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 June 30, 2011
[ ] 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.)
7745 Alabama Ave #9 Canoga Park, CA 91304
(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 August 15, 2011, 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 -
June 30, 2011 and September 30, 2010 3
Consolidated Statements of Operations -
For the three and nine months ended June 30, 2011 and 2010 4
Consolidated Statements of Cash Flows -
For the nine months ended June 30, 2011 and 2010 5
Notes to Consolidated 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 15
Item 5. Other Information 16
Item 6. Exhibits 16
SIGNATURES 16
2
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AMERICAN SOIL TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, 2011 September 30, 2010
------------- ------------------
Assets:
Current assets
Cash and cash equivalents $ 3,421 $ 2,045
Accounts receivable, net of allowance of $38,538 at
June 30, 2011 and September 30, 2010 10,565 6,010
Inventories 9,725 13,622
Prepaid and other current assets 1,020 14,541
------------ ------------
Total current assets 24,731 36,218
Property and equipment, net 1,012 15,014
Intangible assets 124,728 162,147
------------ ------------
Total assets $ 150,471 $ 213,379
============ ============
Liabilities and Stockholders' Deficit:
Current liabilities
Accounts payable $ 1,687,830 $ 1,625,758
Accrued liabilities 2,012,807 1,626,652
Notes payable 1,919,585 1,919,585
Capital lease obligations -- 3,527
Notes payable to related parties 1,104,866 1,101,866
------------ ------------
Total current liabilities 6,725,088 6,277,388
------------ ------------
Stockholders' deficit:
Series A preferred stock, $0.50 stated value, 25,000,000 shares
authorized, 2,763,699 shares issued and outstanding at
June 30, 2011 and September 30, 2010, respectively 1,381,849 1,381,849
Common stock, $0.001 par value, 100,000,000 shares authorized,
68,090,590 shares issued and outstanding at June 30, 2011 and
September 30, 2010, respectively 68,091 68,091
Additional paid-in capital 19,822,864 19,796,056
Accumulated deficit (27,847,421) (27,310,005)
------------ ------------
Total stockholders' deficit (6,574,617) (6,064,009)
------------ ------------
Total liabilities and stockholders' deficit $ 150,471 $ 213,379
============ ============
See accompanying Notes to Consolidated Financial Statements.
3
AMERICAN SOIL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
June 30, 2011 June 30, 2010 June 30, 2011 June 30, 2010
------------- ------------- ------------- -------------
Revenue $ 15,790 $ 53,133 $ 99,608 $ 104,720
Cost of goods sold (excluding
amortization of intangible assets) 4,747 26,993 37,749 48,779
------------ ------------ ------------ ------------
Gross profit 11,043 26,140 61,859 55,941
------------ ------------ ------------ ------------
Operating expenses:
General and administrative 128,710 178,438 476,527 749,030
Sales and marketing 122 575 271 1,326
Amortization of intangible assets 12,473 12,473 37,418 37,418
------------ ------------ ------------ ------------
Total operating expenses 141,305 191,486 514,216 787,774
------------ ------------ ------------ ------------
Loss from operations (130,262) (165,346) (452,357) (731,833)
Other (income) expense
Interest expense 25,659 26,985 88,724 84,761
Provision for litigation loss -- 415,741 -- 415,741
Gain on sale of property and equipment -- -- (3,665) (3,206)
------------ ------------ ------------ ------------
Loss before income taxes (155,921) (608,072) (537,416) (1,229,129)
Provision for income taxes -- -- -- --
------------ ------------ ------------ ------------
Net loss $ (155,921) $ (608,072) $ (537,416) $ (1,229,129)
============ ============ ============ ============
Net loss per share basic and diluted $ (0.00) $ (0.01) $ (0.01) $ (0.02)
============ ============ ============ ============
Weighted average common shares outstanding
used in per share calculations 68,090,590 68,090,590 68,090,590 67,867,147
============ ============ ============ ============
See accompanying Notes to Consolidated Financial Statements.
4
AMERICAN SOIL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Nine Months
Ended Ended
June 30, 2011 June 30, 2010
------------- -------------
Cash flows from operating activities:
Net loss $ (537,416) $(1,229,129)
Adjustments to reconcile net loss to net cash
Disposal of assets (3,665) --
Depreciation and amortization 44,423 60,542
Stock-based compensation 26,808 154,808
Changes in operating assets and liabilities:
Accounts receivable (4,555) 4,151
Inventory 11,560 15,876
Prepaid expenses and other assets 13,521 (7,739)
Accounts payable 62,072 506,840
Accrued expenses 386,155 407,679
----------- -----------
Net cash used in operating activities (1,097) (86,972)
----------- -----------
Cash flows from investing activities:
Proceeds from sale of assets 3,000 --
----------- -----------
Net cash provided by investing activities 3,000 --
----------- -----------
Cash flows from financing activities:
Proceeds from related party notes 3,000 98,392
Payments on capital lease obligations (3,527) (14,147)
Repayments on notes payable -- (4,454)
----------- -----------
Net cash provided by (used in) financing activities (527) 79,791
----------- -----------
Net increase (decrease) in cash and cash equivalents 1,376 (7,181)
Cash and cash equivalents at beginning of period 2,045 13,604
----------- -----------
Cash and cash equivalents at end of period $ 3,421 $ 6,423
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ -- $ --
=========== ===========
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
JUNE 30, 2011
(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. 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
$27,847,421 and negative working capital of $6,700,357 as of June 30, 2011. The
ability of the Company to continue as a going concern is dependent upon
obtaining additional capital and financing, and ultimately generating positive
cash flows from operations. Management intends to seek additional capital either
through debt or equity offerings. 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 consolidated 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.
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
6
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 2010 as reported in the Company's Form 10-K have been omitted. The
results of operations for the three and nine-month periods ended June 30, 2011
and 2010 are not necessarily indicative of the results to be expected for the
full year. 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, 2010.
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, and valuation
of stock options.
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 June 30:
2011 2010
---- ----
Percent of accounts 100% 100%
Number of customers 2 2
Sales from individual customers representing 10% or more of sales consist of the
following customers for the three months ended June 30:
2011 2010
---- ----
Percent of sales 97% 76%
Number of customers 4 4
Sales from individual customers representing 10% or more of sales consist of the
following customers for the nine months ended June 30:
2011 2010
---- ----
Percent of sales 82% 66%
Number of customers 3 3
7
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 and nine months:
June 30, 2011 June 30, 2010
------------- -------------
Series A convertible preferred stock 2,763,699 2,763,699
Convertible debt -- --
--------- ---------
2,763,699 2,763,699
========= =========
NEW ACCOUNTING PRONOUNCEMENTS
In December 2010, the FASB issued updated guidance on when and how to perform
certain steps of the periodic goodwill impairment test for public entities that
may have reporting units with zero or negative carrying amounts. This guidance
is effective for fiscal years, and interim periods within those years, beginning
after December 15, 2010, with early adoption prohibited. It is applicable to the
Company's fiscal year beginning October 1, 2011. The Company is currently
evaluating this guidance, but does not expect its adoption will have a material
effect on its consolidated financial statements.
In May 2011, the FASB issued guidance to amend certain measurement and
disclosure requirements related to fair value measurements to improve
consistency with international reporting standards. This guidance is effective
prospectively for public entities for interim and annual reporting periods
beginning after December 15, 2011, with early adoption by public entities
prohibited, and is applicable to the Company's fiscal quarter beginning January
1, 2012. The Company is currently evaluating this guidance, but does not expect
its adoption will have a material effect on its consolidated financial
statements.
8
In June 2011, the FASB issued new guidance on the presentation of comprehensive
income that will require a company to present components of net income (loss)
and other comprehensive income (loss) in one continuous statement or in two
separate, but consecutive statements. There are no changes to the components
that are recognized in operations or other comprehensive income (loss) under
current GAAP. This guidance is effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2011, with early
adoption permitted. It is applicable to the Company's fiscal year beginning
October 1, 2012. The Company is currently evaluating this guidance, but does not
expect its adoption to have a material effect on its consolidated financial
statements.
Other recent authoritative guidance issued by governing bodies did not, or are
not expected to have a material effect on the Company's consolidated financial
statements.
4. INVENTORIES
Inventories consist of the following at:
June 30, 2011 September 30, 2010
------------- ------------------
Raw materials $ 6,357 $ 9,167
Finished goods 3,368 4,455
---------- ----------
$ 9,725 $ 13,622
========== ==========
5. ACCRUED EXPENSES
Accrued expenses consist of the following at:
June 30, 2011 September 30, 2010
------------- ------------------
Interest $ 358,893 $ 325,434
Interest to related parties 188,230 150,675
Compensation and related 1,465,684 1,150,543
---------- ----------
$2,012,807 $1,626,652
========== ==========
6. NOTES PAYABLES AND RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS
During the nine-months ended June 30, 2011, The Louie Visco Estate loaned the
Company an additional $3,000. This note was consolidated with a note issued in
August 2000 for $85,000, and accordingly the previous note has been superseded.
The new note is for a total of $88,000. Principal is due August 31, 2011.
Interest is payable monthly based upon the current prime rate.
During the nine-months ended June 30, 2011, the shareholder loan by Ms.Visco had
no activity and remains at $789,842, principal due January 11, 2012, interest is
payable monthly based upon the prime rate.
9
7. COMMON STOCK
STOCK OPTIONS
As of June 30, 2011, there were 1,976,000 stock options outstanding with a
weighted average exercise price of $0.19 and a remaining contractual life of
1.25 years. Stock option expense for the three and six-months ended June 30,
2011 and 2010 was $8,936, $8,936, $26,808 and $26,808, respectively which is
included in general and administrative expenses in the accompanying Statement of
Operations. There were no issuances of common stock, options or warrants due
periods presented in fiscal 2011.
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. The parties entered into a settlement
agreement on June 2, 2010. Under the settlement agreement, we agreed to pay
Stockhausen $250,000 on or before June 23, 2010 as a compromise to Stockhausen's
claims that currently total $603,921. We further agreed that we would consent to
the entry of a Judgment against us in favor of Stockhausen in the amount of
$603,921 if we failed to make complete and timely payment as agreed. The company
was unable to make the agreed upon payment and on July 8, 2010 Stockhausen
entered a judgment for the above stated amount against the Company.
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 will 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. On February 21, 2011, we agreed to pay interest on the settlement
amount at 4% per annum.
To the best knowledge of our management, there are no other significant legal
proceedings pending against us.
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:
NINE MONTHS ENDED JUNE 30, 2011 (UNAUDITED) COMPARED TO NINE MONTHS ENDED JUNE
30, 2010 (UNAUDITED)
Nine Months Ended Nine Months Ended
June 30, 2011 June 30, 2010
------------- -------------
(Unaudited) (Unaudited)
STATEMENT OF OPERATIONS DATA:
Revenue $ 99,608 $ 104,720
Net Loss (537,416) (1,229,129)
Net Loss per Share $ (0.01) $ (0.02)
June 30, 2011 September 30, 2010
------------- ------------------
(Unaudited) (Unaudited)
BALANCE SHEET DATA:
Current Assets $ 24,731 $ 36,218
Total Property & Equipment, Net 1,012 15,014
Intellectual Property, Net 124,728 162,147
Net Deferred Tax Asset -- --
Total Assets 150,471 213,379
Total Current Liabilities 6,725,088 6,277,388
Accumulated Deficit $(27,847,421) $(27,310,005)
11
REVENUES
Revenues for the nine months ended June 30, 2011 were $99,608, compared to
$104,720 for the nine months ended June 30, 2010, a decrease of 5%. This
decrease in revenue is a direct result of a customer return of product during
the 2011 period.
COST OF SALES
Cost of goods sold decreased to $37,749 for the nine months ended June 30, 2011
from $48,779 for the nine months ended June 30, 2010. The decrease in the cost
of sales is the result of a lower cost from our vendors during this period. Our
gross margins were 62% and 53% for the nine months ended June 30, 2011 and 2010,
respectively. The increase in our gross margins was due to an increase in sales
in relation to our costs of sales during nine months ending June 30, 2011.
OPERATING EXPENSES
Operating expenses decreased 35% to $514,216 from $787,774 for the nine month
period ended June 30, 2011 and 2010, respectively.
This decrease in operating expenses was a result in decreased operations. Our
general and administrative expenses decreased to $476,527 for the nine months
ended June 30, 2011 from $749,030 for the nine months ended June 30, 2010 due to
the continued reduction in compensation and other administrative costs.
NET LOSS
We experienced a net loss from operations of $537,416 for the nine months ended
June 30, 2011 as compared to a net loss of $1,229,129 for the nine months ended
June 30, 2010. Our sales and marketing expenses decreased from $1,326 in the
nine months ended June 30, 2010, to $271 for the nine months ended June 30,
2011. Our general and administrative expense decreased from $749,030 in the nine
months ended June 30, 2010 to $476,527 for the nine months ended June 30, 2011.
During the nine months ended June 30, 2010, the company incurred a provision for
litigation loss of $415,441. There were no similar expenses during the nine
months ended June 30, 2011. Lastly, during the nine months ended June 30, 2010
the Company recognized $154,808 in stock-based compensation whereas only $26,808
was recognized during the nine months ended June 30, 2011.
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
12
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 $3,421 and $6,423 at June 30, 2011 and June
30, 2010, respectively. Net cash used in operations was $1,097 for the period
ended June 30, 2011 compared to net cash used in operations of $86,972 for the
comparable period ended June 30, 2010. We have historically relied upon one of
our officers and significant shareholders to provide cash to meet short term
operating cash requirements.
At June 30, 2011, the outstanding balance of notes payable was $3,024,451. 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 $419,585 with interest per annum from 8-10%; (c) a loan from an officer
and shareholder for $789,842 bearing interest at prime; (d) various loans from
related parties totaling $315,024 bearing interest from prime to 12%.
Interest expense for the nine months ended June 30, 2011 and 2010 was $88,724
and $84,761, respectively.
We have a working capital deficit $6,700,357 as of June 30, 2011 compared to
working capital deficit of $6,241,170 as of September 30, 2010. 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 $27,847,421 and a working capital deficit of
approximately $6,700,357 as of June 30, 2011. 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.
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.
13
Our auditors issued an explanatory paragraph regarding substantial doubt about
the Company's ability to continue as a going concern in our most recent 10-K for
the year ended September 30, 2010.
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.
Our President and Chief Financial Officer (the "Certifying Officers")
isresponsible for establishing and maintaining our disclosure controls
andprocedures. The Certifying Officer have designed such disclosure controls
andprocedures to ensure that material information is made known to him,
particularly during the period in which this report was prepared. The Certifying
Officer has evaluated the effectiveness of our disclosure controls andprocedures
and has determined that they are effective.
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
14
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. The parties entered into a settlement
agreement on June 2, 2010. Under the settlement agreement, we agreed to pay
Stockhausen $250,000 on or before June 23, 2010 as a compromise to Stockhausen's
claims that currently total $603,921. We further agreed that we would consent to
the entry of a Judgment against us in favor of Stockhausen in the amount of
$603,92 if we failed to make complete and timely payment as agreed. The company
was unable to make the agreed upon payment and on July 8, 2010 Stockhausen
entered a judgment for the above stated amount against the company.
On or about October 4, 2007, Raymond J. Nielsen and Cheryl K. Nielsen
(collectively, "Plaintiffs"), filed a Complaint in the Circuit Court in the
Nineth 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 will 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
15
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
SIGNATURES
In accordance with the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, duly authorized.
DATED: August 15, 2011 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
