To the Board of Directors and Stockholders
of American Absorbents Natural Products, Inc
INDEPENDENT AUDITORS' REPORT
----------------------------
We have audited the accompanying consolidated balance sheet of American
Absorbents Natural Products, Inc. and Subsidiary (a Utah corporation) (a
development stage company) as of August 31, 2000, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the seven
month period then ended and for the period February 9, 1984 to August 31, 2000.
These consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Absorbents
Natural Products, Inc. and subsidiary as of August 31, 2000, and the results of
its operations and its cash flows for the seven month period then ended and for
the period February 9, 1984 to August 31, 2000 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has incurred net losses since its inception and has experienced
liquidity problems. These conditions raise questions about the Company's ability
to continue as a going concern. Management's plans in regard to those matters
also are described in Notes 2 and 14. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
SPROUSE & WINN, L.L.P.
Austin, Texas
September 25, 2000
-1-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS' REPORT
AUGUST 31, 2000
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
TABLE OF CONTENTS
PAGE
------
INDEPENDENT AUDITORS' REPORT
1
FINANCIAL STATEMENTS
Consolidated Balance Sheet 2
Consolidated Statements of Operations 3
Consolidated Statements of Stockholders' Equity 4-7
Consolidated Statements of Cash Flows 8-9
Notes to Financial Statements 10-27
<PAGE>
FINANCIAL STATEMENTS
--------------------
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
AUGUST 31, 2000
ASSETS
------
CURRENT ASSETS
<S> <C>
Cash $ 1,511
Accounts receivable 13,213
Inventory 323,107
------------
Total Current Assets
337,831
PROPERTY AND EQUIPMENT
493,543
OTHER ASSETS
Mining claims 5,081,569
Other 1,725
Certificates of Deposit 15,000
------------
Total Other Assets 5,098,294
------------
TOTAL ASSETS 5,929,668
============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses 299,705
Note payable 120,000
Related party long-term debt, current portion 314,833
------------
Total Current Liabilities 734,538
RELATED PARTY LONG-TERM DEBT, LESS CURRENT MATURTIES 608,004
------------
Total Liabilities 1,342,542
------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock; authorized 50,000,000 common shares at $.001 par value;
9,356,642 issued and 6,466,642 outstanding, respectively 9,281
Preferred stock; authorized 10,000,000 shares at $.001 par value; 294,584
shares issued and outstanding 295
Treasury stock, at cost, 2,890,000 shares in 2000 (945,000)
Capital in excess of par value 10,669,112
Deficit accumulated during the development stage (5,146,562)
------------
Total Stockholders' Equity 4,587,126
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,929,668
============
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS
-2-
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the From Inception
Seven Month on February 9,
Period Ended 1984 Through
August 31, August 31,
2000 2000
-------------- ----------------
<S> <C> <C>
REVENUE
Net Sales $ 74,625 $ 573,364
Cost of goods sold 33,851 350,524
-------------- ----------------
Gross Profit
40,774 222,840
-------------- ----------------
EXPENSES
General and administrative 728,813 5,289,096
Depreciation and amortization 57,351 296,178
-------------- ----------------
Total Expenses
786,164 5,585,274
-------------- ----------------
Other Income (Expense)
Rent 5,220 32,092
Interest -0- 2,668
Other 57,166 57,166
Gain (loss) on sale of assets 68,335 74,318
-------------- ----------------
Net Other Income 130,721 166,244
-------------- ----------------
Net loss before provision for income taxes (614,669) (5,196,190)
Provision for income taxes -0- 2,647
-------------- ----------------
Net loss before extraordinary gain
(614,669) 5,198,837
Extraordinary gain net of income taxes 52,275 52,275
-------------- ----------------
NET LOSS $ (562,394) $ (5,146,562)
============== ================
LOSS PER SHARE:
Basic (.11)
==============
Weighted average shares outstanding - basic 5,244,602
==============
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS
-3-
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON FEBRUARY 9, 1984 TO AUGUST 31, 2000
Deficit
Accumulated
Common Stock Preferred Stock Additional During the
----------------- --------------- Treasury Paid-in Development
Shares Amount Shares Amount Stock Amount Capital Stage
--------- ------ ------ ------ ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at Inception February 9, 1984 -0- $ -0- -0- $ -0- $ -0- $ -0- $ -0-
Issuance of common stock for cash 37,500 38 -0- -0- -0- 962 -0-
Expenses paid by shareholders for the years ended
January 31, 1990 -0- -0- -0- -0- -0- 518 -0-
Net loss from inception to January 31, 1990 -0- -0- -0- -0- -0- -0- (1,618)
--------- ------ ------ ------ ------------ --------- -----------
Balance at January 31, 1990 37,500 38 -0- -0- -0- 1,480 (1,618)
Issuance of common stock for services rendered in
August 1990 391,000 391 -0- -0- -0- 7,429 -0-
Issuance of common stock in September 1990 for
various assets from Austin-Young, Inc. 50,000 50 -0- -0- -0- 198,890 -0-
Issuance of common stock for distribution licenses
from Global Environmental Industries (GEI) for UT
& WA, September 1990 50,000 50 -0- -0- -0- 37,070 -0-
Contribution from Austin-Young, Inc. -0- -0- -0- -0- -0- 13,500 -0-
Issuance of common stock for services rendered in
October 1990 12,500 12 -0- -0- -0- 37,488 -0-
Net loss for the year ended January 31, 1991 -0- -0- -0- -0- -0- -0- (57,756)
--------- ------ ------ ------ ------------ --------- -----------
Balance at January 31, 1991 541,000 541 -0- -0- -0- 295,857 (59,374)
Common stock returned in exchange for common
stock of GEI in March 1991 (17,000) (17) -0- -0- -0- (85,423) -0-
Repurchase of common stock from Austin-Young,
Inc. in May 1991 (338,000) (338) -0- -0- -0- (64,682) -0-
Cancellation of common shares (20,000) (20) -0- -0- -0- 20 -0-
Issuance of common stock for the purchase of product
from Steelhead Specialty Mineral in August 1991 10,000 10 -0- -0- -0- 74,990 -0-
Issuance of common stock for the purchase of mining
claims in October 1991 13,214 13 -0- -0- -0- 184,987 -0-
Common stock canceled by officers/directors in
January 1992 (20,000) (20) -0- -0- -0- 20 -0-
Contribution from Austin -0- -0- -0- -0- -0- 17,000 -0-
Net loss for the year ended January 31, 1992 -0- -0- -0- -0- -0- -0- (93,315)
--------- ------ ------ ------ ------------ --------- -----------
Balance at January 31, 1992 169,214 169 -0- -0- -0- 422,769 (152,689)
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Preferred Stock Additional During the
----------------- --------------- Treasury Paid-in Development
Shares Amount Shares Amount Stock Amount Capital Stage
--------- ------- ------ ------ ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock for the acquisition of Geo-
Environment Services, Inc. in February 1992 701,800 702 -0- -0- -0- 96,442 -0-
Issuance of common stock for the purchase of mining
claims in March 1992 243,000 243 -0- -0- -0- 4,859,757 -0-
Common stock canceled by officers and directors in
June 1992 (32,430) (32) -0- -0- -0- 32 -0-
Cancellation of fractional shares due to reverse
stock split (21) -0- -0- -0- -0- -0- -0-
Contribution by Austin-Young, Inc. -0- -0- -0- -0- -0- 10,000 -0-
Issuance of common stock (pursuant to a repurchase
agreement in May, 1991) to Austin-Young, Inc. for
relief of debt in July 1992 3,380,000 3,380 -0- -0- -0- 61,620 -0-
Net loss for the year ended January 31, 1993 -0- -0- -0- -0- -0- -0- (136,304)
--------- ------- ------ ------ ------------ --------- -----------
Balance at January 31, 1993 4,461,563 4,462 -0- -0- -0- 5,450,620 (288,993)
Issuance of common stock for services rendered in
June 1993 17,800 18 -0- -0- -0- 26,682 -0-
Issuance of common stock Austin-Young, Inc. in
June 1993 12,000 12 -0- -0- -0- 35,988 -0-
Issuance of common stock for cash October 1993 66,667 67 -0- -0- -0- 199,936 -0-
Issuance of common stock as down payment on
building October 1993 6,000 6 -0- -0- -0- 29,994 -0-
Issuance of common stock for services rendered
October 1993 17,000 17 -0- -0- -0- 50,983 -0-
Issuance of common stock for cash December 1993 80,072 80 -0- -0- -0- 191,321 -0-
Contribution by Austin-Young, Inc. -0- -0- -0- -0- -0- 36,000 -0-
Net loss for the year ended January 31, 1994 -0- -0- -0- -0- -0- -0- (310,862)
--------- ------- ------ ------ ------------ --------- -----------
Balance at January 31, 1994 4,661,102 4,662 -0- -0- -0- 6,021,524 (599,855)
Issuance of common stock for services rendered
February 1994 6,000 6 -0- -0- -0- 29,994 -0-
Issuance of common stock for services rendered in
June 1994 41,750 42 -0- -0- -0- 175,458 -0-
Issuance of common stock in a private offering 22,500 22 -0- -0- -0- 89,978 -0-
Issuance of common stock for services rendered in
November 1994 15,000 15 -0- -0- -0- 46,235 -0-
Contribution by Austin-Young, Inc. -0- -0- -0- -0- -0- 36,000 -0-
Net loss for the year ended January 31, 1995 -0- -0- -0- -0- -0- -0- (709,048)
--------- ------- ------ ------ ------------ --------- -----------
Balance at January 31, 1995 4,746,352 4,747 -0- -0- -0- 6,399,189 (1,308,903)
Issuance of common stock for services 9,000 9 -0- -0- -0- 22,391 -0-
Issuance of common stock in a private offering 214,168 214 -0- -0- -0- 394,148 -0-
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Preferred Stock Additional During the
------------------- --------------- Treasury Paid-in Development
Shares Amount Shares Amount Stock Amount Capital Stage
----------- ------ ------- ------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Contribution by Austin-Young, Inc. -0- -0- -0- -0- -0- 36,000 -0-
Net loss for the year ended January 31, 1996 -0- -0- -0- -0- -0- -0- (401,467)
----------- ------ ------- ------ ------------ ----------- ------------
Balance at January 31, 1996 4,969,520 4,970 -0- -0- -0- 6,851,728 1,710,370)
Issuance of common stock for cash in a private
offering 130,960 131 -0- -0- -0- 156,729 -0-
Issuance of common stock for services 259,620 260 -0- -0- -0- 262,359 -0-
Net loss for the year ended January 31, 1997 -0- -0- -0- -0- -0- -0- (464,662)
----------- ------ ------- ------ ------------ ----------- ------------
Balance at January 31, 1997 5,360,100 5,361 -0- -0- -0- 7,270,816 (2,175,032)
Issuance of common stock for cash in a private
offering (net of commissions of $84,575) 582,000 582 -0- -0- -0- 729,843 -0-
Issuance of common stock for services 129,784 130 -0- -0- -0- 131,782 -0-
Issuance of common stock for purchase of equipment 13,555 13 -0- -0- -0- 15,236 -0-
Issuance of common stock for cash pursuant to a
stock option plan 25,000 25 -0- -0- -0- 9,350 -0-
Issuance of common stock for partial redemption of
a note pursuant to a stock option plan 100,000 100 -0- -0- -0- 37,400 -0-
Net loss for the year ended January 31, 1998 -0- -0- -0- -0- -0- -0- (489,525)
----------- ------ ------- ------ ------------ ----------- ------------
Balance at January 31, 1998 6,210,439 6,211 -0- -0- -0- 8,194,427 (2,664,557)
Issuance of common stock in a private placement
offering (net of commissions of $53,428) 963,269 963 -0- -0- -0- 1,218,676 -0-
Issuance of common stock for services 135,480 136 -0- -0- -0- 147,628 -0-
Issuance of common stock for purchase of equipment 82,063 82 -0- -0- -0- 121,472 -0-
Net loss for the year ended January 31, 1999 -0- -0- -0- -0- -0- -0- (961,270)
----------- ------ ------- ------ ------------ ----------- ------------
Balance at January 31, 1999 7,391,251 7,392 -0- -0- -0- 9,682,203 (3,625,827)
Issuance of common stock in a private placement
offering 129,001 78 -0- -0- -0- 79,921 -0-
Issuance of common stock for services 115,514 90 -0- -0- -0- 65,547 -0-
Issuance of preferred stock to redeem debt -0- -0- 142,084 142 -0- 140,372 -0-
Issuance of preferred stock in a private offering -0- -0- 152,500 153 -0- 152,347 -0-
Reacquire common stock for note payable (2,520,000) -0- -0- -0- (831,600) -0- -0-
Reacquire common stock in settlement of note
receivable (50,000) -0- -0- -0- (5,000) -0- -0-
Repurchase common stock (320,000) -0- -0- -0- (108,400) -0- -0-
Net loss for the year ended January 31, 2000 -0- -0- -0- -0- -0- -0- (958,341)
----------- ------ ------- ------ ------------ ----------- ------------
Balance at January 31, 2000 4,745,766 $7,560 294,584 $ 295 $ (945,000) $10,120,390 $(4,584,168)
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Preferred Stock Additional During the
----------------- --------------- Treasury Paid-in Development
Shares Amount Shares Amount Stock Amount Capital Stage
--------- ------ ------- ------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock for debt 330,906 331 -0- -0- -0- 108,868 -0-
Stock for compensation 490,051 490 -0- -0- -0- 190,166 -0-
Issuance of common stock for services 899,919 900 -0- -0- -0- 249,688 -0-
Net loss for the seven month period ended
August 31, 2000 -0- -0- -0- -0- -0- -0- (562,394)
--------- ------ ------- ------ ------------ ----------- ------------
Balance at August 31, 2000 6,466,642 $9,281 294,584 $ 295 $ (945,000) $10,669,112 $(5,146,562)
========= ====== ======= ====== ============ =========== ============
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS
-7-
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Seven Month From Inception on
Period Ended February 9, 1984
August 31, Through August 31,
2000 2000
--------------------- --------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net loss $ (562,394) $ (5,146,562)
Extraordinary gain on debt restructuring (52,275) (52,275)
Depreciation and amortization 57,351 296,178
(Increase) decrease in receivables 18,234 (13,213)
(Increase) decrease in prepaid expenses 17,209 12,001
(Increase) decrease in inventory 22,743 (249,933)
Increase (decrease) in payables (86,606) 267,915
Gain from disposal of fixed assets (68,335) (54,958)
Stock issued for services and compensation 441,244 1,446,859
Stock issued for interest on debt 4,199 4,199
Expenses paid by shareholder -0- 149,018
--------------------- --------------------
Net Cash Used by Operating Activities (208,630) (3,340,771)
--------------------- --------------------
Cash Flows From Investing Activities
Purchase of fixed assets (20,575) (742,086)
Proceeds from sale of fixed assets 190,000 190,000
Purchase of product tradenames -0- (28,683)
Purchase of note receivable -0- (5,000)
Purchase of certificates of deposit -0- (1,524)
Organization costs -0- (15,000)
Purchase/sale of mining -0- 7,920
Development costs -0- (58,599)
Purchase of mining claims -0- 150,000
Sale of licenses -0- (65,000)
--------------------- --------------------
Net Cash Provided (Used) by Investing Activities 169,425 (567,972)
--------------------- --------------------
Cash Flows From Financing Activities
Issuance of common stock -0- 3,210,061
Issuance of preferred stock -0- 152,500
Issuance of notes payable 335,000 1,538,031
Purchase of treasury stock -0- (108,400)
Principal payments on debt (303,796) (881,938)
--------------------- --------------------
Net Cash Provided by Financing Activities 31,204 3,910,254
--------------------- --------------------
Net (Decrease) Increase In Cash (8,001) 1,511
Cash at Beginning of Period 9,512 -0-
--------------------- --------------------
Cash at End of Period $ 1,511 $ 1,511
===================== ====================
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
For the Seven From Inception on
Month Period February 9, 1984
Ended August 31, Through August 31,
2000 2000
----------------- -------------------
<S> <C> <C>
Supplemental cash flow information:
Cash Paid For:
Interest $ 22,613 $ 43,312
Income Taxes $ -0- $ 2,547
Non-Cash Transactions:
Stock issued for mining claims $ -0- $ 5,045,000
Stock issued for down payment on building -0- $ 30,000
Stock issued for services and compensation $ 441,244 $ 1,446,859
Stock issued for stock of Geo-Environment Services, Inc. $ -0- $ 97,144
Stock issued for Inventory $ -0- $ 75,000
Stock issued for assets from Austin-Young, Inc. and Global
Environmental Industries $ -0- $ 236,060
Stock issued for purchase of equipment -0- $ 136,803
Stock issued for redemption of note and interest $ 109,199 $ 142,500
Treasury stock repurchased in exchange for debt $ -0- $ 831,600
Treasury stock repurchased in settlement of note receivable $ -0- $ 5,000
Debt assumed by buyer of fixed asset disposition $ -0- $ 14,281
Preferred stock issued as redemption of debt $ -0- $ 140,000
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS
-9-
<PAGE>
ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2000
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ORGANIZATION
American Absorbents Natural Products, Inc. was incorporated on
February 9, 1984 under the laws of the State of Utah and under
the name of TPI Land, Inc. as a wholly-owned subsidiary of TPI,
Inc. On September 14, 1990, the Company changed its name to
Environmental Fuels, Inc. and began developing its involvement in
various phases of the conversion of vehicles to operating on
compressed natural gas. That developing business was sold on
April 23, 1991.
On May 6, 1991, the Company changed its name to Geo-Environmental
Resources, Inc. and began its involvement in the distribution of
zeolite, a mineral product which is an absorbent and has many
potential uses such as oil and gas well cleanup, shoe and
refrigerator freshener, landfill absorption, and other
agricultural uses.
On February 6, 1992, the Company acquired the outstanding stock
of Geo-Environment Services, Inc., now a wholly owned subsidiary
involved in marketing of the zeolite products. The transaction
was accounted for at historical cost in a manner similar to that
in pooling of interest accounting for business combinations.
In June 1995, the Company changed its name to American Absorbents
Natural Products, Inc. and the name of its subsidiary to American
Absorbents, Inc.
On August 8, 2000, the Company entered into a definitive
agreement and plan of reorganization with Centre Capital
Corporation. The Company will exchange all of the issued and
outstanding common stock for shares of Centre Capital
Corporation's common stock and callable, cumulative preferred
stock. As a result of the transaction the Company will become a
wholly-owned subsidiary of Centre Capital Corporation.
-10-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
AUGUST 31, 2000
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
DEVELOPMENT STAGE ENTERPRISE
The Company, per FASB Statement No. 7, is properly accounted for
and reported as a development stage enterprise. Substantially all
of the Company's efforts since its formation have been devoted to
establishing its new business. No significant revenue has been
earned as of the balance sheet date. Operations have been devoted
to raising capital, purchasing zeolite property and establishing
a marketing plan.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
American Absorbents Natural Products, Inc. and its subsidiary
American Absorbents, Inc. Collectively, these entities are
referred to as the Company. All significant intercompany
transactions and accounts have been eliminated.
METHOD OF ACCOUNTING
The Company recognizes income and expenses according to the
accrual method of accounting. Expenses are recognized when
performance is substantially complete and income is recognized
when earned. Earnings (loss) per share are computed based on the
weighted average method. Stock options currently outstanding,
preferred stock and convertible debt were not used in calculating
earnings per share since the effect would be antidilutive. The
fiscal year of the Company ends January 31 of each year. The
financial statements reflect activity from inception, February 9,
1984.
-11-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
AUGUST 31, 2000
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments with a maturity of
three months or less to be cash equivalents.
NONMONETARY TRANSACTIONS
Nonmonetary transactions are transactions for which no cash was
exchanged and for which shares of common stock were exchanged for
assets. These transactions are recorded at fair market value as
determined by the board of directors.
INVENTORIES
Inventories are stated at the lower of cost (FIFO method) or
market, and consist of the following:
Finished goods $ 74,957
Packaging products 149,220
Raw materials 98,930
---------
$ 323,107
=========
ACCOUNTS RECEIVABLE
Accounts receivables are shown net of the allowance for doubtful
accounts. The allowance for doubtful accounts was determined to
be $-0- at August 31, 2000.
-12-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
AUGUST 31, 2000
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
MINING CLAIMS
Mining claims are stated at the lower of cost or market.
Any costs incurred for the betterment of or to increase the
expected efficiency of the operations related to the extraction
from the Company mining claims are capitalized and charged off to
operations over the expected economic life of the claims.
ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and revenues
and expenses during the reporting period. In these financial
statements, assets, liabilities and earnings involve extensive
reliance on management's estimates. Actual results could differ
from those estimates.
NOTE 2: GOING CONCERN
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
Company has a working capital deficiency of $396,707, an accumulated
deficit of $5,146,562 as of August 31, 2000, and a net loss for the
period then ended of $562,394. Accordingly, its ability to continue as
a going concern is dependent on obtaining capital and financing for
its planned principal operations. The Company plans to secure
financing for its acquisition strategy through the sale of its common
stock and issuance of debt. However, there is no assurance that they
will be successful in their efforts to raise capital or secure other
financing. These factors among others may indicate that the Company
will be unable to continue as a going concern for a reasonable period
of time.
-13-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
AUGUST 31, 2000
NOTE 3: INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes" in the fiscal year ended August 31,
1996 and has applied the provisions of the statement on a retroactive
basis to the previous fiscal years which resulted in no significant
adjustment.
Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes" requires an asset and liability approach for financial
accounting and reporting for income tax purposes. This statement
recognizes (a) the amount of taxes payable or refundable for the
current year and (b) deferred tax liabilities and assets for future
tax consequences of events that have been recognized in the financial
statements or tax returns.
Deferred income taxes result from temporary differences in the
recognition of accounting transactions for tax and financial reporting
purposes. There were no temporary differences at August 31, 2000 and
earlier years, and accordingly, no deferred tax liabilities have been
recognized for all years.
The Company had cumulative net operating loss carryforwards of
approximately $3,500,000 at August 31, 2000. No effect has been shown
in the financial statements for the net operating loss carryforwards
as the likelihood of future tax benefit from such net operating loss
carryforwards is not presently determinable. Accordingly, the
potential tax benefits of the net operating loss carryforwards,
estimated based upon current tax rates, of $1,2000,000 at August 31,
2000, have been offset by valuation reserves of the same amount. The
net change in deferred tax asset and offsetting valuation reserve
amounted to $150,000.
The net operating losses begin to expire in the year 2016.
NOTE 4: RELATED PARTY TRANSACTIONS
As of August 8, 2000, the major portion (42%) of the outstanding
shares of the Company are owned by Austin-Young, Inc., a Utah
corporation that has its primary office in Austin, Texas. Some
individuals are officers and directors in both Austin-Young, Inc. and
the Company. During the periods shown, there were several transactions
involving the majority shareholder and the Company's officers and
directors, as follows:
-14-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
AUGUST 31, 2000
NOTE 4: RELATED PARTY TRANSACTIONS (CONTINUED)
August 10, 1990 - Common investment shares of 250,000 were issued to
Austin-Young, Inc. and 1,000 shares were issued to two officers and
directors of the Company for services rendered.
August 13, 1990 - Common investment shares of 100,000 were issued to
Terry Young, president of the Company, for serving as president. Such
shares were subsequently sold to Austin-Young, Inc.
August 13, 1990 - Common investment shares of 5,000 were issued to
Susan Young for bookkeeping services. Susan Young was the wife of
Terry Young at the time of issuance.
August 17, 1990 - An option was given to Austin-Young, Inc. to
purchase an additional 2,000,000 shares (pre-split)(100,000 shares
post-split) of stock at the price of one cent per share. Also, an
option plan was approved which provided that the board of directors
was authorized to issue up to 1,000,000 shares (pre-split) (50,000
shares post-split) to current and future employees at a price of one
cent per share. None of these options were exercised. These options
were later rescinded by the board of directors in July 1993.
August 17, 1990 - Common investment shares of 12,500 were issued to an
officer and director for services.
September 3, 1990 - 50,000 shares were issued at $3.98 per share to
Austin-Young, Inc. in exchange for distributorship license agreements,
stock in Global Environmental Industries, Inc. and Natural Gas
Industries, Inc., and cash. The assets acquired in the transaction
were recorded at-historical cost. The Company subsequently transferred
178,000 shares of Global stock back to the original transferor in
exchange for 17,000 shares of Company stock. The remaining 200,000
shares of Global stock were sold as part of the transaction which
occurred on April 23, 1991.
-15-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
AUGUST 31, 2000
NOTE 4: RELATED PARTY TRANSACTIONS (CONTINUED)
May 13,1991 - 3,380,000 shares of common stock were purchased for
$65,000 cash from Austin-Young, Inc. and canceled. The Company agreed
that Austin-Young, Inc. had the right to repurchase these shares for
the same price at any time up to June 1, 1993.
February 1992 - the Company issued 701,800 shares of common stock at
$0.14 per share to the shareholders of Geo Environment Services, Inc.,
(now AAI) for their stock. Officers of the corporation were major
shareholders of AAI.
July 1992 - 3,380,000 shares of common stock were issued at $0.02 per
share to Austin -Young, Inc. for debt relief of $65,000.
February 1, 1993 - the Company issued to Austin-Young, Inc. an option
to purchase up to 1,000,000 shares of common stock at a price of $3
per share. This option was set to expire on February 1, 1998. 12,000
shares were exercised at a price of $36,000. These options were
cancelled by Austin-Young in 1997.
July 27, 1993 - the Company issued an option to the employees,
officers and directors to purchase up to a maximum of 250,000 shares
of common stock at a price of $3 per share. This option was canceled
on June 5, 1995.
October 8, 1993 - 6,000 shares of stock were issued at $5 per share to
Susan Young as down payment on the purchase of a building.
During 1994, Austin-Young, Inc. issued several promissory notes to the
Company to cover cash shortages. Total promissory notes issued was
$61,424.
In June 1995, the Company adopted a 1995 stock option plan for the
employees, officers and directors to purchase up to 1,000,000 shares
of common stock at market price. The options expire seven years from
the date of offer.
-16-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
AUGUST 31, 2000
NOTE 4: RELATED PARTY TRANSACTIONS (CONTINUED)
The Company is leasing its office space from a related party pursuant
to a 60 month lease agreement dated July 30, 1996 on a month to month
basis at $1,900 per month.
During 1996, Austin-Young, Inc. issued $38,000 in promissory notes to
cover cash shortages. $5,000 was paid back during the year. For the
years 1990 to 1996, The Company's major stockholder, Austin-Young,
Inc. provided compensation to one of the Company's officers and
directors while working on projects related to Company business. The
compensation is shown as an expense to the Company and capital
contribution.
For 1997, the Company issued 128,869 shares of common stock in lieu of
cash to its officers and directors for services performed. The stock
was valued at $128,869, or $1 per share, the trading value of the
stock at the time of issuance.
In 1997, the Company was required to pay a balloon payment due on its
warehouse in September, 1996. Instead of finding long term funding
through a mortgage company, Austin-Young, Inc., the majority
shareholder provided $125,000 in certificates of deposit for
collateral on a one year note of $125,000 provided by a local bank to
pay the balloon payment. The note was due in September, 1997, but was
extended to 1998. The note was paid off in early 1999 In 1997, the
Company issued 16,751 shares of stock to Austin-Young, Inc. for rent
for the use of office space. In 1999, the Company paid cash for use of
office space. Total rent paid in 1999 was $22,800. The lease was
terminated by both parties early in 2000.
In 1997, the Company contracted with American Crisis Publishing (a
wholly owned subsidiary of Austin-Young, Inc.) to provide $40,000
(40,000 shares of common stock) of future "mail out" services for
company literature and future advertising promotions. American Crisis
Publishing specializes in "the creation and preparation of booklets
and mailouts for the dissemination of information to the public."
-17-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
AUGUST 31, 2000
NOTE 4: RELATED PARTY TRANSACTIONS (CONTINUED)
In 1997, the Company purchased for $5,000 from Austin-Young, Inc. a
$20,000 note receivable from a former officer and director for the
purchase of common stock. The note was discounted due to the poor
probability of collection. The Company intends to make a demand for
payment on the note or cancel the shares that were issued under the
note. In 1998, the Company filed suit to cancel the shares.
In 1999, the Company issued 135,480 shares for services rendered, of
which 118,527 was issued to company officers, directors and employees
at an average cost of $1.03, the average trading value of the stock
during the year, for services rendered.
In 2000, the Company issued 115,514 shares for services rendered, of
which 115,514 were issued to Company Officers, Directors and employees
at an average cost of $.57.
During 2000, the Company received proceeds of $240,821 and made
payments of $63,546 on notes payable to Directors of the Company.
Included in the payments made is $30,000 that was converted to
preferred stock.
During the period ended August 31, 2000, the Company issued 330,906
shares of stock in exchange for debt at an average price of $.33.
During the period ended August 31, 2000, the Company issued 490,051
shares to Directors offices, and employees for services rendered at an
average cost of $.39.
NOTE 5: NONMONETARY TRANSACTIONS
Nonmonetary transactions consist of the transactions detailed in Note
4 above and the transfer of common investment shares to individuals
and corporations for services and distributorship license agreements,
as follows:
September 24, 1990 - 50,000 shares of common stock were issued at
$0.74 per share to two corporations for distributorship license
agreements.
October 25, 1990 - 12,500 shares of common stock were issued at $3 per
share to individuals for services.
-18-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
AUGUST 31, 2000
NOTE 5: NONMONETARY TRANSACTIONS (CONTINUED)
August 1991 - 10,000 shares of stock were issued at $7.50 per share
for trademarks and patents for two zeolite products.
October 1991 - 13,214 shares of stock were issued at $14 per share for
zeolite mining claims.
January, 1992 - 20,000 shares of common stock were returned to the
treasury and canceled.
February 1992 - 701,800 shares were issued at $0.14 per share for 100%
of the shares of Geo-Environment Services, Inc.
March 1992 - 243,000 shares were issued at $20 per share for zeolite
mining claims (see Note 8).
June 1992 - 32,430 shares were canceled by officers and directors.
June 1993 - 17,800 shares were issued at $1.50 per share for services
performed.
October 1993 - 6,000 shares were issued at $5 per share for down
payment on plant facility.
October 1993 - 17,000 shares were issued at $3 per share for advisory
services.
February 1994 - 6,000 shares were issued at $5 per shares for legal
services.
June 1994 - 25,750 shares were issued at $4 per shares for services
rendered.
June 1994 - 11,000 shares were issued at $5 per share for services
rendered.
June 1994 - 5,000 shares were issued at $3.50 per share for services
rendered.
November 1994 - 10,000 shares were issued at $3.50 per share for
services rendered.
-19-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
AUGUST 31, 2000
NOTE 5: NONMONETARY TRANSACTIONS (CONTINUED)
November 1994 - 5,000 shares were issued at $2.25 per share for
services rendered.
In 1995 - 9,000 shares were issued at an average price of $2.49 per
share for services rendered.
In 1997 - 259,620 shares (185,620 related party) were issued at an
average price of $1.01 per share for various services rendered.
In 1998 - 129,784 shares (82,449 related party) were issued at an
average price of $1.02 per share for services rendered.
In 1998 - 13,555 shares were issued at an average price of $1.125 for
the purchase of equipment.
In 1999 - 82,063 shares were issued at an average price of $1.48 for
the purchase of equipment.
In 2000, the Company disposed of a fixed asset. The purchaser assumed
the remaining debt of $14,821 on the disposed asset.
In 2000, 142,084 shares of preferred stock were issued at an average
price of $0.99 in exchange for debt.
In 2000, 115,514 shares of common stock were issued to Directors or
Officers for services rendered at an average cost of $0.57.
In 2000, the Company reacquired 2,520,000 shares of common stock from
Austin-Young, Inc. in exchange for a note payable.
In 2000, the Company reacquired common stock in settlement of a $5,000
note receivable. During the period ended August 31, 2000, issued
330,906 shares of stock in exchange for debt at an average price of
$.33.
In 2000, 899,919 shares were issued to vendors for services rendered
at an average cost of $0.36.
-20-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
AUGUST 31, 2000
NOTE 5: NONMONETARY TRANSACTIONS (CONTINUED)
During the period ended August 31, 2000, the Company issued 490,051
shares to Director or Officers for services rendered at an average
cost of $.39.
All nonmonetary transactions, with related parties and non related
parties, transacted with stock of the Company were measured either at
the estimated fair value of the stock being issued (stock market
quotations) or fair value of goods or services being rendered,
whichever was more readily measurable.
NOTE 6: PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
Plant $ 107,781
Machinery and equipment 534,601
Mining site improvements 52,715
Accumulated depreciation (201,554)
----------
$ 493,543
==========
Machinery and equipment (including computer equipment and vehicles) is
depreciated on the straight-line method over the estimated useful
lives of three to seven years. Plant is being depreciated (straight
line) over the estimated useful life of 20 years. Site improvements
are being depreciated (straight line) over an estimated useful life of
ten years. Depreciation expense is $57,351 for the seven month period
ended August 31, 2000.
In the past, the Company had agreements with various vendors to do the
mining and milling of its zeolite mineral and products; this has
resulted in minimal investment in machinery and equipment. During
1997-1998, the Company began construction of a new milling and
packaging plant in Bums, Oregon. The plant became operational during
1999.
-21-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
AUGUST 31, 2000
NOTE 7: MINING CLAIMS
The Company has purchased several zeolite mining claims in three
different regions in the western United States. All purchases were
acquired through stock issuance and are described below.
In April 1991 (before acquisition by Geo-Environmental Resources) (now
American Absorbents Natural Products, Inc.), the Company's subsidiary
issued 440,000 shares of its stock for mining claims containing
zeolite in the Mohave County, Arizona region, and the stock given was
originally valued at $.50 per share. Thus, the mining claims were
originally valued at $220,000. Since the value of the mining claims
was not readily determined the mining claims were written down to a
nominal value.
In October 1991 the Company acquired twenty zeolite mining claims in
Harney County, Oregon. The value of the claims was agreed to be
$185,000 by the seller and purchaser and 13,214 (132,143 pre-split)
shares of common stock were issued. The stock was quoted on the market
at $1.40 per share, thus determining the number of shares to be issued
for the claims.
In December 1991, the Company acquired an additional 203 zeolite
mining claims in the Harney County, Oregon region. A geological study
was conducted and reserves were estimated at over 477,600,000 tons.
The value per ton was also estimated based on mining costs and market
value of other companies in the industry. The reserves were then
discounted 99 1/2% and a value was determined to be approximately
$4,800,000. Stock was then issued at market price to equal the value
given to the claims. During the period ended August 31, 2000, $-0- of
depletion was taken on the claims.
-22-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
AUGUST 31, 2000
NOTE 8: NOTE PAYABLE
A note with a corporation. The note accures interest
at prime rate plus 1%. The note will convert to capital
upon approval of agreement and plan of reorganiztion. $120,000
---------
Total $120,000
=========
NOTE 9: RELATED PARTY LONG TERM DEBT
Related Party Long Term Debt consist of the following:
A note with a former director of the Company. The note
has an interest rate of 8.25% as of August 31, 2000,
with monthly payments of principal and interest of
$2,500. The note matures in July 2001. $ 44,004
A line of credit of $ 215,000, with an officer of the
Company. The note has an interest rate of 10.0% and is
due on February 2002. The line of credit is secured by
the warehouse in Oregon. 211,000
A note with a former officer and director of the Company
secured by 2,800,000 shares of common stock of the
Company. The original value of the note was $924,000.
The note has annual principal and interest payments of
$118,800. The note matures in July 2006. 667,833
---------
Total 922,837
Less curent marurities (314,833)
---------
Related party long-term debt, less current maturities $608,004
=========
Future maturities of related party long-term debt are as follows:
2001 $314,833
2002 132,804
2003 118,800
2004 118,800
2005 118,800
Thereafter 118,800
---------
Total $922,837
=========
-23-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
AUGUST 31, 2000
NOTE 10: PRIVATE PLACEMENT OF COMMON STOCK
During October 1993, the Company issued 66,667 shares of restricted
common stock in a private placement. The shares sold for $3 per share
and carried an option to purchase additional shares within 120 days.
During December 1993, the Company issued 38,170 and 41,902 shares of
restricted common stock in a private placement at $3 and $1.84 per
share, respectively. The shares issued were under an option agreement
as part of the private placement that occurred during October 1993.
On July 5, 1994, 22,500 shares of common stock were issued at $4 per
share in a Regulation D private stock offering
In 1996, the Company issued 214,168 shares of common stock in a
Regulation D private placement for total consideration of $394,362.
In 1997, the Company issued 130,960 shares of common stock in a
Regulation D private placement for total consideration of $156,860.
In 1998, the Company issued 582,000 shares at an average price of
$1.40 in three separate private placements. One private placement was
with a foreign customer that purchased 80,000 shares for $ 100,000.
The first private placement was sold in blocks of 4,000 shares
(minimum investment) at $1.25 per share with a royalty that pays from
the gross tonage of production from the zeolite claims in Oregon, once
under production. The royalty pays $3 per ton per minimum investment
on 6,000 tons of zeolite mined and sold. Total royalties paid per
minimum investment will be $18,000.
The second private placement was sold in blocks of 4,000 shares
(minimum investment) at $2.50 per share with a similar royalty that
pays $2.00 per ton per minimum investment. Total royalties paid per
minimum investment will be $20,000 (10,000 tons).
The Company sold 432,000 shares under the first private placement
($540,000) and 70,000 shares under the second private placement
($175,000).
-24-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
AUGUST 31, 2000
NOTE 10: PRIVATE PLACEMENT OF COMMON STOCK (CONTINUED)
The royalty will be paid simultaneously ($5.00 per ton) to the
shareholders proportionately once the zeolite has been mined and sold.
The company may increase the amount of the royalty payment to any
holder of the royalty right above the specified dollar per ton
royalty, but in no event will the total royalty payment exceed the
maximum per investment. The increase in the royalty amount paid would
only decrease the time limit in which the holder of a royalty right
would receive the total royalty amount. Royalty payments will be made
quarterly after the Company has made its quarterly financial statement
filings with the Securities and Exchange Commission and determined the
total tonnage that has been mined, milled and sold during the
reporting quarter.
In 1999, 963,269 shares were issued in a Regulation D private
placement at an average price of $1.27.
In 2000, 129,001 shares of common stock were issued in a private
placement at an average price of $.62 per share. In addition, the
Company issued 152,500 shares of preferred stock in a private
placement at an average price of $1.00 per share.
NOTE 11: FAIR VALUES OF FINANCIAL INSTRUMENTS
The following listing of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No.
107, "Disclosure About Fair Value of Financial Instruments". The
carrying amounts and fair value of the Company's financial instruments
at August 31, 2000 are as follows:
August 31, 2000
-----------------------
Carrying Fair
Amount Values
----------- ----------
Cash $ 1,511 $ 1,511
Accounts receivable 13,213 13,213
Notes payable including
current maturities $1,042,837 $1,042,837
-25-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
AUGUST 31, 2000
NOTE 11: FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
CASH
The carrying amounts reported on the balance sheet for cash and
cash equivalents approximate their fair value.
ACCOUNTS RECEIVABLE
The carrying amounts reported on the balance sheet for accounts
receivable are reported at net realizable value.
NOTES PAYABLE
The fair values of notes payable are estimated using discounted
cash flow analyses based on the Company's incremental borrowing
rate as the discount rate.
NOTE 12: CERTIFICATES OF DEPOSITS
During 1998, the Company was required to place a $15,000 bond to
insure the reclamation of any mining done on the mining claims in
Oregon. The Company has placed $15,000 in certificates of deposits as
a pledge against any reclamation work that has to be done after mining
operations have ceased. The mining operations will continue for some
time and the certificates will not be useable as working capital for a
number of years. The interest earned on the certificates is directly
deposited to the Company's operating account.
-26-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
AUGUST 31, 2000
NOTE 13: LEASE ON OFFICE SPACE
The Company leases certain equipment under non-cancelable operating
leases. Rent expense for the seven month period ended August 31, 2000
amounted to approximately $3,200.
Future minimum rentals are as follows:
2001 $ 4,932
2002 4,932
2003 4,932
2004 4,932
2005 411
-------
Total $20,139
=======
NOTE 14: COMMITMENTS AND CONTINGENCIES
On August 9, 2000 the Company entered into an agreement to be aquired
by Centre Capital Corporation (CCCX). The shareholders will exchange
all of its shares of common stock for shares of CCCX authorized and
unissued common stock, $.001 par value, and preferred stock $.001 par
value and $3.00 detachable warrants. As a part of the transaction CCCX
will provide working capital of $500,000 to the Company in the form of
a loan. When the closing of the exchange occurs the note will convert
to capital.
NOTE 15: EXTRAORDINARY GAIN
During the period ended August 31, 2000, the Company was able to
negotiate the reduction of a note payable by $52,275 resulting in an
extraordinary gain of $52,275.
-27-
<PAGE>
