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 APRIL 30, 2000
|_| 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 I.R.S. Employer Identification
Incorporation or Organization)
6015 LOHMAN FORD ROAD, SUITE 100 LAGO VISTA, TEXAS 78645
--------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
512-267-2221
--------------------------------------------------------------------------------
(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:
APRIL 30 , 2000--5,241,136 ($0.001 PAR VALUE) COMMON SHARES
--------------------------------------------------------------
294,584 ($0.001 PAR VALUE) PREFERRED SHARES
-------------------------------------------
-1-
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The following interim consolidated financial statements as of April 30, 2000 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, 2001. The interim
consolidated financial statements should be read in connection with the audited
consolidated financial statements for the year ended January 31, 2000.
SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Forward looking statements made herein are based on current expectations of the
Company that involve a number of risks and uncertainties and should not be
considered as guarantees of future performance. These statements are made under
the Safe Harbor Provisions of the Private Securities Litigation Reform Act of
1995. The factors that could cause actual results to differ materially include
but are not limited to: interruptions or cancellation of existing contracts,
impact of competitive products and pricing, product demand and market acceptance
risks, the presence of competitors with greater financial resources than the
Company, product development and commercialization risks and an inability to
arrange additional debt or equity financing.
-2-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Financial Statements
For the Three Months Ended
April 30, 2000 and 1999
(Unaudited)
INDEX
PART I. FINANCIAL INFORMATION PAGE NUMBERS
Item 1. Financial Statements (Unaudited) 4
Consolidated Balance Sheets at April 30, 2000 and January 31, 4-5
2000
Consolidated Statement of Operations for the three months 6
and quarter ended April 30, 2000
Consolidated Statements of Stockholders' Equity from 7-11
inception on February 9, 1984 through April 30, 2000
Consolidated Statement of Cash Flows for the three months and
quarters 12-13 ended April 30, 2000 and 1999 and from inception
to April 30, 2000 12-13
Notes to the Consolidated Financial Statements 14-18
Item 2. Management's Discussion and Analysis of Financial Condition 19-20
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 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
Exhibit 1, Statement of Earnings (Loss) Per Share 23
Exhibit 2, Subsidiary of the Registrant 24
-3-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets
April 30, 2000 and January 31, 2000
(unaudited)
ASSETS
------
<TABLE>
<CAPTION>
APRIL 30, 2000 JANUARY 31, 2000
-------------- ----------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 5,291 $ 9,512
Accounts receivable
Trade 1,022 31,447
Other 523 0
Prepaid expenses 9,834 17,208
Inventory 345,407 345,851
---------- ----------
Total Current Assets 362,077 404,018
---------- ----------
---------- ----------
PROPERTY AND EQUIPMENT 643,696 651,984
---------- ----------
OTHER ASSETS
Mining claims 5,081,569 5,081,569
Certificates of deposit 15,000 15,000
Trademarks & product development cost 1,725 1,725
---------- ----------
Total Other Assets 5,098,294 5,098,294
---------- ----------
TOTAL ASSETS $6,104,067 $6,154,296
========== ==========
</TABLE>
-4-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
April 30, 2000 and January 31, 2000
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
APRIL 30, 2000 JANUARY 31, 2000
-------------- ----------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 336,339 $ 391,938
Note payable 150,000 155,000
Current portion of related party long-term debt 159,470 252,397
------------ ------------
Total current liabilities 645,809 799,335
------------ ------------
COMMITMENTS AND CONTINGENCIES (See Notes) 10,000 0
LONG-TERM LIABLITIES
Related Party Long-Term Debt, Less Current Maturities 815,762 755,884
------------ ------------
Total Liabilites 1,471,571 1,555,219
------------ ------------
STOCKHOLDERS' EQUITY
Common stock; authorized 50,000,000 common shares at $0.001 par value
8,131,136 and 7,635,766 shares issued and 5,241,136 and 4,745,766 shares
outstanding respectively (2,890,000 in treasury) 8,056 7,560
Preferred stock; authorized 10,000,000 preferred shares at 295 295
$0.001 par value; 294,584 shares issued and outstanding
Common Stock Subscription 187,500 0
Common Stock Subscription Receivable (152,374) 0
Capital in excess of par value 10,269,726 10,120,390
Deficit accumulated during the development
stage (4,735,707) (4,584,168)
Treasury stock (cost of 2,890,000 shares held by the company) (945,000) (945,000)
------------ ------------
Total Stockholders' Equity 4,632,496 4,599,077
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,104,067 $ 6,154,296
============ ============
</TABLE>
-5-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations
April 30, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
First Quarter (three months)
Ended April 30 From Inception
--------------------------- (February 9, 1984)
2000 1999 to April 30, 2000
----------- ----------- -----------------
<S> <C> <C> <C>
REVENUES
Net sales $ 739 $ 10,140 $ 499,478
Cost of goods sold 444 7,098 317,117
----------- ----------- -----------
Gross Profit 295 3,042 182,361
----------- ----------- -----------
EXPENSES
General and administrative 234,051 179,278 4,794,334
Depreciation and amortization 24,288 23,845 263,115
----------- ----------- -----------
Total expenses 258,339 203,123 5,057,449
----------- ----------- -----------
Other Income
Rent 2,610 2,610 29,482
Interest 208 173 2,876
Other Income 57,084 0 57,084
Gain on sale of assets 0 0 5,983
----------- ----------- -----------
Net Other Income 59,902 2,783 95,425
Net loss before provision ----------- ----------- -----------
for income taxes (198,142) (197,298) (4,779,663)
Provision for income taxes 0 0 2,647
----------- ----------- -----------
Net loss before extraordinary items (198,142) (197,298) (4,782,310)
Extraordinary gain, modification
of note payable, net of taxes 46,603 0 46,603
----------- ----------- -----------
Net Loss $ (151,539) $ (197,298) $(4,735,707)
=========== =========== ===========
Weighted average loss per share $ (0.03) $ (0.03)
=========== ===========
</TABLE>
-6-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
From Inception on February 9, 1984 to April 30, 2000
(unaudited)
<TABLE>
<CAPTION>
CAPITAL
COMMON STOCK PREFERRED STOCK CAPITAL STOCK
------------ ------------------ STOCK SUBSCRIPTION
SHARES AMOUNT SHARES AMOUNT SUBSCRIPTION RECEIVABLE
------- ------ ------ ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT INCEPTION FEBRUARY 9, 1984 -0- $-0- -0- $-0- -0- $-0-
ISSUANCE OF COMMON STOCK FOR CASH 37,500 38 -0- -0- -0- -0-
EXPENSES PAID BY SHAREHOLDERS FOR THE YEARS
ENDED JANUARY 31, 1990 -0- -0- -0- -0- -0- -0-
NET LOSS FROM INCEPTION TO JANUARY 31, 1990 -0- -0- -0- -0- -0- -0-
--------- ----- --- --- --- ---
BALANCE AT JANUARY 31, 1990 37,500 38 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR SERVICES RENDERED
IN AUGUST 1990 391,000 391 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK IN SEPTEMBER 1990 FOR
VARIOUS ASSETS FROM AUSTIN-YOUNG, INC. 50,000 50 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR DISTRIBUTION
LICENSES FROM GLOBAL ENVIRONMENTAL
INDUSTRIES (GEI) FOR UT & WA, SEPTEMBER 1990 50,000 50 -0- -0- -0- -0-
CONTRIBUTION FROM AUSTIN-YOUNG, INC. -0- -0- -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR SERVICES RENDERED
IN OCTOBER 1990 12,500 12 -0- -0- -0- -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 1991 -0- -0- -0- -0- -0- -0-
--------- ----- --- --- --- ---
BALANCE AT JANUARY 31, 1991 541,000 541 -0- -0- -0- -0-
COMMON STOCK RETURNED IN EXCHANGE FOR COMMON
STOCK OF GEI IN MARCH 1991 (17,000) (17) -0- -0- -0- -0-
REPURCHASE OF COMMON STOCK FROM AUSTIN-YOUNG,
INC. IN MAY 1991 (338,000) (338) -0- -0- -0- -0-
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
TREASURY PAID-IN DEVELOPMENT
STOCK AMOUNT CAPITAL STAGE
------------ --------- -----------
<S> <C> <C> <C>
BALANCE AT INCEPTION FEBRUARY 9, 1984 $-0- $-0- $-0-
ISSUANCE OF COMMON STOCK FOR CASH -0- 962 -0-
EXPENSES PAID BY SHAREHOLDERS FOR THE YEARS
ENDED JANUARY 31, 1990 -0- 518 -0-
NET LOSS FROM INCEPTION TO JANUARY 31, 1990 -0- -0- (1,618)
BALANCE AT JANUARY 31, 1990 -0- 1,480 (1,618)
ISSUANCE OF COMMON STOCK FOR SERVICES RENDERED
IN AUGUST 1990 -0- 7,429 -0-
ISSUANCE OF COMMON STOCK IN SEPTEMBER 1990 FOR
VARIOUS ASSETS FROM AUSTIN-YOUNG, INC. -0- 198,890 -0-
ISSUANCE OF COMMON STOCK FOR DISTRIBUTION
LICENSES FROM GLOBAL ENVIRONMENTAL
INDUSTRIES (GEI) FOR UT & WA, SEPTEMBER 1990 -0- 37,070 -0-
CONTRIBUTION FROM AUSTIN-YOUNG, INC. -0- 13,500 -0-
ISSUANCE OF COMMON STOCK FOR SERVICES RENDERED
IN OCTOBER 1990 -0- 37,488 -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 1991 -0- -0- (57,756)
--- -------- -------
BALANCE AT JANUARY 31, 1991 -0- 295,857 (59,374)
COMMON STOCK RETURNED IN EXCHANGE FOR COMMON
STOCK OF GEI IN MARCH 1991 -0- (85,423) -0-
REPURCHASE OF COMMON STOCK FROM AUSTIN-YOUNG,
INC. IN MAY 1991 -0- (64,682) -0-
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
CAPITAL
COMMON STOCK PREFERRED STOCK CAPITAL STOCK
------------- ---------------- STOCK SUBSCRIPTION
SHARES AMOUNT SHARES AMOUNT SUBSCRIPTION RECEIVABLE
------ ------ ------ ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CANCELLATION OF COMMON SHARES (20,000) (20) -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR THE PURCHASE OF
PRODUCT FROM STEELHEAD SPECIALTY MINERAL IN
AUGUST 1991 10,000 10 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR THE PURCHASE OF
MINING CLAIMS IN OCTOBER 1991 13,214 13 -0- -0- -0- -0-
COMMON STOCK CANCELED BY OFFICERS/DIRECTORS IN
JANUARY 1992 (20,000) (20) -0- -0- -0- -0-
CONTRIBUTION FROM AUSTIN -0- -0- -0- -0- -0- -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 1992 -0- -0- -0- -0- -0- -0-
--------- ----- --- --- --- ---
BALANCE AT JANUARY 31, 1992 169,214 169 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR THE ACQUISITION OF
GEO-ENVIRONMENT SERVICES, INC. IN FEBRUARY
1992 701,800 702 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR THE PURCHASE OF
MINING CLAIMS IN MARCH 1992 243,000 243 -0- -0- -0- -0-
COMMON STOCK CANCELED BY OFFICERS AND DIRECTORS
IN JUNE 1992 (32,430) (32) -0- -0- -0- -0-
CANCELLATION OF FRACTIONAL SHARES DUE TO
REVERSE STOCK SPLIT (21) -0- -0- -0- -0- -0-
CONTRIBUTION BY AUSTIN-YOUNG, INC. -0- -0- -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK (PURSUANT TO A
REPURCHASE AGREEMENT IN MAY, 1991) TO
AUSTIN-YOUNG, INC. FOR RELIEF OF DEBT IN
JULY 1992 3,380,000 3,380 -0- -0- -0- -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 1993 -0- -0- -0- -0- -0- -0-
--------- ----- --- --- --- ---
BALANCE AT JANUARY 31, 1993 4,461,563 4,462 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR SERVICES RENDERED
IN JUNE 1993 17,800 18 -0- -0- -0- -0-
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
TREASURY PAID-IN DEVELOPMENT
STOCK AMOUNT CAPITAL STAGE
------------- --------- -----------
<S> <C> <C> <C>
CANCELLATION OF COMMON SHARES -0- 20 -0-
ISSUANCE OF COMMON STOCK FOR THE PURCHASE OF
PRODUCT FROM STEELHEAD SPECIALTY MINERAL IN
AUGUST 1991 -0- 74,990 -0-
ISSUANCE OF COMMON STOCK FOR THE PURCHASE OF
MINING CLAIMS IN OCTOBER 1991 -0- 184,987 -0-
COMMON STOCK CANCELED BY OFFICERS/DIRECTORS IN
JANUARY 1992 -0- 20 -0-
CONTRIBUTION FROM AUSTIN -0- 17,000 -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 1992 -0- -0- (93,315)
--- ------- --------
BALANCE AT JANUARY 31, 1992 -0- 422,769 (152,689)
ISSUANCE OF COMMON STOCK FOR THE ACQUISITION OF
GEO-ENVIRONMENT SERVICES, INC. IN FEBRUARY
1992 -0- 96,442 -0-
ISSUANCE OF COMMON STOCK FOR THE PURCHASE OF
MINING CLAIMS IN MARCH 1992 -0- 4,859,757 -0-
COMMON STOCK CANCELED BY OFFICERS AND DIRECTORS
IN JUNE 1992 -0- 32 -0-
CANCELLATION OF FRACTIONAL SHARES DUE TO
REVERSE STOCK SPLIT -0- -0- -0-
CONTRIBUTION BY AUSTIN-YOUNG, INC. -0- 10,000 -0-
ISSUANCE OF COMMON STOCK (PURSUANT TO A
REPURCHASE AGREEMENT IN MAY, 1991) TO
AUSTIN-YOUNG, INC. FOR RELIEF OF DEBT IN
JULY 1992 -0- 61,620 -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 1993 -0- -0- (136,304)
--- --------- --------
BALANCE AT JANUARY 31, 1993 -0- 5,450,620 (288,993)
ISSUANCE OF COMMON STOCK FOR SERVICES RENDERED
IN JUNE 1993 -0- 26,682 -0-
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
CAPITAL
COMMON STOCK PREFERRED STOCK CAPITAL STOCK
------------- --------------- STOCK SUBSCRIPTION
SHARES AMOUNT SHARES AMOUNT SUBSCRIPTION RECEIVABLE
------ ------ ------ ------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
ISSUANCE OF COMMON STOCK AUSTIN-YOUNG, INC. IN
JUNE 1993 12,000 12 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR CASH OCTOBER 1993 66,667 67 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK AS DOWN PAYMENT ON
BUILDING OCTOBER 1993 6,000 6 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR SERVICES RENDERED
OCTOBER 1993 17,000 17 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR CASH DECEMBER 1993
80,072 80 -0- -0- -0- -0-
CONTRIBUTION BY AUSTIN-YOUNG, INC. -0- -0- -0- -0- -0- -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 1994 -0- -0- -0- -0- -0- -0-
--- --- --- --- --- ---
BALANCE AT JANUARY 31, 1994 4,661,102 4,662 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR SERVICES RENDERED
FEBRUARY 1994 6,000 6 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR SERVICES RENDERED
IN JUNE 1994 41,750 42 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK IN A PRIVATE OFFERING 22,500 22 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR SERVICES RENDERED
IN NOVEMBER 1994 15,000 15 -0- -0- -0- -0-
CONTRIBUTION BY AUSTIN-YOUNG, INC. -0- -0- -0- -0- -0- -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 1995 -0- -0- -0- -0- -0- -0-
--- --- --- --- --- ---
BALANCE AT JANUARY 31, 1995 4,746,352 4,747 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR SERVICES 9,000 9 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR SERVICES 9,000 9 -0- -0- -0- -0-
CONTRIBUTION BY AUSTIN-YOUNG, INC. -0- -0- -0- -0- -0- -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 1996 -0- -0- -0- -0- -0- -0-
--------- ------ --- --- --- ---
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
TREASURY PAID-IN DEVELOPMENT
STOCK AMOUNT CAPITAL STAGE
------------ --------- ------------
<S> <C> <C> <C>
ISSUANCE OF COMMON STOCK AUSTIN-YOUNG, INC. IN
JUNE 1993 -0- 35,988 -0-
ISSUANCE OF COMMON STOCK FOR CASH OCTOBER 1993 -0- 199,936 -0-
ISSUANCE OF COMMON STOCK AS DOWN PAYMENT ON
BUILDING OCTOBER 1993 -0- 29,994 -0-
ISSUANCE OF COMMON STOCK FOR SERVICES RENDERED
OCTOBER 1993 -0- 50,983 -0-
ISSUANCE OF COMMON STOCK FOR CASH DECEMBER 1993
-0- 191,321 -0-
CONTRIBUTION BY AUSTIN-YOUNG, INC. -0- 36,000 -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 1994 -0- -0- (310,862)
--- --------- --------
BALANCE AT JANUARY 31, 1994 -0- 6,021,524 (599,855)
ISSUANCE OF COMMON STOCK FOR SERVICES RENDERED
FEBRUARY 1994 -0- 29,994 -0-
ISSUANCE OF COMMON STOCK FOR SERVICES RENDERED
IN JUNE 1994 -0- 175,458 -0-
ISSUANCE OF COMMON STOCK IN A PRIVATE OFFERING -0- 89,978 -0-
ISSUANCE OF COMMON STOCK FOR SERVICES RENDERED
IN NOVEMBER 1994 -0- 46,235 -0-
CONTRIBUTION BY AUSTIN-YOUNG, INC. -0- 36,000 -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 1995 -0- -0- (709,048)
--- --------- ----------
BALANCE AT JANUARY 31, 1995 -0- 6,399,189 (1,308,903)
ISSUANCE OF COMMON STOCK FOR SERVICES -0- 22,391 -0-
ISSUANCE OF COMMON STOCK FOR SERVICES -0- 22,391 -0-
CONTRIBUTION BY AUSTIN-YOUNG, INC. -0- 36,000 -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 1996 -0- -0- (401,467)
--- --------- ----------
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
CAPITAL
COMMON STOCK PREFERRED STOCK CAPITAL STOCK
------------- ---------------- STOCK SUBSCRIPTION
SHARES AMOUNT SHARES AMOUNT SUBSCRIPTION RECEIVABLE
------ ------ ------ ------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 31, 1996 4,969,520 4,970 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR CASH IN A
PRIVATE OFFERING 130,960 131 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR SERVICES 259,620 260 -0- -0- -0- -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 1997 -0- -0- -0- -0- -0- -0-
--- --- --- --- --- ---
BALANCE AT JANUARY 31, 1997 5,360,100 5,361 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR CASH IN A PRIVATE
OFFERING (NET OF COMMISSIONS OF $84,575) 582,000 582 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR SERVICES 129,784 130 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR PURCHASE OF
EQUIPMENT 13,555 13 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR CASH PURSUANT TO A
STOCK OPTION PLAN 25,000 25 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR PARTIAL REDEMPTION
OF A NOTE PURSUANT TO A STOCK OPTION PLAN 100,000 100 -0- -0- -0- -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 1998 -0- -0- -0- -0- -0- -0-
--- --- --- --- --- ---
BALANCE AT JANUARY 31, 1998 6,210,439 6,211 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK IN A PRIVATE PLACEMENT
OFFERING (NET OF COMMISSIONS OF $53,428) 963,269 963 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR SERVICES 135,480 136 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR PURCHASE OF
EQUIPMENT 82,063 82 -0- -0- -0- -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 1999 -0- -0- -0- -0- -0- -0-
--- --- --- --- --- ---
BALANCE AT JANUARY 31, 1999 7,391,251 7,392 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK IN A PRIVATE PLACEMENT
OFFERING 129,001 78 -0- -0- -0- -0-
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
TREASURY PAID-IN DEVELOPMENT
STOCK AMOUNT CAPITAL STAGE
------------ ------- -----
<S> <C> <C> <C>
BALANCE AT JANUARY 31, 1996 -0- 6,851,728 (1,710,370)
ISSUANCE OF COMMON STOCK FOR CASH IN A
PRIVATE OFFERING -0- 156,729 -0-
ISSUANCE OF COMMON STOCK FOR SERVICES -0- 262,359 -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 1997 -0- -0- (464,662)
--- --------- ---------
BALANCE AT JANUARY 31, 1997 -0- 7,270,816 (2,175,032)
ISSUANCE OF COMMON STOCK FOR CASH IN A PRIVATE
OFFERING (NET OF COMMISSIONS OF $84,575) -0- 729,843 -0-
ISSUANCE OF COMMON STOCK FOR SERVICES -0- 131,782 -0-
ISSUANCE OF COMMON STOCK FOR PURCHASE OF
EQUIPMENT -0- 15,236 -0-
ISSUANCE OF COMMON STOCK FOR CASH PURSUANT TO A
STOCK OPTION PLAN -0- 9,350 -0-
ISSUANCE OF COMMON STOCK FOR PARTIAL REDEMPTION
OF A NOTE PURSUANT TO A STOCK OPTION PLAN -0- 37,400 -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 1998 -0- -0- (489,525)
--- ---------- ----------
BALANCE AT JANUARY 31, 1998 -0- 8,194,427 (2,664,557)
ISSUANCE OF COMMON STOCK IN A PRIVATE PLACEMENT
OFFERING (NET OF COMMISSIONS OF $53,428) -0- 1,218,676 -0-
ISSUANCE OF COMMON STOCK FOR SERVICES -0- 147,628 -0-
ISSUANCE OF COMMON STOCK FOR PURCHASE OF
EQUIPMENT -0- 121,472 -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 1999 -0- -0- (961,270)
--- ---------- ----------
BALANCE AT JANUARY 31, 1999 -0- 9,682,203 (3,625,827)
ISSUANCE OF COMMON STOCK IN A PRIVATE PLACEMENT
OFFERING -0- 79,921 -0-
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
CAPITAL
COMMON STOCK PREFERRED STOCK CAPITAL STOCK
------------- ---------------- STOCK SUBSCRIPTION
SHARES AMOUNT SHARES AMOUNT SUBSCRIPTION RECEIVABLE
------ ------ ------ ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ISSUANCE OF COMMON STOCK FOR SERVICES 115,514 90 -0- -0- -0- -0-
ISSUANCE OF PREFERRED STOCK TO REDEEM DEBT -0- -0- 142,084 142 -0- -0-
ISSUANCE OF PREFERRED STOCK IN A PRIVATE
OFFERING -0- -0- 152,500 153 -0- -0-
REACQUIRE COMMON STOCK FOR NOTE PAYABLE (2,520,000) -0- -0- -0- -0- -0-
REACQUIRE COMMON STOCK IN SETTLEMENT OF NOTE
RECEIVABLE (50,000) -0- -0- -0- -0- -0-
REPURCHASE COMMON STOCK (320,000) -0- -0- -0- -0- -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 2000 -0- -0- -0- -0- -0- -0-
---------- ------ ------- ---- --- ---
BALANCE AT JANUARY 31, 2000 4,745,766 $7,560 294,584 $295 -0- -0-
ISSUANCE OF COMMON STOCK FOR SERVICES 12,616 13 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR DEBT,
COMPENSATION, AND ACCRUED INTEREST 415,754 416 -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK FOR COMPENSATION 100,000 100 -0- -0- -0- -0-
CANCELLATION OF COMMON STOCK ISSUED FOR
COMPENSATION (33,000) (33) -0- -0- -0- -0-
ISSUANCE OF COMMON STOCK SUBSCRIPTION (500,000) -0- -0- -0- -0- 187,500 (187,500)
AMORTIZATION OF COMMON STOCK SUBSCRIPTION
RECEIVABLE EARNED -0- -0- -0- -0- -0- (35,126)
NET LOSS FOR THE PERIOD ENDED APRIL 30, 2000 -0- -0- -0- -0- -0- -0-
BALANCE AT APRIL 30, 2000 5,241,136 $8,056 294,584 $295 $187,500 $(152,374)
========= ====== ======= ==== ======== ==========
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
TREASURY PAID-IN DEVELOPMENT
STOCK AMOUNT CAPITAL STAGE
------------ --------- -----------
<S> <C> <C> <C>
ISSUANCE OF COMMON STOCK FOR SERVICES -0- 65,547 -0-
ISSUANCE OF PREFERRED STOCK TO REDEEM DEBT -0- 140,372 -0-
ISSUANCE OF PREFERRED STOCK IN A PRIVATE
OFFERING -0- 152,347 -0-
REACQUIRE COMMON STOCK FOR NOTE PAYABLE (831,600) -0- -0-
REACQUIRE COMMON STOCK IN SETTLEMENT OF NOTE
RECEIVABLE (5,000) -0- -0-
REPURCHASE COMMON STOCK (108,400) -0- -0-
NET LOSS FOR THE YEAR ENDED JANUARY 31, 2000 -0- -0- (958,341)
---------- ----------- -----------
BALANCE AT JANUARY 31, 2000 $(945,000) $10,120,390 $(4,584,168)
ISSUANCE OF COMMON STOCK FOR SERVICES -0- 4,120
ISSUANCE OF COMMON STOCK FOR DEBT,
COMPENSATION, AND ACCRUED INTEREST -0- 136,783
ISSUANCE OF COMMON STOCK FOR COMPENSATION -0- 24,900
CANCELLATION OF COMMON STOCK ISSUED FOR
COMPENSATION -0- (16,467)
ISSUANCE OF COMMON STOCK SUBSCRIPTION (500,000) -0- -0- -0-
AMORTIZATION OF COMMON STOCK SUBSCRIPTION
RECEIVABLE EARNED -0- -0- -0-
NET LOSS FOR THE PERIOD ENDED APRIL 30, 2000 -0- -0- (151,539)
BALANCE AT APRIL 30, 2000 $(945,000) $10,269,726 $(4,735,707)
========== =========== ============
</TABLE>
-11-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statement of Cashflows
<TABLE>
<CAPTION>
From Inception on
Three Months Ended February 9, 1984
April 30, 2000 Through
2000 1999 April 30, 2000
---- ---- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss (151,539) (197,302) (4,735,707)
Extraordinary gain, modification of debt (46,603) 0 (46,603)
Depreciation and amortization 24,288 20,513 263,115
(Increase) decrease in receivables 29,901 9,146 (1,546)
Decrease (increase) in prepaid expenses 7,375 7,375 2,167
Non Cash Consulting Expense 35,126 0 35,126
Decrease (increase) in inventory 444 (32,738) (272,232)
Increase (decrease) in payables (45,599) 30,732 308,922
Loss from disposal of fixed asset 0 0 13,377
Stock issued for services 44,832 0 1,050,447
Expenses paid by shareholder 0 0 149,018
---------- --------- -----------
Net cash used by operating activities (101,775) (162,274) (3,233,916)
---------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed & other assets (16,000) 27,312 (737,511)
Purchase certificates of deposit 0 0 (15,000)
Purchase of product tradenames 0 0 (28,683)
Purchase of note receivable 0 0 (5,000)
Organization costs 0 0 (1,524)
Business Development Costs 0 0 (58,599)
Purchase/sale of mining development costs 0 0 7,920
Purchase of mining claims 0 0 150,000
Sale of licenses & other assets 0 0 (65,000)
---------- --------- -----------
Net cash used by investing activities (16,000) 27,312 (753,397)
---------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 0 30,000 3,210,061
Issuance of preferred stock 0 0 152,500
Issuance of notes payable 0 184,145 1,203,031
Purchase of treasury stock 0 0 (108,400)
Principal payments on long-term debt (30,173) 0 (608,315)
Draw on Line of Credit 143,727 0 143,727
---------- --------- -----------
Net cash provided by financing activities 113,554 214,145 3,992,604
---------- --------- -----------
Net (decrease) increase in cash (4,221) 79,183 5,291
Cash at beginning of period 9,512 4,966 0
---------- --------- -----------
Cash at end of period 5,291 84,149 5,291
========== ========= ===========
</TABLE>
-12-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
From Inception on
For the Quarters Ended February 9, 1984
April 30, Through
2000 1999 April 30, 2000
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest 5,879 1,810 51,937
Income taxes 0 100 2,547
NON-CASH TRANSACTIONS:
Stock issued for mining claims 0 0 5,045,000
Stock issued for down payment on building 0 0 30,000
Stock issued for services 44,832 147,764 1,050,447
Stock issued for stock of Geo-Environmental
Services, Inc. (name changed to
American Absorbents, Inc.) 0 0 97,144
Stock issued for inventory 0 0 75,000
Stock issued for assets of Austin-Young, Inc.
and Global Environmental Industries 0 0 236,000
Stock issued for purchase of equipment 0 121,554 136,803
Stock issued for redemption of note 105,000 0 142,500
Treasury stock repurchased in exchange for debt 0 0 831,600
Treasury stock repurchased in settlement of note receivable 0 0 5,000
Debt assumed by buyer of fixed asset disposition 0 0 14,281
Preferred stock issued as redemption of debt 0 0 142,084
</TABLE>
-13-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
April 30, 2000
(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, preferred stock and convertible debt
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 or services. These transactions are recorded at fair market
value as determined by the board of directors.
-14-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
April 30, 2000
(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 April 30,
2000 and 1999 after writing off all accounts determined to be
uncollectible.
PREPAID EXPENSES
Prepaid expenses consist of the following:
QUARTER ENDED
-------------
April 30, 2000 April 30, 1999
--------------- ----------------
Prepaid mining land lease $ 9,833 $ 9,833
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.
-15-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
April 30, 2000
(unaudited)
NOTE 3 - COMMON STOCK AND STOCKHOLDERS' EQUITY
Stock of the Company has been issued for cash, license agreements,
mining claims, compensation for services, and in exchange for other
stock.
During the period ended April 30, 2000, the Company issued shares
of stock for service, the payment of debt, and compensation.
On March 7, 2000, the Company issued 12,616 shares at $0.33/share
for legal services.
On April 13, 2000, the Company issued 330,906 shares at $0.33/share
for payment of debt and accrued interest.
On April 13, 2000, the Company issued 84,848 shares at $0.33/share
for payment of accrued salaries to an officer of the Company.
On April 27, 2000, the Company cancelled 33,000 shares issued for
compensation to two officers of the Company. The shares were issued
at $0.50/share.
On April 27, 2000 the Company issued 100,000 shares at $0.25/share
for compensation to two officers of the Company.
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 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.
-16-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
April 30, 2000
(unaudited)
NOTE 4 - MINING CLAIMS (Continued)
On July 10, 1997, the Department of the Interior Bureau of Land
Management granted approval of the Company's Permanent Mining
Permit and Plan of Operations to mine its Harney County, Oregon
zeolite properties.
To date $100 depletion has been taken on any of these claims.
Additional depletion of these assets will begin once material
mining operations on these claims begins.
NOTE 5 - NOTES PAYABLE
During the quarter ended April 30, 2000, total notes payable
outstanding decreased by $38,049 from the previous quarter. Of the
remaining notes payable, three are outstanding to stockholders and
bear interest at the rate of 8.25, 10.5%, and 0.00%. In addition
to the notes payable to shareholders, American Absorbents Natural
Products secured a $150,000 loan from Frost National Bank on
September 2, 1999. The company's Austin warehouse secures the note
that is due September 2, 2000. The interest rate is Prime plus 1%
(10.00% as of April 30, 2000 and 10.5% as of the filing date of
this 10QSB) and is payable monthly. Additional transactions this
quarter included four shareholders converting $105,000 of debt
into common stock. The Company began to draw funds on its $215,000
line of credit. On April 30, 2000 the outstanding balance was
$143,727. Also during the first quarter, the Company was able to
reduce another note payable by $56,238. $52,264 of the reduction
was as a result of the settlement reached between Austin-Young,
Inc and the Company concerning the lease at 3800 Hudson Bend Road,
Austin, TX 78734.
NOTE 6 - PRIVATE PLACEMENT OF COMMON STOCK or PREFERRED STOCK
During the first quarter ended April 30, 2000, there was no
issuance of private placements of common stock. There was,
however, several transactions completed with common stock. The
Company issued 12,616 shares of common stock for legal services
rendered last fiscal year. The Company also issued 415,754 shares
of common stock to pay $105,000 in note payables and the related
accrued interest as well as $28,000 in accrued salaries to an
officer of the Company. The Company cancelled 33,000 shares of
common stock issued to two officers of the Company and in an
unrelated transaction issued 100,000 shares of common stock to the
same two officers.
-17-
<PAGE>
AMERICAN ABSORBENTS NATURAL PRODUCTS, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to the Consolidated Financial Statements
April 30, 2000
(unaudited)
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 company
sold 91 units of this private placement. The second private
placement 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 Company sold 144 units of this
private placement. 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.
At April 30, 2000, 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. Subsequent to the end of
the quarter, this case went to trial and the Court found in favor
of Calkins. The Company is awaiting the determination of legal fees
in order to determine the total judgement against the Company. We
anticipate the judgement will be approximately $10,000.
Also subsequent to the end of the quarter, the Company reached a
settlement with David Redding which finalized any unresolved
compensation and outstanding options issues. The Company agreed
to issue 21,625 shares of common stock to David Redding for
services rendered after his resignation from the Company and
David Redding agreed to return 100,000 stock options to the
Company.
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.
-18-
<PAGE>
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.
RESULTS OF OPERATIONS
The Company is a development stage enterprise and has incurred losses in each of
its fiscal years ended January 31, 1998, 1999 and 2000 and for the quarters
ended April 30, 2000, and April 30, 1999. These losses are the result of the
continued operating expenses the Company incurs as it develops it niche in the
retail and industrial marketplaces. Revenues have been insufficient to cover
operating expenses or operational cash flow requirements.
A net loss of $151,539 was incurred in the three-month period ended April 30,
2000, compared to a net loss of $197,302 for the same quarter of the previous
year. Revenues for the quarter ended April 30, 2000 decreased to $739 from
$10,140 for the same quarter of the previous year.
General and administrative expenses increased by approximately $54,773 from
$179,278 to $234,051 during the three months ended April 30, 2000 as compared to
the same period of the previous year. A charge of $35,126 for consulting
services accounted for the majority of the increase. An additional charge of
$10,000 for the Caulkin's lawsuit settlement was also incurred during the first
quarter. Personnel related expenses increased by $10,223 from $94,715 for the
period ended April 30, 1999 to $104,938 for the quarter ended April 30, 2000.
Legal and accounting fees increased by $5,485 due in part to the costs
associated with the year-end audit. Plant related expenses decreased during the
same period by $4,550 with additional decreases of $1,600, $2,280, and $2,500 in
automobile, freight and delivery, and royalty expenses respectively.
For the three months ended April 30, 2000, the Company realized gross profit
margins of 40% on revenues of $739. During the quarter ended April 30, 2000, the
Company recognized income of $57,084 from the settlement of the lease dispute
between Lakeview Holdings, Inc. and the Company. Lakeview Holdings paid the
Company $50,000 in cash to satisfy their portion of the settlement and
Austin-Young, Inc. agreed to reduce the balance of its note payable by $60,000.
The reduction in debt is reflected as an extraordinary item on the income
statement in the amount of $46,603.
Without this income, the loss for the period would have increased to $205,750.
An increase of $8,450 from $197,298 for the period ended April 30, 1999.
The ratio of current assets to current liabilities (current ratio) was 0.51,
2.69, 0.77, and 0.47, respectively, for the fiscal years ended January 31, 2000,
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, owed to Austin-Young, Inc., the previous
major stockholder of the Company. Current ratios at April 30, 2000 and 1999 were
.56 and 1.23, respectively. The decrease in the current ratio is attributable to
the approximately $237,000 increase in payables from $ 109,280 on April 30, 1999
to approximately $346,000 on April 30, 2000 and the $79,000 increase in
short-term notes payable from $230,400 on April 30, 1999 to $309,470 on April
30, 2000. During the same periods, cash and receivables decreased by $106,900.
-19-
<PAGE>
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 since its inception and has incurred net losses in each year,
including a net loss of $151,539 for quarter ended April 30, 2000. Revenues to
date have provided insufficient funding of working capital. During the quarter,
the Company's primary sources of funding were the approximately $145,000
advanced from the line of credit and the $50,000 received from the settlement of
the lease dispute. The Company also collected the $30,000 in receivables due it
from the shipment to Fragrance Solutions in late January. The Company will have
to continue to rely on funding from the line of credit as well as private
placements, cash flows and other offerings for future operating and development
costs. In addition to funds for continuing operations, the $118,800 principal
payment on the $831,6000 note to Austin-Young is due July 6, 2000 and the
$29,500 payment to the Bureau of Land Management for our leases is due in August
2000.
At April 30, 2000, the Company had $346,339 in accounts payable and accrued
expenses; a year ago at April 30, 1999, the Company had $109,280. Notes payable,
current and long-term, totaled $1,125,232 at April 30, 2000, versus $231,268 at
April 30, 1999. Management believes it will be able to raise capital to provide
for operations and debt service. However, there can be no assurance that
additional financing will be available at all or, if available, such financing
would be obtainable on terms acceptable to the Company. If adequate financing is
not available, the Company may be required to curtail its operation
significantly or to obtain funds through entering collaborative agreements or
other arrangements on less favorable terms. The failure of the Company to raise
capital on acceptable terms would have a material adverse effect on the
Company's business, financial condition, and results of operations.
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 for the fiscal year ended
January 31, 1996 and $29,500 in the fiscal years ended January 31, 1997, 1998,
1999, and 2000. 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.
The Company's need for warehouse space in Austin, Texas has diminished.
Therefore, the Company has been negotiating to sell the warehouse to its current
tenant. As of April 30, 2000, the warehouse is under contract to be sold with an
anticipated closing in the second quarter. Proceeds from the sale will be used
to payoff the loan at Frost Bank which is secured by the warehouse with any
remaining funds used to continue operations.
During the three months ended April 30, 2000, the Company issued 415,754 shares
of common stock to pay approximately $137,000 in debt and accrued expenses and
salaries. The Company did not issue any stock for cash investments into the
Company during this quarter.
INFLATION
The Company does not expect inflation to have any material effect on its
revenues, costs or overall operation.
-20-
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
During the quarter ended April 30, 2000, 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 17)
ITEM 2. CHANGES IN SECURITIES.
During the quarter ended April 30, 2000, 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 class of
securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
During the quarter ended April 30, 2000, 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.)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
During the quarter ended April 30, 2000, no matters were submitted to a vote of
security-holders.
ITEM 5. OTHER INFORMATION.
No reports were filed on Form 8-K during the quarter ended April 30, 2000.
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 April 30, 2000 and 1999:
Exhibit 1 - Computation of Earnings (Loss) Per Share 23
Exhibit 2 - Subsidiary of the Registrant 24
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 April 30, 2000.
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<PAGE>
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, Chairman of the Board
and Chief Executive Officer
Date: June 14, 2000
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 Chief Executive June 14, 2000
---------------------- Officer and Chairman of the Board
Robert L. Bitterli (Principal Executive Officer)
/s/ DAVID C. SCOTT President and Chief Financial Officer June 14, 2000
------------------ (Principal Accounting Officer)
David C. Scott
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