Attached files
file | filename |
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EX-32.2 - EXHIBIT 32.2 - AMERALIA INC | ex32_2.htm |
EX-32.1 - EXHIBIT 32.1 - AMERALIA INC | ex32_1.htm |
EX-31.1 - EXHIBIT 31.1 - AMERALIA INC | ex31_1.htm |
EX-31.2 - EXHIBIT 31.2 - AMERALIA INC | ex31_2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
one)
T
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the Quarter Ended September 30, 2009
OR
£
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Commission
File No. 0-15474
AMERALIA,
INC.
(Exact
name of Company as specified in its charter)
Utah
|
87-0403973
|
(State
or other jurisdiction of Incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
3200 County Road 31, Rifle,
CO 81650
(Address
of Principal Executive Offices)
Company's
telephone number, including area code:
|
(720)
876-2373
|
Company’s
Web Page:
|
www.ameralia.com
|
Indicate
by check mark whether issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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
T 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
|
T
|
Indicate
by a check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange
Act). Yes £ No T
As of
November 2, 2009, the number of shares outstanding of the company's $.01 par
value common stock was 66,293,696.
AMERALIA, INC.
INDEX
TO FORM 10-Q
Page
|
||
PART
I:
|
FINANCIAL
INFORMATION
|
|
Item
1:
|
Financial
Statements
|
|
1 | ||
2 | ||
3 | ||
4 | ||
5 | ||
Item
2:
|
9 | |
Item
4T:
|
15 | |
PART
II:
|
OTHER
INFORMATION
|
|
Item
1:
|
15 | |
Item
2:
|
16 | |
Item
6:
|
16 | |
17 |
AMERALIA, INC.
Balance
Sheets
September
30,
|
June
30,
|
|||||||
2009
|
2009
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
|
$ | 3,592,185 | $ | 4,346,065 | ||||
Prepaid
expenses
|
49,909 | - | ||||||
Total
Current Assets
|
3,642,094 | 4,346,065 | ||||||
OTHER
ASSETS
|
||||||||
Investment
in Natural Soda Holdings, Inc.
|
6,400,446 | 5,805,793 | ||||||
Total
Other Assets
|
6,400,446 | 5,805,793 | ||||||
TOTAL
ASSETS
|
$ | 10,042,540 | $ | 10,151,858 | ||||
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable
|
$ | 368,529 | $ | 357,042 | ||||
Royalties
payable
|
975,000 | 975,000 | ||||||
Accrued
expenses
|
3,408 | 44,211 | ||||||
Accrued
expenses due to related parties
|
67,972 | 71,401 | ||||||
Total
Current Liabilities
|
1,414,909 | 1,447,654 | ||||||
TOTAL
LIABILITIES
|
1,414,909 | 1,447,654 | ||||||
COMMITMENTS
AND CONTINGENT LIABILITIES
|
||||||||
STOCKHOLDERS’
EQUITY
|
||||||||
Preferred
stock, $0.05 par value; 1,000,000 authorized;82 issued and
outstanding
|
4 | 4 | ||||||
Common
stock, $0.01 par value; 100,000,000 shares authorized; 66,293,696 issued
and outstanding
|
662,937 | 662,937 | ||||||
Additional
paid in capital
|
119,266,835 | 119,221,803 | ||||||
Accumulated
deficit
|
(111,302,145 | ) | (111,180,540 | ) | ||||
Total
Stockholders’ Equity
|
8,627,631 | 8,704,204 | ||||||
TOTAL
LIABILITIES & STOCKHOLDERS’ EQUITY
|
$ | 10,042,540 | $ | 10,151,858 |
The
accompanying notes are an integral part of these financial
statements.
AMERALIA, INC.
Statements
of Operations
(unaudited)
Three Months Ended
September 30,
|
||||||||
2009
|
2008
|
|||||||
REVENUES
|
$ | - | $ | 4,851,389 | ||||
COST
OF GOODS SOLD
|
- | 3,801,079 | ||||||
GROSS
PROFIT
|
- | 1,050,310 | ||||||
EXPENSES
|
||||||||
General
and administrative
|
266,258 | 286,435 | ||||||
Depreciation,
amortization and accretion expense
|
- | 680,315 | ||||||
Total
Expenses
|
266,258 | 966,750 | ||||||
INCOME
(LOSS) FROM OPERATIONS
|
(266,258 | ) | 83,560 | |||||
OTHER
INCOME (EXPENSE)
|
||||||||
Interest
income
|
- | 794 | ||||||
Gain
on settlement of debt
|
- | 1,591,650 | ||||||
Other
income
|
- | 11,025 | ||||||
Interest
expense
|
- | (5,037,549 | ) | |||||
Other
financing costs
|
- | (209,449 | ) | |||||
Total
Other Income (Expense)
|
- | (3,643,529 | ) | |||||
LOSS
BEFORE MINORITY INTEREST AND INCOME TAX EXPENSE
|
(266,258 | ) | (3,559,969 | ) | ||||
Net
income from equity investment
|
144,653 | - | ||||||
Minority
interest in net loss of subsidiary
|
- | (146,224 | ) | |||||
LOSS
BEFORE INCOME TAX EXPENSE
|
(121,605 | ) | (3,706,193 | ) | ||||
Income
tax expense
|
- | - | ||||||
NET
LOSS
|
$ | (121,605 | ) | $ | (3,706,193 | ) | ||
BASIC
LOSS PER SHARE
|
$ | (0.00 | ) | $ | (0.21 | ) | ||
WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING
|
66,293,696 | 17,496,644 |
The
accompanying notes are an integral part of these financial
statements.
AMERALIA, INC.
Statement
of Stockholders' Equity
(unaudited)
Preferred Stock
|
Common Stock
|
Additional Paid-In Capital
|
Accumulated Deficit
|
Total
|
||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||||||
Balance,
June 30, 2009
|
82 | $ | 4 | 66,293,696 | $ | 662,937 | $ | 119,221,803 | $ | (111,180,540 | ) | $ | 8,704,204 | |||||||||||||||
Fair
value of options granted
|
- | - | - | - | 45,032 | - | 45,032 | |||||||||||||||||||||
Net
loss
|
- | - | - | - | - | (121,605 | ) | (121,605 | ) | |||||||||||||||||||
Balance,
September 30, 2009
|
82 | $ | 4 | 66,293,696 | $ | 662,937 | $ | 119,266,835 | $ | (111,302,145 | ) | $ | 8,627,631 |
The
accompanying notes are an integral part of these financial
statements.
AMERALIA, INC.
Statements
of Cash Flows
(unaudited)
Three Months Ended
September 30,
|
||||||||
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
loss
|
$ | (121,605 | ) | $ | (3,706,193 | ) | ||
Adjustments
to reconcile net loss to net cash (used in) provided by operating
activities:
|
||||||||
Fair
value of options granted
|
45,032 | 69,142 | ||||||
Depreciation,
amortization and accretion expense
|
- | 680,315 | ||||||
Amortization
of debt discount
|
- | 209,449 | ||||||
Gain
on settlement of liabilities
|
- | (1,591,650 | ) | |||||
Net
income from equity investment
|
(144,653 | ) | - | |||||
Minority
interest in net loss of subsidiary
|
- | 146,224 | ||||||
Change
in Operating Assets and Liabilities:
|
||||||||
Accounts
receivable
|
- | (242,561 | ) | |||||
Inventory
|
- | (95,427 | ) | |||||
Prepaid
expenses
|
(49,909 | ) | 128,941 | |||||
Accounts
and royalties payable
|
11,487 | (534,204 | ) | |||||
Accrued
expenses due to related parties
|
(3,429 | ) | 4,868,206 | |||||
Accrued
expenses
|
(40,803 | ) | (61,371 | ) | ||||
Interest
payable
|
- | 134,857 | ||||||
Net
Cash (Used in) Provided By Operating Activities
|
(303,880 | ) | 5,728 | |||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Investments
in, and advances to, Natural Soda Holdings, Inc.
|
(450,000 | ) | - | |||||
Cavities
and well development
|
- | (43,590 | ) | |||||
Purchase
of property and equipment
|
- | (7,949 | ) | |||||
Net
Cash (Used in) Investing Activities
|
(450,000 | ) | (51,539 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Increase
(decrease) in bank overdraft
|
- | (54,331 | ) | |||||
Payments
on capital leases
|
- | (21,822 | ) | |||||
Payments
on debt
|
- | (10,355 | ) | |||||
Proceeds
from related party notes payable
|
- | 243,000 | ||||||
Net
Cash Provided by Financing Activities
|
- | 156,492 | ||||||
NET
INCREASE (DECREASE) IN CASH
|
(753,880 | ) | 110,681 | |||||
CASH
AT BEGINNING OF PERIOD
|
4,346,065 | 43,374 | ||||||
CASH
AT END OF PERIOD
|
$ | 3,592,185 | $ | 154,055 | ||||
SUPPLEMENTAL
DISCLOSURE OF CASH
|
||||||||
FLOW
INFORMATION
|
||||||||
Income
taxes
|
$ | - | $ | - | ||||
Interest
|
$ | - | $ | 106,835 |
The
accompanying notes are an integral part of these financial
statements.
AMERALIA, INC.
Notes to
the Unaudited Financial Statements
September
30, 2009
NOTE
1 -
|
BASIS
OF FINANCIAL STATEMENT PRESENTATION
|
AmerAlia,
Inc. (“AmerAlia”) was originally incorporated as Computer Learning Software,
Inc. under the laws of the State of Utah on June 7, 1983 and renamed AmerAlia,
Inc. in January 1984. Until October 31, 2008, AmerAlia owned 100% of
Natural Soda Holdings, Inc. (“NSHI”) and NSHI owned 46.5% of Natural Soda, Inc.
(“NSI”). On October 31, 2008 AmerAlia completed a restructuring
agreement wherein AmerAlia and NSHI issued new equity in exchange for cash and
settlement of various debt obligations. As of October 31, 2008,
AmerAlia owns 18% of the equity of NSHI which now owns 100% of the equity of
NSI. Previously, the financial position, operations and cash flows of
NSI have been included in the consolidated financial statements primarily
because NSI represented AmerAlia’s principal business activity. The
“Minority Interest” ownership of the Sentient Entities in NSI was reflected
separately in the consolidated balance sheets along with its “Minority Interest”
share of income and loss from operations. All material inter-company
accounts and transactions have been eliminated in the consolidation
accounts.
As a
result of the restructuring, AmerAlia no longer has a controlling interest in
NSHI or its direct subsidiary, NSI. Consequently, in accordance with
generally accepted accounting principles, AmerAlia’s financial statements
reflect AmerAlia’s results on a consolidated basis through October 31,
2008. After October 31, 2008 AmerAlia’s financial statements reflect
AmerAlia’s investment in NSHI using the equity method of
accounting. Nevertheless, AmerAlia’s participation in the management
and development of NSHI and NSI remains its principal business
activity. NSI uses solution mining to recover sodium bicarbonate for
sale to the animal feed, human food, pharmaceutical, personal products and
industrial uses including for flue gas desulfurization.
The
accompanying unaudited condensed financial statements have been prepared by
AmerAlia pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted in
accordance with such rules and regulations. The information furnished in the
interim condensed financial statements includes normal recurring adjustments and
reflects all adjustments, which, in the opinion of management, are necessary for
a fair presentation of such financial statements. Although management believes
the disclosures and information presented are adequate to make the information
not misleading, these interim condensed financial statements should be read in
conjunction with AmerAlia's most recent audited financial statements and notes
thereto included in its Annual Report on Form 10-K for the year ended June 30,
2009. Operating results for the three months ended September 30, 2009
are not necessarily indicative of the results that may be expected for the year
ending June 30, 2010.
AmerAlia
has evaluated subsequent events for recognition or disclosure through the date
these financial statements were available to be issued, November 6,
2009.
AMERALIA,
INC.
Notes to
the Unaudited Financial Statements
September
30, 2009
NOTE
2 -
|
OUTSTANDING
STOCK OPTIONS AND PURCHASE WARRANTS
|
During
the three months ended September 30, 2009, AmerAlia granted options to purchase
187,500 shares of its common stock. Under the shareholder approved
2001 Directors’ Incentive Plan, each director (who is not an employee or
officer) is granted an option to purchase 75,000 shares of AmerAlia common stock
when joining the Board of Directors. In addition, options to purchase
37,500 shares of AmerAlia common stock are granted to each such director sitting
at July 1 of each year. The exercise price for these options is the
average market price during the month preceding each grant date, and the options
have a three-year term. All options under this plan are exercisable
six months after the date of grant.
AmerAlia
recorded an expense of $45,032 for the quarter ended September 30, 2009 in
relation to the stock options granted to board members. This expense
is included in the general and administrative amount of the statement of
operations. AmerAlia estimates the fair value of each stock
option award at the grant date by using the Black-Scholes option pricing model
with the following weighted average assumptions used for grants: dividend yield
of zero percent for all years; expected volatility of 223%, risk-free interest
rate of 1.50 percent and expected life of 3.0 years. A summary of the
status of AmerAlia’s stock options and warrants as of September 30, 2009 and
changes during the three months ended September 30, 2009 is presented
below:
Options, Warrants and SARs
|
Weighted Average Exercise Price
|
|||||||
Outstanding
June 30, 2009
|
375,000 | $ | 0.64 | |||||
Granted
|
187,500 | $ | 0.29 | |||||
Expired/Cancelled
|
- | - | ||||||
Exercised
|
- | - | ||||||
Outstanding
September 30, 2009
|
562,500 | $ | 0.52 | |||||
Vested,
September 30, 2009
|
375,000 | $ | 0.64 |
The
following summarizes the exercise price per share and expiration date of
AmerAlia’s outstanding options and warrants to purchase AmerAlia common stock at
September 30, 2009:
Expiration Date
|
Price
|
Number
|
||||||
June
30, 2010
|
$ | 0.40 | 187,500 | |||||
June
30, 2011
|
$ | 0.88 | 187,500 | |||||
June
30, 2012
|
$ | 0.29 | 187,500 | |||||
562,500 |
AMERALIA,
INC.
Notes to
the Unaudited Financial Statements
September
30, 2009
NOTE
3 -
|
INVESTMENT
IN NATURAL SODA HOLDINGS, INC.
|
Under the
equity method of accounting, only AmerAlia’s investment in and amounts due to
and from NSHI and its direct subsidiary, NSI, have been included in AmerAlia’s
balance sheet. As a result, AmerAlia recorded an asset in its balance
sheet related to AmerAlia’s investment interest in NSHI. The
following is the consolidated statement of operations for the three months ended
September 30, 2009 and the consolidated balance sheet for NSHI and NSI as of
September 30, 2009:
Consolidated Balance Sheet as at September 30,
2009
|
||||
ASSETS
|
||||
Cash
|
$ | 1,729,079 | ||
Accounts
receivable
|
3,514,504 | |||
Inventories
|
975,431 | |||
Prepaid
expenses
|
301,073 | |||
Total
Current Assets
|
6,520,087 | |||
Property,
plant and equipment, net
|
9,472,836 | |||
Cavities
and well development, net
|
8,874,240 | |||
Mineral
leases
|
4,167,471 | |||
Total
Fixed Assets
|
22,514,547 | |||
Water
rights
|
3,150,582 | |||
Patents,
net
|
22,048 | |||
Equipment
held and not yet in service
|
3,197,842 | |||
Well
and well development, RSL
|
595,000 | |||
Acquisition
costs, net
|
722,094 | |||
Rock
School Lease and reserves
|
3,300,000 | |||
Deposits
and bonds
|
7,000 | |||
Restricted
funds
|
1,267,480 | |||
Total
Other Assets
|
12,262,046 | |||
TOTAL
ASSETS
|
$ | 41,296,680 | ||
LIABILITIES
|
||||
Accounts
and royalties payable
|
$ | 2,332,651 | ||
Accrued
expenses
|
426,069 | |||
Notes
payable, current
|
1,963,383 | |||
Capital
leases, current portion
|
8,553 | |||
Total
Current Liabilities
|
4,730,656 | |||
Notes
payable, long term
|
24,289 | |||
Capital
leases, non-current portion
|
8,610 | |||
Asset
retirement obligations
|
975,084 | |||
Total
Long Term Liabilities
|
1,007,983 | |||
TOTAL
LIABILITIES
|
5,738,639 | |||
EQUITY
|
||||
Common
stock
|
10,000 | |||
Additional
paid in capital
|
120,201,031 | |||
Accumulated
deficit
|
(84,652,990 | ) | ||
TOTAL
EQUITY
|
35,558,041 | |||
TOTAL
LIABILITIES AND EQUITY
|
$ | 41,296,680 |
AMERALIA,
INC.
Notes to
the Unaudited Financial Statements
September
30, 2009
NOTE
3 -
|
INVESTMENT
IN NATURAL SODA HOLDINGS, INC.
(Continued)
|
Consolidated Statement of
Operations
For Three Months ended September 30,
2009
|
||||
Revenues
|
$ | 5,105,691 | ||
Cost
of sales
|
(3,498,497 | ) | ||
Gross
profit
|
1,607,194 | |||
General
and administrative expenses
|
111,631 | |||
Depreciation
and amortization expense
|
623,591 | |||
Total
expenses
|
735,222 | |||
Income
from operations
|
871,972 | |||
Interest
expense
|
(68,639 | ) | ||
Interest
income
|
296 | |||
Total
other income (expense)
|
(68,343 | ) | ||
Net
income
|
$ | 803,629 |
NOTE
4 -
|
LIQUIDITY
|
As a
result of the recent restructuring, AmerAlia holds an investment in NSHI which
is unlikely to produce sufficient distributions of income to meet AmerAlia’s
overhead expenses in the short term. As the effect of the
restructuring has been to repay nearly all of AmerAlia’s obligations, AmerAlia
expects that the operating costs of AmerAlia will be reduced to approximately
$1,000,000 annually. In addition, NSHI may call on its
shareholders for additional capital. Of the $3,592,185 held as cash
at September 30, 2009, AmerAlia has reserved $2,430,000 to meet an anticipated
capital call. The remaining cash reserves are required to sustain
AmerAlia’s operations and repay obligations.
Under the
Restructuring Agreement, Sentient has the right to purchase up to a total of
5,500,000 additional shares of AmerAlia’s common stock at $0.36 per share until
October 31, 2011. This right can only be exercised to resolve
obligations of AmerAlia that existed at October 31, 2008 and have not been
discharged, and only then if the holders of the unpaid obligations pursue or
threaten to pursue claims against AmerAlia or AmerAlia’s
affiliates.
In view
of these conditions, AmerAlia’s ability to continue as a going concern is
dependent upon its ability to obtain additional financing or capital to meet its
ongoing obligations. AmerAlia’s ability to obtain further financing
through the offer and sale of AmerAlia’s securities is subject to market
conditions and other factors beyond AmerAlia’s control. There is no
assurance AmerAlia will be able to obtain financing on favourable terms or at
all. AmerAlia’s business operations could be adversely affected if
cash is insufficient to fund them.
AMERALIA,
INC.
ITEM
2:
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The
information in this Quarterly Report on Form 10-Q contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements involve risks and uncertainties regarding
the intent, belief or current expectations of us, our directors or our
officers. Any statements contained herein that are not statements of
historical facts may be deemed to be forward-looking statements. In some cases,
you can identify forward-looking statements by terminology such as "may",
"will", "should", "expect", "plan", "intend", "anticipate", "believe",
"estimate", "predict", "potential" or "continue", the negative of such terms or
other comparable terminology. Actual events or results may differ materially. In
evaluating these statements, you should consider various factors, including the
risks we outline from time to time in other reports we file with the Securities
and Exchange Commission (the “SEC”) including our Annual Report on Form
10-K. These factors may cause our actual results to differ materially
from any forward-looking statement. We disclaim any obligation to publicly
update these statements, or disclose any difference between our actual results
and those reflected in these statements. The information constitutes
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Given these uncertainties, readers are cautioned
not to place undue reliance on such forward-looking statements.
Cautionary
Note to US Investors - The SEC limits disclosure for U.S. reporting purposes to
mineral deposits that a company can economically and legally extract or produce.
The reader is cautioned that the terms "resource," "indicated" and "inferred"
are not terms recognized by SEC guidelines for disclosure of mineral
properties.
Our
business is to identify and develop natural resource assets. AmerAlia
actively participates in the management and development of the natural sodium
bicarbonate resources and water rights owned by Natural Soda Holdings, Inc.
(“NSHI”) and NSHI’s wholly-owned subsidiary Natural Soda, Inc.
(“NSI”).
NSI owns
various water rights in the Piceance Creek Basin in northwest Colorado, a part
of the Colorado River drainage system. These various rights allow NSI
to draw up to a maximum of 108,812 acre feet (35.46 million gallons) annually
and to store up to 7,980 acre feet of water.
NSHI and
NSI also own BLM leases in the Piceance Creek Basin covering very large deposits
of naturally occurring sodium bicarbonate called nahcolite. NSI’s
business is to produce and sell natural sodium bicarbonate, commonly known as
baking soda, for use in a wide variety of products and activities. NSI’s
immediate objectives are to profitably utilize its water assets and to be a low
cost producer of sodium bicarbonate while leveraging that low cost advantage to
achieve superior profit margins.
Deposits
of oil shale lie below, above and are interspersed within the nahcolite
contained within the sodium leases. We do not have any rights to
recover oil shale but NSHI and NSI plan to apply for a research, development and
demonstration lease to exploit all or part of this oil shale pursuant to a new
program announced by the U.S. Department of Interior in October
2009. Shell Frontier Oil & Gas Co. (“Shell”) has three research,
development and demonstration leases adjacent to NSI’s sodium
leases. A Shell fact sheet, “Shell Exploration & Production
Technology - to secure our energy future – Mahogany Research Project” reports an
estimated potential recovery rate of up to one million barrels of oil per
surface acre. If we obtain the right to exploit all or part of this
oil shale, we plan to independently determine possible recovery rates and
attempt to develop an economically feasible plan to recover oil from the oil
shale resource contained within the area where NSHI’s and
NSI’s sodium leases are located.
AMERALIA,
INC.
Currently,
we own 18% of NSHI. We are attempting to acquire some or all of the
outstanding shares of NSHI we do not own from Sentient so that we can secure
majority ownership. If we can successfully acquire more of NSHI to
increase our ownership to at least 50% in exchange for an issue of new shares we
shall, as we discuss below, consolidate at least 50% of NSHI’s and NSI’s assets
and liabilities to our balance sheet and consolidate at least 50% of NSHI’s and
NSI’s income and expenses to our income statement. If we cannot
achieve this objective we shall likely have to register as an investment company
or seek alternative means of complying with the Investment Company
Act. We are discussing this issue with Sentient and the
SEC. We are also considering the possible benefits of acquiring other
natural resource assets
Sales and Revenue
Performance of NSHI and NSI
Fiscal
year 2004 was the first complete fiscal year of NSI’s ownership of its
processing plant. NSI’s annual sales in tonnages and gross revenues
are shown in the following tables:
Fiscal
|
Sales
(tons)
|
%
Change
|
||||
Year
|
on prior FY
|
|||||
2004
|
84,103 | |||||
2005
|
85,038 | +1.1 | ||||
2006
|
88,910 | + 4.6 | ||||
2007
|
101,970 | +14.7 | ||||
2008
|
101,614 | - 0.4 | ||||
2009
|
97,729 | -3.8 | ||||
Fiscal
|
Gross
Revenues
|
%
Change
|
||||
Year
|
($)
|
on prior FY
|
||||
2004
|
12,609,041 | |||||
2005
|
14,141,500 | +12.2 | ||||
2006
|
15,293,688 | +8.1 | ||||
2007
|
16,951,997 | +10.8 | ||||
2008
|
17,947,800 | +5.9 | ||||
2009
|
19,835,160 | +10.5 | ||||
During
calendar year 2009, sales were constrained by production interruptions, cavity
limitations and the general downturn in economic activity. The
following table presents comparative consolidated income statements of NSHI and
NSI:
For
the three months ended September 30,
|
%
Change on
|
|||||||||||
2009
|
2008
|
prior period
|
||||||||||
Tonnage
sold
|
24,067 | 25,657 | -6.2 | % | ||||||||
Revenues
|
$ | 5,105,691 | $ | 4,851,389 | +5.2 | % | ||||||
Cost
of Sales
|
3,498,497 | 3,801,079 | -8.0 | % | ||||||||
Gross
Profit
|
1,607,194 | 1,050,310 | +53.0 | % | ||||||||
General
and administrative expenses
|
111,631 | 52,705 | +111.8 | % | ||||||||
Depreciation &
amortization
|
623,591 | 680,315 | -8.3 | % | ||||||||
Total
expenses
|
735,222 | 733,020 | ||||||||||
Income
from operations
|
871,972 | 317,290 | +174.8 | % | ||||||||
Other
income (expense)
|
||||||||||||
Other
income
|
- | 11,025 | ||||||||||
Interest
income
|
296 | 305 | ||||||||||
Interest
expense
|
(68,639 | ) | (5,186,802 | ) | ||||||||
Total
other income (expense)
|
(68,343 | ) | (5,175,472 | ) | ||||||||
Net
income (loss) before minority interest
|
803,629 | (4,858,182 | ) | |||||||||
Minority
income (loss)
|
- | (146,224 | ) | |||||||||
Net
income (loss)
|
$ | 803,629 | $ | (5,004,406 | ) |
AMERALIA,
INC.
This
table shows a reduction of 1,590 tons of product sold or 6.2% during the quarter
compared with the same period last year. However, revenues increased
by 5.2% which reflects an increase of 12% in revenue per ton as a result of
increases in selling prices. The total cost of sales was 8% lower
than for the same period last year which is equivalent to a reduction of 2% on a
cost per ton basis. This reduced cost was primarily due to lower
energy costs. The resulting gross profit of $1,607,194 was 53% higher
than the same period last year or an increase of 63% per ton.
General
& administrative expenses increased to $111,631 from $52,705, an increase of
111.8% because NSHI has engaged geologists to examine further the geology of its
lease areas. Depreciation and amortization expense was 8.3% lower
this year than the comparable period last year, although only 2.3% lower on a
per ton basis. Depreciation and amortization expense was 8.3% lower
this year than for the comparable period last year as a result of the lower
volume of production and sales.
The
resulting income from operations was $871,972, a 175% increase on the comparable
period last year. A consequence of the restructuring completed in
October last year is that debt has been almost entirely replaced by equity so
that interest expense for the three months was $68,639 compared with $5,186,802
incurred in the comparable period last year. The net income for the
three months ended September 30, 2009 was $803,629 compared with the loss of
$5,004,406 in the comparable period last year, a result that also included a
loss of $146,224 attributable to the minority interest in NSI at that
time. The following table presents the consolidated balance sheets
for NSHI and NSI as at end September and June 2009:
Natural
Soda Holdings, Inc.
|
||||||||||||
Consolidated
Balance Sheet
|
||||||||||||
As
of Sept. 30, 2009
|
As
of June 30, 2009
|
Change
Since June 30, 2009
|
||||||||||
ASSETS
|
||||||||||||
Cash
|
$ | 1,729,079 | $ | 156,139 | ||||||||
Accounts
receivable
|
3,514,504 | 3,723,426 | ||||||||||
Inventories
|
975,431 | 930,349 | ||||||||||
Prepaid
expenses
|
301,073 | 325,942 | ||||||||||
Total
Current Assets
|
6,520,087 | 5,135,856 | 1,384,231 | |||||||||
Property,
plant & equipment, net
|
9,472,836 | 9,462,474 | ||||||||||
Cavities &
well development, net
|
8,874,240 | 6,130,745 | ||||||||||
Mineral
leases
|
4,167,471 | 4,167,471 | ||||||||||
Total
Fixed Assets
|
22,514,547 | 19,760,690 | 2,753,857 | |||||||||
Water
rights
|
3,150,582 | 3,150,582 | ||||||||||
Equipment
held and not yet in service
|
3,197,842 | 3,197,842 | ||||||||||
Rock
School lease & reserves
|
3,300,000 | 3,300,000 | ||||||||||
Well
& well development, RSL
|
595,000 | 595,000 | ||||||||||
Deferred
financing & acquisition costs, net
|
722,094 | 731,848 | ||||||||||
Deposits &
bonds
|
7,000 | 8,000 | ||||||||||
Restricted
funds
|
1,267,480 | 1,267,480 | ||||||||||
Patents,
net
|
22,048 | 22,886 | ||||||||||
Total
Other Assets
|
12,262,046 | 12,273,638 | (11,592 | ) | ||||||||
TOTAL
ASSETS
|
$ | 41,296,680 | $ | 37,170,184 | $ | 4,126,496 | ||||||
LIABILITIES
|
||||||||||||
Accounts
& royalties payable
|
$ | 2,332,651 | $ | 1,848,778 | ||||||||
Accrued
expenses
|
426,069 | 434,590 | ||||||||||
Notes
payable, current
|
1,963,383 | 1,612,741 | ||||||||||
Capital
leases, current
|
8,553 | 10,983 | ||||||||||
Total
Current Liabilities
|
4,730,656 | 3,907,092 | 823,564 | |||||||||
Notes
payable, long term
|
24,289 | 29,784 | ||||||||||
Capital
leases, noncurrent portion
|
8,610 | 11,071 | ||||||||||
Asset
retirement obligations
|
975,084 | 967,825 | ||||||||||
Total
Non Current Liabilities
|
1,007,983 | 1,008,680 | (697 | ) | ||||||||
TOTAL
LIABILITIES
|
5,738,639 | 4,915,772 | 822,867 |
AMERALIA,
INC.
Natural
Soda Holdings, Inc.
|
||||||||||||
Consolidated
Balance Sheet
|
||||||||||||
As
of Sept. 30, 2009
|
As
of June 30, 2009
|
Change
Since June 30, 2009
|
||||||||||
EQUITY
|
||||||||||||
Common
stock
|
10,000 | 10,000 | ||||||||||
Additional
paid in capital
|
120,201,031 | 117,701,031 | 2,500,000 | |||||||||
Accumulated
deficit
|
(84,652,990 | ) | (85,456,619 | ) | 803,629 | |||||||
TOTAL
EQUITY
|
35,558,041 | 32,254,412 | 3,303,629 | |||||||||
TOTAL
LIABILITIES AND EQUITY
|
$ | 41,296,680 | $ | 37,170,184 | $ | 4,126,496 |
This data
shows that during the three months ended September 30, 2009, NSHI and NSI earned
$803,629 in net income, received $2,500,000 in equity contributions from its
shareholders and received $822,867 through trade credit during the quarter, a
total of $4,126,496. The companies invested $2,753,857 in well
field expansion, machinery and equipment. NSI expects that its new
cavities will improve production and supply capability. At September
30, 2009 NSHI and NSI held $1,729,079 in cash.
AmerAlia
Our
restructuring last year has substantially altered AmerAlia’s income and cost
structure. Whereas we reported revenues from operations and cost of
sales for the three months ended September 30, 2008 as shown in our income
statement, we now report the net income from our equity investment in NSHI which
was $144,653 for the quarter. This reflects our 18% ownership of NSHI
and our 18% share of NSHI’s net income of $803,629 for the three months
discussed above. Otherwise, our general and administrative expenses
were $266,258 a 7% reduction on these costs for the same period last
year. The resulting net loss was $121,605 for the three months
compared with $3,706,193 for the same period last year.
Liquidity
and Capital Resources
NSHI and
NSI
Since the
acquisition of its properties in 2003 up to June 30, 2009, NSI has invested
$6,566,202 developing the well field and its cavities. In recent
times sodium bicarbonate has been recovered from three cavities denominated as
5H, 6H and 7H from which the BLM has authorized NSI to recover nearly 230,000
tons of sodium bicarbonate under an approved mine plan as at June 30,
2009. In early September 2009, NSI completed a new cavity, 10H, at a
cost of approximately $2,750,000 that increases NSI’s authorized recovery by
308,000 tons. NSI is currently embarking on another drilling program
at an estimated cost of $2,400,000 to establish another new well, 11H, and
expects to secure a further increase of 300,000 tons to its authorized recovery
to ensure a reliable supply of feed liquor to its plant for several
years. Along with these wells, NSI has installed an additional
pipeline to carry the recovered liquor to the plant at a cost of approximately
$715,000. This pipeline will support three cavities. These
activities are part of an exploration and production cavity installation program
which is expected to cost approximately $9 million over time. While NSI is
generating sufficient free cash flow to provide for most of this expenditure,
NSI needed additional financing to fund the initial
investment. Consequently, AmerAlia and Sentient completed a
Contribution Agreement and we advanced $450,000 as our share of $2,500,000 NSHI
raised from ourselves and Sentient in July 2009.
AMERALIA,
INC.
AmerAlia
During
the three months ended September 30, 2009, in addition to our $450,000 capital
contribution to NSHI discussed above, we increased prepaid expenses by a net
$49,909, accounts and royalties payable by $11,487 and reduced accrued expenses
by $44,232. Consequently, we used $753,880 of our cash during the
quarter leaving a balance of $3,592,185 at September 30, 2009. Of
this balance $2,430,000 is reserved for further capital calls that will likely
be made by NSHI.
AMERALIA,
INC.
Our
remaining cash reserves are required to sustain AmerAlia’s operations and repay
obligations. We expect the operating costs of AmerAlia will be
approximately $1,000,000 annually.
AmerAlia
now holds an investment in NSHI which we expected will require additional
capital to expand its operations and will, as a result, be unlikely to produce
sufficient distributions of income to meet AmerAlia’s overhead expenses in the
short term.
Under the
Restructuring Agreement completed last year, Sentient has the right to purchase
up to a total of 5,500,000 additional shares of AmerAlia’s common stock at $0.36
per share until October 31, 2011. This right can only be exercised to
resolve obligations of AmerAlia that existed at October 31, 2008 and have not
been discharged, and only then if the holders of the unpaid obligations pursue
or threaten to pursue claims against AmerAlia or AmerAlia’s
affiliates.
In view
of these conditions, AmerAlia’s ability to continue as a going concern is
dependent upon its ability to obtain additional financing or
capital. AmerAlia’s ability to obtain further financing through the
offer and sale of AmerAlia’s securities is subject to market conditions and
other factors beyond AmerAlia’s control. There is no assurance
AmerAlia will be able to obtain financing on favorable terms or at
all. If cash is insufficient to fund its business operations, they
could be adversely affected. Insufficient funds may require
delay, scaling back or eliminating expenses and/or employees.
Effect of Potential
Acquisition of Additional NSHI Shares
Nevertheless,
we may acquire some or all the outstanding equity in NSHI and are investigating
acquiring other businesses. If we could acquire all the shares of
NSHI we currently do not own in exchange for an issue of our shares, then, on
the basis of the September 30, 2009 financial data, we would have total assets
of approximately $45 million and total liabilities of approximately $7
million. We would own all of the operating assets of NSHI and NSI and
have access to their surplus cash flow. We would also assume
responsibility for the further development of the business. We expect
that NSHI will have development capital requirements in addition to those needs
discussed above. Hence we intend to seek additional capital during
the forthcoming year although we may not be able to obtain additional financing
on commercially reasonable terms, if at all.
While we
are having discussions with Sentient about our need to either comply with the
obligations of the Investment Company Act or else take other action so that we
do not have to register as an investment company, we may not reach an agreement
with Sentient that achieves these objectives.
Off-Balance
Sheet Arrangements
We do not
have any significant off-balance sheet arrangements for either AmerAlia, NSHI or
NSI that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
is material to investors. NSI sometimes enters into forward purchases of natural
gas in order to secure supplies at fixed prices for up to 75% of anticipated
requirements.
AMERALIA,
INC.
ITEM
4T:
|
CONTROLS
AND PROCEDURES
|
As
required by Rule 13a-15 under the Securities Exchange Act of 1934 and Item 307
of Regulation S-K we carried out an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures during the
quarter ended September 30, 2009. This evaluation was carried out
under the supervision and with the participation of our Chief Executive Officer
and our Chief Financial Officer who concluded that our disclosure controls and
procedures are effective.
As
defined in Rule 13a-15(e), disclosure controls and procedures are controls and
other procedures that are designed to ensure that information required to be
disclosed in our reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in our reports
filed under the Exchange Act is accumulated and communicated to management,
including our Chief Executive Officer and our Chief Financial Officer as
appropriate, to allow timely decisions regarding required
disclosure.
Changes
in Internal Control over Financial Reporting
There has
been no change in our internal control over financial reporting during the three
months ended September 30, 2009 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
PART
II:
|
OTHER
INFORMATION
|
ITEM
1:
|
LEGAL
PROCEEDINGS
|
AmerAlia
is not subject to any legal proceeding.
NSI owns
water rights located in the Piceance Creek, Yellow Creek and White River basins
within Colorado. NSI is involved in several cases pending in the
District Court in and for Water Division No. 5 (“Water Court”). The
proceedings in Water Court pertain to applications for water rights filed by NSI
and objections to water rights applications by third parties. In
addition, under Colorado law, the owner of conditional water rights must
periodically file an application for determination of reasonable diligence in
the development of the conditional water rights. The proceedings
pertaining to the conditional water right must be filed within six years
following the determination by the Court regarding the prior proceeding, or the
water right is considered abandoned.
NSI is
the applicant in the following cases: 1998CW315, 2005CW41,
2006CW135,
2006CW136 and
2007CW91.
NSI has
filed a statement of opposition in the following cases: 2003CW82–Exxon Mobile
Corporation, 2003CW309–Encana Oil &
Gas (USA), Inc., 2003CW318–Encana Oil &
Gas (USA), Inc., 2004CW110–Shell Frontier Oil
& Gas, Inc., 2005CW285–Exxon Mobile Corporation, 2005CW294–Exxon Mobile
Corporation, 2006CW263–Exxon Mobile
Corporation, 2006CW265–Exxon Mobile Corporation, 2007CW242–Puckett Land
Company,
2007CW253–XTO Energy Inc. and 2007CW254–Williams Production RMT
Company.
Of the
cases in which NSI has filed a statement of opposition the principal one is the
objection to Shell Frontier Oil & Gas, Inc.’s application to move a water
right from a tributary of the White River to a point on the White River lower
down river than the off take point for NSI’s White River direct pumping right.
If Shell were to be successful in their application it might adversely impact
the value of our White River rights. We intend to vigorously oppose this
move.
AMERALIA,
INC.
ITEM
2:
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
On July
1, 2009 we granted options to acquire 187,500 shares of our common stock at
$0.29 per share to our non-executive directors in accordance with the
requirements of the Non-Executive Directors Option Plan. The options
vest on January 2, 2010 and expire on June 30, 2012.
ITEM
6:
|
EXHIBITS
|
(a)
|
Exhibits
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley
Act of 2002 (filed herewith).
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley
Act of 2002 (filed herewith).
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (filed
herewith).
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (filed
herewith).
|
AMERALIA, INC.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date:
November 6, 2009
|
AMERALIA,
INC.
|
By:
/s/ Bill H.
Gunn
|
|
Bill H. Gunn, Chief Executive
Officer
|
17