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 QUARTER ENDED SEPTEMBER 30, 2001
OR
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission File No. 0-15474
AMERALIA, INC.
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(Exact name of Company as specified in its charter)
A Utah Corporation
I.R.S. Employer Identification No. 87-0403973
818 TAUGHENBAUGH BLVD., RIFLE, CO 81650
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(Address of Principal Executive Offices)
(970) 625 9134
----------------------------------
(Company's telephone number, including area code)
Registrant (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.
The number of shares outstanding of the Company's $.01 par value common stock as
of November 1, 2001 was 12,117,276. Shares of preference stock, $0.05 par value,
outstanding as of November 1, 2001 was 82.
AMERALIA, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FORM 10-Q
<Table>
<Caption>
Page
----
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
Balance Sheets - September 30, 2001
and June 30, 2001 1
Statements of Operations for the Quarters
ending September 30, 2001 & 2000 and from
the Beginning of Development Stage on
July 1, 1992 to September 30, 2001 3
Statements of Cash Flows for the Quarters
ending September 30, 2001 & 2000 and from
the Beginning of Development Stage on
July 1, 1992 to September 30, 2001 4
Note to Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of
Financial Condition and Results
of Operations. 7
PART II: OTHER INFORMATION
Item 2: Changes in Securities 9
SIGNATURE 9
</Table>
AMERALIA INC
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<Table>
<Caption>
Sept 30 June 30
2001 2001
------------ ------------
(unaudited)
CURRENT ASSETS
Cash $ 4,987 $ 143,215
Restricted cash 42,863 42,863
Related party receivables 54,720 54,720
Prepaid expenses 235,000 248,667
------------ ------------
Total Current Assets 337,570 489,465
------------ ------------
FIXED ASSETS 24,947 28,712
------------ ------------
OTHER ASSETS
Lease acquisition, exploration and development costs 4,442,931 4,310,432
Plant construction in progress 8,106,093 8,057,108
Deferred financing costs 425,235 414,678
Loan guarantee fees, net 169,057 368,707
Note receivable - related party 15,000 15,000
Interest receivable 4,142 3,879
Deposits and bonds 119,914 115,650
------------ ------------
Total Other Assets 13,282,372 13,285,454
------------ ------------
TOTAL ASSETS $ 13,644,889 $ 13,803,631
------------ ------------
</Table>
(Continued over page)
1
AMERALIA INC
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<Table>
<Caption>
Sept 30 June 30
2001 2001
------------ ------------
(unaudited)
CURRENT LIABILITIES
Accounts payable $ 528,097 $ 370,208
Royalties payable 447,917 429,167
Guarantee fees payable 1,415,000 1,415,000
Accrued expenses 31,215 28,689
Due to related parties 267,818 187,948
Notes payable 9,725,583 9,725,583
Interest payable 124,782 73,170
------------ ------------
Total Current Liabilities 12,540,412 12,229,765
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, $.05 par value; 1,000,000 authorized;
82 and 82 issued and outstanding; respectively 4 4
Common stock, $.01 par value; 100,000,000 shares
authorized; 12,117,276 and 12,042,276 issued and
outstanding respectively 121,173 120,423
Additional paid in capital 19,494,922 19,424,422
Prepaid construction costs (1,223,000) (1,223,000)
Accumulated deficit (17,288,622) (16,747,983)
------------ ------------
Total Stockholders' Equity 1,104,477 1,573,866
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,644,889 $ 13,803,631
------------ ------------
</Table>
2
AMERALIA INC
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(unaudited)
<Table>
<Caption>
From the
Beginning of
Development Stage
on July 1,
Quarter ending Quarter ending 1992 to Sept 30,
Sept 30, 2001 Sept 30, 2000 2001
-------------- -------------- ----------------
REVENUES $ -- $ -- $ --
EXPENSES
General & administrative 281,412 439,223 9,410,848
Depreciation & amortisation 3,765 3,500 95,843
-------------- -------------- --------------
Total Expenses 285,177 442,723 9,506,691
-------------- -------------- --------------
LOSS FROM OPERATIONS (285,177) (442,723) (9,506,691)
OTHER INCOME (EXPENSE)
Other income -- -- 29
Investment income -- -- 89,760
Other financing costs (199,650) (144,398) (1,335,943)
Gain on settlement of debt -- -- 53,800
Interest income 656 4,823 333,397
Interest expense (54,260) (29,175) (1,235,030)
Foreign currency gain (loss)
-- -- (63,572)
-------------- -------------- --------------
Total Other Income (Expense) (253,254) (168,750) (2,157,559)
-------------- -------------- --------------
NET LOSS BEFORE INCOME TAX EXPENSE (538,431) (611,473) (11,664,250)
-------------- -------------- --------------
Income tax expense -- -- --
NET LOSS $ (538,431) $ (611,473) $ (11,664,250)
-------------- -------------- --------------
BASIC NET LOSS PER SHARE
$ (0.045) $ (0.070)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 12,079,776 8,765,699
</Table>
3
AMERALIA INC
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(unaudited)
<Table>
<Caption>
From the
Beginning of
Development
Stage on July 1,
Quarter ending Quarter ending 1992 to Sept 30,
Sept 30, 2001 Sept 30, 2000 2001
-------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (538,431) $ (611,473) $ (11,664,250)
Adjustments to reconcile net loss to net cash
(Used) in operating activities:
Bad debt -- -- 624,798
Stock issued for services rendered -- -- 94,405
Depreciation 3,765 3,500 105,421
Exchange (gain) -- -- (168,556)
(Gain) on settlement of debt -- -- (53,800)
(Increase) decrease in:
Restricted cash -- -- (42,863)
Accounts and interest receivable (263) -- (3,477)
Deposits & bonds (4,264) -- (119,914)
Notes receivable -- -- 1,300,497
Related parties receivables -- (2,051) (54,720)
Prepaid expenses 13,667 (74,015) (217,000)
Other assets 189,093 (479,503) (399,292)
Increase (decrease) in:
Bank overdraft -- (38,356) --
Accounts and royalties payable 176,639 (275,968) 967,210
Accrued expenses 318 (4,878) 28,974
Due to related parties 79,870 (47,950) 186,516
Interest payable 51,612 (94,853) 5,716
Guarantee fees payable -- 578,900 1,415,000
-------------- -------------- --------------
Net Cash (Used) in Operating Activities (27,994) (1,046,647) (7,995,335)
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Lease exploration & development expenditure (132,499) (128,924) (3,597,534)
Plant construction in progress (48,985) (650,000) (8,029,093)
Purchase of property & equipment -- (3,660) (118,147)
Liquidation of RIT investment -- -- 418,346
Cash paid on note receivable related -- -- (25,000)
Cash received from notes receivable -- -- (134,853)
-------------- -------------- --------------
Net Cash (Used) in Investing Activities $ (181,484) $ (782,584) $ (11,486,281)
-------------- -------------- --------------
</Table>
4
AMERALIA INC
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
(unaudited)
<Table>
<Caption>
From the
Beginning of
Development
Stage on July 1,
Quarter ending Quarter ending 1992 to Sept 30,
Sept 30, 2001 Sept 30, 2000 2001
--------------- --------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received from issuance of stock 71,250 -- 9,312,846
Additional capital contributed -- -- 307,372
Cash received from notes -- 2,121,583 10,478,805
Cash payments on notes payable -- -- (612,658)
--------------- --------------- ---------------
Net Cash provided from Financing Activities 71,250 2,121,583 19,486,365
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH (138,228) 292,352 4,749
Cash and cash equivalents at beginning of period 143,215 4,980 238
--------------- --------------- ---------------
Cash and cash equivalents at end of period $ 4,987 $ 297,332 $ 4,987
--------------- --------------- ---------------
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Income taxes $ -- $ -- $ --
Interest $ 2,648 $ -- $ 753,863
NON CASH FINANCING ACTIVITIES
Common stock issued for payment of obligations $ -- $ -- $ 668,781
Common stock issued for services rendered $ -- $ -- $ 94,405
Common stock issued for financing costs $ -- $ -- $ 105,000
Payment of preferred stock dividends through
the issuance of additional common and
preferred stock $ -- $ -- $ 1,592,713
Common stock issued as prepaid construction costs $ -- $ -- $ 1,300,000
</Table>
5
AMERALIA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTE TO FINANCIAL STATEMENTS
As at September 30, 2001 and June 30, 2001
and for the Periods ended September 30, 2001 and 2000
NOTE 1. MANAGEMENT ADJUSTMENTS
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these financial
statements be read in conjunction with our June 30, 2001 Annual Report on Form
10-K. The results of operations for the periods ended September 30, 2001 and
2000 are not necessarily indicative of operating results for the full years.
The Financial Statements and other information furnished herein reflect
all adjustments which are, in the opinion of our management, necessary for a
fair presentation of the results of the interim periods covered by this report.
NOTE 2. GOING CONCERN
Our consolidated financial statements are prepared using generally
accepted accounting principles applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. However, we do not have significant cash or other material assets, nor
do we have an established source of revenues sufficient to cover our operating
costs and to allow us to continue as a going concern. We intend to generate
revenue through the manufacture and sale of sodium bicarbonate products.
However, we cannot begin production until long-term financing for the
construction of our plant is obtained and our plant completed.
6
AMERALIA, INC.
(A DEVELOPMENT STAGE COMPANY)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
AmerAlia's future conduct depends on a number of factors beyond our
control, so we cannot assure anyone we will be able to conduct AmerAlia's
operations as we contemplate in this report. This report contains various
statements using the terms "may", "expects to", and other terms denoting future
possibilities. They are forward-looking statements. We cannot guarantee the
accuracy of these statements as they are subject to a variety of risks beyond
our ability to predict or control. These risks may cause actual results to
differ materially from the projections or estimates contained in this report.
These risks include, but are not limited to, the possibility the described
operations, reserves, exploration or production activities will not be completed
on economic terms. Undertaking exploration, development and mining of mineral
properties, significant construction projects, and the manufacture and marketing
of chemical products is risky. Many of these risks are described in the
Company's filing on Form 10-K for the fiscal year ended June 30, 2001 and it is
important that each person reviewing this report understands the significant
risks accompanying the establishment of AmerAlia's proposed operations.
Liquidity and Capital Resources
Our corporate objective is to profitably provide low cost natural
sodium bicarbonate (baking soda) products and our ability to ensure our
long-term survival is dependent on generating revenues from the production and
sale of sodium bicarbonate. This has been our business plan for several years.
In order to accomplish this, we must either:
o Secure funding of up to $50 million to construct our proposed plant
to produce sodium bicarbonate from our Rock School Lease, or
o Conclude negotiations and agreements with other parties to either
acquire complementary business activities or develop some form of
strategic joint venture that enables us to achieve our business
objectives; and to obtain the debt and equity funding necessary to
complete these agreements.
During the September quarter, we continued various negotiations to
acquire complementary business activities. However, concluding any agreement
requires our meeting numerous conditions including the finalisation of purchase
agreements and a significant amount of financing. We reached an agreement with
US Filter to provide construction financing for the development of our Rock
School Lease, but US Filter's agreement is subject to numerous conditions and US
Filter has not yet advanced any funds under that agreement. Our recent
activities and shortage of working capital have caused us to defer our plans to
build on the Rock School Lease. US Filter has the right to terminate the current
contract and, if it did, we would be liable for breakage fees and other costs
which could be substantial. Until we receive long-term funding to develop the
Rock School Lease and/or develop other strategic alliances, we will continue to
be dependent upon equity placements to accredited investors and short-term
financing as in the past. We will continue to engage in appropriate cash
management techniques. In recent years, we have been able to finance our
activities through short-term borrowings and small amounts of equity investment.
This situation has
7
aggravated our working capital shortage and imposed high interest payments,
while allowing us to meet our more pressing financial needs and increase our
investment in the Rock School Lease.
We have borrowed approximately $8.9 million from the Bank of America.
As discussed in our filing on Form 10-K for the year ended June 30, 2001, this
loan is guaranteed by our principal shareholder for a fee of $1,350,000, payable
in shares of restricted stock. This loan is due for repayment on December 1,
2001. Similarly, we have borrowed $500,000 from the Harris Bank and we are
liable for a guaranty fee of $65,000 also payable in shares of restricted common
stock. The number of shares to be issued under these guaranty agreements will be
determined by future market prices of our common stock. The total guaranty fee
liability is $1,415,000 and is classified in our financial statements as a
current liability. If we can finance our Rock School Lease development or
complete a strategic alliance, the resulting conversion of the guaranty fees
into equity will add $1,415,000 to shareholders' funds.
During the September quarter, we raised $75,000 through the issue of
75,000 shares of restricted common stock to an accredited investor. We funded
our operating loss and invested a further $181,484 in our Rock School Lease
project and plant construction activities, largely through increases in accounts
and royalties payable ($176,639), accrual of unpaid compensation due to related
parties ($79,870) and an increase in interest payable ($51,612).
Results of Operations
Since we do not generate revenues from operations, any income we
receive is generally derived from interest earned on funds on deposit. Interest
income this quarter was $656 (last year: $4,823). As a result of our working
capital shortages, we have severely curtailed our general and administrative
expenses; $281,412 for the quarter (last year: $439,223). Interest expense is
higher as a result of the higher level of debt, although falling interest rates
have been beneficial, $54,260 (last year: $29,175). As much of the debt has been
used to fund capital expenditures, we capitalised a further $132,499 of interest
expenditure (last year: $128,924). A significant non-cash expense is the
amortization of the guaranty fees which are amortized over the term of the
borrowings. This expense was $199,650 for the September quarter, (last year:
$144,398).
It is likely we will continue to recognize significant operating losses
and negative cash flow until after we are able to generate profitable revenues
from operations. This is a risky endeavour and we cannot assure anyone we will
achieve profitable operations or positive cash flow. Whilst we are progressing
negotiations to acquire other businesses in consultation with our prospective
lender and various investors, we have not reached definitive agreements.
Meanwhile, we must fund our operating losses as we have discussed above.
Impact of Inflation
We believe the Company's activities are not materially affected by
inflation.
8
PART II: OTHER INFORMATION
Item 2: Changes in Securities
During the quarter ended September 30, 2001:
o We issued 75,000 shares of restricted Common Stock to an accredited
investor for $75,000. We paid a finder's fee of $3,750. We made the
offering under the exemptions from registration under sections 4(2) and
4(6) of the Securities Act of 1933, and Rule 506 of Regulation D.
o We granted options to acquire 112,500 shares of restricted common stock
at $1.45 until June 30, 2004 in accordance with the requirements of the
Non-Executive Directors Option Plan.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized representative.
AMERALIA, INC.
November 19, 2001 By: /s/ Robert van Mourik
----------------------------------
Robert van Mourik
Executive Vice President,
Chief Financial Officer and
principal financial and accounting
officer.
9