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, 1999
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 Jurisdiction
of Incorporation or Organization) IRS Employer Identification
3800 Hudson Bend Road, Suite 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, 1999
4,530,252 ($0.001 par value) common shares
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
The following interim consolidated financial statements as of July 31, 1999
and for the three months and quarter then ended, are unaudited, but in the
opinion of managment, 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, 2000. The interim consolidated financial statements should be
read in connection with the audited consolidated financial statements for the
year ended January 31, 1999.
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Financial Statements
For the Three Months Ended
July 31, 1999 and 1998
(Unaudited)
INDEX
PART I. FINANCIAL INFORMATION PAGE NUMBERS
Item 1. Financial Statements (Unaudited) 4
Consolidated Balance Sheets at]
July 31, 1999 and January 31, 1999 4-5
Consoildated Statement of Operations
for the six months and quarter ended
July 31, 1999 6
Consolidted Statement of Stockholders'
Equity from inception on February 9,
1984 through July 31, 1999 7-10
Consolidated Statement of Cash Flows
for the six months ended July 31, 1999
and 1998 and from inception to
July 31, 1999 11-12
Notes to the Consolidated Financial
Statements 13-17
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 18-20
PART II OTHER INFORMATION
Item 1. Legal Procceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters of a Vote
of Security-Holders 21
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
Exhibit 1, Statement of Earnings (Loss)
Per Share 24
Exhibit 2, Subsidiary of the Registrant 25
Exhibit 3, Form 8-K filed on July, 1999 26-28
Exhibit 4, Shareholder Notice Regarding Change
in Capital Structure 29-30
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets
July 31, 1999 and January 31, 1999
(unaudited)
ASSETS
July 31, 1999 January 31, 1999
CURRENT ASSETS
Cash (cash deficit) $ (3,395) $ 4,966
Accounts Receivable
Trade 27,089 53,005
Other 730 730
Prepaid expenses 2,458 17,208
Inventory 335,051 262,121
Total Current assets 361,933 338,030
PROPERT AND EQUIPMENT 680,684 749,844
OTHER ASSETS
Mining claims 5,081,569 5,081,569
Notes receivable 5,000
Certificates of deposit 15,000 15,000
Trademarks & product development cost 9,883
Total Other Assets 5,106,452 5,101,569
TOTAL ASSETS 6,149,069 6,189,443
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
July 31, 1999 and January 31, 1999
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES July 31, 1999 January 31, 1999
Accounts payable and accrued expenses $220,755 $ 61,394
Notes payable - shareholders 377,900 50,000
Note payable 868 14,281
Current portion of long term debt 118,000
Total Current liabilities 718,323 125,675
COMMITMENTS AND CONTINGENCIES (See Notes)
LONG TERM LIABILITIES
Notes payable-shareholders 712,800
STOCKHOLDERS EQUITY
Common Stock; authorized 50,000,000 common shars
at $0.001 par value; 7,420,252 and 7,391,251
shares issued respectivley (2,890,000 in
treasury; 4,530,252 outstanding) 7,420 7,392
Capital in excess of par value 9,712,174 9,682,203
Deficit accumulated during the
development stage (4,056,648) (3,625,827)
Treasury stock (cost of 2,890,000 shres held
by the company) (945,000)
Total Stockholders Equity 4,717,946 6,063,768
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY 6,149,069 6,189,443
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations
July 31, 1999 and 1998
(unaudited)
Second Quarter(three months) From Inception
Six Months Ended July 31 Ended July 31 (Februrary 9,
1984)
1999 1998 1999 1998 to July 31, 1999
REVENUES
Net Sales $ 18,539 $ 26,224 $ 8,398 $ 21,675 $ 459,539
Costs of
Goods Sold 12,977 18,370 5,879 15,115 299,868
Gross Profit 5,562 7,854 2,519 6,560 159,671
EXPENSES
General and
Administrative 394,599 354,460 215,322 212,902 4,063,412
Depreciation
and amortization 47,348 23,115 23,503 11,250 190,971
Total Expenses 441,947 377,575 238,825 224,152 4,254,383
Other Income/(Expense)
Rent 5,220 4,116 2,610 1,968 21,652
Interest 345 370 173 185 1,259
Gain on sale of assets 17,800
Net loss beofre provision
for income taxes (430,820) (365,235) (233,523) (215,439) (4,054,001)
Provisin for income taxes 0 0 0 0 2,647
Net Loss (430,820) (365,235) (233,523) (215,439) (4,054,001)
Weighted average
loss per share (0.06) (0.05) (0.04) (0.03)
Average shares
outstanding 6,944,075 7,025,578 6,538,948 6,993,350
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, 1999
(unaudited)
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
Balance at Inception-February 9, 1984 - $ - - $ -
Issuance of common stock for cash 37,500 38 962 -
Expenses paid by shareholders for the
years ended January 31, 1990 - - 518 -
Net loss for the years ended January 31,
1990 - - - (1,618)
Balance, January 31, 1990 37,500 $ 38 $ 1,480 $(1,618)
Issuance of common stock for services
rendered in August 1990 391,000 391 7,429 -
Issuance of common stock in September
1990 for various assets from
Austin-Young, Inc. 50,000 50 198,890 -
Issuance of common stock for
distribution licenses from Global
Environmental Industries (GEI) for
UT & WA, September 1990 50,000 50 37,070 -
Contribution from Austin-Young, Inc. - - 13,500 -
Issuance of common stock for
services rendered in October 1990 12,500 12 37,488 -
Net loss for the year ended
January 31, 1991 - - - (57,756)
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 May 1991 (338,000) (338) (64,682) -
Cancellation of common shares (20,000) (20) 20 -
Issuance of common stock for the
purchase of product from
Steelhead Specialty Minerals in
August 1991 10,000 10 74,990 -
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, 1999
(unaudited)
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
Issuance of common stock for
the purchase of mining claims
in October 1991 13,214 13 184,987 -
Common stock canceled by
officers/directors in
January 1992 (20,000) (20) 20 -
Contribution from Austin-
Young, Inc. - - 17,000 -
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-
GEOenvironment Services, Inc.
in February 1992 701,800 702 96,442 -
Issuance of common stock for
the purchase of mining claims
in March 1992 243,000 243 4,859,757 -
Common stock canceled by officers
and directors in June 1992 (32,430) (32) 32 -
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 relief of debt in July 1992 3,380,000 3,380 61,620 -
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 June 1993 17,800 18 26,682 -
Issuance of common stock to Austin-
Young, Inc. in June 1993 12,000 12 35,988 -
Issuance of Common stock for
cash October 1993 66,667 67 199,936 -
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, 1999
(unaudited)
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
Issuance of common stock as
down payment on building
October 1993 6,000 6 29,994 -
Issuance of common stock
for services rendered in
October 1993 17,000 17 50,983 -
Issuance of common stock for
cash December 1993 80,072 80 191,321 -
Contribution by Austin-Young, Inc. - - 36,000 -
Net loss for the year ended
January 31, 1994 - - - (310,862)
Balance, January 31, 1994 4,661,102 $ 4,662 $ 6,021,524 $ (599,855)
Issuance of common stock for
services rendered February
1994 6,000 6 29,994 -
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
1994 15,000 15 46,235 -
Contribution by Austin-Young, Inc. - - 36,000 -
Net loss for the year ended
January 31, 1995 - - - (709,048)
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 31, 1996 - - - (401,467)
Balance at January 31, 1996 4,969,520 $ 4,970 $ 6,851,728 $(1,710,370)
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, 1999
(unaudited)
Deficit
Accumulated
Additional During the
Common stock Paid-in Development
Shares Amount Capital Stage
Issuance of common stock for services 259,620 260 262,359
Net loss for the year ended January
31, 1997 (464,662)
Balance Jnauary 31, 1997 5,360,100 5,361 7,270,816 (2,175,032)
Issuance of common stock for
cash in private offering 582,000 582 729,843
Issuance of stock for
services 129,784 130 131,782
Issuance of stock for
purchase of equipment 13,555 13 15,236
Issuance of common stock
pursuant to a stock
option plan 25,000 25 9,350
Issuance of common stock for
partial redemption of a note
pursuant to a stock option plan 100,000 100 37,400
Net loss foe the year ended
January 31, 1998 (489,525)
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 963,269 963 1,218,676
Isaunce of common stock for
services 135,480 136 147,628
Isuance of common stock for
purchase of equipment 82,063 82 121,472
Net loss for the year ended
January 31, 1999 (961,270)
Balance of January 31, 1999 7,391,251 7,392 9,682,203 (3,625,827)
Issuance of common stock for
cash in a private offering 29,001 28 29,971
Net loss for the three months
ended Aprial 30, 1999 (197,298)
Balance April 30, 1999 7,420,252 7,420 9,712,174 (3,823,125)
Net Loss for the three
months ended July 31, 1999 (233,523)
Balance July 31, 1999 7,420,252 7,420 9,712,174 (4,056,648)
AMERICAN ABSORBANTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows
Second Quarter (three months) From Inception
Six months Ended Ended (2/9/84)
July 31, 1999 July 31, 1998 July 31, 1999 July 31, 1998 to July 31, 1999
Cash flows from operatinf activities
Net loss (430,825) (365,235) (233,523) (215,439) (4,056,648)
Depreciation and
amortization 44,016 23,115 23,503 11,250 187,639
(Increase)decrease in
receivables 30,916 (8,433) 21,770 (1,284) (22,819)
Decrease (increase) in
in prepaid expenses 14,750 46,750 7,375 54,125 9,542
Decrease (increase)in
inventory (72,930) (88,348) (40,192) (42,328) (261,876)
loss from disposal
of fixed asset 1,560
Stock issued for
services 44,178 38,928 939,465
Expenses paid by shareholder 149,018
Net cash used by
operating activiities (271,867) (503,321) (109,593) (176,074) (2,837,346)
Cash flows from investing activities
Purchase of fixed assets (3,418) (204,790) (2,168) (125,276) (701,488)
Purchase certifitcates of
deposit (15,000)
Purchase of product
tradenames/marks (1,715) (1,715) (28,673)
Purchase of note
receivable (5,000)
Organization costs (1,524)
Purchase/sale of mining development 7,920
Business development costs (8,168) (45,259) (8,168) (45,259) (8,168)
Purchase of mining claims (58,599)
Sale of licenses and
other assets 28,562 178,562
Purchase of treasury
stock (945,000) (925,000 (1,010,000)
Net cash used by investing
activiites (929,739) (250,049) (937,051) (170,535) (1,641,970)
Cash flows from financing activiites
Issuance of common stock 30,000 1,011,781 267,127 3,160,062
Issuance of notes payable 1,163,245 24,655 979,100 1,810,455
Prinicipal paymentd on long term
debt (235,352) (154,300) (494,596)
Net cash from
financing activities 1,193,245 801,084 979,100 112,827 4,475,921
Cash flows from finaning activities
Issuance of common stock 30,000 1,011,781 267,127 3,160,062
Issuance of
notes payable 1,163,245 24,655 979,100 1,810,455
Principal payments
on lonng term debt (235,352) (154,300) (494,596)
net cash from financing
activities 1,193,245 801,084 979,100 112,827 4,475,921
Net (decrease) Increase
in cash (8,361) 47,714 (67,544) (233,782) (3,395)
Cash at the begining of
period 4,966 24,642 64,149 306,138
Cash at the end of period (3,395) 72,356 (3,395) 72,356 (3,395)
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
Second Quarter (three months) From Inception
Six months Ended Ended (February 9, 1984)
July 31, 1999 July 41, 1998 July 31, 1999 July 31, 1998 to July 31, 1999
Supplemental cash flow information:
Cash paid for:
Interest 6,627 6,400 4,817 1,777 39,447
Income taxes 2,547
Non-cash transactions:
Stock issued for mining
claims 5,045,000
Stock issued for down
payment on building 30,000
Stock issued for Services 38,900 38,900 939,465
Stock issued for
stock of Geo-Environmental
services, Inc. 97,144
Stock issued for
inventory 75,000
Stok issued for assets
of Austin Young, Inc.
and Global Environmental
Industires 236,060
Stock issued for purchase
or equipemtn 121,600 121,600 136,803
Stock issued for
partial redemption
of note 37,500
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
July 31, 1999
(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, 1999
(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, 1999 and 1998 after
writing off all accounts determined to be uncollectible.
Prepaid Expenses
Prepaid expenses consist of the following:
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. The Company completed its plant
in Oregon and began operation in 1998.
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, 1999
(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, 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.
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.
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
July 31, 1999
(unaudited)
NOTE 4 - MINING CLAIMS (Continued)
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.
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, 1999, notes payable increased by
$979,100 from the previous quarter. (The increase was $147,500 if the note
relating to the treasury stock purchase is excluded.) The notes payable are
primarily to stockholders and bear interest at the rate of 8% approximately.
Two notes of $50,000 each were given to secure financing to make the down
payment on the purchase of stock from the previous major stockholder. One of
those notes matured on July 31, 1999, and was paid on September 9, 1999. Two
shareholders also loaned the company $50,000 each in quarter ended April 30,
1999, and these notes were secured by the Company's warehouse in Austin,
Texas; these two notes were converted to preferred stock in August, 1999.
NOTE 6 - PRIVATE PLACEMENT OF COMMON STOCK
During the second quarter ended July 31, 1999, there was no issuance of
private placements of common stock, and the Company commenced a serial
preferred stock offering.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company has sold two private placements that include a royalty
payment. The first private placement 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 includes a
$2 per ton per minimum investment on 10,000 tons.
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
July 31, 1999
(unaudited)
NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued)
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
he 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.
At July 31, 1999, the Company was involved in one legal proceeding:
-American Absorbents Natural Products, Inc. v. Calkins
A former independent contractor hired to construct the Oregon plant has
placed a mechanics lien on the Oregon plant for alleged unpaid claims and the
Company has sued to remove the mechanics liens since the claims are being
contested. Calkins has filed a counter claim seeking damages in addition to
his lien. The case is in initial stages and an outcome cannot be determined
at this time.
The Company is currently investigating certain allegations of
improprieties involving former officers of the Company. The Company does not
believe that the improprieties even if true would have a materially adverse
impact on the Company.
The Company is also involved in a dispute over the lease of its office
space in Austin, Texas. The building was sold in August, 1999, and the new
owners filed a lawsuit on August 27, 1999, challenging the existing lease. The
Company believes the lawsuit is without merit and will vigorously contest it and
seek damages.
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 ofthe 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, 1999 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.
During the quarter ended April 30, 1998, the Company's milling plant in Burns
/Hines, Oregon was completed and placed into production processing the 10,000
tons of zeolite minerals that were mined from the Company's claims in Oregon
in December, 1997.
RESULTS OF OPERATIONS
The Company is a development stage enterprise and has incurred losses in each
of its fiscal years ended January 31, 1997, 1998 and 1999 and for the quarters
ended April 30, 1999 and July 31, 1999. 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.
A net loss of $233,523 was incurred in the three month period ended July 31,
1999, compared to a net loss of $215,439 for the same quarter of the previous
year. For the six month period ended July 31, 1999, a net loss of $430,820
was incurred, compared to a net loss of $365,235 for the six month period
ended July 31, 1998. Revenues for the quarter ended July 31, 1999 decreased
to $8,398 from $21,675 for the same quarter of the previous year. Revenues
for the six month period ended July 31, 1999, decreased to $18,539 from
$26,224 for the same six month period of the previous year.
General and administrative expenses have increased steadily over the last
several years. In the year ended January 31, 1999, general and
administrative expense increased to $983,873 from $496,585 in fiscal 1998. A
large portion of the increase is attributable to extra expense associated with
the production facility, marketing personnel and marketing expense. Salary and
payroll expenses increased by $202,000 with the addition of production
employees and management salary increases. Additional marketing personnel
also contributed to the increase. Advertising, postage and printing expenses
increased by approximately $126,000 due to increased promotion levels with
the introduction of new marketing programs. Insurance expense increased by
$28,200 due to the increased valuation of the Oregon milling facility and the
addition of health and hospitalization insurance to certain employees as a
benefit. Interest expense decreased by $13,700 during the current fiscal year
due to the repayment of approximately $250,000 of bank debt and debt owed to
the major shareholder. Travel expenses decreased by $8,150 and outside
service expense decreased by $3,100 due to more personnel on the payroll.
Legal expenses increased by $46,950 due to legal fees incurred in the Charles
Walden and David Calkins lawsuits as well as legal fees incurred relating to
private stock offerings.
General and administrative expenses increased by approximately $40,000 during
the six months ended July 31, 1999 as compared to the same period of the
previous year mostly due to increases in number of personnel, salary
increases, legal fees, and health insurance and worker compensation costs.
Depreciation expense increased by approximately $24,000 during this period from
depreciating the new milling equipment.
For the three months ended July 31, 1999, the Company realized gross profit
margins of 30% on revenues of $8,398. The Company is currently reviewing
previous gross profit margin computations.
The ratio of current assets to current liabilities (current ratio) was 2.69,
0.77, and 0.47, respectively, for the fiscal years ended January 31, 1999,
1998 and 1997. 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 previous
major stockholder of the Company. Current ratios at July 31, 1999 and 1998
were .50 and 6.47, respectively.
In fiscal 1992, the Company began test marketing products that it had
developed and/or to which it had acquired the rights from other companies.
Revenues increased from $11,388 in 1992 to $43,115 in 1993 due to test
marketing of existing products in limited market areas. During the fiscal
year ended January 31, 1994, the Company concentrated on attractive packaging
of its products, Company capitalization and distribution networks, with less
emphasis on product research as it prepared to implement various marketing
programs for its products. Sales for the fiscal year indicated no growth
over the previous year and, in fact, showed a decline in sales to $20,323.
Sales for the fiscal year ended January 31, 1995, increased to $69,467, or
242% over the previous year, as the Company expanded the test marketing of
products into more outlets. 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. During the fiscal year ended January 31, 1999,
sales increased to $153,873, including $63,000 from the sale of the Company's
shoe products division.
LIQUIDITY AND FINANCIAL CONDITION
The Company has financed its operations to date primarily through the sale of
equity securities and borrowings from stockholders. The Company has been
unprofitable most of its inception and has incurred net losses in each year,
including a net loss of $233,523 for quarter ended July 31, 1999.
Previously, Austin Young, Inc., the former major stockholder of the Company,
had provided, through loans and equity funding, any deficiencies to working
capital during the development stage. The Company will have to rely on
funding from private placements, cash flows and other offerings for future
operating and development costs. The Company owed $50,000 to Austin Young,
Inc. at July 31, 1998 and $134,104 at July 31, 1999, not including $831,600
in debt related to stock purchases. During the previous quarter, two
shareholders loaned the company $50,000 each, and the loans were secured by
the warehouse in Austin, Texas. The loans were converted to preferred stock
in August, 1999.
Revenues to date have provided insufficient funding of working capital. When
possible, the Company has issued stock for the acquisition of assets or
services to reduce the need for additional operating capital from the former
major stockholder, additional shareholders or gross profits from its limited
marketing efforts. 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 and conserve its limited resources.
At July 31, 1999, the Company had $220,755 in accounts payable and accrued
expenses; a year ago at July 31, 1998, the Company had $1,567. Notes payable,
current and long-term, totaled $1,209,500 at July 31, 1999, versus $64,281 at
July 31, 1998. Management believes it will be able to raise capital in the
preferred stock offering to provide for operations and debt service.
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 $91,700 to the Bureau of Land Management in the fiscal year ended
January 31, 1996 and $29,500 in the fiscal years ended January 31, 1997, 1998
and 1999. 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, 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 year ended
January 31, 1999 the Company raised $1,219,639 (net of commissions of
$53,428) through the sale of 963,269 restricted common shares. Additional
milling equipment to increase the capacity of the Oregon milling facility and
valued at $121,554 was acquired through the issuance of 82,063 restricted common
shares. Another 135,480 restricted common shares were issued for professional
services rendered to the Company and valued at $147,764. During the three
months ended April 30, 1998, the Company issued 520,976 shares in a private
placement for $730,204, 3,500 shares for services rendered to the Company and
valued at $5,250 and issued 81,763 shares for equipment valued at $121,000.
During the three months ended April 30, 1999, the Company issued 29,001 shares
of common stock in a private placement for $30,000. No capital was raised in
private placements in the three months ended July 31, 1999.
PLAN OF OPERATIONS
Although the Company had turnover of two senior management persons, the Company
has hired a chief executive officer, a chief operating officer and a chief
financial officer. The Company is now directing its efforts to obtaining
large sales contracts, tightening cost controls and improving its financial
position and the overall management of the Company. The board of directors
is being expanded to include persons with significant sales management and/or
financial management backgrounds, and the board is currently seeking funding
to continue and expand its operations. Management believes that it can
continue to fund its operations through external financing until revenues
reach the level at which the gross profits attained will sustain and finance
the operations.
The Company has developed seven new retail products in the current quarter
Sweet PawsTM cat litter; Litter HelperTM, an odor eliminator for cat litter
boxes; Pet MessTM, an odor neutralizer to counter pet stains; Aqua RocksTM,
which maintains ammonia control in fish aquariums; Carpet GenieTM, an odor
eliminator for carpets; Pit StopTM, an absorbent for cleaning automobile fluid
spills; and Ammonia DestroyerTM, an ammonia remover for fresh and salt water
fish tanks. 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. The Company continues to ship some of its
agricultural products to E.N.S.R./S.A.R.L., an import company located in
France.
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.
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.
Year 2000 Compliance
The Company believes that it has addressed the Year 2000 issues in its
proprietary software products and does not anticipate business interruptions
associated with these applications. The Company is in the process of
estimating the total cost and time that will be required to address the Year
2000 issue, but does not expect any material adverse impact on its operations.
However, no assurance can be given that the failure of one or more of its
vendors to become Year 2000 compliant will not have a material adverse effect
on the Company's operations.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
During the quarter ended July 31, 1999, there were no material pending or
threatened legal proceedings against the Company or, to the best of the
company's knowledge, 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, to the best of the company's knowledge, 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.
(SEE NOTE 7 COMMITMENTS AND CONTINGENCIES, page 16)
Item 2. Changes in Securities.
During the quarter ended July 31, 1999, the capital structure of the Company
was modified. The aggregate number of shares of capital stock the Company is
authorized to issue was increased to sixty million shares (from fifty million),
composed of one class of fifty million shares of Common Stock with the par
value of one mil ($.001) per share; and another class of ten million shares
of Serial Preferred Stock with the par value of one mil ($.001) per share.
(see Exhibit 4, page 29 for a copy of the shareholder notice)
Item 3. Defaults Upon Senior Securities.
During the quarter ended July 31, 1999, 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 but
will have preferred stock outstanding in quarter ending October 31, 1999).
Item 4. Submission of Matters to a vote of Security-Holders.
During the quarter ended July 31, 1999, matters were submitted to a vote of
security-holders in connection with the Annual Meeting of shareholders. The
following items were voted upon at the Annual Meeting held on July 28, 1999:
Proposal #1 The election of the members of the Board of Directors, and the
votes were as follows:
Name Votes for Against Abstain
Robert L. Bitteli 4,866,806
Donald Chapman 4,866,806
John Krings 4,866,806
Richard Waterfield 4,866,806
Proposal #2 Authorize the board to evaluate the performance of the present
auditing firm, Orton & Company, and hire a local auditing firm as
independent certified public accountants for fiscal year ending January 31,
2000, should the Board deem it appropriate, and the votes were as follows:
Votes for Against Abstain
4,866,306 500
Proposal #3 Ratify and approve the transactions with Austin-Young, Inc., and
the votes were as follows:
Votes for Against Abstain
712,055 22,016
Proposal #4 Ratify that all non-employee directors be paid the value of $500
in common stock per meeting attended, such stock is issued based on the
average closing asking price for the thirty days preceding the meeting, and
the votes were as follows:
Votes for Against Abstain
4,843,556 6,500 16,750
See Item 2 above and Exhibit 4, page 29 for information regarding voting on
the change in capital structure.
Item 5. Other Information.
During the quarter ended July 31, 1999, one Form 8-K was filed to report the
purchase by the Company of 2,800,000 shares of its common stock from the
previous major shareholder (see Exhibit 3, page 26).
Item 6. Exhibits and Reports on Form 8-K.
(a) (1) The following financial statements are included in Part I, Item 1:
(3) The following exhibits are included for the three months and quarters
ended July 31, 1999 and 1998:
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) One report was filed on Form 8-K during the quarter ended July 31,
1999, to report a purchase of stock by the Company from the previous major
stockholder (see Exhibit 3).
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: /s/ Robert L. Bitterli
Robert L. Bitterli, President and
Chief Executive Officer
Date: September 17, 1999
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
/s/ Robert L. Bitterli President, Chief Executive September 17, 1999
Robert L. Bitterli Officer and Director
(Principal Executive Officer)
/s/ David C. Scott Chief Financial Officer September 17, 1999
David C. Scott (Principal Accounting Officer)
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
EXHIBIT 1 - STATEMENT RE: COMPUTATION OF EARNINGS (LOSS) PER SHARE
Basic earnings per share represents net earnings (loss) divided by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share represents net earnings (loss) divided by the weighted-
average number of shares outstanding, inclusive of the dilutive impact of
common stock equivalents.
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
EXHIBIT 2 - 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.
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
EXHIBIT 3 Form 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
To Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 6, 1999
American Absorbents Natural Products, Inc.
(Exact name of registrant as specified in its charter)
Utah
(State or other jurisdiction of incorporation)
0-23356 87-0421089
(Commission file number) (IRS employer identification)
3800 Hudson Bend Road, Suite 300
Austin, Texas 78734
(Address of principal executive offices)
(512) 266-2481
(Registrant's telephone number)
N/A
(Former name or former address, if changed since last report)
Item 1. Changes in Control of Registrant
On July 6, 1999, American Absorbents Natural Products, Inc. (AANP) acquired
2,800,000 shares of its common stock from its principal shareholder, Austin-
Young, Inc. The stock was purchased for $924,000, a price of thirty-three
cents ($.33) per share. Prior to the purchase, the company had 7,420,252
shares of common stock outstanding. The company was also granted the proxy to
vote the 2,800,000 shares of common stock at the annual shareholders meeting.
The terms of the purchase included an initial payment of $92,400 for 280,00
shares of common stock. The balance of the purchase price is evidenced by a
non-interest bearing note of $831,600 payable over a seven- year period. The
note is payable in equal annual installments of $118,800 beginning July 15,
2000. Subsequent payments are due on July 15 of each year. The company is
entitled to a twenty percent (20%) reduction (discount) on the remaining
unpaid balance if the note is paid in full by July 15, 2001. The note is
collateralized by 2,520,000 shares of common stock of AANP. The collateral
and security interest on the 2,520,000 shares of common stock will be released
pro rata as payments are made. Upon each note payment, 360,000 shares will be
released from the collateral and security interest until all such stock is
released, as summarized below:
Payment Date Amount Shares Released
Payments subject to a collateral & Security interest:
First (7/15/2000 $118,800 360,000
Second (7/15/2001) 118,000 360,000
Third (7/15/2002) 118,000 360,000
Fourth (7/15/2003) 118,000 360,000
Fifth (7/15/2004) 118,000 360,000
Sixth (7/15/2005) 118,000 360,000
Seventh (7/15/2006) 118,000 360,000
The transaction with Austin-Young, Inc. also included the conversion of a
$130,400 demand note to an installment note--this note relates to money that
Austin-Young, Inc. had advanced to AANP for working capital. The new
installment note is in the amount of $133,321 (original balance plus accrued
interest to July 6, 1999) and provides for interest at 8.25% per annum, and
twenty-four (24) monthly payments of $6,324.65, beginning September 1, 1999,
and continuing monthly thereafter until paid in full.
Item 7. Financial Statements and Exhibits
No financial statements or exhibits are required to be filed with this Form 8-K.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
American Absorbents Natural Products, Inc.
(Registrant)
Date: July 19, 1999 By: /s/ Robert L. Bitterli
Robert L. Bitterli, President and
Chief Executive Officer
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
EXHIBIT 4 Form 8-K
NOTICE TO SHAREHOLDERS OF CORPORATE
ACTION WITHOUT SHAREHOLDERS' MEETING
To: Shareholders of American Absorbents Natural Products, Inc. (a Utah
corporation)
NOTICE IS HEREBY given pursuant to Section 16-10a-704 of the Revised Utah
Business Corporation Act, that the following proposal was approved without a
shareholders' meeting by the written consent of the holders of outstanding
shares of American Absorbents Natural Products, Inc. a Utah corporation (the
Corporation) having 4,215,393 votes (approximately 56.81% of the votes
outstanding) which is greater than the minimum number of votes that would be
necessary to take the action if it had been taken at a shareholders' meeting
at which the holders of all shares entitled to vote on the action were present
and voted.
Article III (entitled Capitalization) of the Restated Articles of
Incorporation of the Corporation was deleted in its entirety and was replaced
with the following new Article III.
ARTICLE III
Capitalization
Section 1.
The aggregate number of shares of capital stock which the corporation shall
have authority to issue is sixty million (60,000,000) shares, composed of one
class of fifty million (50,000,000) shares of Common Stock with the par value
of one mil (($0.001) per share; and another class of ten million (10,000,000)
shares of Serial Preferred Stock with the par value of one mil ($0.001) per
share. The Serial Preferred Stock may be issued in one or more series, from
time to time, at the discretion of the Board of Directors without the
necessity of stockholder approval, with each such series to consist of such
number of shares and to have such voting powers (whether full or limited, or
no voting powers) and such designations, powers, preferences and relative,
participating, optional, redemption, conversion, exchange or other special
rights, and such qualifications, limitations or restrictions thereof, as shall
be stated in the resolution or resolutions providing for the issuance of such
series adopted by the Board of Directors. The Board of Directors is hereby
expressly vested with the authority, to the full extent now or hereafter
provided by law, to adopt any such resolution or resolutions. Each share of
any series of Serial Preferred Stock shall be identical with all other shares
of such series, except as to the date from which dividends, if any, shall
accrue. The Board of Directors shall have the power and authority at any time
and from time to time to issue, sell, or otherwise dispose of any authorized
and unissued shares of any class of stock, for such consideration (not less
than the par value thereof) and upon such terms and conditions as the Board
of Directors in its discretion may deem for the best interests of the
Corporation.
Section 2.
No holder of any shares of any class of stock of the Corporation shall,
as such holder, have any preemptive or preferential right to receive, purchase,
or subscribe to (1) any unissued or treasury shares of any class of stock
(whether now or later authorized) of the corporation; (2) any obligations,
evidences of indebtedness, or other securities of the Corporation convertible
into or exchangeable for, or carrying or accompanied by any rights to receive,
purchase, or subscribe to, any such unissued or treasury shares: (3) any
right of subscription to or to receive, or any warrant or option for the
purchase of, any of the foregoing securities; (4) any other securities that
may be issued or sold by the Corporation, other than such (if any) as the
Board of Directors of the Corporation, in its sole and absolute discretion, may
determine from time to time.
Section 3.
There shall be no cumulative voting by shareholders.
The written consents of the requisite number of shares required to
authorize the action(s) described above were received by the Corporation on
June 21, 1999.
Dated: June 23, 1999.
American Absorbents Natural Products, Inc.
By: /s/ Robert L. Bitterli
Print Name: Robert L. Bitterli
Title: President / C.E.O.
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