U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
OMB Approval Expires: Approval Pending
OMB Number: xxxx-xxxx Estimated Average Burden Hours
Per Response: 1.0
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended July 31, 1998
Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to .
Commission file number 0-23356
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
(Name of Small Business Issuer in Its Charter)
Utah 87-0421089.
(State or Other (IRS Employer Identification)
Jurisdiction of
Incorporation or
Organization)
3800 Hudson Bend Road, Ste. 300, Austin, Texas 78734
(Address of Principal Executive Offices) (Zip Code)
512-266-2481
(Issuer's Telephone Number, Including Area Code)
____________________________________________________________________________
(Former Name, Former Address and Former
Fiscal Year, if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days.
Yes X No .
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the Registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes__________ No___________
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: July 31,
1998----7,025,578 ($0.001 par value) common shares
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The following interim consolidated financial statements as of July 31, 1998
for the six months and quarters then ended, are unaudited, but in the opinion
of management, have been prepared in conformity with generally accepted
accounting principles applied on a basis consistent with those of the annual
audited financial statements and in conformity with the instructions provided
in Item 310(b) of Regulation S-B. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete audited financial statements. Such interim financial
statements reflect all adjustments (consisting of normal recurring
adjustments and accruals) which management considered necessary for a fair
presentation of the financial position and the results of operations for the
quarters presented. The results of operations for the quarters presented are
not necessarily indicative of the results to be expected for the year ending
January 31, 1999. The interim consolidated financial statements should be read
in connection with the audited consolidated financial statements for the year
ended January 31, 1998.
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Financial Statements
For the Six Months and Quarters Ended
July 31, 1998 and 1997
(Unaudited)
INDEX
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PART I. FINANCIAL INFORMATION PAGE NUMBERS
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) 4
CONSOLIDATED BALANCE SHEETS AT JULY 31, 4-5
1998 AND JANUARY 31, 1998
CONSOLIDATED STATEMENT OF OPERATIONS FOR 6
THE SIX MONTHS AND QUARTERS
ENDED JULY 31, 1998 AND 1997
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' 7-10
EQUITY FROM INCEPTION ON
FEBRUARY 9, 1984 THROUGH JULY 31, 1998
CONSOLIDATED STATEMENT OF CASH FLOWS FOR 11-12
THE SIX MONTHS AND QUARTERS
ENDED JULY 31, 1998 AND 1997
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 13-17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 18-21
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PART II.OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 21
ITEM 2. CHANGES IN SECURITIES 21
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY-HOLDERS 22
ITEM 5. OTHER INFORMATION 22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 22
SIGNATURES 23
</TABLE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets
July 31, 1998 and January 31, 1998
(unaudited)
ASSETS
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July 31, January 31,
</TABLE>
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1998 1998
CURRENT ASSETS
</TABLE>
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Cash $ 72,356 $ 24,642
Accounts receivable 9,405 972
Prepaid expenses 42,458 89,208
Inventory 330,754 242,406
Total Current Assets 454,973 357,228
PROPERTY AND EQUIPMENT 742,941 538,151
OTHER ASSETS
Mining claims 5,081,669 5,081,669
Notes receivable 5,000 5,000
Certificates of deposit 15,000 15,000
Business development costs 45,259 -
Total Other Assets 5,146,928 5,101,669
$ 6,344,842 $ 5,997,048
</TABLE>
The accompanying notes are an integral part of these financial statements
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
July 31, 1998 and January 31, 1998
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE> <S> <C> <C> <C>
July 31, January 31,
</TABLE>
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1998 1998
CURRENT LIABILITIES
</TABLE>
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Accounts payable and accrued expenses $ 1,567 $ 156,915
Note payable-related party 50,000 179,052
Note payable 18,700 125,000
Total Current Liabilities 70,267 460,967
COMMITMENTS AND CONTINGENCIES (See Notes)
STOCKHOLDERS' EQUITY
Common stock; authorized 50,000,000
common shares at $0.001 par value;
7,025,578 and 6,210,439 shares issued
and outstanding, respectively 7,026 6,211
Capital in excess of par value 9,297,341 8,194,427
Deficit accumulated during the
development stage (3,029,792) (2,664,557)
Total Stockholders' Equity 6,274,575 5,536,081
$ 6,344,842 $ 5,997,048
</TABLE>
The accompanying notes are an integral part of these financial statements
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations
July 31, 1998 and 1997
(unaudited)
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From Inception
Six Months Six Months Three Months Three Months (February 9,
Ended Ended Ended Ended 1997)
July 31,1998 July 31, 1997 July 31,1998 July 31,1998 July 31,1998
REVENUES
Net sales $ 26,224 36,454 21,675 4,901 313,352
Cost of
goods sold 18,370 31,555 15,115 4,409 204,227
Gross Profit 7,854 4,899 6,560 492 109,125
EXPENSES
General and
administrative 354,460 237,653 212,902 111,338 3,039,586
Depreciation 23,115 7,394 11,250 3,697 109,350
and amortization
Total expenses 377,575 245,047 224,152 115,035 3,148,936
Other Income/(Expense)
Rent 4,116 -0- 1,968 -0- 12,021
Interest 370 -0- 185 -0- 545
Net loss before
provisionfor
income taxes
(240,148) (215,439) (114,543) (3,027,245) (365,235)
Provision for -0- -0- -0- -0- 2,547
income taxes
Net loss $(365,235) (215,439) (114,543) (3,029,792) (240,148)
Weighted average
loss per share (.05) (.04) (.03) (1.26) (.02)
Average shares
outstanding 7,025,578 5,637,694 6,993,350 5,637,694 2,402,100
</TABLE>
The accompanying notes are an integral part of these financial statements
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
From Inception on February 9, 1984 to July 31, 1998
(unaudited)
Deficit Accumulated Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
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Balance at Inception-
February 9, 1984 $ - $ - $ -
Issuance of common stock
for cash 37,500 38 962 -
</TABLE>
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Expenses paid by shareholders for the
years ended January 31, 1990 - - 518 -
</TABLE>
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Net loss for the years ended January - - - (1,618)
31, 1990
Balance, January 31, 1990 37,500 $ 38 1,480
Issuance of common stock for services 391,000 391 7,429 -
rendered in August 1990
Issuance of common stock in September
1990 for various 50,000 50 198,890 -
assets from Austin-Young, Inc.
Issuance of common stock for
distribution licenses from Global
Environmental Industries (GEI) for UT 50,000 50 37,070 -
& WA, September
1990
Contribution from Austin-Young, Inc. - - 13,500 -
Issuance of common stock for services 12,500 12 37,488 -
rendered in October 1990
Net loss for the year ended January - - - (57,756)
31, 1 991
Balance, January 31, 1991 541,000 541$295,857 $(59,374)
Common stock returned in exchange for
common stock of GEI in March 1991 (17,000) (17) (85,423) -
Repurchase of common stock from
Austin-Young, Inc. in (338,000) (338) (64,682) -
May 1991
Cancellation of common shares (20,000) (20) 20 -
Issuance of common stock for the
purchase of product from 10,000 10 74,990 -
Steelhead Specialty Minerals in August
1991
</TABLE>
The accompanying notes are an integral part of these financial statements
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
From Inception on February 9, 1984 to July 31, 1998
(unaudited)
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
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Issuance of common stock for the
purchase of mining claims in
13,214 13 184,987 -
October 1991
Common stock canceled by (20,000) (20) 20 -
officers/directors in January 1992
</TABLE>
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Contribution from
Austin-Young, Inc. - - 17,000 -
</TABLE>
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Net loss for the year ended
January 31, 1992 - - - (93,315)
Balance, January 31, 1992 169,214 169 $ 422,769 $(152,689)
Issuance of common stock for the
acquisition of Geo- 701,800 702 96,442 -
Environment Services, Inc. in February
1992
Issuance of common stock for the
purchase of mining claims 243,000 243 4,859,757 -
in March 1992
Common stock canceled by officers and
directors in (32,430) (32) 32 -
June 1992
Cancellation of fractional shares
due to reverse stock split (21) - - -
Contribution by Austin-Young,
Inc. - - 10,000 -
Issuance of common stock (pursuant to a
repurchase agreement
in May, 1991) to
Austin-Young, Inc. for 3,380,000 3,380 61,620 -
relief of debt in July
1992
Net loss for the year ended
January 31, 1993 - - - (136,304)
Balance, January 31, 1993 4,461,563 $ 4,462 5,450,620 (288,993)
Issuance of common stock for services
rendered in 17,800 18 26,682 -
June 1993
Issuance of common stock to
Austin-Young, Inc. in 12,000 12 35,988 -
June 1993
Issuance of common stock for cash 66,667 67 199,936 -
October 1993
</TABLE>
The accompanying notes are an integral part of these financial statements
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
From Inception on February 9, 1984 to July 31, 1998
(unaudited)
Deficit Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
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Issuance of common stock as down
payment on building 6,000 6 29,994 -
October 1993
Issuance of common stock for services
rendered in 17,000 17 50,983 -
October 1993
</TABLE>
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Issuance of common stock for cash 80,072 80 191,321 -
December 1993
</TABLE>
<TABLE>
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Contribution by Austin-Young, Inc. - - 36,000 -
Net loss for the year ended January - - - (310,862)
31, 1994
Balance, January 31, 1994 4,661,102 $ 4,662 $ 6,021,524$ (599,855)
Issuance of common stock for services
rendered February 6,000 6 29,994 -
1994
Issuance of common stock for services
rendered in June 1994 41,750 42 175,458 -
Issuance of common stock in a private offering 22,500 22 89,978 -
Issuance of common stock for services
rendered in November 15,000 15 46,235 -
1994
Contribution by Austin-Young, Inc. - - 36,000 -
Net loss for the year ended January - - - (709,048)
31, 1995
Balance, January 31, 1995 4,746,352 $ 4,747 $ 6,399,189$(1,308,903)
Issuance of common stock for services 9,000 9 22,391 -
Issuance of common stock in a private offering 214,168 214 394,148 -
Contribution by Austin-Young, Inc. - - 36,000 -
Net loss for the year ended January - - - (401,467)
31, 1996
Balance at January 31, 1996 4,969,520 $ 4,970 $ 6,851,728$(1,710,370)
</TABLE>
The accompanying notes are an integral part of these financial statements
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
From Inception on February 9, 1984 to July 31, 1998
(unaudited)
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
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Issuance of common stock for cash in
a private 130,960 131 156,729 -
offering
Issuance of common stock
for services 259,620 260 262,359 -
</TABLE>
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Net loss for the year
ended January - - - (464,662)
31, 1997
</TABLE>
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Balance, January 31, 1997 5,360,100 $ 5,361$ 7,270,816 $(2,175,032)
Issuance of common stock for cash in
a private offering 582,000 582 729,843 -
(Net of commissions of $84,575)
Issuance of common
stock for services 129,784 130 131,782 -
Issuance of common
stock for purchase 13,555 13 15,236 -
of equipment
Issuance of common stock for cash
pursuant to a stock
option plan 25,000 25 9,350 -
Issuance of common stock for partial
redemption of a note 100,000 100 37,400 -
pursuant to a stock option plan
Net loss for the year ended January - - - (489,525)
31, 1998
Balance, January 31, 1998 6,210,439 $ 6,211 $ 8,194,427 $ (2,664,557)
Issuance of common stock for cash in
a private offering 520,976 521 729,383 -
(Net of commissions of $51,290)
Issuance of common stock for the 81,763 81 120,872 -
purchase of equipment
Issuance of common stock
for services 3,500 4 5,246 -
Issuance of make-up shares in a 46,672 47 47 -
private offering amendment
Issuance of common stock for cas in a
private offering 140,007 140 207,860 -
(Net of commissions of $2,000)
Issuance of common stock for the 300 - 600 -
purchase of equipment
Issuance of common stock for services 21,921 22 38,906 -
Net loss for the six months ended - - - (365,235)
July 31, 1998
Balance, July 31, 1998 7,025,578 $ 7,026$ 9,297,341$(3,029,792)
</TABLE>
The accompanying notes are an integral part of these financial statements
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows
<TABLE>
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From
Inception
February
1997
Six Months Six Months Three Months Three Months to July
Ended Ended Ended Ended 31, 1998
July 31, 1998 July 31, 1997 July 31, 1998 July 31, 1997
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Loss $ (365,235) $ (240,148) $ (215,439) $ (114,543) $(3,029,792)
Depreciation 23,115 7,394 11,250 3,697 109,350
and amortization
(increase)
decrease in (8,433) (20,410) (1,284) 14,211 (9,405)
receivables
Decrease
(increase) in 46,750 14,750 54,125 7,375 (42,458)
prepaid
expenses
Decrease (88,348) 10,357 (42,328) 256 (377,114)
(increase) in inventory
Increase (155,348) (39,137) (21,326) (24,808) 1,567
(decrease) in payables
Loss from -0- -0- -0- -0- 1,560
disposal of fixed asset
Stock issued 44,178 62,294 38,928 33,950 835,879
for services
Expenses paid -0- -0- -0- -0- 149,018
by shareholder
Net cash
used by operating (503,321) (204,900) (176,074) (79,862) (2,361,395)
activities
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of (204,790) (46,751) (125,276) (46,751) (755,433)
fixed assets
Purchase -0- -0- -0- -0- (15,000)
certificates of deposit
Purchase of -0- -0- -0- -0- (26,958)
product tradenames
Purchase of -0- -0- -0- -0- (5,000)
note receivable
Organization costs -0- -0- -0- -0- (1,524)
Sale-mining -0- -0- -0- -0- 7,920
development costs
Business (45,259) -0- (45,259) -0- (45,259)
development costs
Purchase of -0- -0- -0- -0- (58,599)
mining claims
Sale of licenses -0- -0- -0- -0- 150,000
Purchase of stock -0- -0- -0- -0- (65,000)
Net cash
used by investing (250,049) (46,751) (170,535) (46,751) (814,853)
activities
CASH FLOWS FROM
FINANCING ACTIVITIES
Issuance of 1,011,781 252,001 267,127 72,000 2,922,204
common stock
Issuance of 24,655 -0- -0- -0- 671,865
notes payable
Principal
payments on (235,352) -0- (154,300) -0- (490,177)
long-term
debt
Net cash
provided by 801,084 267,361 112,827 72,000 3,103,892
financing activities
Net (decrease)
increase in cash 47,714 350 (233,782) (54,613)
Cash at beginning
of period 24,642 1,078 306,138 56,041 -
Cash at end of period 72,356 1,428 72,356 1,428 72,356
</TABLE>
The accompanying notes are an integral part of these financial statements
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
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From
Inception
(February 9,
1984)
Six Months Six Months Three Months Three Months Ended to July
Ended Ended Ended Ended 31, 199
July 31, 1998 July 31, 1998 July 31, 1998 July 31, 1998
SUPPLEMENTAL CASH FLOWINFORMATION:
CASH PAID FOR:
Interest 6,400 10,806 1,777 5,886 31,759
Income Taxes -0- -0- -0- -0- 2,447
NON-CASH TRANSACTIONS:
Stock issued -0- -0- -0- -0- 5,045,000
for mining claims
Stock issued
for down payment -0- -0- -0- 30,000
on building
Stock issued 38,900 62,294 38,900 33,950 830,601
for services
Stock issued
for stock of Geo- -0- -0- -0- 97,144
Environmental
Services, Inc.
Stock issued -0- -0- -0- 75,000
for inventory
Stock issued
for assets of
Austin-Young, -0- -0- -0- 236,060
Inc. and Global
Environmental Industries
Stock issued 121,600 15,362 121,600 15,362 136,849
for mill equipment
Stock issued
for partial -0- -0- -0- -0- 37,500
redemption of note
</TABLE>
The accompanying notes are an integral part of these financial statements
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
July 31, 1998
(unaudited)
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 is now developing 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., 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.
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 recognized 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 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.
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.
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
July 31, 1998
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventories
Inventories are stated at the lower of cost (FIFO method) or market, and
consist of finished goods and packaging materials.
Accounts Receivable
Accounts receivable are shown net of the allowance for doubtful
accounts. This amount was determined to be $0 and $0 at July 31, 1998 and
1997 after writing off all accounts determined to be uncollectible.
Prepaid Expenses
Prepaid expenses at July 31, 1998 consist of the following:
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Prepaid mining land lease $ 2,458
Prepaid fees 40,000
$ 42,458
</TABLE>
Business Development Costs
Business development costs of $45,259 at July 31, 1998 consists of
slotting fees.
Mining Claims
Mining claims are stated at the lower of cost or market, whichever is
lower.
Any costs incurred for the betterment 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.
The Company has adopted SFAS statement #121 which requires a review of
any potential for the impairment of value of any long-lived assets. It is
the policy of the Company to annually review the future economic benefit of
all long-lived assets and to charge off to operations any potential
impairment of value of long-lived assets when applicable.
NOTE 2 - 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.
Continuation of the development effort is contingent upon the Company
raising sufficient capital from shareholders or other sources. It is
management's intent to raise capital and further develop the marketing of
its zeolite products.
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
July 31, 1998
(unaudited)
NOTE 3 - COMMON STOCK AND STOCKHOLDERS' EQUITY
During the periods shown, the Company had a one-for-two reverse stock
split and a one-for-ten reverse stock split. The financial statements have
been retroactively restated to reflect the stock splits.
Stock of the Company has been issued for cash, license agreements, mining
claims, compensation for services, equipment and in exchange for other stock.
On February 10, 1984, the Company issued 37,500 shares of its stock to
TPI, Inc. for $1,000 cash. On June 30, 1984, TPI, Inc. distributed the 37,500
shares to its stockholders in a partial liquidating dividend.
In August and September 1990, control of the Company was acquired by
Austin-Young,Inc. and shares of stock were issued to Austin-Young, Inc. and to
some of its officers and directors.
In September 1990, the Company acquired four license agreements to
distribute the products of Natural Gas Resources, Inc., (NGRI) a wholly-owned
subsidiary of Global Environmental Industries, Inc. NGRI was engaged in the
business of licensing the operations of compressed natural gas conversion
centers and natural gas refueling stations. NGRI had certain patented
products used in the conversion of vehicles from gasoline and diesel to the
use of natural gas. Under these license agreements, the Company acquired the
right to distribute the products of NGRI in San Antonio, Texas (metropolitan
area); Burnet County, Texas; state of Utah; and the state of Washington. On
April 23, 1991, the Company sold the license agreements along with stock of
Global Environmental Industries, Inc. and Natural Gas Industries, Inc. for
$150,000. All assets were sold at book value and no gain or loss was
recognized on the sale.
In August of 1991 the Company issued 10,000 shares of stock at $7.50 per
share for the rights to two zeolite products of Steelhead Specialty Mineral,
Inc. (see Note 9).
In October 1991 the Company issued 13,214 shares of stock at $14 per
share for mining claims in Harney County, Oregon and in March 1992, issued
243,000 shares at $20 per share for additional zeolite mining claims in the
same area (see Note 8).
In February 1992 the Company issued 701,800 shares at $0.14 per share for
all the outstanding stock of American Absorbents, Inc. (AAI) which became a
wholly owned subsidiary. AAI had, prior to being acquired, purchased
zeolite mining claims in Mohave County, Arizona.
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
July 31, 1998
(unaudited)
NOTE 4 - 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
stockfor 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.
On July 10, 1997, the Company was granted, by the Department of the
Interior Bureau of Land Management, its Permanent Mining Permit and Plan of
Operations approval to mine its Harney County, Oregon zeolite properties.
To date no depletion has been taken on any of these claims. Depletion
of these assets will begin once material mining operations on these claims
begins.
NOTE 5 - NOTES PAYABLE
During the quarter ended July 31, 1998, the note payable to the major
shareholder was reduced by $50,000 thereby reducing relevant annual interest
expense to $3,500.
NOTE 6 - PRIVATE PLACEMENT OF COMMON STOCK
During the quarter ended July 31, 1998, 140,007 shares of common stock
were issued in a private placement for $208,000 cash which was net of
brokerage commissions. Another 300 common shares were issued for the
purchase of equipment valued at $600. Another 21,921 common shares were
issued to officers for services valued at $38,900.
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
July 31, 1998
(unaudited)
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company has sold two private placements that include a royalty
payment. The first private placement sold includes a $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 sold
includes a $2 per ton per minimum investment on 10,000 tons of zeolite mined
and sold. Total royalties paid per minimum investment will be $20,000. The
royalties will be paid simultaneously ($5 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 filing with the Securities and Exchange Commission and determined
the total tonnage that has been mined, milled and sold during the quarter.
NOTE 8 - USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements
and revenues and expenses during the reporting period. In these financial
statements, assets, liabilities and earnings involve extensive reliance
on management's estimates. Actual results could differ from those estimates.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION, RESULTS
OF OPERATIONS AND PLAN OF OPERATIONS.
The Company, per FASB statement No. 7, is properly accounted for and reported
as a development stage enterprise. The Company's efforts since entering its
current business have been devoted primarily to Company capitalization,
acquisition of mining properties, packaging and milling facility acquisitions
and product and market development.
The Company has realized limited sales in each of its fiscal years ended
January 31, 1992 through January 31, 1998 from limited test marketing programs
for its products while in the development stage. During the development stage
the Company has developed over a dozen products and test marketed these
products in various parts of the country.
LIQUIDITY
Austin Young, Inc., the major stockholder of the Company, has provided,
through loans and equity funding, any deficiencies to the necessary working
capital during the development stage, but expects funding from private
placements and other offerings will be sufficient for future development
costs. Austin Young, Inc. provided a small portion ($7,000) of the Company's
operating capital during fiscal year 1997 through advances on behalf of the
Company. The Company owed $202,385 to Austin Young, Inc. at July 31, 1997
and $50,000 at July 31, 1998. The balance owing to Austin Young, Inc. was
reduced by $23,333 in principal and $14,167 in accrued interest during the
fiscal year ended January 31, 1998 by the exercise of options by Mr. Young
and by $79,052 during the quarter ended April 30, 1998. The note was further
reduced by $50,000 during the quarter ended July 31, 1998. Revenues to date
have provided insignificant funding of working capital because of the
development stage status of the company and the limited test marketing
programs.
When possible, the Company has issued stock for the acquisition of assets or
services to reduce the need for additional operating capital from the major
stockholder, additional shareholders or gross profits from its limited
marketing efforts. A large part of the Company's zeolite mineral deposits were
acquired by stock issuance which is expected to play an integral part of
maintaining a competitive edge by keeping supply costs of the principle
ingredient of its packaged products to a minimum. During the development stage,
the Company has also relied on favorable office space and equipment leases
from Austin Young, Inc. to maintain a lower overhead to conserve its limited
resources for product and market development.
During the development stage the Company has paid for almost everything as it
was acquired including the build up in inventory levels. As a result, and now
that the milling facility is in production, the future cash flow of the Company
will benefit as the inventory is converted into sales with the implementation
of the marketing efforts.
During the development stage the Company incurred losses that reflect the
development stage activity of researching and test marketing its products. The
Company paid $29,500 to the Bureau of Land Management in the fiscal year
ended January 31, 1997 and $29,500 in the fiscal year ended January 31, 1998.
In the future, approximately $29,500 will be due to the Bureau of Land
Management in August of each year to satisfy claim maintenance fees on existing
claims.
As the Company moves into the marketing phase, its need for the warehouse
space in Austin, Texas has diminished somewhat and the Company has leased a
portion of the warehouse to a tenant for approximately $900 per month with
the Company continuing to use the remainder of the space.
During the fiscal year ended January 31, 1997, the Company issued 130,960
shares in private placements for $156,860 and issued 259,620 shares for service
rendered to the Company and valued at $262,219. During the fiscal year ended
January 31, 1998, the Company issued 582,000 shares in private placements for
$815,000, 129,784 shares for services rendered to the Company and valued at
$132,380, 13,555 shares for equipment valued at $15,250, 25,000 shares
through the exercise of an option to a director for $9,375 and 100,000 shares
through the exercise of an option to an officer and director for $37,500 in
debt relief. During the six months ended July 31, 1997, the Company issued
201,600 shares in a private placement for $252,000 and issued 62,339 shares
for services rendered to the Company and valued at $62,294. During the six
months ended July 31, 1998, the Company issued 660,983 shares in a private
placement for $937,904, 25,421 shares for services rendered to the Company and
valued at $44,178 and issued 82,063 shares for equipment valued at $121,600.
The Company realizes gross profit margins generally ranging from 20% to 35% on
its product sales depending on product line and pricing levels. While still
in the test marketing phase, for the fiscal years ended January 31, 1996,
January 31, 1997, January 31, 1998 and for the period from the inception date
on February 9, 1984 to January 31, 1998, the Company had average gross profit
margins of 35%, 30%, 30% and 35% respectively. Bringing the Oregon milling
facility into production should also decrease costs, thereby allowing the
Company to increase gross profit margins or reduce selling prices to facilitate
increasing market share on each of the products sold by the Company. Quantity
discounts on bag purchases for certain of the Company's products could result
in up to a 15% increase in the gross profit percent. At current operating
expense levels and with the anticipated product sales mix, the Company estimates
its break-even at approximately $125,000 in sales per month or $1,500,000 in
sales per year. For the period from the inception date on February 9, 1984 to
July 31, 1998, the Company had an average gross profit margin of 35%. For the
six months ended July 31, 1998 and 1997, the Company realized gross profit
margins of 30% and 13%, respectively on revenues of $26,224 and $36,454,
respectively.
At July 31, 1998, the Company had $18,700 in bank debt outstanding relative to
transportation equipment. All accounts payable and accrued expenses are paid
when due or sooner when discounts are available.
RESULTS OF OPERATIONS
Because the Company is a development stage enterprise, it has incurred losses
in each of its fiscal years ended January 31, 1996, 1997 and 1998 and for the
six months ended July 31, 1997 and July 31, 1998. This is due to the Company
incurring operating expenses during a time when most of the efforts were
expended in product and market development and other areas not directly related
to marketing while positioning the Company to implement various marketing
programs.
During the fiscal year ended January 31, 1996, sales declined to $26,070 as
the Company's management concentrated on the revamping of existing marketing
structures in retail outlets, the design of a marketing program to market
agricultural products through feed dealers, the development of the conceptual
framework for marketing the smaller packaged products through a direct sales
organization, the development of a relationship with an import company in
France to market products in France and the acquisition of a milling facility
in Oregon. During the fiscal year ended January 31, 1997 revenues increased
to $69,293, or 166% over the previous year, as the Company began to realize
revenues from the agricultural marketing programs in the United States and
France. During the fiscal year ended January 31, 1998 revenues decreased to
$47,472 from $69,293 the previous year, or, 31%, due to lower orders from
the French distributor resulting from milder weather conditions in France.
Revenues for the six months ended July 31, 1998 decreased to $26,224 from
$36,454 for the same period of the previous year as the management focused on
getting the Oregon production facility into production and the employment of
personnel to operate the plant.
Ownership of its own zeolite deposits should allow the Company to better
control its cost of sales since zeolite is the major raw material used in its
products. The Company also has negotiated mining arrangements with mining
companies to eliminate large capital requirements that would be necessary to
acquire equipment.
General and administrative expenses have increased steadily since January 31,
1991, as the Company developed more products and added personnel to test market
products. Depreciation and amortization expenses since inception have
remained low because the Company has contracted many of its needs that would
otherwise require capital expenditures. Approximately $22,400 of the
operating expenses for the fiscal year ended January 31, 1996, were funded
through S-8 Registration Statements. Approximately $262,000 of services were
acquired during the fiscal year ended January 31, 1997 and $132,380 of
services were acquired for the fiscal year ended January 31, 1998 through the
issuance of common stock. Net General and Administrative Expenses increased by
approximately $75,000 during the fiscal year ended January 31, 1997, from
$393,000 to $468,000. Of this increase in general and administrative expenses,
legal and accounting expenses increased by $9,700, interest expense by $2,400,
rent expense by $13,000, repairs and maintenance by $1,200, miscellaneous
expense by $2,200 and professional services by $190,000. Professional services
included shares of stock that were issued to officers and directors as
compensation for their services. Decreases to the general and administrative
accounts include zeolite lease expense ($52,500), printing, postage and office
expenses ($11,100), travel and entertainment ($7,700), advertising ($5,700),
business promotion ($2,950), contract labor ($4,000), insurance ($4,000),
salaries and wages ($27,000), property taxes ($700), and payroll taxes
($1,200). Other accounts accounted for the remaining difference. Net general
and administrative expenses only increased by approximately $29,000 during the
fiscal year ended January 31, 1998. The increase was mostly due to increases
in payroll as Terry L. Young was added to the Company's payroll.
Net General and Administrative Expenses increased by approximately $117,000
during the six months ended July 31, 1998 as compared to the same period of
the previous year mostly due to payroll increases relating to the employment
of the Vice President of Production and employees for the Oregon milling
facility and increased fees and costs associated with bringing the Oregon
facility into production. Depreciation expenses increased by approximately
$15,700 during this same time period due to increased depreciation expense
relative to the new milling equipment.
In May 1998, the Company paid off a note payable of approximately $125,000 on
the warehouse/plant facility in Austin, Texas.
The Company has maintained current ratios of 0.77, 0.47 and 1.10,
respectively, for the fiscal years ended January 31, 1998, 1997 and 1996.
The lower current ratio for the fiscal years ended January 31, 1998 and 1997,
results from the classification as short term debt of $ 179, 052 and $202,385,
respectively, owing to Austin-Young, Inc., the major stockholder of the
Company. Current ratios for the six months ended July 31, 1998 and 1997 were
6.47 and 0.51, respectively. The improved current ratio results from the
payment of approximately $277,000 of current bank debt.
INFLATION
The Company does not expect inflation to have any material effect on its
revenues, costs or overall operation. Since the Company owns its own zeolite
deposits for the main raw material used in its products, inflation would
generally give the Company a competitive edge over companies that do not own
their own deposits. The Company expects that any increased paper costs for
the packaging used in its products can be off-set by price increases without
losing any competitive edges since all other competitors will face the same
price increases. The Company is using quality, less expensive plastic
packaging for its Stall Fresh product and may pursue plastic packaging for
other products as well.
PLAN OF OPERATIONS
Management believes that it can continue to fund its operations through
private placements or funds received from the major stockholder until a public
stock offering can be completed or revenues reach the level (approximately
$1,500,000 per year) at which the gross profits attained will sustain and
finance the operations. The Company will have to raise a more significant
amount of equity in order to expand its operations at a more rapid rate.
Management has begun a limited marketing campaign, based on available capital,
of its products in certain market areas of the United States and in France.
Several distributors have been signed to distribute the products and
discussions are being held with others and are in different stages of
completion which usually requires extensive testing and approval by each of
the wholesale or retail outlets. The Company continues to sell some of its
smaller packaged products through several of the retail outlets that
participated in the test marketing program for the products. During the six
months ended July 31, 1998, the Company began cat litter shipments to Drug
Emporium in the northwestern United States, Smith's Food and Drug Centers in a
nine state region, Randall's, Albertson's and Fleming Companies in the Texas
and Louisiana markets, and has received approvals for shipments to Krogers
and Tom Thumb as well. These additional market areas makes the Company's
products available for sale in at least 15 states.
The Company has completed design and packaging for products such as Mother
Earth Cat Litter and Soil Enhancer, White Buffalo , Stall Fresh, Stinky
Pinkys and Shoe Fresh as well as eight other products. The Company is also
working the conceptual framework of various other products using the zeolite
minerals present in its existing product line. This includes the impregnation
of zeolites with pesticides, herbicides and fertilizers for use in fields,
pastures and gardens as well as chemicals to help eradicate fire ants. The
Company is also planning the introduction of at least two new products
including a lawn and garden product and a multi-purpose product during the next
fiscal year.
In October, 1995, the Company purchased a production plant containing 103,125
sq. ft. and approximately 3,500,000 cu. ft. of production, packaging and
storage space near its zeolite properties in Oregon. The facility is not
subject to any existing mortgages. The Company completed a private placement
offering in the early part of fiscal 1998 that was sufficient to equip this
facility with crushing, milling, drying, screening, packaging and storage
equipment. The construction of the milling facility equipment was completed
during the quarter ended April 30, 1998 and the plant has begun operating.
The Company has purchased additional milling equipment that will at least
triple the milling facility's capacity when installed.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
During the quarter ended July 31, 1998, there were no material pending or
threatened legal proceedings against the Company or its directors, officers,
affiliates and owners of record or beneficially of more than five percent of any
class of voting securities of the Company nor was there any associate of any
such director, officer, affiliate or security-holder who is a party in any
action that is adverse to the Company or its subsidiary.
On or about May 25, 1998, the Company received service on a lawsuit (Cause No.
9804737) that was filed in the 126th Judicial District Court of Travis County,
Texas by Mr. Charles R. Walden, Jr. (former President of the Company).
Named as defendants in the lawsuit were American Absorbents Natural Products,
Inc. and Terry L. Young. Prior to receiving service on the lawsuit, the
Company had filed a lawsuit against Mr. Walden seeking the return and
cancellation of 200,000 common shares he had been sold at a reduced rate
pursuant to a 30 month note by Austin Young, Inc. in return for future services
to the Company to get the Company beyond the development stage. Mr. Walden's
services to the Company terminated for cause within 60 days of the
transaction and more than 3 years prior to the Company moving beyond the
development stage. Subsequent to the sale by note of the shares to Mr. Walden by
Austin Young, Inc., the Company purchased the note from Austin Young. The
Company seeks to have these shares canceled for the benefit of all shareholders
for failure on Mr. Walden's part to perform the required services and failure
to pay the note when due in August, 1997. The Company's management does not
expect this litigation to have any material impact on the Company, its
management or its operations.
On or about July 6, 1998, the Company filed a Complaint For Declaratory Relief
(Case No. 98-07-145-CV) in the Circuit Court of the State of Oregon for the
County of Harney against David Calkins seeking the removal of a Claim of
Lien Upon Chattels. Mr. Calkins was contracted by the Company to install
milling equipment for the Company in its Oregon Milling Facility. Mr.
Calkins alleged that he was not completely paid for the installation and filed
a Claim of Lien Upon Chattels (No. 980681) in the amount of $10,806.37. The
Company alleges that, after deducting items that were completed without the
Company's approval and for the personal benefit of Mr. Calkins and after paying
directly to Service Providers items that were billed to the Company by Mr.
Calkins, the contract fees were all paid to Mr. Calkins. The Company's
management does not expect this litigation to have any material impact on the
Company, its management or its operations.
ITEM 2. CHANGES IN SECURITIES.
During the quarter ended July 31, 1998, there were no material modifications
to instruments defining the rights of the holders of any class of registered
securities nor were the rights evidenced by any class of registered securities
materially limited or qualified by the issuance or modification of any other
class of securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
During the quarter ended July 31, 1998, there was no material default in the
payment of principal, interest, sinking or purchase fund installments, or any
other material default not cured within 30 days, with respect to any
indebtedness of the Company exceeding five percent of the total assets of the
Company, nor was there any material arrearage in the payment of dividends with
respect to any class of preferred stock of the Company which is registered or
which ranks prior to any class of registered securities, or with respect to
any class of preferred stock of any significant subsidiary of the Company ( The
Company currently has no dividend policy or preferred stock outstanding).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
During the quarter ended July 31, 1998, no matters were submitted to a vote of
security-holders through the solicitation of proxies at a Meeting of
Shareholders:
ITEM 5. OTHER INFORMATION.
During the quarter ended July 31, 1998, there was no information not
previously reported on Form 8-K to include under this item.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Pages
(a) (1) The following financial statements are included in Part I, Item 1:
Consolidated Balance Sheets
July 31, 1998 and January 31, 1998 4-5
Consolidated Statements of Operations
Six months and quarters
ended July 31, 1998 and 1997 6
Consolidated Statements of Stockholders'
Equity (Deficit) - period ended
July 31, 1998 7-10
Consolidated Statements of Cash Flows
Six months and quarters
ended July 31, 1998 and 1997 11-12
Notes to Consolidated Financial
Statements 13-17
(3) The following exhibits for the six months and quarters ended July
31, 1998 and 1997, are submitted herewith:
Exhibit 11 - Computation of
Per Share Earnings (Loss) 24
Exhibit 21 - Subsidiary of the
Registrant 25
All other exhibits are omitted since the required information is included in
the financial statements or notes thereto, or since the required information is
either not present, not present in sufficient amount or is not applicable.
(b) No reports were filed on Form 8-K during the quarter ended July 31, 1998
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
By: _____________________________________________
Terry L. Young, Chairman of the Board
and Chief Executive Officer
Date: September 11, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Company and
in their capacities and on the dates indicated.
Signature Title Date
__________________________ Chairman, Chief Executive September 11, 1998
Terry L. Young Officer and Director
__________________________President, Chief Financial Officer,September 11, 1998
David W. Redding Treasurer, Principal Accounting
Officer and Director
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (LOSS)
<TABLE>
<S> <C> <C><C> <C><C> <C><C> <C><C>
From Inception
Six Months Six Months Three Months Three Months Ended(February
Ended Ended Ended Ended 9, 1984)
July 31, 1998 July 31, 1998 July 31, 1997 July 31, 1998 July 31, 1997
Primary and
Fully Diluted:
Average Shares
Outstanding
7,025,578 5,637,694 6,993,350 5,637,694 2,402,100
Net Loss (365,235) (215,439)$ (114,543) (3,029,792) (240,148)
Earnings (Loss)
Per Share (.05) (.04) (.03) (1.26) (.02)
</TABLE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
EXHIBIT 21 - SUBSIDIARY OF THE REGISTRANT
Name Jurisdiction of Incorporation American Absorbents, Inc.
Texas
The corporation listed is a wholly owned subsidiary of the Registrant, and is
included in the consolidated financial statements.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JUL-31-1998
<CASH> 72,356
<SECURITIES> 0
<RECEIVABLES> 9,405
<ALLOWANCES> 0
<INVENTORY> 330,754
<CURRENT-ASSETS> 454,973
<PP&E> 822,242
<DEPRECIATION> 79,301
<TOTAL-ASSETS> 6,344,842
<CURRENT-LIABILITIES> 70267
<BONDS> 0
0
0
<COMMON> 9,304,367
<OTHER-SE> (3029,792)
<TOTAL-LIABILITY-AND-EQUITY> 6,344,842
<SALES> 26,224
<TOTAL-REVENUES> 26,244
<CGS> 18,370
<TOTAL-COSTS> 377,575
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (365,235)
<INCOME-TAX> 0
<INCOME-CONTINUING> (365,235)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (365,235)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
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