Attached files
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 2009
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number: 000-22855
AMERICAN SOIL TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 95-4780218
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
12224 Montague Street, Pacoima, California 91331
(Address of principal executive offices)
(818) 899-4686
(Issuer's telephone number)
N/A
(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 Section
13 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 the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files). Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell Company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of March 23, 2010, the number of shares of common stock issued and
outstanding was 68,090,590.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited) 3
Consolidated Balance Sheets - December 31, 2009 and
September 30, 2009 3
Consolidated Statements of Operations -
For the three months ended December 31, 2009 and 2008 4
Consolidated Statements of Cash Flow -
For the three months ended December 31, 2009 and 2008 5
Consolidated Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 3. Qualitative and Quantitative Disclosures About Market Risk 14
Item 4. Controls and Procedures 14
Item 4T. Controls and Procedures 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 1A. Risk Factors 15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits 16
SIGNATURES 17
2
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AMERICAN SOIL TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, September 30,
2009 2009
------------ ------------
Assets:
Current assets
Cash and cash equivalents $ 1,823 $ 13,604
Accounts receivable, net of allowance of $35,538 and
$38,538 at December 31, 2009 and September 30, 2009, respectively 7,015 16,648
Inventories 69,025 70,227
Prepaid expenses and other current assets 19,083 19,589
------------ ------------
Total current assets 96,946 120,068
Property and equipment, net 71,172 78,824
Deposits and other assets -- 256
Intangible assets 199,565 212,038
------------ ------------
Total assets $ 367,683 $ 411,186
============ ============
Liabilities and Stockholders' Deficit:
Current liabilities
Accounts payable $ 769,946 $ 802,095
Due to related parties 330,837 318,212
Accrued liabilities 1,212,822 1,080,031
Notes payable 1,921,858 1,924,039
Capital lease obligations 18,264 19,261
Notes payable to related parties 1,051,974 1,003,474
------------ ------------
Total current liabilities 5,305,701 5,147,112
Capital lease obligations -- 3,527
Notes payable -- 125,000
------------ ------------
Total liabilities 5,305,701 5,275,639
------------ ------------
Stockholders' deficit:
Series A preferred stock, $0.50 stated value, 25,000,000
shares authorized, 2,763,699 shares issued and outstanding
at December 31, 2009 and September 30, 2009, respectively 1,381,849 1,381,849
Common stock, $0.001 par value, 100,000,000 shares authorized,
68,090,590 and 60,965,590 shares issued and outstanding at
December 31, 2009 and September 30, 2009, respectively 68,091 60,966
Additional paid-in capital 19,769,248 19,514,437
Accumulated deficit (26,157,206) (25,821,705)
------------ ------------
Total stockholders' deficit (4,938,018) (4,864,453)
------------ ------------
Total liabilities and stockholders' deficit $ 367,683 $ 411,186
============ ============
See accompanying Notes to Consolidated Financial Statements.
3
AMERICAN SOIL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Three Months
Ended Ended
December 31, December 31,
2009 2008
------------ ------------
Revenue $ 10,258 $ 65,565
Cost of goods sold (excluding amortization of
intangible assets) 6,831 28,144
------------ ------------
Gross profit 3,427 37,421
------------ ------------
Operating expenses:
General and administrative 299,571 233,913
Sales and marketing 317 20,768
Amortization of intangible assets 12,473 86,533
------------ ------------
Total operating expenses 312,361 341,214
------------ ------------
Loss from operations (308,934) (303,793)
Other (income) expense
Interest expense 26,567 31,765
Change in fair value of derivative liability -- 1,394
Loss on sale of property and equipment -- 572
------------ ------------
Loss before income taxes (335,501) (337,524)
Provision for income taxes -- --
------------ ------------
Net loss $ (335,501) $ (337,524)
============ ============
Net loss per share, basic and diluted $ (0.00) $ (0.01)
============ ============
Weighted average common shares outstanding 67,427,547 60,965,590
============ ============
See accompanying Notes to Consolidated Financial Statements.
4
AMERICAN SOIL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Three Months
Ended Ended
December 31, December 31,
2009 2008
--------- ---------
Cash flows from operating activities:
Net loss $(335,501) $(337,524)
Adjustments to reconcile net loss to net cash
used in operating activities
Disposal of assets -- 572
Depreciation and amortization 20,125 115,871
Stock-based compensation 136,936 10,745
Change in derivative liabilities -- 1,394
Amortization of debt discount -- 1,539
Changes in operating assets and liabilities:
Accounts receivable 9,633 48,538
Inventory 1,202 10,198
Prepaid expenses and other assets 762 1,194
Accounts payable (32,149) 65,548
Due to related parties 12,625 --
Accrued expenses 132,791 96,200
--------- ---------
Net cash provided by (used in) operating activities (53,576) 14,275
--------- ---------
Cash flows from financing activities:
Proceeds from related party notes 48,500 --
Payments on capital lease obligations (4,524) (3,842)
Repayments on related party notes payable -- (5,587)
Repayments on notes payable (2,181) (6,757)
--------- ---------
Net cash provided by (used in) financing activities 41,795 (16,186)
--------- ---------
Net decrease in cash and cash equivalents (11,781) (1,911)
Cash and cash equivalents at beginning of period 13,604 6,286
--------- ---------
Cash and cash equivalents at end of period $ 1,823 $ 4,375
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ -- $ 6,074
========= =========
Cash paid during the period for income taxes $ -- $ --
========= =========
Supplemental disclosure of non-cash investing and financing activities:
Conversion of debt and accrued interest into common stock $(125,000) $ --
--------- ---------
See accompanying Notes to Consolidated Financial Statements.
5
AMERICAN SOIL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009
(UNAUDITED)
1. BUSINESS
The Company is primarily engaged in the marketing of polymer and other soil
amendments to the agricultural turf and horticulture industries. The Company's
products are used to decrease water usage, increase nutrient retention in soil,
enhance seed germination and sprout emergence, clarify ponds and increase the
effectiveness of chemical fertilizers and biological additives. In 2006, the
Company acquired the patent to a slow release fertilizer. The Company also has
exclusive license rights to the use of patented polymer application techniques,
as well as numerous patents on a unique machine designed to inject polymer and
other liquid products into existing turf and some crops.
The Company also expanded to provide next-generation and sustainable fertilizers
thru the acquisition of Smart World Organics, Inc. ("Smart World") on December
20, 2006. Simultaneously, the Company entered into an Intellectual Property
Purchase Agreement with the founder of Smart World, Ray Nielsen ("Nielsen") that
included certain formulas originally believed to be proprietary and intellectual
properties used in the business of Smart World. The formulas acquired from
Nielsen were deemed not to be proprietary and subsequently deemed to have little
or no value. Smart World sells homogenized fertilizers, non-toxic insect
controls, plant protectants, seed, and soil and silage inoculants. Smart World
also provides advanced, custom-formulated products built to suit unusual growing
conditions and environments. Due to losses incurred in 2008, management
terminated Smart World employees and seeks to operate through commission-based
sales representatives. Additionally, the Company has several debt obligations
that are past the contractual maturity date or are due and payable due to non
payment of interest.
2. GOING CONCERN AND MANAGEMENT'S PLAN
The Company has sustained significant losses and has an accumulated deficit of
$26,157,206 and negative working capital of $5,208,755 as of December 31, 2009.
The ability of the Company to continue as a going concern is dependent upon
obtaining additional capital and financing, and generating positive cash flows
from operations. The Company intends to seek additional capital either through
debt or equity offerings and is attempting to increase sales volume and
operating margins to achieve profitability. Due to the current economic
environment and the Company's current financial condition, management cannot be
assured there will be adequate capital available when needed and on acceptable
terms. These factors raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.
6
3. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements of the Company are unaudited and have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information, pursuant to the
rules and regulations of the Securities and Exchange Commission. Notes to the
consolidated financial statements which would substantially duplicate the
disclosures contained in the audited financial statements for the most recent
fiscal year 2009 as reported in the Company's Form 10-K have been omitted. The
results of operations for the three month periods ended December 31, 2009 and
2008 are not necessarily indicative of the results to be expected for the full
year. All accounts and intercompany transactions have been eliminated in
consolidation. In the opinion of management, the consolidated financial
statements include all adjustments, consisting of normal recurring accruals,
necessary to present fairly the Company's financial position, results of
operations and cash flows. These statements should be read in conjunction with
the financial statements and related notes which are part of the Company's
Annual Report on Form 10-K for the year ended September 30, 2009.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America,
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates. The Company's significant estimates made in connection
with the preparation of the accompanying financial statements include the
valuation of inventories, carrying value of the intangible assets, valuation of
stock options, and the valuation of the derivative liability.
Estimates are periodically reviewed in light of changes in circumstances, facts
and experience. The effects of material revisions in estimates are reflected in
the consolidated financial statements prospectively from the date of the change
in estimate in accordance with Accounting Standards Codification ("ASC") 250 -
Accounting Changes and Error Corrections, formerly Statement of Financial
Accounting Standards ("SFAS") No. 154, "Accounting Changes and Error Corrections
- A Replacement of APB Opinion No. 20 and FASB Statement No. 3".
CONCENTRATION OF CREDIT RISK
Accounts receivable from individual customers representing 10% or more of the
net accounts receivable balance consists of the following as of December 31:
2009 2008
---- ----
Percent of accounts receivable 76% 85%
Number of customers 3 3
7
Sales from individual customers representing 10% or more of sales consist of the
following customers for the three months ended December 31:
2009 2008
---- ----
Percent of sales 85% 80%
Number of customers 4 3
As a result of the Company's concentration of its customer base, the loss or
cancellation of business from, or significant changes in scheduled deliveries of
product sold to the above customers or a change in their financial position
could materially and adversely affect the Company's consolidated financial
position, results of operations and cash flows.
NET LOSS PER SHARE
Basic net loss per share is calculated by dividing net loss by the weighted
average common shares outstanding during the period. Diluted net loss per share
reflects the potential dilution to basic net loss per share that could occur
upon conversion or exercise of securities, options or other such items to common
shares using the treasury stock method, based upon the weighted average fair
value of our common shares during the period. For each period presented, basic
and diluted net loss per share amounts are identical as the effect of potential
common shares is antidilutive.
The following is a summary of outstanding securities which have been excluded
from the calculation of diluted net loss per share because the effect would have
been antidilutive for the three months ended December 31:
2009 2008
----------- -----------
Series A convertible preferred stock 2,763,699 2,763,699
Convertible debt -- 150,000,000
----------- -----------
2,763,699 152,763,699
=========== ===========
RECENT ACCOUNTING PRONOUNCEMENTS
In October 2009, the FASB issued ASU No. 2009-13, MULTIPLE-DELIVERABLE REVENUE
ARRANGEMENTS--a consensus of the FASB Emerging Issues Task Force, codified into
ASC 605 REVENUE RECOGNITION which provides amendments to the criteria for
separating consideration in multiple-deliverable arrangements. As a result of
these amendments, multiple-deliverable revenue arrangements will be separated in
more circumstances than under existing U.S. GAAP. The ASU does this by
establishing a selling price hierarchy for determining the selling price of a
deliverable. The selling price used for each deliverable will be based on
vendor-specific objective evidence if available, third-party evidence if
vendor-specific objective evidence is not available, or estimated selling price
if neither vendor-specific objective evidence nor third-party evidence is
available. A vendor will be required to determine its best estimate of selling
price in a manner that is consistent with that used to determine the price to
8
sell the deliverable on a standalone basis. This ASU also eliminates the
residual method of allocation and will require that arrangement consideration be
allocated at the inception of the arrangement to all deliverables using the
relative selling price method, which allocates any discount in the overall
arrangement proportionally to each deliverable based on its relative selling
price. Expanded disclosures of qualitative and quantitative information
regarding application of the multiple-deliverable revenue arrangement guidance
are also required under the ASU. The ASU does not apply to arrangements for
which industry specific allocation and measurement guidance exists, such as
long-term construction contracts and software transactions. ASU No. 2009-13 is
effective beginning of the Company's fiscal year, or October 1, 2009. This
standard will not have a significant impact on the Company's operating results
based on current revenue generating activities.
4. INVENTORIES
Inventories consist of the following at:
December 31, September 30,
2009 2009
---------- ----------
Raw materials $ 64,481 $ 64,818
Finished goods 4,544 5,409
---------- ----------
$ 69,025 $ 70,227
========== ==========
5. ACCRUED EXPENSES
Accrued expenses consist of the following at:
December 31, September 30,
2009 2009
---------- ----------
Interest $ 289,581 $ 282,349
Interest to related parties 113,366 101,427
Compensation and related 809,744 696,255
Other 131 --
---------- ----------
$1,212,822 $1,080,031
========== ==========
6. NOTES PAYABLES AND RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS
During the quarter ended December 31, 2009, Ms. Diana Visco loaned the Company
an additional $48,500. This note was consolidated with a note issued in August
2009 to Ms. Visco for $691,450, and accordingly the previous note has been
superceeded. The new note is for a total of $739,950. The principal is due on
September 30, 2010. Interest is payable monthly based upon the prime rate.
9
NOTE PAYABLE
On October 8, 2009, a third party investor converted a promissory note with an
outstanding balance of $125,000 into 3,125,000 shares of common stock at the
contractual exercise price $0.04 per share.
7. COMMON STOCK
STOCK OPTIONS
As of December 31, 2009, there were 1,996,999 stock options outstanding with a
weighted average exercise price of $0.19 and a remaining contractual life of
2.75 years. Stock option expense for the quarters ending December 31, 2009 and
2008 was $8,936 and $10,745, respectively which is included in general and
administrative expenses in the accompanying Statements of Operations.
On October 8, 2009, the Company issued 3,125,000 shares of common stock for
settlement of a note. See Note 6.
On October 9, 2009, the Company issued 4,000,000 shares of common stock at
$0.032 per share to officers and directors for services rendered. The shares
were immediately vested and accordingly, the Company valued the shares based on
the Company's stock price on the date of grant.
8. LITIGATION
On or about September 21, 2007, Stockhausen, Inc. ("Stockhausen") filed a
Complaint in the United States District Court, for the Middle District of North
Carolina, against us seeking damages. Stockhausen alleges that we breached an
agreement with them by failing to pay for goods purchased and failing to
purchase a minimum quantity of goods. We believe that Stockhausen provided
Defective products and waived any minimum purchase requirements. Stockhausen is
seeking a judgment in the amount of $188,180 plus interest and lost profits in
an unspecified amount, along with costs and attorneys fees. We filed an Answer
to the Complaint and a Cross-Complaint against Stockhausen on November 14, 2007.
Stockhausen has filed a motion to strike our answer and counterclaim which has
been recommended to the judge by the magistrate. We have filed a brief in
opposition, as well as an explanation of damages and are awaiting the court's
decision. We have been advised that the court has taken the matter under
advisement.
On or about October 4, 2007, Raymond J. Nielsen and Cheryl K. Nielsen
(collectively, "Plaintiffs"), filed a Complaint in the Circuit Court in the
Sixth Judicial District of Pasco County, Florida, against us and Smart World
(collectively "Defendants") seeking damages, declaratory, and injunctive relief.
Plaintiffs allege that Defendants failed to pay interest when due on the
Convertible Debenture from Defendants to Plaintiffs and, thus, the entire amount
of the Convertible Debenture is accelerated and Plaintiffs are seeking a
judgment in the amount of $1,500,000 plus interest. On December 29, 2009, the
matter was settled for $400,000 and the Company had 60 days in which to remit
the amount or a judgment in the entire amount claimed would be entered against
us. The Company was not able to meet the terms of the settlement and have been
actively communicating with the Plaintiffs to extend the terms of the
settlement.
8. SUBSEQUENT EVENT
On January 12 2010, Diana Visco loaned the Company $35,725 to fund certain
operating expenses of the Company. The amount is due upon demand and added to
previous notes discussed in Note 6.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with our
financial statements, including the notes thereto, appearing elsewhere in this
Report.
FORWARD-LOOKING STATEMENTS
The following information contains certain forward-looking statements.
Forward-looking statements are statements that estimate the happening of future
events and are not based on historical fact. Forward-looking statements may be
identified by the use of forward-looking terminology, such as "may," "could,"
"expect," "estimate," "anticipate," "plan," "predict," "probable," "possible,"
"should," "continue," or similar terms, variations of those terms or the
negative of those terms. The forward-looking statements specified in the
following information have been compiled by our management on the basis of
assumptions made by management and considered by management to be reasonable.
Our future operating results, however, are impossible to predict and no
representation, guaranty, or warranty is to be inferred from those
forward-looking statements.
OVERVIEW
We develop, manufacture and market cutting-edge technology that decreases the
need for water and improves the soil in the "Green Industry" consisting of
agriculture, turf and horticulture.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, our selected
financial information:
Three Months Ended Three Months Ended
December 31, 2009 December 31, 2008
----------------- -----------------
(Unaudited) (Unaudited)
STATEMENT OF OPERATIONS DATA:
Revenue $ 10,258 $ 65,565
Net Loss (335,501) (337,524)
Net Loss per Share $ (0.00) $ (0.01)
December 31, 2009 September 30, 2009
----------------- ------------------
(Unaudited) (Audited)
BALANCE SHEET DATA:
Current Assets $ 96,946 $ 120,068
Total Property & Equipment, Net 71,172 78,824
Intellectual Property, Net 199,565 212,038
Total Assets 367,683 411,186
Total Current Liabilities 5,305,701 5,147,112
Accumulated Deficit $(26,157,206) $(25,821,705)
11
THREE MONTHS ENDED DECEMBER 31, 2009 (UNAUDITED) COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 2008 (UNAUDITED)
REVENUES
Revenues for the three months ended December 31, 2009 were $10,258 compared to
$65,565 for the three months ended December 31, 2008, a decrease of 84.4%. This
decrease in revenue is a direct result of the lack of capital necessary to
promote our products and the continuing effect of our decline in linear polymer
business caused by defective product received from our linear polymer supplier.
We are in litigation with our linear polymer supplier and have commenced
settlement negotiations. We continue to lose linear polymer sales because of
reluctance by our customers to purchase product from us over concerns about
receiving defective product.
COST OF SALES
Cost of goods sold decreased to $6,831 for the three months ended December 31,
2009 from $29,144 for the three months ended December 31, 2008. The decrease in
the cost of sales is the result of the decrease revenues during this period. Our
gross margins were 33% and 57% for the three months ended December 31, 2009 and
2008, respectively. The decrease in our gross margins was due to reduction in
sales in relation to fixed costs of sales during three months ending December
31, 2009.
OPERATING EXPENSES
Operating expenses decreased 9% to $312,361 from $341,214 for the three-month
period ended December 31, 2009 and 2008, respectively. This decrease in
operating expenses was a result in decreased operations offset by increased
stock-based compensation charges. Our amortization expense decreased to $12,473
for the three months ended December 31, 2009 from $86,533 for the three months
ended December 31, 2008 due to impairment of certain intangible assets as of
September 30, 2009.
NET LOSS
We experienced a net loss from operations of $335,501 for the three months ended
December 31, 2009 as compared to a net loss of $337,524 for the three months
ended December 31, 2008. Our sales and marketing expenses decreased from $20,768
in the three months ended December 31, 2008 to $317 for the three months ended
December 31, 2009. The decrease in the net loss is directly related to a
reduction in certain staff and reduced operations offset by increased
stock-based compensation charges. Revenue from the sale of products decreased
from $65,565 for the three months ended December 31, 2008 to $10,258 for the
three months ended December 31, 2009. This decrease in revenue is a direct
result of lack of capital preventing proper sales support and ability to promote
our products, as well as the continuing effect of defective product received in
prior periods as discussed above.
12
SEASONALITY
Our efforts in the United States have focused on the southern states and
therefore generally experience year round growing cycles, with the sale of the
agricultural products preceding the growing cycle of various crops.
International sales have not been sufficient enough or the geographic
distribution of sales concentrated enough to determine if a seasonal trend
exists although the initial indication is that our markets will become diverse
and therefore not indicate significant seasonal variations. As we expand into
the residential and commercial segments nationally, we will experience some
seasonal declines in sales during the fall and winter quarters in less temperate
climates. As we expand into the hydroponics organic market, we should experience
a significant lessening of seasonal variations.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $1,823 and $13,604 at December 31, 2009 and
September 30, 2009, respectively. Net cash used in operations was $53,576 for
the period ended December 31, 2009 compared to net cash provided by operations
of $14,275 for the comparable period ended December 31, 2008. We have
historically relied upon one of our officers and significant shareholders to
provide cash to meet short term operating cash requirements.
At December 31, 2009, the outstanding balance of the debentures was $2,973,832.
These convertible debentures consisted of: a) $1,500,000, 8% per annum
convertible debentures at the closing price on the day immediately preceding the
day of conversion which is currently in default and in dispute; (b) various
debentures totaling $421,858 with interest per annum from 8-10%; (c) a loan from
an officer and shareholder for $739,950 bearing interest at prime; (d) various
loans from related parties totaling $312,024 bearing interest ranging from prime
to 12%
Interest expense for the three months ended December 31, 2009 and 2008 was
$26,567 and $31,765, respectively.
We have a working capital deficit $5,208,755 as of December 31, 2009 compared to
working capital deficit of $5,027,044 as of September 30, 2009. Our increase in
current liabilities is directly related to an increase in our notes payable,
accounts payable and accrued liabilities.
As shown in the accompanying financial statements, we have incurred an
accumulated deficit of $26,157,206 and a working capital deficit of
approximately $5,208,755 as of December 31, 2009. Our ability to continue as a
going concern is dependent on obtaining additional capital and financing and
operating at a profitable level. We intend to seek additional capital either
through debt or equity offerings and to increase sales volume and operating
margins to achieve profitability. Our working capital and other capital
requirements during the next fiscal year and thereafter will vary based on the
sales revenue generated.
13
We will consider both the public and private sale of securities and/or debt
instruments for expansion of our operations if such expansion would benefit our
overall growth and income objectives. Should sales growth not materialize, we
may look to these public and private sources of financing. There can be no
assurance, however, that we can obtain sufficient capital on acceptable terms,
if at all. Under such conditions, failure to obtain such capital likely would at
a minimum negatively impact our ability to timely meet our business objectives.
Our auditors issued an explanatory paragraph regarding substantial doubt about
the Company's ability to continue as a going concern in our most recent 10K for
the year ended September 30, 2009.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
ITEM 4. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to provide
reasonable assurance that information required to be disclosed in our Exchange
Act reports is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms and that such information is
accumulated and communicated to our management, including our Chief Executive
Officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures,
management recognizes that any controls and procures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives and in reaching a reasonable level of assurance
management necessarily was required to apply its judgment in evaluating the cost
benefit relationship of possible controls and procedures.
As required by Rule 13a-15(b) of the Exchange Act, we carried out an evaluation
under the supervision and with the participation of our management, including
our Chief Executive Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures as of the end of the period covered by
this report. For the year ended September 30, 2009, the Chief Executive Officer
had evaluated the effectiveness of our disclosure controls and procedures and
had determined that asset recoverability analysis needs to be improved. In
response to this deficiency, we hired a financial expert to assist us in
improving our disclosure controls and procedures. We believe that the changes
implemented enabled the Company to improve its timely reporting of the required
assessment analysis and related disclosures. Based on the foregoing, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective at the reasonable assurance level as of
December 31, 2009.
There has been no other change in our internal controls over financial reporting
during our most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal controls over financial
reporting.
ITEM 4T. CONTROLS AND PROCEDURES
Not applicable
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On or about September 21, 2007, Stockhausen, Inc. ("Stockhausen") filed a
Complaint in the United States District Court, for the Middle District of North
Carolina, against us seeking damages. Stockhausen alleges that we breached an
agreement with them by failing to pay for goods purchased and failing to
purchase a minimum quantity of goods. We believe that Stockhausen provided
Defective products and waived any minimum purchase requirements. Stockhausen is
seeking a judgment in the amount of $188,180 plus interest and lost profits in
an unspecified amount, along with costs and attorneys fees. We filed an Answer
to the Complaint and a Cross-Complaint against Stockhausen on November 14, 2007.
Stockhausen has filed a motion to strike our answer and counterclaim which has
been recommended to the judge by the magistrate. We have filed a brief in
opposition, as well as an explanation of damages and are awaiting the court's
decision. We have been advised that the court has taken the matter under
advisement.
On or about October 4, 2007, Raymond J. Nielsen and Cheryl K. Nielsen
(collectively, "Plaintiffs"), filed a Complaint in the Circuit Court in the
Sixth Judicial District of Pasco County, Florida, against us and Smart World
(collectively "Defendants") seeking damages, declaratory, and injunctive relief.
Plaintiffs allege that Defendants failed to pay interest when due on the
Convertible Debenture from Defendants to Plaintiffs and, thus, the entire amount
of the Convertible Debenture is accelerated and Plaintiffs are seeking a
judgment in the amount of $1,500,000 plus interest. On December 29, 2009, the
matter was settled for $400,000 and the Company had 60 days in which to remit
the amount or a judgment in the entire amount claimed would be entered against
us. The Company was not able to meet the terms of the settlement and have been
actively communicating with the Plaintiffs to extend the terms of the
settlement.
To the best knowledge of our management, there are no other legal proceedings
pending against us.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following Exhibits are filed herein:
No. Title
--- -----
31.1 Certification of Chief Executive Officer Pursuant to the Securities
Exchange Act of 1934, Rules 13a-14 and 15d-14, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer Pursuant to the Securities
Exchange Act of 1934, Rules 13a-14 and 15d-14, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
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SIGNATURES
In accordance with the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, duly authorized.
DATED: March 23, 2010 AMERICAN SOIL TECHNOLOGIES, INC.
By: /s/ Carl P. Ranno
-------------------------------------
Carl P. Ranno
Its: President, Chief Executive Officer,
Chief Financial Officer (Principal
Executive Officer, Principal
Financial Officer and Principal
Accounting Officer)
1