00*
----------
Total $17,469.30
==========
----------
* Estimated
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
On March 31, 2000 the company completed a private placement of $1,325,000
of its 10% convertible debenture. The debentures are in two forms; a "lump sum"
debenture which requires the entire amount to be paid at the upon execution and
an "incremental" debenture which allows the amount to be remitted over a period
of time. There are two "incremental" and six "lump sum" debentures. The
debentures are due on February 1, 2002. Interest is accrued and paid, in cash,
on a quarterly basis commencing May 1, 2000. The holder, commencing on the date
of execution and ending on the maturity date may convert the debenture at any
time. The conversion rate is one (1) share of common stock per $3.00 principal
amount of the debenture. The holder, after conversion, agreed not to sell more
than 8,000 common shares, on a non-cumulative basis, during any calendar month
through brokerage transactions. The private placement convertible debenture was
exempt from the registration provisions of the Securities Act of 1933, as
amended (the "Act") by virtue of Section 4(2) of the Act, as transactions by an
issuer not involving any public offering. The securities issued pursuant to this
private offering were restricted securities as defined in Rule 144 of the Act.
The offering generated net proceeds of $1,325,000. All investors in this private
placement were accredited investors as defined in Rule 501 of Regulation D as
adopted under the Act.
II-1
<PAGE>
ITEM 27. EXHIBITS
Number Description
------ -----------
3.1 Articles of Incorporation of New Directions Manufacturing, Inc.,
a Nevada corporation, dated January 9, 1997*
3.2 Amendment to Articles of Incorporation of New Directions
Manufacturing, Inc., a Nevada corporation, dated May 29, 1997*
3.3 Amendment to Articles of Incorporation of New Directions
Manufacturing, Inc., dated January 4, 2000*
3.4 Bylaws of New Directions Manufacturing, Inc., dated May 29, 1997*
3.5 Amended and Restated Bylaws of New Directions Manufacturing,
Inc., dated July 20, 1998 *
4.1 Convertible Debenture - Lump Sum Contribution (Form)*
4.2 Convertible Debenture - Incremental (Form)*
5.0 Opinion of Carl P. Ranno, Attorney dated December 20, 2000
10.1 License Agreement between Ron Salestrom, American Soil
Technologies, Inc., and Polymers Plus, L.L.C. Dated January 4,
2000*
10.2 Client Service Agreement between Continental Capital & Equity
Corporation and American Soil Technologies, Inc., dated February
17, 2000 and Addendum, dated August 29, 2000*
10.3 Distributorship Agreement between American Soil Technologies,
Inc. and Sunpride, Inc. dated May 10, 2000*
10.4 Distribution Agreement between UAP Southwest and with Agriblend,
a division of American Soil Technologies Inc., dated August 16,
2000*
10.5 Employment Agreement with Ronald Salestrom, dated January 4,
2000*
10.6 Licensing Agreement between Soil Wash Technologies, Inc. and Site
Remediation Services Limited, dated June 24, 1999*
10.7 Promissory Note between Ron Salestrom and American Soil
Technologies,Inc. dated January 1, 2000*
10.8 Consulting Agreement with Hunter Wise Financial Group, LLC dated
November 22, 2000.
10.9 Fee agreement with Carl P. Ranno, Attorney dated December 14,
2000
10.10 Settlement Agreement with Ron Salestrom and Vice, Inc. dated
December 11, 2000
10.11 Consulting Agreement with Howard Curtis dated June 8, 2000
16 Letter on change in certifying accountant*
23.1 Consent of Carl P. Ranno (included in his opinion set forth in
exhibit 5)
23.2 Consent of James C. Marshall, CPA, P.C., dated December 9, 2000
25.1 Power of Attorney (see signature page)
27 Financial Data Schedule*
----------
* Previously filed
II-2
<PAGE>
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to:
(i) include any prospectus required by Section 10(a0 (3) of the
Securities Act of 1933 (the Securities Act)
(ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the Registration Statement; and
(iii) include any additional or changed material information on the
plan of distribution.
(2) That, for determining liability under the Securities Act, each such
post-effective amendment shall be treated as a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To file a post-effective amendment to remove from registration any of
the securities being registered that remain unsold at the termination
of the offering.
ACCELERATION
In so far as indemnification for liabilities arising under the
Securities Act of 1933 (the Act) may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedence, submitted to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Pasadena, State of California on the 6th day of December 2000.
AMERICAN SOIL TECHNOLOGIES, INC.
By: /s/ Sean Lee By: /s/ Neil C. Kitchen
---------------------------- ----------------------------------
Sean Lee Neil C. Kitchen
Chief Financial Officer President, Chief Executive Officer
Director
POWER OF ATTORNEY
Each person whose signature appears appoints Neil C. Kitchen as his agent and
attorney-in-fact, with full power of substitution to execute for him and in his
name, in any and all capacities, all amendments (including post-effective
amendments0 to this Registration Statement to which this power of attorney is
attached. In accordance with the requirements of the Securities Act of 1933,
this Registration Statement was signed by the following persons in the
capacities and on the date stated.
Signature Title Date
--------- ----- ----
/s/ Neil C. Kitchen President, Chief Executive December 26, 2000
--------------------------- Officer, Director
Neil C. Kitchen
/s/ Sean Lee Chief Financial Officer December 26, 2000
---------------------------
Sean Lee
/s/ Ken Lew Secretary, Director December 26, 2000
---------------------------
Ken Lew
/s/ Louie Visco Director December 26, 2000
---------------------------
Louie Visco
/s/ Richard P. Stevens Director December 26, 2000
---------------------------
Richard P. Stevens
/s/ Scott Baker Director December 26, 2000
---------------------------
Scott Baker
By: /s/ Neil C. Kitchen
------------------------
Neil C. Kitchen
Attorney-in-Fact
II-4
