U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB/Amendment 1
Natural Solutions Corporation
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(Name of Small Business Issuer in its charter)
Nevada 88-0367024
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1201 US Highway 1, Suite 205
North Palm Beach, Florida 33408
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (561) 625-4232
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class to be registered
None None
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Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 par value
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(Title of class)
Copies of Communications Sent to:
Donald F. Mintmire, Esq.
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696
Fax: (561) 659-5371
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SUMMARY TABLE OF CONTENTS
PART I
Item 1 Description of Business.
Item 2 Management's Discussion and Analysis or Plan of Operation.
Item 3 Description of Property.
Item 4 Security Ownership of Certain Beneficial Owners and Management.
Item 5 Directors, Executive Officers, Promoters and Control Persons.
Item 6 Executive Compensation.
Item 7 Certain Relationships and Related Transactions.
Item 8 Description of Securities.
PART II
Item 1 Market Price of and Dividends on the Registrant's Common Equity
and Other Shareholder Matters.
Item 2 Legal Proceedings.
Item 3 Changes In and Disagreements With Accountants.
Item 4 Recent Sales of Unregistered Securities.
Item 5 Indemnification of Directors and Officers.
PART F/S Financial Statements.
PART III
Item 1 Index to Exhibits.
Item 2 Description of Exhibits.
PART I
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Item 1. Description of Business
(a) Business Development
Ice Ban America, Inc. ("IBA" or the "Company"), a Nevada corporation,
was incorporated on August 14, 1996. On November 11, 1998, IBA changed its name
to Natural Solutions Corporation ("NSC" or the "Company"). IBA was formed to
market agricultural by-products for use as anti-icing and de-icing agents. The
Company later expanded into providing dust control and road stabilization
agents. On December 24, 1996, IBA's common stock first began trading on the NASD
Over-the-Counter (OTC) Bulletin Board under the stock symbol "ICEB" (OTC
BB:ICEB). On December 7, 1998, IBA changed its name to Natural Solutions
Corporation ("NSC" or the "Company"). NSC has retained "ICEB" as its stock
symbol. Currently NSC has three wholly-owned subsidiaries, Ice Ban America,
Inc., Roadbind America, Inc. and Ice Ban Holdings, Inc. NSC's current address is
1201 U.S. Highway 1, Suite 205, North Palm Beach, Florida 33408. The Company's
Web-site address is http://www.naturalsolutionscorp.com. The Company's telephone
number is (561) 625-4232 and the consumer information number is 1-888-ICEBAN-1.
In the first two years of its operating history the Company spent its
time and resources developing its product offerings and developing and executing
its marketing and distribution strategies. Into its third year of operations the
Company had already developed a distribution network, marketing and selling its
products throughout the United States. NSC is currently a development stage
company in its fourth fiscal year.
On August 10, 1997, George Janke and the Company entered into an
employment agreement the terms of which would be retroactive to January 1, 1997.
The term and salary of the new agreement are that George Janke was to receive a
salary of eighty-five thousand ($85,000) dollars per year for each year of his
employment. The term of the agreement was to extend from January 1, 1997 for a
minimum of five (5) years thereafter, and after the five year minimum, the term
continues year by year unless canceled or terminated by either party.
Termination by either party is subject to one hundred and eighty days notice.
The agreement also called for George Janke to receive one hundred and
fifty-thousand (150,000) shares of restricted common stock to be issued, per
year, for five years (5) if certain performance goals are met. See Part I, Item
6. Executive Compensation, "1999 Stock Option Plan." Mr. Janke deferred all
claims for option-based compensation or salary through December 31, 1998 under
this agreement. The position of the Company is that George Janke waived his
rights to future payment of any kind under this contract after his resignation
as Chief Executive Officer on July 30, 1999. Mr. Janke contends the contract was
simply a waiver for only one(1) year and that the Company remains obligated for
the balance of the contract term. The issue remains unresolved.
Prior to the August 31, 1996 execution of the licensing agreement
described below, on August 16, 1996, in consideration of obtaining such
licensing agreement concerning intellectual property rights related to de-icing
and anti-icing products, and payment of five thousand dollars ($5,000), the
Company issued founders' shares to George Janke, in his capacity as trustee for
certain family members, and to Warren D. Johnson, Jr. George Janke, as trustee,
received five million eighthundred thousand (5,800,000) shares of common stock
and Warren D. Johnson, Jr. received six million four-hundred thousand
(6,400,000) shares of common stock. These shares were issued pursuant to the
exemption from registration provided by ss.4(2) of the Securities Act of 1933,
as amended (the "Act") and ss.517.061(11) of the Florida Code.
On August 31, 1996, IBA entered into an exclusive licensing agreement
with Ice Ban USA, Inc. ("IBUSA") to exploit certain patents, patents pending and
trademarks assigned to IBUSA. IBUSA is a Company owned by ICE BAN(R)'s inventor
George Janke and Warren D. Johnson, Jr. These patents govern the use of certain
agricultural by-products as road de-icing and anti-icing agents. The product is
currently marketed as ICE BAN(R). The territory granted under this license
included all of the United States except for upstate New York (north of the 42nd
parallel) and Erie, Pennsylvania. These territories were later added to the
Company's rights through subsequent corporate acquisition of Ice Ban, Inc.
("IBNY"). These areas, termed "out-territories" in the licensing agreement, were
the subject of a previously extended non-assignable license to IBNY, a New York
corporation. On March 30, 1998, IBUSA and IBA entered into an addendum to their
previous agreement. The terms of the addendum state that IBUSA shall transfer
one hundred and twenty-five thousand ($125,000) dollars to IBA's account for it
to use to pay for inventory and operations, at the sole discretion of IBA. IBA
agreed to pay a one ($1.00) dollar per ton additional fee to IBUSA for all IBA
products sold annually up to twenty-five thousand ($25,000) dollars per year for
six years, which would include interest and principal. The principal amount of
the loan as of 1999 is one hundred fifty-thousand ($150,000) dollars.
Prior to the August 31, 1996 execution of the licensing agreement
described below, on August 16, 1996, in consideration of obtaining such
licensing agreement concerning intellectual property rights related to de-icing
and anti-icing products, and payment of five thousand dollars ($5,000), the
Company issued founder's shares to George Janke, as trustee, received five
million eight-hundred thousand(5,800,000) shares of common stock and Warren D.
Johnson, Jr. received six million four-hundred thousand (6,400,000) shares of
common stock. These shares were issued pursuant to the exemptions from
registration provided by ss. 4(2) of the Securities Act of 1933, as amended (the
"Act") and ss. 517.061(11) of the Florida Code.
IBA also acquired the exclusive license to market the trademarked
TEMBIND(R) product upon the consummation of its acquisition of IBNY. TEMBIND(R)
is a biodegradable, non-corrosive dust control and road stabilization product
for use in the maintenance of unpaved roads. The Company now markets this
product under the trademarked brands RB ULTRA(TM) PRODUCTS and ICE BAN(R) as the
primary products offered by the Company.
During the period from September 23, 1996 through November 1, 1996, the
Company sold one million shares (1,000,000) of its common stock at ten cents
($0.10) per share, raising a total of $100,000. This offering was conducted
pursuant to ss.3(b) of the Act and Rule 504 of Regulation D promulgated
thereunder. This offering was made in the State of New York and to nonresident
foreign citizens. An offering memorandum was used in connection with the
offering.
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Commencing December 30, 1996 and through February 1, 1997, the Company
sold nine hundred thousand shares (900,000) of its common stock at one dollar
($1.00) per share, raising a total of $900,000. This offering was conducted
pursuant to ss.3(b) of the Act and Rule 504 of Regulation D promulgated
thereunder. This offering was made in the State of New York and to nonresident
foreign citizens. An offering memorandum was used in connection with the
offering.
IBA's first year of operation was very active. Efforts by the
management team during such year were aimed to develop the Company into a
successful business for its shareholders. During this first year of development
operations, the corporate executives collected no salary and no founder received
any up front fees or compensation for previous work done or expenditures made.
The Company had acquired considerable inventory which was placed in storage at
distribution centers ready for the winter season. Additionally during the first
year of operations the Company began receiving very strong positive interest
from federal, state, county and local highway officials about the Company's
products.
The corporate policy of the Company is to engage or encourage third
party testing facilities to conduct testing and analysis of its products. In
January 1997, the Company engaged the American Association of Civil Engineers
Research Foundation (CERF) to conduct testing of ICE BAN(R), CERF then
instructed Highway Innovative Technological Evaluation Center (HITEC) to
evaluate the technical aspects and effectiveness of ICE BAN(R). The reports that
were produced indicated successful field and laboratory test results. CERF has
another evaluation council named the Environmental Technology Evaluation Center
(EvTEC) which conducts environmental evaluations. The ICE BAN(R) product was
selected by CERF to be the first full scale environmental evaluation that EvTEC
conducted. The results of this evaluation are pending.
On February 21, 1997, the Company entered into an agreement to sell
common stock to Minnesota Corn Processors Company ("MCP") in exchange for
supplies of the raw material by- product which MCP produces and which the
Company uses to produce ICE BAN(R). This arrangement provided the Company with
nearly fifty percent (50%) of the Company's product supply. In accord with this
agreement, on February 21, 1997, the Company committed one million one-hundred
seventy thousand (1,170,000) shares of common stock to MCP for the exchange of
raw material for the ICE BAN(R) product. The amount of raw material to be
supplied by MCP is derived from a formula based on the market value of the
product and the price of stock of the Company at the time of shipment based upon
a formula agreed to between the Company and MCP. The contract provides: (1) MCP
agreed to conduct laboratory and field testing of ICE BAN(R) and TEMBIND(R), (2)
MCP agreed to use its resources to promote further development of ICE BAN(R) and
TEMBIND(R), (3) MCP agreed to provide tankage and distribution as well as sales
and service in its market, (4) MCP agreed to confidentiality and non-compete
provisions, (5) the Company granted MCP an option to purchase an additional
1,170,000 shares on the same terms as previously agreed to, and (6) IBA granted
MCP pre-emptive rights to maintain a 15% stake in the Company. The Company
relied upon the exemption from registration provided by ss.4(2) of the Act and
Rule 506 of Regulation D ("Rule 506"), promulgated thereunder, and ss.80A.15
(Subd. 2)(h) of the Minnesota Code.
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On May 1, 1997, IBA and Jeffrey Johnson entered into an employment
agreement. Jeffrey Johnson was to receive a salary of thirty-six thousand
($36,000) dollars per year for each year of his employment with IBA. Jeffrey
Johnson was to be Senior Vice President and Chief Operating Officer for a
minimum term of three years, subject to the discretion of the IBA Board of
Directors. For each of the three-year term of the agreement, Johnson was to
receive one hundred thousand (100,000) shares of stock per year on the yearly
anniversary of his employment with the Company, provided that Johnson fully
performed under the terms of the contract. The total maximum number of shares
due under this provision was three hundred thousand (300,000) shares. The
contract was to continue after the three-year minimum time period until canceled
or terminated by either party subject to one hundred and eighty (180) days
notice. This employment agreement is currently the subject of litigation. See
Part II, Item 2. Legal Proceedings, Jeffrey Johnson vs. Natural Solutions.
On July 29, 1997, in an exchange of stock, the Company acquired IBNY,
the only licensee with territorial rights to ICE BAN(R) in the U.S. (i.e.
upstate New York and Erie, Pennsylvania) which was not included in the original
license to the Company. This acquisition provided the Company with a fully
operational and cash generating company to enhance its business. The
acquisition, moreover, provided additional personnel experienced in the
Company's line of business. IBA issued 1.3 million shares of its common stock to
acquire 100% of the common stock of IBNY. In the same transaction, an additional
one hundred thousand (100,000) shares of the Company was issued to IBUSA, in
exchange for the waiver of its non-assignability provision in its licensing
agreement. Mr. Janke is the inventor of the patents that cover the ICE BAN(R)
products. As a result of this acquisition of IBNY, the Company's license now
extends to the entire United States. In acquiring IBNY, the Company also
acquired the national distribution rights from IBUSA to the TEMBIND(R) product,
a wood by-product. The Company would later re-brand the product as RB ULTRA(TM)
Products.
IBNY owned the exclusive license to market the ICE BAN(R) products in
upstate New York and Erie County, Pennsylvania, and also the exclusive license
to market and distribute TEMBIND(R) in the United States. As part of the
transaction, IBNY was obligated to assign the above rights to IBUSA (from whence
they came) with the further agreement that IBUSA would assign the rights to the
Company or its designee, which it did, in consideration for one hundred thousand
(100,000) shares of the Company's common stock. As part of this transaction, the
above mentioned 100,000 shares of the Company's common stock were issued to
IBUSA in consideration for the waiver of its non-assignability provision in its
licensing agreement with IBNY in regard to the license of ICE BAN(R) products in
upstate New York and Erie County, Pennsylvania. The Company relied upon the
exemption from registration provided by ss.4(2) of the Act and Rule 506.
On August 10, 1997, IBA and George Janke entered into an employment
agreement with the Company. The agreement stated that George Janke was to be
Chief Executive Officer for a minimum term of five (5) years, from January 1,
1997 thru December 31, 2001. George Janke was to receive eighty-five thousand
dollars ($85,000) per year for each year of his employment with IBA, subject to
cost of living adjustments. Mr. Janke was also given the right to receive his
compensation in the form of IBA stock based on the amount of salary due and the
price that the IBA stock is listed as sold at the close of business on the last
trading day each year. Such compensation would be in lieu of cash, and Mr. Janke
would have the right to receive such non-cash compensation at his sole
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discretion. The agreement provided for a "shares of stock bonus." This bonus
consists of up to one hundred and fifty-thousand (150,000) shares of restricted
shares of common stock to be issued, per year, for five (5) years if certain
performance goals are met. The agreement and Mr. Janke's employment with the
Company, can be terminated after the five(5) year base term, however, each party
is required to provide one hundred and eighty(180) days notice in writing of
said termination or resignation. The position of the Company is that George
Janke deferred or waived his rights to future payment of any kind under this
contract after his resignation as Chief Executive Officer on July 30, 1999. Mr.
Janke contends the contract was simply a waiver for only one(1) year and that
the Company remains obligated for the balance of the contract term. The issue
remains unresolved.
On August 22, 1997, the Company issued to David Wright a total of 5,000
shares of its common stock, Ann M. Owen a total of 2,000 shares, Continental
Capital & Equity Corp. a total of 55,000 shares, and Cullen M. Ryan a total of
10,000 shares, all in payment of professional fees. The Company relied upon the
exemption to registration provided by ss.4(2) of the Act and Rule 506 and
ss.517.061(11) of the Florida Code. On the same date, the Company issued
Castlebar Industries Corp. Profit Sharing Plan a total of 10,000 shares in
payment of professional fees. The Company relied upon the exemption from
registration provided by ss.4(2) of the Act and Rule 506 and ss.49:3-50(b)(9) of
the New Jersey Code. Robert E. Freer was also issued 40,000 shares in payment of
professional fees as well. The Company relied upon the exemption from
registration provided by ss.4(2) and ss.11- 602 (15), ss.11-501 and Rule 9 of
the Maryland Code.
On October 17, 1997, the Company formed Tembind America, Inc. as a
wholly owned subsidiary to market the TEMBIND(R) product in the United States.
On November 3, 1998, the Company changed the name of this subsidiary to Roadbind
America, Inc. ("RBA"). The Company at this time also discontinued use of the
TEMBIND(R) brand name and decided it would market this dust control and road
stabilization product under brand names more related to its product
distinctions. The Company now uses the brand names RB ULTRA(TM) Products.
On or about November 7, 1997, Dr. Marion G. (Pat) Robertson ("Pat
Robertson") entered into an agreement with the Company which allowed him to
acquire up to one million shares of restricted common stock over the next two
years. On November 7, 1997, Dr. Robertson was issued a total of 150,000 shares
at the purchase price of $7.50 per share, as well as warrants to purchase an
additional 1,000,000 shares of common stock were issued by and in consideration
for an aggregate price of $1,125,000 if all warrants are exercised. The Company
relied upon the exemption from registration provided by ss.4(2) of the Act and
Rule 506 and ss.13.1-507 of the Virginia Code.
On December 12, 1997, the Company formed Ice Ban Holdings, Inc. ("IBH")
as a wholly owned subsidiary, the purpose of which was to be a holding company
for certain assets and interests.
On December 19, 1997, the Company issued 4,651 shares of its common
stock to MCP as payment for product. The Company relied upon the exemption from
registration provided by ss.4(2) of the Act and Rule 506 and ss.80A.15 (Subd.
2)(h) of the Minnesota Code.
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On February 20, 1998, the Company issued 25,391 shares of its common
stock to MCP as payment for product. The Company relied upon the exemption from
registration provided by ss.4(2) of the Act and Rule 506 and ss.80A.15 (Subd.
2)(h) of the Minnesota Code.
On March 4, 1998, the Company issued 10,000 shares of its common stock
to Robert E. Freer as payment of professional fees. The Company relied upon the
exemption from registration provided by ss.4(2) of the Act and ss.11-602 (15),
ss.11-501 and Rule 9 of the Maryland Code.
During April 1998, William Dannhausen owner and publisher of Better
Roads, the premier road and transportation trade magazine, agreed to join the
Company's Board of Directors in April , of 1998. In addition, Robert E. Freer,
Esq.: Officer & Director of Baise, Miller & Freer, PC, Dr. J. Nelson Happy: Dean
of Regent University Law School, Richard Jurgenson: Retired President & CEO of
Minnesota Corn Processors, Stanley L. Sitton: Vice President of Marketing of
Minnesota Corn Processors and J. Carter Beese, Managing Partner of B.T. Alex
Brown were appointed to the Company's Board of Directors. The Company believes
the broad experience and perspective of the above board members will assist
management in making the Company's development successful.
On April 23, 1998, the Company issued 35,000 shares of its common stock
to the law firm of Baise, Miller & Freer P.C. of Washington, D.C. as payment of
professional fees. The Company relied upon the exemption from registration
provided by ss.4(2) of the Act and Rule 506.
On or about, May 26, 1998, Hon. J. Carter Beese Jr., managing director
of the Global Banking Group at BT Alex Brown and former Commissioner of the U.S.
Securities & Exchange Commission, agreed to serve on the Company's Board of
Directors.
On June 9, 1998, the 1998 Transportation Efficiency Act for the 21st
Century (TEA 21) legislation was signed by President Clinton. TEA 21 includes
provisions that would permit state users of ICE BAN(R) products to substantially
recoup user costs for de-icing bridges, elevated roadways and approaches thereto
that are part of the national highway system. The Company's products and its
compositions qualify for the federal subsidy because of their environmentally
friendly and corrosion inhibiting characteristics. At about this time, Company
test results indicated that ICE BAN(R) products even when blended with chloride
salt brines have a corrosion index less than distilled water even when blended
with chloride salt brines.
On June 12, 1998, the Company issued 10,000 shares of its common stock
to Floyd Chapman and 10,000 shares of its common stock to NSC Secretary to the
Board of Directors, Ann M. Owen. Both issues were in payment for professional
fees. The Company relied upon the exemption from registration provided by
ss.4(2) of the Act and Rule 506 and ss.517.061(11) of the Florida Code.
On June 16, 1998, the Company issued 914 shares of its common stock to
MCP in payment for product. The Company relied upon the exemption from
registration provided by ss.4(2) of the Act and Rule 506 and ss.80A.15 (Subd.
2)(h) of the Minnesota Code.
On June 16, 1998, the Company entered into a Business Loan Agreement
with First United Bank of Lake Park, Florida. Several documents related to such
loan were executed by the Company.
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Ice Ban America, Inc. provided a company certificate of deposit as a guarantee
in conjunction with this loan. The principal amount of the loan was thirty-five
thousand dollars ($35,000) with a maturity date of June 16, 1999. The Company
has repaid in full this Business Loan Agreement.
On July 7, 1998, the Company formed a separate corporation named
Natural Solutions Corporation with the purpose of changing the name of the
Company from Ice Ban America, Inc. to Natural Solutions Corporation. The newly
formed corporation's name was changed to Ice Ban America, Inc. on December 7,
1998 and on that date the Company changed its name to Natural Solutions
Corporation (NSC). As a result of these events, NSC has a wholly owned
subsidiary named Ice Ban America, Inc. (IBA).
On July 8, 1998, the Company executed an "Operating Agreement of Sears
Environmental Applications Company, L.L.C." (SEACO) with Sears Petroleum &
Transport, Corp. and IMUS, Inc. Each of the three parties owned a one-third
interest (33 1/3%) in SEACO. SEACO Articles of Organization were filed with the
Office of the New York Secretary of State on July 6, 1998. The purpose of SEACO
was to engage in the sale and distribution of ICE BAN(R), TEMBIND(R), and other
related products.
On July 17, 1998, the Company issued 20,000 shares of its common stock
to Richard Stanton as payment of professional fees. The Company relied upon the
exemption from registration provided by ss.4(2) of the Act and ss.11-602 (15),
ss.11-501 and Rule 9 of the Maryland Code.
On August 13, 1998, the Company issued 10,000 shares of its common
stock to Leo Palmer as payment of professional fees. The Company relied upon the
exemption from registration provided by ss.4(2) of the Act and Rule 506 and
ss.517.061(11) of the Florida Code.
On September 15, 1998, the Company issued 784 shares of its common
stock to MCP as payment for product. The Company relied upon the exemption from
registration provided by ss.4(2) of the Act and Rule 506 and ss.80A.15 (Subd.
2)(h) of the Minnesota Code.
On September 29, 1998, the Company announced that Mr. Leo C. Palmer
joined the Company's management team as Chief Financial Officer (CFO).
On October 8, 1998, the Company issued 19,674 shares of its common
stock to the law firm of Baise, Miller & Freer PC of Washington, D.C. in payment
of professional fees. The Company relied upon the exemption from registration
provided by ss.4(2) of the Act and Rule 506.
On November 10, 1998, ICE BAN(R) and its inventor, George Janke, were
awarded the prestigious Charles W. Pankow Innovative Applications Award for 1998
from the Civil Engineering Research Foundation (CERF). The award is presented
each year after consideration and evaluation of various technological
innovations. CERF selected ICE BAN(R) product and technology as the winner of
the Innovative Applications Award, the ICE BAN(R) product and technology from
more than 200 applications submitted. The Company believes that this award was a
significant international honor and confirmed the Company's policy of
independent-based testing of its products and its belief in the product's
capabilities of ICE BAN(R).
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On November 12, 1998, the Company at its annual meeting formally
approved the change of the Company's name from IBA to Natural Solutions
Corporation. The new name was adopted to better describe the Company's
commitment to developing and marketing environmentally friendly products. The
Company believes the new name is more suggestive of the year round nature of the
Company's operations.
On January 11, 1999, the Company issued 200 shares of its common stock
to Andrew Deggeller as an award for winning a science competition at the 1998
Indiana Regional Science Fare using the ICE BAN(R) product . The Company relied
upon the exemption from registration provided by ss.4(2) of the Act and Rule 506
and ss.517.061(11) of the Florida Code.
On January 21, 1999, the Company issued 9,465 shares of its common
stock to Minnesota Corn Processors (MCP) as payment for product. The Company
relied upon the exemption from registration provided by ss.4(2) of the Act and
Rule 506 and ss.80A.15 (Subd. 2)(h) of the Minnesota Code.
On February 10, 1999, the Company issued 22,687 shares of its common
stock to the law firm of Baise, Miller & Freer P.C. of Washington, D.C. as
payment of professional fees. The Company relied upon the exemption from
registration provided by ss.4(2) of the Act and Rule 506.
On March 25, 1999, the Company issued 24,761 shares of its common stock
to MCP as payment for product. The Company relied upon the exemption from
registration provided by ss.4(2) of the Act and Rule 506 and ss.80A.15 of the
Minnesota Code. Also, on March 25, 1999, the Company issued 3,056 shares of its
common stock to Nick D. Hansen for as payment for professional fees. The Company
relied upon the exemption from registration provided by ss.4(2) of the Act and
Rule 506 and ss.517.061(11) of the Florida Code.
On April 16, 1999, the Company issued 17,957 shares of its common stock
to Baise, Miller & Freer PC of Washington, D.C. as payment of professional fees.
The Company relied upon the exemption from registration provided by ss.4(2) of
the Act and Rule 506.
On or about April 16, 1999, NSC filed litigation and also became a
defendant in a case related to the ownership rights of a de-icing patent
covering the use of stillage. The Defendants in this case counter-sued NSC. This
claim against NSC does not threaten the other de-icing patents or patents
pending. The suit was filed in Florida Circuit Court, Palm Beach County, as Case
No. CL 99-3344-AD titled Ice Ban USA, Inc. and Natural Solutions Corp., as
Licensee, vs. Sears Oil Co., Inc., Howard Sears et al. In response to NSC's
legal action, the adverse claimant filed an action against NSC's subsidiary, Ice
Ban America, Inc., in Oneida County Superior Court, Utica, N.Y., Case No.
9900200 titled Sears Petroleum & Transport Corp. et al vs. Ice Ban America et
al. See Part II., Item 2. "Legal Proceedings."
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On or about, May 5, 1999, Richard Jurgenson was elected Chairman of the
Company's Board of Directors. Mr. Jurgenson first joined the Company's board in
April 1998 and had earlier served as President of MCP as well as one of its
founders.
In August of 1999, George Janke, founder of the Company resigned as
President and Chief Executive Officer. Richard Jurgenson was selected to replace
Mr. Janke. Mr. Janke was then appointed Chief Development Officer and assigned
the responsibilities to work on further development of new products and on
expanding the use of existing products.
In August of 1999, NSC filed a claim against Jeffrey Johnson, a former
officer of the Company, members of the Warren Johnson, Jr. family and others
charging fraud, conversion of funds, civil theft, embezzlement, tortuous
interference and racketeering under the RICO statute. The Company requested the
Johnson family's federal bankruptcy trustee to rescind the issuance of
approximately five million shares of the Company's stock issued to members of
the Johnson family and which has now been frozen by the Bankruptcy Trustee.
Kapila Trustee vs. Warren Douglas, Jr. et al. (U.S. Bankruptcy Court, Southern
District of Florida Case No. 92-33339 BKC SHF Chapter 7). The lawsuits that were
filed by the Johnsons and others alleged that the Company does not have a
legitimate ownership in one of the patents it claims and for that reason
investors and others were misled. This patent relates to the "Toth" patent. See
Part I., Item 1. Description of Business. -(b) Business of Issuer, (4)
"Competitive business conditions and issuer's competitive position in the
industry and methods of competition."
On August 11, 1999, Dr. Pat Robertson invested an additional seven
hundred fifty-thousand dollars ($750,000) in the Company. In consideration for
this additional investment, Pat Robertson received stock warrants allowing for
the purchase of 1,000,000 shares of restricted common stock at $.75 per share.
NSC and Dr. Robertson executed a convertible debenture whereby the Company is to
pay Dr. Robertson on August 11, 2001 the principal sum of seven hundred and
fifty-thousand dollars ($750,000), at ten percent (10%) interest per annum which
interest may be converted at the Company's election to pay in cash or shares of
its common stock, each share to be valued at seventy-five cents per share
($0.75/share). On August 11, 2001 upon the execution of an "Election to
Convert", at Dr. Robertson's option, the debenture may be converted to shares of
stock on the outstanding principal and interest due at seventy-five cents per
share ($0.75/share) or the Company will repay the debenture back in cash. In the
event that NSC is unable to repay back the debenture at the end of two years and
Pat Robertson does not wish to convert said debenture into shares of NSC's
stock, a third-party, namely George Janke, who is also a related party of the
Company, acting as Trustee for the Janke Family Trust, has secured this
debenture with artwork as collateral. The Warrants associated with the debenture
were executed on August 10, 1999. The Company relied upon the exemption from
registration provided by ss.4(2) of the Act and Rule 506 and ss.13.1-507 of the
Virginia Code.
On September 28, 1999, Roadbind America, Inc., announced the completion
of the "Pikes Peak Road Dust Research Project" which was conducted by Dr. Tom
Sanders of Colorado State University. The purpose of the project was to
determine the ability of RB ULTRA (TM) Products to reduce the amount of dust and
aggregate loss thereby extending the useful life of a dirt road. Analysis of the
data showed that the road section treated with RB ULTRA(TM) Products performed
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significantly better than the untreated section, retaining 270% more road fines
than the control sections.
On October 29, 1999, the Company entered into a Stock Purchase
Agreement with Dr. Pat Robertson wherein he invested an additional one million
dollars ($1,000,000) in the Company in exchange for 4,000,000 shares of
restricted common stock, $0.001 par value per share. The Company relied upon the
exemption from registration provided by ss.4(2) of the Act and Rule 506 and
ss.13.1-507 of the Virginia Code. Upon the closing of the above Stock Purchase
Agreement Mr. Robertson was appointed as Chairman of the Board of Directors of
the Company.
In November 1999, the Company regretfully accepted the resignation of
William Dannhausen owner and publisher of Better Roads, the premier road and
transportation trade magazine, from the Company's Board of Directors.
In November 1999, upon the voluntary resignation of Richard Jurgenson
as President of the Company, the Board of Directors appointed Jim Foshee as the
Company's new President. The Company believes Mr. Foshee's previous experience
as controller of the AMF Companies and as the former President of North American
Marketing, Inc. provides strong financial and marketing experience which will
contribute greatly towards the establishment of a fundamentally sound financial
and marketing plan which will strategically position the Company into the
future.
(b) Business of Issuer
Overview
Natural Solutions Corporation is a distributor of patented
environmentally friendly corrosion inhibitor products for de-icing and
anti-icing under the ICE BAN(R) brand and the environmentally friendly road
stabilization and dust control products currently marketed under the RB
ULTRA(TM) Products brands.
(1) Principal Products and Markets
The Company entered into an exclusive licensing agreement with IBUSA to
exploit certain patents, patents pending and trademarks. The patents cover the
use of agricultural by-products as road de-icing and anti-icing products. The
products are marketed under the trademark ICE BAN(R). The Company also acquired
through acquisition of IBNY exclusive rights to the product TEMBIND(R) which the
Company brands RB ULTRA(TM) Products.
ICE BAN(R)
ICE BAN(R) is produced from the concentrated liquid residue of grain
processing and from the processing of other agricultural products. These
products are the result of natural processes, and are used in various
applications for the de-icing and anti-icing of roadways and other surfaces.
ICE BAN(R) products are designed to satisfy demand for a superior
de-icing and anti-icing agent that is at the same time an environmentally safe
product. ICE BAN(R) is environmentally friendly. ICE BAN(R) is biodegradable,
non-toxic, and does not accumulate in the environment. It has no known adverse
effects on vegetation or fresh water organisms. Using ICE BAN(R) in place of
chloride-based agents reduces the level of damaging chlorides in the
environment. Chloride salts, producing corrosion and other harmful effects to
the environment, are ICE BAN(R)'s primary competition. ICE BAN(R) products are
intended as (1) an alternative to chloride-based substitutes or (2) to be mixed
with chloride to reduce their harmful corrosive effects. Both of these uses
provide the Company with a unique and valuable product in the approximately one
billion dollar ($1,000,000,000) annual market in roadway de-icing and
anti-icing.
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Chloride-based products, ICE BAN(R)'s primary competition imposes
significant external costs and damage the environment. This has been articulated
in an important article on the subject:
"The use of (chloride) salt for the use of de-icing roads results in costs
estimated at more than $800 ($932 in 1997 dollars) per ton (per year)
including the costs of repair and maintenance of roads and bridges, vehicle
corrosion costs, the loss of aesthetic value through roadside tree damage,
etc. Additionally there are...health costs related to sodium levels in
drinking water." Vitaliano, Donald F., "Economic Assessment of the Social
Costs of Highway Salting and the Efficiency of Substituting a New De- Icing
Material", Journal of Policy Analysis & Management, Vol. 11, No. 3, pp.
397- 418.
Dr. Donald F. Vitaliono's, a professor of economics at the Rensselaer
Polytechnic Institute, study further estimates that annual salt damage to
roadway infrastructure and vehicles to be approximately twenty billion dollars
($20,000,000,000) annually. NSC's ICE BAN(R) products seek to attain a marketing
advantage by being more effective and safer than chloride salts.
In laboratory tests, ICE BAN(R) has been shown to be effective in
melting snow and ice faster and at lower temperatures than sodium chloride
(commonly known as "salt"). ICE BAN(R) products are biologically and
environmentally friendly, are minimally corrosive, and have no significant known
adverse effects on roads, other infrastructure, or vehicles. ICE BAN(R) is
water-soluble, easy to handle and apply, and can be used with various
admixtures. They are economical and tests indicate that when used in a mixture
with various chloride salts ICE BAN(R) significantly lower salt's corrosive
effect.
ICE BAN(R) provides the first economical and readily available
replacement for chloride salt de-icers. Testing indicates that the use of ICE
BAN(R) products result in both substantial short-term dollar savings from
reduced direct de-icing budgetary costs and, in the long-term savings in reduced
damage to roadways, infrastructure, vehicles and the environment. ICE BAN(R)
products also have potential special use applications such as on airport runways
where salt is not suitable or approved for salt. The use of ICE BAN(R) by such
specialized users could save such users substantial amounts of money and enable
these users to de-ice where previously the salt corrosiveness was unacceptable
and other alternative de-icers were toxic or cost-prohibitive.
ICE BAN(R) is both technically and economically effective and
efficient. Field and laboratory applications of ICE BAN(R) mixtures have
demonstrated superior penetration on existing ice and snow-packs than
conventional applications. Applications of ICE BAN(R) at the rate of 40-
gallons/lane mile removed snow-pack directly at temperatures well below the
effective range of salt application. ICE BAN(R) mixtures penetrate the snow-pack
vertically to the underlying road surface, then spreads out on the road and
breaks the bond between the snow-pack and the road surface. ICE BAN(R) works on
the road surface and not on the top of the snow-pack. Unlike salts and brines,
it is resistant to dilution and remains effective for much greater periods of
time. Thus, using ICE BAN(R) requires fewer applications, man hours, and truck
miles. Using ICE BAN(R) reduces truck fuel and maintenance costs, and use of ICE
BAN(R) results in fewer problems with spreader vehicles and methods.
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ICE BAN(R) users have reported that ICE BAN(R) products have a residual
re-activation effect after the initial application and melting process. The
re-activation effect is that even long after application, the product continues
to act as an anti-icing agent and prevents new snow and ice from adhering to the
road surface.
Re-activation results in further cost savings for ICE BAN(R) users
compared to traditional de- icing methods. For example, if ICE BAN(R) is applied
prior to storms, it prevents or otherwise impedes snow and ice from bonding to
the road surface. This property further lowers maintenance costs by reducing the
number of applications that are needed; and in turn further reduces materials
requirements (whether salts or agricultural by-products).
In addition, ICE BAN(R) reduces winter-time PM-10 (dust) levels by
eliminating or reducing the need for sand or other grit. ICE BAN(R) is
especially ideal for treating black ice and clear weather frost on road and
bridge surfaces.
Prior to the Company's formation, field and laboratory testing began in
northwestern New York in 1994. After testing, limited commercial use began in
January 1995. Sales and testing continued on a limited basis during the winter
season of 1995-1996 by the licensee for the product in upstate New York. During
this period the licensee obtained a Beneficial Use Determination for commercial
use in the State of New York. This approval required the monitoring of streams
in the use areas for runoff concentrations and environmental impacts. The
impacts were negligible or non- detectable. Commercial use was significantly
expanded in the New York State licensee area in the winter of 1996-1997.
ICE BAN(R) products have been subjected to unrestricted independent
testing. Testing results have been positive. Testing and evaluations have been
conducted by the Civil Engineering Research Foundation (CERF) through its
affiliates HITEC and EvTEC. The National Aeronautics and Space
Administration("NASA") has also participated in conducting tests on the
effectiveness of ICE BAN(R) in association with HITEC. HITEC is the Highway
Innovative Technology Evaluation Center, which conducted technical and field
effectiveness evaluations. EvTEC is the Environmental Technology Evaluation
Center. It conducted environmental testing. Toxicon, Inc. has conducted testing
for algae growth stimulation. Scientific Materials International, Inc. is a
certified FAA testing laboratory, and has conducted tests related to FAA airport
standards. The Washington State Department of Transportation (WSDOT) has
conducted tests concerning ICE BAN(R)'s ice melting capacity and corrosion
inhibiting characteristics. The Nebraska Department of Transportation conducted
roadway traction tests. Materials Engineering and Technical Support Services,
Ltd. (METSS) conducted tests related to ice melting capacity and corrosion
inhibiting characteristics. The New York Department of Environmental Conservancy
(DEC) conducted evaluations related to melt runoff on vegetation and streams.
The Company believes in an open policy with regard to testing and evaluation of
its products, and the testing and evaluation reports have backed up management's
support of ICE BAN(R).
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Testing and roadway use has confirmed that ICE BAN(R) is effective for
anti-icing and de- icing. It is highly soluble in water, and it has a high
concentration of solids in solution resulting in a very low freezing-melting
temperature. These attributes make the product is such an effective de- icing
agent.
RB ULTRA(TM) PRODUCTS (formerly marketed as TEMBIND(R))
RB ULTRA(TM) is an environmentally friendly liquid prodcts used for
unpaved road stabilization and dust control. The Company's product, formerly
known as TEMBIND(R), is now known as, and marketed under, the trademark RB
ULTRA(TM) PRODUCTS(collectively hereinafter also referred to as "Roadbind
products "). TEMBIND(R) provided the Company with a summer season business to
balance the Company's winter season snow and icing control business. This gives
the Company the potential capability to stabilize earnings and provide a revenue
base over the entire fiscal year. The Company is thereby attempting to manage
its product portfolio to reduce any seasonal cycles which subject revenues and
potential earnings to variables in weather and climate conditions. The Company
believes that the potential of these Roadbind products in the marketplace is
exceptional in that the United States has approximately four million (4,000,000)
miles of roads of which nearly one million two-hundred thousand (1,200,000) are
unpaved (or thirty percent). The Company believes that its products are superior
road binders and dust control agents.
Roadbind products are biodegradable, environmentally friendly,
non-toxic, non-corrosive dust control and road stabilization products for use in
the maintenance of unpaved roads. The product is made of lignin and
lignosulfonates, or tree glue, which is a co-product of the papermaking process.
Roadbind product increases the load-bearing strength of roads and soils, and
also allows for immediate use of the road after application and prevents
washouts while increasing traction.
Roadbind products use lignin which is a natural binder found in plants
and trees. It provides strength and rigidity. Approximately one-quarter of dry
wood is lignin. It is the second most prominent component of the wood part of a
tree (cellulose is the first). Lignosulfonates have been used as a treatment for
unpaved roads since the 1920's and have been effective; Roadbind products are
designed to maximize and augment these lignosulfonate properties. Using lignin
as the main ingredient Roadbind America, Inc. (RBA) has blended it with other
environmentally safe proprietary agricultural additives. This blended product is
then marketed under the RB ULTRA(TM) Products brand name.
Roadbind products, when properly mixed and applied, are more resilient,
durable, long lasting and a more effective dust control agent than other
products on the market. Roadbind products increase load-bearing ratios
approximately two to three times. The products are water soluble and are easily
rinsed from equipment and clothing easily. However, it takes heavy and prolonged
rains and traffic to substantially affect the Roadbind treated surfaces.
RBA's products coat dirt roads with an adhesive-like film that binds
particles together for a stronger road surface. Water uptake by the roadbed
surface is also greatly reduced and the treated roadbed is less likely therefore
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to be washed away by rain. Roadbind products can be used on all types of unpaved
roads including shell, coquina, limestone, clay, sand, marl, and gravel.
Roadbind products have been used successfully on roadways, airstrips, helicopter
pads, campgrounds, parks, racetracks, parking areas, nature trails, and even for
embankment stabilization. RBA's products are a safe and economic alternative for
road stabilization and dust control.
(2) Distribution Methods
The Company's products, both its ICE BAN(R) products and its Roadbind
products, are sold by NSC principally in the United States. Sales are made
primarily through exclusive distributors and agents as well as the Company's
sales force.
NSC's ICE BAN(R) distributors service the transportation departments of
government municipalities and other potential users with the Company providing
marketing material, contracts, references, referrals, demonstrations, logistical
backup, technical data and assistance, trade show presence and other support as
may be needed from time to time. At the distributor level, NSC provides
marketing and advertising support both on a territorial and national basis,
including, trade and municipal publications, trade shows, direct mail, news
media, infomercial, and proposal presentations.
The Company originally used ship as well as rail to transport its
product to certain holding tank facilities. ICE BAN(R) is primarily stored in
holding tanks in New York and New Jersey; this is for the most part at the
Company's expense. The independent distributors also use holding tank facilities
for their needs, at their expense.
The Company has determined that a limited number of holding tanks
strategically located throughout the U.S., plus rail cars transported to large
work sites directly from its suppliers will satisfy its supply needs. The
Company has had strategic alliances with MCP, Tembec, Inc., and other suppliers
of the raw materials. Through these alliances, the Company has reduced the
future need for its own extensive storage facilities. The ultimate plan is to
drop ship 85 to 90% of both products to strategic holding tanks throughout the
country, as well as holding tanks owned or leased by its distributors, as well
as to drop shipments directly from the suppliers to large customer job sites and
storage facilities. This strategy is a variation of Just-in-Time Inventory
procedures used in many large industries and the Company believes that this
strategy will result in cost-savings and added flexibility in its marketing and
logistical efforts. Strategic holding tanks along with rapid supplier response
and strategic rail car locations, will potentially keep the Company's inventory
holding costs to a minimum.
The Company's road stabilization products are primarily sold directly
to customers, of which municipalities constitute the largest customer segment.
The Company occasionally sells through authorized Company distributors and other
non-affiliated distributors. The Company's road stabilization products are
currently stored in the State of Florida.
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Distribution and Transportation Agreements
On March 5, 1997, an agreement was executed between Sears Oil Co., Inc.
and IBNY, which calls for Sears to provide storage and thru-put services in
Rome, NY. Such service would include receiving product by rail or truck, in-tank
storage of product, inventory control and reporting, provision of truck loading
facilities, equipment maintenance and provision of normal supplies. This
agreement also calls for minimum quantities of thru-put services to be provided
by IBNY. This contract is binding on any successors of such corporations.
On May 31, 1997, IBNY entered into a contract with Sweetners Plus, Inc.
relating to the unloading, storage, reloading and delivery of ICE BAN(R)
products at Sweetners' Lakeville, New York and Wayland, New York facilities.
This contract is binding on any successors of such corporations. The effective
date of the contract with Sweetners Plus is from June 1, 1997 to May 31, 2002,
with an automatic update from year to year after such five year effective date.
In July 1997, the Company acquired, pursuant to its acquisition of ICE
BAN, INC., the contract with SRI, Inc.,and Petro-chem Div. concerning lignin
storage in Jacksonville, Fla. The proposed contract called for a three-year term
whereby SRI would provide various transport and loading services and storage.
On June 4, 1998, a "Lease" was entered into between 1194 Corporation,
of North Palm Beach, Florida, and Tembind America, Inc. for a three-year lease,
from July 1, 1998 to June 30, 2001, of property to be used for the sale and
storage of materials.
On June 8, 1998, a "Commercial Contract & Lease" was entered into
between Ted Gaczynski, President of R. Conley, Inc. and Jeffrey Johnson, Vice
President of IBNY. IBNY agreed to lease from R. Conley, Inc. premises situated
in Erie, New York. This contract was for the use and occupation of premises for
storage (tank) and handling of product commenced on July 1, 1998 and terminated
on July 1, 1999.
On August 25, 1998, an agreement was entered into among Sears Petroleum
& Transport Corp., Sears Oil Co., Inc. ("Sears"), IBA and Sears Environmental
Applications Company, LLC ("SEACO") . The agreement provided for Sears to have
the right to purchase up to one and one-half million gallons (1,500,000) of ICE
BAN(R), subject to certain provisions relating to resales to SEACO. This
agreement has recently expired.
On August 14, 1999, a "Terminal & Transloading Agreement" was entered
into between Roadbind America, Inc. and Na-Churs Plant Food Company d/b/a
Na-Churs/Alpine Solutions of Corydon, Indiana ("Na-Churs"). The agreement calls
for Na-Churs to receive, store and transload out ROADBIND ULTRA(TM) PRODUCTS,
ICE BAN(R) and Magnesium Chloride Solution. The materials will be delivered FOB
to Na-Churs facility in Roadbind designated trucks or tank cars and all the
inventoried materials will be owned by Roadbind. Na-Churs will store the
materials in storage tanks having a capacity of 110,000 gallons. Roadbind
guarantees a minimum of two hundred thousand (200,000) gallons per calendar year
to be placed through the Na-Churs facility.
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On October 14, 1999, a "Terminal & Transloading Agreement" was entered
into between Roadbind America, Inc. and Steuben County Co-op, Angola, Indiana
("Steuben"). The agreement calls for Steuben to receive, store and transload out
ROADBIND ULTRA(TM) PRODUCTS, ICE BAN(R) and Magnesium Chloride Solution. The
materials will be delivered FOB to Steuben facility in Roadbind designated
trucks or tank cars and all the inventoried materials will be owned by Roadbind.
Steuben's will store the materials in storage tanks having a capacity of 110,000
gallons. Roadbind guarantees a minimum of two hundred thousand (200,000) gallons
per calendar year to be placed through the Steuben facility.
The Company also from time to time contracts with various other railway
and storage companies for the transport and storage of the Company's product.
Such companies include, among others, CSX Corporation and TransMatrix.
(3) Status of any publicly announced new product or service
The status of such is described above. See Part I, Item 2.
(4) Competitive business conditions and issuer's competitive position in the
industry and methods of competition
The de-icing market is highly competitive. Although the Company is
currently a development stage enterprise and is to date not a major volume
supplier of product within the de- icing industry, the Company's market share is
growing within certain geographic and product segments of the market. The
Company believes that because of ICE BAN(R)'s unique environmental advantage
over salts, the product has the potential to become a major factor within the
industry. NSC uses price, quality, and product performance, as well as related
technical support services, to gain a competitive edge over its competitors'
product offerings. NSC further seeks to achieve competitive advantages by using
advertising, promotional, logistical, and branding strategies. The Company
believes that this will result in increased product identification and that this
will translate into increased market penetration.
The principal products in competition with ICE BAN(R) are salt or
chloride based de-icing and anti-icing products. The Company its ICE BAN(R)
product compete and will be competing primarily against de-icing salt producers.
These producers are primarily large multinational corporations with financial
resources substantially greater than those of the Company. These major companies
have large inventories and storage facilities and have distribution
infrastructure already in place. Those government agencies, currently using salt
already have equipment for salt application Much of this equipment which will
require modification or replacement in order to use ICE BAN(R). Most salt
products are currently comparable or less expensive in price than ICE BAN(R)
(the Company believes that this is in part due to the fact that the effects of
corrosion and other environmental harms that salt produces is not accurately
reflected, if at all, in the price of salt; these harms are thus externalities).
However, the Salt Institute has reported that the chloride salt roadway de-icing
market to be in excess of twenty million (20,000,000) tons per annum. This
translates into a market that approaches one billion dollars ($1,000,000,000)
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annually. Thus, the Company is presented with a large market potential for its
differentiated environmentally friendly products and is seeking to carve out a
significant piece of this market dominated by salts, together with salt's
environmental costs and impacts.
Salt de-icing products cause certain environmental impacts including
corrosion that could be (1) reduced by use of ICE BAN(R) if used in mixes with
salt, or (2) effectively eliminated by use of ICE BAN(R) if used exclusively.
The salt industry currently uses liquid calcium brine (8 to 12 gallons per ton
of salt) to reduce bounce-off and loss due to traffic, and to extend its
effective application temperature and increase ice melting action. Calcium
chloride is the salt of a strong acid and a strong base. ICE BAN(R) is not made
from toxic or hazardous chemicals and it mixes with slat, cinder, sand, ash,
river gravel, or other regionally available products or aggregates now being
used for winter season road maintenance.
While salt currently is ICE BAN(R)'s main competition in the de-icing
and anti-icing of roads, ICE BAN(R) can also be used in conjunction with salt as
well. Because of ICE BAN(R)'s intrinsic properties it can be combined with salt
to form a mixture. Thus, while ICE BAN(R) competes with salt products, ICE
BAN(R) maybe sold to salt de-icing companies for use in their salt de-icing
products. This gives ICE BAN(R) a unique advantage in having the ability to sell
its product to its principal competition without incurring significant
disadvantages.
There is the potential for competition from the "Toth" patent. The
"Toth" patent, otherwise known as the VINASZ patent or '918 (U.S. Patent No.
4,676,918), is a patent which covers an admixture of water and a waste
concentrate of a molasses-based alcohol manufacturing procedure (see the actual
patent for complete and accurate details of its coverage), which concentrated
molasses swill is sold under the name "VINASZ". The ICE BAN(R) product and the
testing and reliability of the ICE BAN(R) product is not based upon the VINASZ
patent. NSC has never marketed any ICE BAN(R) products covered by the VINASZ
patent. Currently, Sears, IMUS, Mountain Products and other entities are
claiming that waste "stillbottom" products are covered by the VINASZ patent and
therefore can be sold by them in competition with ICE BAN(R) products without
denigrating the Company's patents.
In June of 1994, George Janke, a founder of the Company, concluded an
Assignment Agreement and an Agreement of Sale for all rights to the VINASZ
patent from three Hungarians who purportedly were the original inventors of the
patent. Ownership of the patent is now in litigation.
Inflation may impact on the costs of the Company, and the ability of
the Company to pass on cost increases in the form of increased sales prices is
dependant upon market conditions. While the general level of inflation in the
U.S. economy has been at relatively low levels, the Company has experienced, to
date, virtually no significant cost increases. If there is an increase in the
rate of inflation, the Company will reexamine its pricing structure. This may
have an impact on competitive conditions.
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Seasonality and weather conditions may affect competitive conditions.
While the Company has made efforts to extend its business year-round, the
business of the Company remains largely seasonal. Due principally to the
seasonal nature of the Company's de-icing and anti-icing products which depend
upon snow and ice conditions, and in which demand is stronger during the winter
months. The Company's shipment volume is typically higher in the second and
third quarters. The Company has made, and is making, arrangements with its
de-icing and anti-icing suppliers to schedule shipments closer to demand periods
rather than store large amounts of this product in its inventory facilities.
This will proportionately reduce inventory and conserve cash. Periods with less
ice and snow, such as the El Nino season of 1997-98, impact upon revenues.
However, the Company's road stabilization and dust control products are
effective for year round use in many areas of the county and for six to eight
months in the areas which experience ice and snow conditions. The Company plans
to aggressively market and sell dust control and stabilization products in order
to create a year-round revenue base for the Company. The Company's acquired IBNY
in 1997 in part to implement this plan.
RB ULTRA(TM) products' principal competition is calcium chloride, cold
mix asphalt, and various polymers.
(5) Sources and availability of raw materials and the names of principal
suppliers
The Company's major source of raw product comes from the processing of
corn which results in corn by-products (or sometimes termed co-products). As
outlined above, in February 1997, Minnesota Corn Processors ("MCP") of Marshall,
Minnesota and the Company entered into an agreement whereby MCP acquired a right
to purchase a minority interest (1,170,000 shares of the Company, then at the
time known as IBA) in the Company's common stock in exchange for supplies of the
corn by-product which NSC brands as ICE BAN(R). MCP has further benefitted the
Company by assisting in laboratory and field testing and evaluation of ICE
BAN(R) and the Company's road stabilization products. The Company does not
anticipate any shortage of reasonably priced raw materials necessary to produce
ICE BAN(R) because it is a by-product of the processing of corn. While MCP had
been the Company's primary supplier of ICE BAN(R) source material, the Company
no longer uses MCP or any other single entity as a sole supplier of material.
The Company has been in the process of diversifying its supplier base. This
diversification includes using various supply sources to enhance NSC's
negotiating posture relative to each of its suppliers.
The Company presently relies heavily upon the expertise and resources
of Tembec, Inc. as a source for its dust control products and materials. The
Tembec products are made, in part, of raw materials that come from co-products
of the wood processing done by paper mills, including, lignosulphonates, or tree
glue. Used previously as a binder for horse and cattle feed products, the tree
glue contains no toxins, which is in contrast to commonly used chloride salts
and asphaltic emulsions which are toxic. It is the Company's belief that there
are sufficient sources in both variety and quantity to ensure a reliable stream
of raw material for the foreseeable future.
The profitability of the Company's operations is dependent, in part,
upon the prices that it pays for raw materials. Accordingly, to the extent there
is a shortage of any related commodity as
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a result of weather, disease or other factors, such events would tend to
increase the operating costs of the Company and may have a negative impact on
its operations.
(6) Dependence on one or a few major customers
The Company expects that federal, state and municipal governments will
be the largest customer segment for the Company's ICE BAN(R) and Roadbind
products. The Company does not at the present time depend on one or a few major
customers for its product sales.
(7) Patents, trademarks, licenses, franchises, concessions, royalty agreements
or labor contracts, including duration
Overview
Intellectual property rights owned or controlled by the Company through
licenses, along with its marketing and distribution networks, are an integral
part of Company's ability to compete successfully in its chosen markets. They
constitute an essential component of NSC's competitive and strategic advantage.
The Company is the exclusive licensee of certain U.S. patents, including
U.S. Patent Nos. 5,635,101(STEEPWATER), 5,709,812(WHEY), 5,709,813(VCS),
5,932,135(CIP/VCS), 5,919,394(CIP/WHEY), and 5,922,240(BCS). In addition, the
Company is the exclusive licensee of certain pending U.S. patent applications.
The Company is a licensee of certain trademarks, including, ICE
BAN(R)(2,215,700), ICE BAN MAGIC(R)(2,270,214), and the ICE BAN(R) LOGO
(2,230,199). The Company secured the aforementioned rights by virtue of a
license agreement dated August 31, 1996, as amended by an August 31, 1998
agreement, between the Company and IBUSA, which agreement has an initial term of
seven years and is automatically renewable for successive one-year terms unless
canceled or otherwise terminated for cause. See Part I, Item 1. (b) Business of
Issuer. (13) Risk Factors. 6. Risk of Effective Failure of Certain Intellectual
Property Rights and 13. Uncertainty Regarding Protection of Proprietary Rights.
IBUSA has filed a U.S. Patent application for certain proprietary
products related to dust control and method. The application was filed May 12,
1998. This patent has been assigned to the Company on an exclusive license basis
for use the United States.
Patent Information
The abstract of each patent is provided below as a summary of the
contents of each patent's coverage.
(1) Patent Number 5,635,101 (Wet Milling Processing; By-Products of Corn)
Date of Patent: Jun. 3, 1997. Disclosed is a new and improved, environmentally
acceptable nd negligibly corrosive de-icing composition comprising a by-products
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from a wet milling process of corn, which by-products are biodegradable. The
invention also relates to the use of a de-icing composition in a manner that
helps to reduce the buildup of snow and ice on roads, bridges and other outdoor
surfaces.
(2) Patent Number 5,709,812 (Whey; By-Products of Cheese Making)
Date of Patent: Jan. 20, 1998. Disclosed is a new and improved,
environmentally acceptable and negligibly corrosive de-icing composition
comprising by-products from the production of cheese from various milks. In
particular, the by-products are the liquids that remain after the coagulated
cheese has been removed from the milks, said liquids being commonly known in the
cheese making industry as "whey". The invention also relates to the use of a
de-icing composition in a manner that helps to reduce the buildup of snow and
ice on roads, bridges and other outdoor surfaces.
(3) Patent Number 5,709,813
(Vintners' Condensed Solubles; wine, fruits, and grains)
Date of Patent: Jan 20, 1998. Disclosed is a new and improved,
environmentally acceptable and negligibly corrosive de-icing composition
comprising by-products from the fermentation and production of wine from grapes
and other fruit, as well as from grains. In particular, the by-products are the
solubles that settle during the fermentation process, said solubles being
commonly known in the wine making industry as "Vintners' Condensed Solubles",
and less technically known as "wine bottoms" and "lees". The invention also
relates to the use of a de-icing composition in a manner that helps to reduce
the buildup of snow and ice on roads, bridges and other outdoor surfaces.
(4) Patent Number 5,919,394 (Whey; By-Products of Cheese Making)
Date of Patent: Jul. 6, 1999. This patent is subject to a terminal
disclaimer. Disclosed is a new and improved, environmentally acceptable and
negligibly corrosive de-icing composition comprising by-products from the
production of cheese from various milks. The present invention is directed to
the liquids that remain after the coagulated cheese has been removed from the
milks, said liquids being commonly known in the cheese making industry as
"whey". The invention also relates to the de-icing composition in a manner that
helps to reduce the buildup of snow and ice on roads, bridges and other outdoor
surfaces. The invention also relates to the a corrosion inhibiting composition
comprising whey.
(5) Patent Number 5,922,240 (Brewers' Condensed Solubles)
Date of Patent: Jul. 13, 1999. Disclosed is a new and improved,
environmentally acceptable and negligibly corrosive de-icing composition
comprising brewers' condensed solubles produced, for example, as by-products
from a commercial beer brewing process, which by-products are biodegradable. The
invention also relates to the use of a de-icing composition to reduce the
buildup of snow and ice on roads, bridges and other outdoor surfaces.
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(6) Patent Number 5,932,135
(Vintners' Condensed Solubles; wine, fruits, and grains)
Date of Patent: Aug. 3, 1999. This patent is subject to a terminal
disclaimer. Disclosed is a new and improved, environmentally acceptable and
negligibly corrosive de-icing composition comprising by-products from the
fermentation and production of wine from grapes and other fruit, as well as from
grains. In particular, the by-products are the solubles that settle during the
fermentation process, said solubles being commonly known in the wine making
industry as "Vintners' Condensed Solubles", and less technically known as "wine
bottoms" and "lees". The invention also relates to a corrosion-inhibiting
composition which comprises vintner's condensed solubles. Other embodiments and
uses of the invention will be apparent to those skilled in the art from
consideration of the specific practice of the invention disclosed herein.
Trademarks
The Company is a licensee of certain trademarks, including, "ICE BAN",
"ICE BAN MAGIC", and the "ICE BAN LOGO" that resembles a caution sign. The
Company has a non-exclusive right and license to use such trademarks. These
trademarks were obtained by virtue of the "Amendment to Exclusive License Area
Agreement" dated August 31, 1998, between IBA and IBUSA. See Part I, Item 7
"Certain Relationships and Related Transactions" and Part I, Item 5, "Directors,
Executive Officers, Promoters and Control Persons".
The Company through its Roadbind America, Inc. subsidiary has filed to
register the trademark RB ULTRA(TM). The Company, through licensing
arrangements, with IBUSA has use of a registered logo(s), as well as the use of
trademarks ICE BAN(R), ICE BAN MAGIC(R), and TEMBIND(R).
Licenses of Dust Control and Road Stabilization Products
The Company is the United States distributor for the TEMBIND(R) product
manufactured by Tembec, Inc. This was accomplished by the acquisition of IBNY by
IBA. TEMBIND(R) is a biodegradable, non-corrosive dust control and road
stabilization product, specified for use by the United States government in
national parks and military installations. TEMBIND(R) is also distributed across
the U.S. to highway superintendents and departments of transportation.
TEMBIND(R) is now marketed by the Company under the RB ULTRA(TM) Products
trademark.
The right to sell and deliver TDS (liquid lignosulfonate or other
products for sale as dust control on roads and parking lots), i.e. TEMBIND(R),
was granted initially to Ice Ban, Inc. (herein also referred to as IBNY)
pursuant to a "Distributor Agreement" between IBNY and Tembec, Inc.
of Quebec, Canada.
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Licenses of ICE BAN(R) Related Patents and Trademarks
On August 31, 1996, IBUSA for consideration of one hundred thousand
dollars ($100,000) granted the Company the use of ICE BAN(R) patents and
trademarks in an exclusive license agreement for the United States, excluding
only counties in the State of New York north of the 42nd parallel and also
excluding Erie County, Pennsylvania. IBUSA, is a Florida corporation controlled
by Mr. George Janke, as trustee. George Janke was then Vice President and
Director of IBA. IBUSA acquired the sole rights to the use of certain patent
rights relating to roadway de-icing and anti-icing products and their related
compositions. In consideration for obtaining the licensing agreement, and after
having contributed five thousand dollars ($5,000) in cash, the Company issued
six million four-hundred thousand shares (6,400,000) to Mr. Warren Johnson, a
former President and Director of the Company and a former officer of IBUSA, and
five million eight-hundred thousand shares (5,800,000) to Mr. George Janke, as
trustee, for the benefit of certain members of Mr. Janke's family. Prior to the
August 31, 1996 execution of the licensing agreement described below, on August
16, 1996, in consideration of obtaining this licensing agreement concerning
intellectual property rights related to de-icing and anti-icing products, and
five thousand dollars ($5,000), the Company issued founders shares to George
Janke, in his capacity as trustee for certain family members, and to Warren D.
Johnson, Jr. George Janke, as trustee, received five million eight- hundred
thousand (5,800,000) shares of common stock and Warren D. Johnson, Jr. received
six million four-hundred thousand (6,400,000) shares of common stock. On this
date 12.2 million shares of stock were issued and this was done pursuant to
ss.4(2) of the Securities Act of 1933. This issuance was also done pursuant to a
form M11 which was forwarded to the State of New York on September 19, 1996 and
was filed by the State of New York (i.e. received) on September 20, 1996. See
Part II, Item 4. "Recent Sales of Unregistered Securities" and Part II, Item 7.
"Certain Relationships and Related Transactions". The license agreement term is
for seven years with one-year automatic renewals thereafter. See Part III,
Exhibits; see also Part I, Item 1. -(b) Business of Issuer, (13) Risk Factors,
6. Risk of Effective Failure of Certain Intellectual Property Rights and 13.
Uncertainty Regarding Protection of Proprietary Rights. All rights to the
excluded territory were reverted to IBA on July 29, 1997 as a result of the
acquisition of IBNY by IBA in 1997 and an amendment to exclusive license area
agreement executed on August 31, 1998, between IBA and IBUSA. See Part I, Item
7, "Certain Relationships and Related Transactions" and Part I, Item 5,
"Directors, Executive Officers, Promoters and Control Persons".
The August 31, 1996 contract was then amended on August 31, 1998. It
was captioned "Amendment to Exclusive License Area Agreement". This amendment
extended IBA's license to cover the entire U.S. The amendment also granted
certain rights to trademarks. These trademark rights were identified and listed
as: (1) "ICE BAN", (2) "ICE BAN MAGIC" and (3) the ICE BAN LOGO. These
trademarks are "for [sic] anti-icing and de-icing composition for use on
exterior surfaces." See Part I, Item 7 Certain Relationships and Related
Transactions and Part I, Item 5, Directors, Executive Officers, Promoters and
Control Persons.
(8) Government Approval of Principal Products or Services
Sales of ICE BAN(R) products have, to date, been slow primarily due to
the numerous testing requirements by municipalities and departments of
transportation (slow sales were also due to two consecutive years of very
minimal snow and ice conditions in the Snow Belt). NSC expects the
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testing to continue; however, many of the departments of transportation and
environmental agencies throughout the Snow Belt have already approved the use of
ICE BAN(R) products.
(9) Governmental Regulations
The Company is subject to various laws and governmental regulations
applicable to businesses generally. The Company's products are also subject to
certain standards, laws, and regulations. The Company believes it is currently
in compliance with such laws and that such laws do not have a material impact on
its operations.
(10) Research and Development Activities
The Company has spent a majority of its time involved in developing its
marketing and distribution structure. The Company has engaged certain testing
facilities and organizations, described elsewhere herein, to conduct product
performance and environmental impact tests. NSC's research and development costs
are not borne directly by its customers.
(11) Environmental Laws
NSC's products are based upon natural ingredients gleaned from
agricultural processing. The Company's strategic focus has always been to
promote environmentally friendly products. NSC believes that its ICE BAN(R)
products and Roadbind products are safe for the environment. The Company
believes that the costs and effects of any environmental laws would actually
harm NSC's competition to a larger extent than it would harm the Company.
NSC is subject to environmental laws concerning safe water, air, and
other environmental protection laws on the federal, state, and local level. The
Company does not foresee any problems, nor has it measured any material cost or
effect, in managing compliance with such to date.
(12) Employees
The Company currently employs fourteen (14) employees of which ten (10)
are full time employees and four (4) of which are salespersons. The full time
employees receive annual salaries and the salespersons are compensated by a base
salary plus commissions.
(13) Risk Factors
Before making an investment decision, prospective investors in the
Company's common stock should carefully consider, along with other matters
referred to herein, the following risk factors inherent in and affecting the
business of the Company.
1. History of Losses. Although the Company has been in business since
August 14, 1996, the Company is still a development stage company. As of July
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31, 1999, the Company had total assets of $1,410,392, a net loss of $2,764,547
on revenues of $2,100,199 and stockholders deficit of $2,764,547. As of July 31,
1998, the Company had total assets of $2,426,918, a net loss of $2,596,930 on
revenues of $1,994,415 and stockholders deficit of $2,586,718. The total deficit
accumulated during development stage since inception to July 31, 1999 is
$5,242,043. Due to the Company's operating history and limited resources, among
other factors, there can be no assurance that profitability or significant
revenue will occur in the future. Moreover, the Company expects to continue to
incur operating losses through at least the next twelve months, and there can be
no assurance that losses will not continue thereafter. The ability of the
Company to establish itself as a going concern is dependent upon the receipt of
additional funds from operations or other sources to continue those activities.
The Company's auditor has expressed in his most recent audit report substantial
doubt that the Company can continue as a going concern. See Part F/S. The
Company is subject to all of the risks inherent in the operation of a
development stage business and there can be no assurance that the Company will
be able to successfully address these risks.
2. Minimal Assets. Working Capital and Net Worth. As of July 31, 1999,
the Company's total assets in the amount of $1,410,392, consisted, principally,
of the sum of $ 78,535 in accounts receivable-trade, $63,954 in prepaid expenses
and $614,280 in inventory. As a result of its minimal assets and a net loss from
operations, in the amount of $2,764,547, there can be no assurance that the
Company will be able to remain solvent over the next twelve (12) months.
Further, there can be no assurance that the Company's financial condition will
improve. Even though management believes, without assurance, that it may obtain
sufficient capital with which to implement its business plan (plan of operation)
and strategy, the Company is not expected to proceed with its business plan and
strategy without an infusion of capital or a pronounced rise in sales. In order
to obtain additional equity financing, management may be required to dilute the
interest of existing shareholders or forego a substantial interest of its
revenues, if any.
3. Need for Additional Capital. Without an infusion of capital or
profits from operations, the Company is not expected to proceed with its
expansion as planned. Accordingly, the Company is not expected to overcome its
history of losses unless sales reach above the current levels and/or additional
equity or debt financing is obtained. While the Company anticipates the receipt
of increased operating revenues, such increased revenues cannot be assured.
Further, the Company may incur significant unanticipated expenditures which
deplete its capital at a more rapid rate because of among other things, the
stage of its business, its limited personnel and other resources and its lack of
a widespread customer base and market recognition. Because of these and other
factors, management is presently unable to predict what additional costs might
be incurred by the Company beyond those currently contemplated. The Company has
no identified sources of additional capital funds other than those otherwise
mentioned herein, and there can be no assurance that resources will be available
to the Company when needed.
4. Dependence on Management. The possible success of the Company is
expected to be largely dependent on the continued services of its President,
Richard Jurgenson and the other executive officers. Virtually all decisions
concerning the marketing, distribution and sales of the Company's products and
services will be made or significantly influenced by the Company's
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officers. These officers are expected to devote only such time and effort to the
business and affairs of the Company as may be necessary to perform their
responsibilities as executive officers. The loss of the services of any of these
officers would adversely affect the conduct of the Company's business and its
prospects for the future.
5. Limited Distribution Capability. The Company's success depends in
large part upon its ability to distribute its products and related services. As
compared to the Company, which lacks the financial, personnel and other
resources required to compete with its larger, better-financed competitors,
virtually all of the Company's competitors or potential competitors have much
larger budgets for securing customers. Although the Company has entered into
agreements for the transportation, storage, and distribution of its products,
these actions have produced only limited revenues to date. Depending upon the
level of operating capital or funding obtained by the Company, management
believes, without assurance, that it will be possible for the Company to attract
additional customers for its products and services. However, in the event that
only limited funds are available from operations or obtained, the Company
anticipates that its limited finances and other resources may be a determinative
factor in the decision or ability to go forward with its plan of operation and
strategy. Until such time, if ever, as the Company is successful in generating
sufficient cash flow from operations or securing additional capital, of which
there is no assurance, it intends to continue marketing its products through its
current distribution arrangements. However, the fact that these arrangements
have not thus far produced significant revenue may adversely impact the
Company's chances for success.
6. Risk of Effective Failure of Certain Intellectual Property Rights.
The Company's ability to continue its business is at significant risk if the
terms or conditions of its licensing agreement, and amendment to such, with
IBUSA are rendered or construed in such a manner that the license of
intellectual property rights to the Company by IBUSA is effectively terminated.
Therefore, all potential investors are strongly encouraged to read this
agreement attached hereto. See Part III, Exhibits; see also Part I, Item 1. -(b)
Business of Issuer, 13. Uncertainty Regarding Protection of Proprietary Rights.
7. Weather and Climate Changes. The Company's sales are to a
significant extent dependent upon, and related to, weather conditions and
climate trends. Specifically, variation in actual and forecasted snow and ice
conditions will have an effect upon the sales of ICE BAN(R) products. Variations
in wind and rainfall amounts may also have an impact upon the sales of Roadbind
products, but this variation or impact has not been analyzed and is deemed
insignificant by management.
8. Significant Customer and Product Concentration. To date, a limited
number of customers and distributors have accounted for substantially all of the
Company's revenues with respect to product sales. Although the company entered
into distribution agreements, there is no assurance that the Company will be
able to obtain adequate distribution of its products to the intended end user.
The Company's ability to achieve revenues in the future will depend in
significant part upon its ability to obtain additional customers and users. The
Company will also be required to maintain relationships with and provide support
to existing and new distributors. As a result, any cancellation,
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reduction or delay in transportation or supply may materially adversely affect
the Company's business, financial condition and results of operations. There can
be no assurance that the Company's revenues will increase in the future or that
the Company will be able to support or attract customers.
9. Fluctuations in Results of Operations. The Company has experienced
and may in the future experience significant fluctuations in revenues, gross
margins and operating results. As with many developing businesses, the Company
expects that some orders may not materialize or delivery schedules may have to
be deferred as a result of changes in customer requirements, among other
factors. As a result, the Company's operating results for a particular period to
date have been and may in the future be materially adversely affected by a
delay, rescheduling or cancellation of even one purchase order. Moreover,
purchase orders are often received and accepted substantially in advance of
shipment, and the failure to reduce actual costs to the extent anticipated or an
increase in anticipated costs before shipment could materially, adversely affect
the gross margins for such order, and as a result, the Company's results of
operations. A delay in a shipment near the end of a particular quarter, due, for
example, to an unanticipated shipment rescheduling, to cancellations or
deferrals by customers or to unexpected difficulties in obtaining sufficient
supplies, may cause net revenues in a particular quarter to fall significantly
below the company's expectations and may materially adversely affect the
Company's operating results for such quarter.
A large portion of the Company's expenses are fixed and difficult to
reduce should revenues not meet the Company's expectations, thus magnifying the
material adverse effect of any revenue shortfall. Furthermore, announcements by
the Company or its competitors of new products and technologies could cause
customers to defer purchases of the Company's products or a reevaluation of any
products then under development, which would materially adversely affect the
Company's business, financial condition and results of operations. Additional
factors that may cause the Company's revenues, gross margins and results of
operations to vary significantly from period to period include: product
development, patent processing, supplier efficiencies, costs and capacity and
the timing of availability of new products by the Company or its customers,
usage of different distribution and sales channels; customization of road
maintenance delivery systems; and general economic and political conditions. In
addition, the Company's results of operations are influenced by competitive
factors, including the pricing and availability of and demand for, competitive
products such as de-icing salt. All of the above factors are difficult for the
company to forecast, and these or other factors could materially adversely
affect the Company's business, financial condition and results of operations. As
a result, the Company believes that period-to-period comparisons are not
necessarily meaningful and should not be relied upon as indications of future
performance.
10. Potential for Changes or Unfavorable Interpretation of Government
Regulation. The Company's products are subject to various federal, state, and
local laws and regulations. Specifically, the regulation of highway and road
maintenance products and technologies, along with their related delivery systems
and methods, may increase to an extent, or move in a direction, in which the
Company would be forced to incur increased regulatory compliance costs. Such
costs could have a material impact on the Company's business, financial
condition and results of operation. The Company's main competition, that is
companies that provide salt and salt related services concerning de-icing and
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anti-icing, may be impacted by such latent risk differently, and upon any such
manifested change in regulation, may be impacted by such in a different manner
and in a different degree than the Company. This difference in regulatory impact
may alter the competitive situation of the Company.
Because the regulatory environment in which the Company operates is
subject to change, regulatory changes, which are affected by political, economic
and technical factors, could furthermore significantly impact the Company's
operations by restricting development efforts by the Company and its customers,
making current products obsolete, making the delivery of road maintenance
products and services more costly or increasing the opportunity for additional
competition. Any such regulatory changes could have a material adverse effect on
the Company's business, financial condition and results of operations.
Furthermore, the Company might deem it necessary or advisable to alter or modify
its products to operate in compliance with such regulations. Such modifications
could be extremely expensive and, especially if subject to regulatory review and
approval, time-consuming.
11. No Assurance of Product Quality, Performance and Reliability. The
Company expects that its distributor and their customers will continue to
establish demanding specifications for quality, performance and reliability.
Although the Company attempts to only deal with suppliers who adhere to good
processing and manufacturing practice standards, there can be no assurance that
problems will not occur in the future with respect to quality, performance,
reliability and price. If such problems occur, the Company could experience
increased costs, delays in or cancellations or rescheduling of orders or
shipments and product returns and discounts, any of which would have a material
adverse effect on the Company's business, financial condition or results of
operations.
12. Future Capital Requirements. The Company's future capital
requirements will depend upon many factors, including any necessary development
of new de-icing and anti-icing technologies, requirements to maintain adequate
storage and transportation facilities, the progress of the Company's research
and development efforts, if any, expansion of the Company's marketing and sales
efforts and the status of competitive products and services. The Company
believes that it will require additional funding in order to fully exploit its
plan for operations. There can be no assurance, however, that the Company will
secure such additional financing. There can be no assurance that any additional
financing will be available to the Company on acceptable terms, or at all. If
additional funds are raised by issuing equity securities, further dilution to
the existing stockholders may result. If adequate funds are not available, the
Company may be required to delay, reduce or eliminate any research and
development or supply or distribution programs or obtain funds through
arrangements with partners or others that may require the Company to relinquish
rights to certain of its existing or potential products, rights, or other
assets. Accordingly, the inability to obtain such financing could have a
material adverse effect on the Company's business, financial condition and
results of operations.
13. Uncertainty Regarding Protection of Proprietary Rights. The Company
attempts to protect its intellectual property rights through patents,
trademarks, secrecy agreements, trade secrets and a variety of other measures.
However, there can be no assurance that such measures will provide
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adequate protection for the Company's trade secrets or other proprietary
information, that additional disputes with respect to the ownership of its
intellectual property rights will not arise, that the Company's trade secrets or
proprietary technology will not otherwise become known or be independently
developed by competitors or that the Company can otherwise meaningfully protect
its intellectual property rights. There can be no assurance that any patent
licensed to the Company will not be invalidated, circumvented or challenged,
that the rights granted thereunder will provide competitive advantages to the
Company or that any of the Company's pending or future patent applications will
be issued with the scope of the claims sought by the Company, if at all.
Furthermore, there can be no assurance that others will not develop similar
products, duplicate the Company's products or design around the patents owned by
the Company or that third parties will not assert further intellectual property
infringement claims against the Company. In addition, there can be no assurance
that foreign intellectual property laws will adequately protect any rights the
Company may assert in the future, if at all, with regard to the Company's
intellectual property rights, if any, abroad. The failure of the Company to
protect its proprietary rights could have a material adverse effect on its
business, financial condition and results of operations.
Future litigation, notwithstanding the Company's current litigation,
may be necessary to protect the Company's intellectual property rights and trade
secrets, to determine the validity of and scope of the proprietary rights of
others or to defend against claims of infringement or invalidity. Such
litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance that
infringement, invalidity, right to use or ownership claims by third parties or
claims for indemnification resulting from infringement claims will not be
asserted in the future. If any claims or actions are asserted against the
Company, the Company may seek to obtain a license under a third party's
intellectual property rights. There can be no assurance, however, that a license
will be available under reasonable terms or at all. In addition, should the
Company decide to litigate such claims, such litigation could be extremely
expensive and time consuming and could materially adversely affect the Company's
business, financial condition and results of operations, regardless of the
outcome of the litigation.
14. Ability to Grow. The Company expects to grow through strategic
acquisitions, internal growth and by expansion of its current relationships.
There can be no assurance that the Company will be able to create a greater
market presence, or if such market presence is created, to expand its market
presence or successfully enter other geographic or product markets. The ability
of the Company to grow will depend on a number of factors, including the
availability of working capital to support such growth, existing and emerging
competition, one or more qualified strategic alliances and the Company's ability
to maintain sufficient profit margins in the face of pricing pressures. The
Company must also manage costs in a changing regulatory environment, adapt its
infrastructure and distribution network to accommodate growth within its market.
The Company also plans to expand its business, in part, through
acquisitions. Although the Company will continuously review potential
acquisition candidates, it has not entered into any agreement, understanding or
commitment with respect to any additional acquisitions at this time. There can
be no assurance that the Company will be able to successfully identify suitable
acquisition
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candidates, complete acquisitions on favorable terms, or at all, or integrate
acquired businesses into its operations. Moreover, there can be no assurance
that acquisitions will not have a material adverse effect on the Company's
operating results, particularly in the fiscal quarters immediately following the
consummation of such transactions while the operations of the acquired business
are being integrated into the Company's operations. Once integrated,
acquisitions may not achieve comparable levels of revenues, profitability or
productivity as at the level then existing or otherwise perform as expected. The
Company is unable to predict whether or when any prospective acquisition
candidate will become available or the likelihood that any acquisitions will be
completed.
The Company has engaged in preliminary discussions with George Janke
regarding the possible acquisition of IBUSA. Such discussions to date have not
yielded an agreement. The Company has also been in further contact with Pat
Robertson's representatives concerning possible future funding and investment
(in addition to his past investments in the Company which are herein disclosed).
Such overtures and preliminary discussions, if any, regarding possible future
funding and investment in the Company have not, to date, yielded any type of
agreement or understanding other than expressing interest and the potential of
conducting future substantive negotiations. Any such future substantive
negotiations, in any case, may or may not result in the Company receiving
adequate funding or assistance, if any.
The Company will be competing for acquisition and expansion
opportunities with entities that have substantially greater resources than the
Company. In addition, acquisitions involve a number of special risks, such as
diversion of management's attention, difficulties in the integration of acquired
operations and retention of personnel, unanticipated problems or legal
liabilities, and tax and accounting issues, some or all of which could have a
material adverse effect on the Company's results of operations and financial
condition.
15. Competition. The markets the Company operates in are characterized
by high levels of competition, with several major companies involved, as well as
smaller regional and local companies. The Company's primary concern is with its
larger competitors. The Company will be competing with these larger competitors
in national, regional and local markets. The Company may also at some point in
the future engage its competition and enter markets in other countries when, if
at all, it becomes feasible and appropriate.
In addition, the Company may encounter substantial competition from new
market entrants. Many of the Company's competitors or potential competitors have
significantly greater name recognition and have greater marketing, financial and
other resources than the Company. There can be no assurance that the Company
will be able to complete effectively against such competitors in the future.
16. Possible Adverse Effect of Fluctuations in the General Economy and
Business of Customers. Historically, the general level of economic activity has
significantly affected the demand for new technology products. ICE BAN(R)
products and Roadbind products are new and innovative methods for road
maintenance. While they provide an environmentally safer alternative to
traditional road stabilization and icing control products, they will often
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demand of its customers certain costs of switching over to this new technology.
Such costs may include the modification of traditional delivery systems (i.e.
specialized vehicles) and information costs related to product attributes and
servicing requirements. Therefore, under certain economic conditions, its
customers may prefer the "safety" of the traditional methods, instead of
incurring additional cost risk in switching to the Company's products. The
pricing structure of the Company's products relative to its competitors, to a
large extent, obviously determines the direction of switching, either to the
Company's products or away from such and into salt-based products. Such
switching could become magnified and pronounced in a general economic decline or
a decline in the economic conditions of its customer firms and municipalities.
17. Lack of Working Capital Funding Source. Other than revenues from
the sale of its products, which revenues have yet to produce any net profit, the
Company has no current source of working capital funds other than otherwise
mentioned herein, and should the Company be unable to secure additional
financing on acceptable terms, its business, financial condition, results of
operations and liquidity would be materially adversely affected.
18. Uncertainty of Market Acceptance. The future operating results of
the Company depend to a significant extent upon the growth in sales of the
Company's products. There can be no assurance that the Company has the ability
to introduce any new propriety products and services into the marketplace which
will achieve the market penetration and acceptance necessary for the Company to
grow and become profitable on a sustained basis, especially given the fierce
competition that exists from companies more established and well financed than
the Company. The Company, however, believes that the environmental advantages
offered by its products have the potential to alter the demand structure within
the market to the Company's advantage. The Company believes that increased
environmental awareness, interest, and political pressure will operate to the
Company's long-run advantage.
To date, substantially all of the Company's product sales have been to
a limited number of customers. The Company's future results of operations will
be dependent in significant part on its ability to penetrate markets in the
United States and possibly in the future, if at all, in foreign countries in
which the Company has not yet established a meaningful presence. There can be no
assurance that the Company will be successful in penetrating these additional
markets.
19. Potential Year 2000 Problems. The "Year 2000" issue affects the
Company's installed computer systems, network elements, software applications,
and other business systems that have time-sensitive programs that may not
properly reflect or recognize the year 2000. Because many computers and computer
applications define dates by the last two digits of the year, "00" may not be
properly identified as the year 2000. This error could result in miscalculations
or system failures. The Year 2000 issue may also affect the systems and
applications of the Company's suppliers. There can be no assurance that systems
operated by third parties providing services to the Company will be Year 2000
compliant. See Part I, Item 2. "Management's Discussion and Analysis or Plan of
Operation - Impact of the Year 2000 Issue."
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20. No Dividends. While payments of dividends on the Common Stock
rests with the discretion of the Board of Directors, there can be no assurance
that dividends can or will ever be paid. Payment of dividends is contingent
upon, among other things, future earnings, if any, and the financial condition
of the Company, capital requirements, general business conditions and other
factors which cannot now be predicted. It is highly unlikely that cash dividends
on the Common Stock will be paid by the Company in the foreseeable future.
21. No Cumulative Voting. The election of directors and other questions
will be decided by a majority vote. Since cumulative voting is not permitted and
a majority of the Company's outstanding Common Stock constitute a quorum,
investors who purchase shares of the Company's Common Stock may not have the
power to elect even a single director and, as a practical matter, the current
management will continue to effectively control the Company.
22. Control by Present Shareholders. The present shareholders of the
Company's common stock will, by virtue of their percentage share ownership and
the lack of cumulative voting, be able to elect the entire Board of Directors,
establish the Company's policies and generally direct its affairs. Accordingly,
persons investing in the Company's Common Stock will have no significant voice
in Company management, and cannot be assured of ever having representation on
the Board of Directors. See Part I, Item 4. "Security Ownership of Certain
Beneficial Owners and Management."
23. Potential Anti-Takeover and Other Effects of Issuance of Preferred
Stock May Be Detrimental to Common Shareholders. The Company is authorized to
issue shares of preferred stock. ("Preferred Stock"). The issuance of Preferred
Stock does not require approval by the shareholders of the Company's Common
Stock. The Board of Directors, in its sole discretion, has the power to issue
shares of Preferred Stock in one or more series and to establish the dividend
rates and preferences, liquidation preferences, voting rights, redemption and
conversion terms and conditions and any other relative rights and preferences
with respect to any series of Preferred Stock. Holders of Preferred Stock may
have the right to receive dividends, certain preferences in liquidation and
conversion and other rights; any of which rights and preferences may operate to
the detriment of the shareholders of the Company's Common Stock. Further, the
issuance of any shares of Preferred Stock having rights superior to those of the
Company's Common Stock may result in a decrease in the value of the market price
of the Common Stock, provided a market exists, and additionally, could be used
by the Board of Directors as an anti-takeover measure or device to prevent a
change in control of the Company. See Part I, Item 1. "Description of Securities
Description of Preferred Stock."
24. Risk of De-Listing from Market and Potential Illiquidity in Trading
of Common Stock. The Company's common stock is traded on the NASDAQ
Over-the-Counter Bulletin Board (OTC Bulletin Board). The Company's stock symbol
is ICEB. The Company makes no assurances whether NSC will be able to maintain
the requirements necessary for such listing. The Company could become de-listed
from such market if certain regulatory requirements are not met; such regulatory
requirements which could such risk de-listing include the timing of the filing
of this SEC disclosure document (Form 10-SB). Any such de-listing could affect
the liquidity of the market for the Company's common stock. This could result in
higher transaction costs in buying or selling the
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<PAGE>
Company's common stock and the inability to find a buyer or seller to unwind or
reverse positions in the Company's common stock. There could also be potential
problems involving the Company's ability to attract investment capital, secure
debt financing, or the ability to otherwise implement its strategies, business
plan, plan of operations, etc. However, in the event of de-listing, the Company
anticipates that its common stock will trade on the Over-the-Counter Pink
Sheets.
(c) Reports to Security Holders.
The Company sends out annual reports to its shareholders that include
audited financial statements. The public may read and copy any materials the
Company files with SEC at the SEC's Public Reference Room at 450 Fifth Street,
NW Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC; the address of this site is http://www.sec.gov. The Company's
Internet address is http://www.naturalsolutionscorp.com.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Business Mission
NSC's mission is to expand the market share of its environmentally
friendly, anti-corrosive products, which replace or improve current technologies
that are environmentally damaging and corrosive to the infrastructure of
elevated highways and bridges. NSC seeks to continue its research, testing and
development programs to identify new and unique products and technologies for
the commercialization of environmentally friendly products, produced from
renewable, recyclable, low cost waste base stock.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Introduction
In Management's Discussion and Analysis, Management explains the general
financial condition and the results of operations for the Company and its
subsidiaries including:
What factors affect the Company's business,
What the Company's earnings and costs were in 1998 and 1999,
Why those earnings and costs were different from the year before,
Where the Company's earnings and costs came from,
How the above discussion affects the Company's overall financial condition,
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What the Company's expenditures for capital projects were from 1996 through 1999
and what we expect them to be in 1999 through 2001, and
Where cash is projected to come from to pay for future expenditures.
When reading Management's Discussion and Analysis, it may be helpful to refer to
the Company's Annual Report which presents the results of our operations for
1996 through 1999. In Management's Discussion and Analysis, we analyze and
explain the annual changes in the specific line items in the Consolidated
Statements of Income. This analysis may be important to an investor making
decisions about the Company.
Forward-Looking Statements
This Form 10-SB includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical facts, included or incorporated by reference in
this Form 10-SB which address activities, events or developments which the
Company expects or anticipates will or may occur in the future, including such
things as future capital expenditures (including the amount and nature thereof),
demand for the Company's products and services, expansion and growth of the
Company's business and operations, and other such matters are forward-looking
statements. These statements are based on certain assumptions and analyses made
by the Company in light of its experience and its perception of historical
trends, current conditions and expected future developments as well as other
factors it believes are appropriate in the circumstances. However, whether
actual results or developments will conform with the Company's expectations and
predictions is subject to a number of risks and uncertainties, general economic
market and business conditions; the business opportunities (or lack thereof)
that may be presented to and pursued by the Company; changes in laws or
regulation; and other factors, most of which are beyond the control of the
Company. Consequently, all of the forward-looking statements made in this Form
10-SB are qualified by these cautionary statements and there can be no assurance
that the actual results or developments anticipated by the Company will be
realized or, even if substantially realized, that they will have the expected
consequence to or effects on the Company or its business or operations. The
Company assumes no obligations to update any such forward-looking statements.
OVERVIEW
The Company was formed on August 14,1996, as a Nevada Corporation, to market
several agricultural co-products for use as anti-icing, de-icing, road
stabilization and dust control agents.
The company has been a development stage company since inception.
On August 31,1996, Ice Ban America Inc., entered into an exclusive licensing
agreement with Ice Ban, USA, Inc., to exploit certain patents and patents
pending and trademarks assigned to Ice Ban USA, Inc. The patents cover the use
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<PAGE>
of agricultural co-products as road de-icing and anti-icing products. The
product is marketed under the name ICE BAN.
The Company also owns, as a result of the acquisition of Ice Ban, Inc. by Ice
Ban America, Inc, the exclusive United States license agreement and rights to
market TDS, a dust control product from Tembec, Inc., a Canadian company. The
Company has established the trademark name of RB ULTRA(TM) Products in the
United States and have begun to market these products. RB ULTRA(TM) Products are
biodegradable, environmentally friendly, non-toxic, non-corrosive dust control
and road stabilization products for use in the maintenance of unpaved roads.
Both products are made of lignosulphonates, or tree glue, a co-product of the
papermaking process..
RESULTS OF OPERATIONS
Fiscal 1999 Compared to Fiscal 1998
Net Sales. Net Sales for the 52 weeks in fiscal year 1999 for continuing
operations by the Company were approximately $2.1 million, or approximately
$40,000 per week. Net sales for the fiscal year 1998 (50 weeks) were
approximately $1.9 million or $36,000 per week Of the net sales of approximately
$2.1 million for fiscal year 1999, approximately $1.35 million was attributed to
the expanded use of ICE BAN(R) de-icing and anti-icing products, and
approximately $0.652 million was attributed to the expanded use of RB ULTRA(TM)
Products road stabilization and dust control products.
Cost of Products Sold. The Company's cost of product sold in fiscal 1999 was
approximately $1.6 million (or approximately 76% of Net Sales), while the cost
of product sold for 1998 was approximately $1.6 million (or 82% of net sales).
Included in the $1.6 million cost of product sold for fiscal 1999 is $0.427
million for stock issued in exchange for product (see Note 6. Major
Customers/Suppliers and Note 10 Supplemental Cash Flow Information to Notes to
Consolidated Financial Statements.
Selling and administrative expenses. Selling and administrative expenses for the
fiscal year 1999 were approximately $2.4 million (or approximately 116% of net
sales), while selling and administrative expenses for 1998 were approximately
$2.9 million (or approximately 153% of net sales).
Net Income (Loss). The Company had a net loss of approximately $2.0 million for
fiscal year 1999 of approximately as compared to a net loss of approximately
$2.6 million for the fiscal year 1998. Included in the net loss for fiscal year
1999 was non-cash equity transactions of approximately $0.43 million which
included recognizing an aggregate of $0.11 million in option based compensation
and $.32 million for exchange for product and services.
LIQUIDITY AND CAPITAL RESOURCES
In the fiscal year ended 1999, operating activities consumed approximately $0.25
million in cash ascompared to approximately $1.4 million of cash provided in the
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<PAGE>
1998 fiscal year. This decrease in cash consumed from fiscal year 1998 to 1999
reflects increases in accounts payable of approximately $0.834 million
reflecting delays in payment to vendors. Also non-cash charges and other changes
in working capital reduced cash consumed by $1.13 million.
Capital expenditures required for operation were approximately $0.01
million for fiscal year 1999. The company anticipates expenditures for expansion
of computer information system during fiscal years 1999 and 2000 to better
prepare it for future growth. Cost of the computer information system will be
dependent upon selection of equipment and software that is year 2000 compliant.
However, no assurance can be given as to the Company's actual expenditures for
year 2000 compliance. See "Year 2000" below. Additional purchases for capital
resources are further dependent upon sales of its road stabilization and dust
control products. Cost of application equipment for road stabilization/dust
control products will initially be borne by the Company until a thorough
training program is instituted for its customers and distributors. The equipment
requirements for the Company's de-icing and anti-icing products are currently
incurred by the Company's customers and distributors.
YEAR 2000
The Company's information systems currently are made up of networked computers
which are used internally and are not linked to any outside sources other than
the browser used by the Company. The Company's future information system will
cover a spectrum of software applications for its distribution operations,
certain of these will be custom designed. The company will need to do an
extensive study to achieve year 2000 compliance for both packaged and
custom-designed software.
The cost of compliance has not yet been determined.
The company has initiated formal communication with all of its significant
suppliers to determine the extent to which the Company is vulnerable to the
failure of such suppliers to resolve their own Year 2000 problems. The Company
will grade the responses from low to high risk. In addition, although many of
the Company's customers have been communicating with the Company regarding the
Year 2000 issues, the Company has not made any formal assessment of the effect
which the failure of its larger customers to resolve their own Year 2000
problems could have on the Company's operations. Despite these efforts, there
can be no assurance that the systems of other companies on which the company
relies will be timely converted or that a failure to resolve by one or more of
the company's customers or suppliers would not have a material adverse effect on
the Company.
IMPACT OF INFLATION
The impact of inflation on the costs of the Company, and the ability to pass on
cost increases in the form of increased sales prices, is dependent upon market
conditions. While the general level of inflation in the economy has been at
relatively low levels, the Company has begun to pass on inflationary cost
increases or as the result of recent negotiations with various customers, and
will continue do so.
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SEASONALITY
Due principally to the seasonal nature of the Company's de-icing and anti-icing
products which depends upon snow and ice, and in which demand is stronger during
the winter months, the Company's shipment volume is typically higher in the
second and third quarters. The company had been building inventory at a higher
level to accommodate a projected precipitous winter. The company is making
arrangements with its de-icing/anti-icing suppliers to schedule shipments closer
to demand periods rather than store large amounts of this product in its
inventory facilities. This will proportionately reduce inventory and conserve
cash. However, periods of no ice and snow affect profitability, especially
during the first and fourth quarters. New management is evaluating the relevant
emphasis on its two principal products with the goal of better balancing its
cash flow by accelerating its sales efforts for its RB ULTRA(TM) brand both in
the United States and abroad. Company's road stabilization/dust control products
are available for year round use in most areas of the country and for eight to
twelve months in the areas which experience ice and snow. Increasing the
proportion of corporate income from dust control and stabilization products is
one alternative to create a larger year round revenue base for the Company.
Business Mission
NSC's mission is to expand the market for its environmentally friendly,
anti-corrosive products, which replace or improve current technologies that are
environmentally damaging and corrosive to the infrastructure of elevated
highways, roads and bridges and to replace less effective and environmentally
harmful dust control and road stabilization agents currently used on much of the
almost one and one half million miles of unpaved U.S. roads. NSC seeks to
continue its research, testing and development programs to identify new and
unique products and technologies for the commercialization of environmentally
friendly products, produced from renewable, recyclable, low cost waste base
stock.
Results of Operations - Full Fiscal Years
Net Sales
For the fiscal year ending July 31, 1999, the Company had $2,100,199 in net
sales, compared to $1,994,415 for the fiscal year ending July 31, 1998. Since
the Company's inception thru the fiscal year ending July 31, 1999, the Company
had total net sales of $4,594,662. Costs applicable to sales and revenue related
to such periods are: $1,645,410 for the fiscal year ending July 31, 1999,
$1,635,726 for the fiscal year ending July 31, 1998, and $3,637,431 for the time
period of the Company's inception thru the fiscal year ending July 31, 1999.
Gross Profit
Gross profits were $454,789 for the fiscal year ending July 31, 1999 and
$358,689 for the fiscal year ending July 31, 1998. Gross profit since inception
thru fiscal year ending July 31, 1999 were $957,231.
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Selling, General & Administrative Expenses
Selling, general and administrative expenses were $3,002,378 for the fiscal year
ending July 31, 1999 and $2,955,619 for the fiscal year ending July 31, 1998.
Such expenses since exception thru fiscal year ending July 31, 1999 were
$6,654,213.
Loss
Loss before other income and income taxes were $2,547,589 and $2,596,930, for
fiscal years ending July 31, 1999 and July 31, 1998, respectively. Since
inception thru July 31, 1999 such loss was $5,696,982. The loss is then adjusted
by other income (investment income) and income taxes to arrive at the Company's
deficit accumulated during the development stage, as described below.
Deficit Accumulated During the Development Stage
The deficit accumulated during the development stage of the Company was
$2,764,547 and $2,586,718, for the fiscal years ending July 31, 1999 and July
31, 1998, respectively. Since inception thru July 31, 1999 such deficit amounted
to $5,242,043.
Basic Net Loss Per Share
The basic net loss per share was $0.1736 and $0.1642, for the fiscal years
ending July 31, 1999 and July 31, 1998, respectively. The weighted average
common shares outstanding for such periods were 15,923,733 and 15,753,032,
respectively.
Financial Condition, Liquidity and Capital Resources
The Company's total current assets were $749,634 and $1,454,057, on July 31,
1999 and July 31, 1998, respectively. Total assets were $1,410,392 and
$2,426,918, on July 31, 1999 and July 31, 1998, respectively. Total current
liabilities were $1,400,510 and $641,869, on July 31, 1999 and July 31, 1998,
respectively. Thus, the Company's financial condition and liquidity has
deteriorated from July 31, 1998 through July 31, 1999. The Company believes that
it will probably be necessary to raise additional debt or equity capital in
order to meet its short-term liquidity and solvency needs over the next twelve
(12) months. The Company also believes that increased sales are necessary in
order to regain adequate liquidity and solvency both in the short term as well
as in the long-term. The Company has recorded an infusion of $1,750,000 since
the end of its fiscal year and new management. The new management is in the
process of implementing a wide ranging assessment of each item of cost,
marketing and sales efforts, it is too early in the process to predict the steps
management will institute as a result. But certainly management will seek to
increase sales to lower fixed costs as a percentage of sales and to either
settle or see through to successful conclusion the non-productive litigation
which this year has burdened the Company's bottom line.
Stockholders' Equity consisted of fifty five (55) million shares of common stock
authorized and fifteen million nine-hundred ninety-six thousand five-hundred
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forty shares (15,996,540) issued on July 31, 1999. The common stock account is
$15,998 and $15,889, on July 31, 1999 and July 31, 1998, respectively.
Additional paid in capital was $5,564,564 and $4,512,276, on July 31, 1999 and
July 31, 1998, respectively. The deficit accumulated during the development
stage was $5,702,712 and $2,938,165, on July 31, 1999 and July 31, 1998. Total
stockholders' equity was ($122,150) and $1,590,000, on July 31, 1999 and July
31, 1998, respectively.
Strategic Elements of NSC's Product Portfolio
o First de-icing and anti-icing application that will not pollute rivers and
streams.
o Beneficial for elevated highway and bridge applications acting as an
anti-corrosive element while de-icing.
o A co-product that is in abundant supply and subject to seasonal over
production discounts.
o Road stabilization and dust control application that is environmentally
friendly.
o Application technique affording greater stability than previously achieved.
Strategic Objectives and Goals
o Qualify as a fully reporting company on the NASDAQ market.
o Distribute NSC's products to the entire market including government and
municipalities.
o Expand use applications and techniques.
o Secure retail packaging and distribution.
o Explore additional expansion through creation of more patents and through
improvements to the Company's current product portfolio.
Strategic Plan: Sales and Marketing
The Company's plan of operations for the next twelve months is to further
strengthen and develop its sales and marketing efforts with its current product
portfolio. The Company is evaluating marketing and logistical structure with the
intention of marketing through distribution dedicated to our products in smaller
distribution areas. NSC plans to place its emphasis on sales and marketing
activities, and execute sales through its distribution structure to increase
revenues and cash flow. One of NSC's main focuses will be on a tighter control
of cost elements and on achieving significant sales growth. The Company
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believes that all of the major elements are in place for product development,
but we need to define and execute sales operations more effectively. NSC plans
to market its products nationally through trade publications, trade shows,
direct mailings, television and news media outlets.
Ice Ban America, Inc. Opportunities for Growth
IBA, now operating as a wholly owned subsidiary of NSC, has been engaged in
unique market opportunities. Currently, IBA has focused on new products and
applications technologies. IBA is researching and developing an aerial spray
method (by helicopter) of a specialty composition and technical spraying
technique (patent pending) with a long established commercial aerial spraying
organization. This spraying application for anti-icing is to be used on high
voltage power transmission lines. Also being studied as an aerial spray
application is the spraying of fruit and vegetable crops to protect them against
freeze damage.
Potential new market areas are being examined. IBA is continuing to develop ICE
BAN(R) products for airports and runways, and continued study of such products
for de-icing of airplanes is being investigated by both the FAA and NASA. IBA
also has been seeking the development of ICE BAN(R) products for the retail
market and home use.
Roadbind America, Inc. Opportunities for Growth
RBA is examining potential expansion of the use of RB ULTRA(TM) products
throughout the U.S. for both municipality and private businesses who use dust
control and road stabilization products. The Company believes there is
opportunity for applications in the farm road, feed lot, and feed lot holding
ponds to reduce waste leaching into fresh water resources and to stabilize the
area where animals are fed.
RBA is seeking further opportunities to continue development of aviation runway
stabilization projects in rural unimproved airports in the West and Alaska. RBA
intends to also continue development of new and existing products as a binder in
producing earthen and adobe building blocks, and a composition binder to replace
mortar or mud for the bonding of building materials. This has the potential for
low cost housing for third-world countries. RBA is seeking to develop agreements
with Central and South American countries for testing and product sales for
unpaved road and airport runway stabilization projects.
Liquidity and Working Capital
The Company is uncertain how long it can continue operations without raising
additional funds. New management has invested $1.75 million since the close of
the fiscal year and instituted stringent cash management but the Company
believes that within the next twelve months (12) it may have to raise additional
funds for working capital by possibly engaging various lending institutions,
accessing capital markets, seeking out private investors, or a combination of
the above. If this is the
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case, then appropriate funding methods would be analyzed and the most prudent
course of action for the Company would be taken.
Research and Development
The Company does not plan any substantial product research and development
("R&D") for the duration of its current operational plans. However, outside
entities and institutions may be conducting such R&D in their own interests, or
if deemed in the best interests of the Company then NSC may in the future cause
such further R&D to occur.
Plant and Equipment
NSC does not foresee any substantial purchase or sale of plant or equipment
within the term of its current operational plans, but does plan to move its
operations to Virginia Beach in the near future to be closer to its winter
markets and to the resources that can be provided to it by new management.
Internal Employment Level
The Company does not expect any significant changes in the number or
compensation of its employees.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of potential problems with computer
systems or any equipment with computer chips that use dates where the date has
been stored as just two digits (e.g. 98 for 1998). On January 1, 2000, any clock
or date recording mechanism including date sensitive software which uses only
two digits to represent the year, may recognize the date using 00 as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including among other things,
a temporary inability to process transactions, send invoices, or engage in
similar activities.
The Company determined that the Year 2000 impact is not material to NSC
and that it will not impact its business, operations or financial condition
since all of the internal software utilized by the Company has the capability of
being upgraded to support Year 2000 versions.
The Company believes that it has disclosed all required information
relative to Year 2000 issues relating to its business and operations. However,
there can be no assurance that the systems of other companies on which the
Company's systems rely also will be timely converted or that any such failure to
convert by another company would not have an adverse affect on the Company's
systems.
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Item 3. Description of Property.
The Company does not currently own any real property. The Company leases its
corporate headquarters and sales office at 1201 US Highway 1, Suite 205-215,
North Palm Beach, Florida 33408.
The Company leases its executive offices pursuant to a lease dated
April 11, 1997 with North Palm Crystal Associates, as amended by an addendum
dated July 10, 1997 and a second addendum dated February 11, 1999 and effective
April 1, 1999. The Company currently rents approximately 2,043 square feet at a
base monthly rent of $1,369.30 and with a monthly common area maintenance charge
of $1,380.72. The current lease term commenced on April 1, 1999 and will
terminate on March 31, 2002.
On February 10, 1999, a lease was entered into between Anthony M.
Massaro and Lance J. Mark and Ice Ban America, Inc., for 547-a Main Street,
Medina, New York 14103. The premises are office spaces. The term of the lease is
twelve months commencing February 8, 1999. The annual rent is three thousand
dollars ($3,000) payable in monthly installments of two-hundred fifty dollars
($250). The office in Medina, NY is currently not being occupied by the Company
and office operations were halted in August 1999.
On June 1, 1997, IBNY agreed to lease approximately 700 feet of office
space at 12118 East Yates Center Road, Lyndonville, New York at one thousand
dollars ($1,000) per month. The term commenced on June 1, 1997 and runs for
three (3) years, with first option to renew after the initial term. Mr. Jeffrey
A. Johnson was the owner of the property and lessor. Mr. Jeffrey Johnson was
also a Senior Vice-President, Chief Operating Officer and a Director of the
Company at the time. See Part I, Item 7. "Certain Relationships and Related
Transactions". On July 1, 1998, an addendum to the lease was executed and an
increase in the monthly rent to one thousand thirty-five dollars ($1,035)
commenced on July 1, 1998 due to installation of central air conditioning. On
February 2, 1999, Ice Ban America, Inc. entered into an "Exclusive Right to
Lease Contract" with Jeanne Whipple Realty concerning the property located at
12118 East Yates Center Rd., Lyndonville, New York. Mr. Johnson refused to
cooperate with the Company to sublease the space and therefore effectively
repudiated the contract.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners.
The following is information on any person or group who is known to be the
beneficial owner of more than five percent of any class of the issuer's voting
securities:
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<TABLE>
<CAPTION>
(1) (2) (3) (4)*
Title of Name and Address Amount and Percent of
Class of Beneficial Owner Nature of Beneficial Class
official Owner Owner
<S> <C> <C> <C>
Common Stock Warren D. Johnson, Jr. 4,929,524 (1) 24.65 %
5111 S.W. Bay Point Circle
Palm City, FL 54990
Common Stock George Janke, Trustee, 4,889,000 24.449 %
Janke Family Vinasz T rust,
511 New Hope Road
Lahaska, PA 18938
Common Stock Dr. M. G. "Pat" Robertson, 4,150,000 (2) 20.75%
Chairman
977 Centerville Turnpike
Virginia Beach, VA 23463
</TABLE>
- ----------------------------------------
* Based on 19,996,540 shares outstanding on November 15, 1999.
(1) These shares are subject to a preliminary injunction in Warren D. Johnson,
Jr.'s Chapter 7 bankruptcy proceeding. Kapila, Trustee vs. Warren Douglas
Johnson, Jr., et al., Case No. 92-33339-BKC-SHF (U.S. Bankruptcy Court, Southern
District of Florida). The Company deems Warren D. Johnson, Jr. the true
beneficial owner of such shares. They are held in nominee names as follows:
700,000 shares / Medical College Fund, 625,000 shares / Windmills Plantation
Fund, Ltd., 600,000 shares / Hawks Nest Plantation Fund, 750,000 shares / Reed
International Fund, Inc., 750,000 shares / Ryder Securities Ltd., 500,000 shares
/ Marlin Preservation Fund, 260,000 shares / Harvard Fund, Ltd., 260,000 shares
Merchants Trust Fund, 100,000 shares / Warren D. Johnson, Sr., 284,524 shares /
Dianne Johnson, 100,000 shares / Dianne Johnson.
(2) In addition to these shares Mr. Robertson has an option to exercise stock
warrants to purchase an additional 4,000,000 shares of the Company's common
stock. ( See Part II, Item 4. Recent Sales of Unregistered Securities.)
(b) Security Ownership of Management.
For directors and officers:
<TABLE>
<CAPTION>
(1) (2) (3) (4)*
Title of Name and Address Amount and Percent of
Class of Beneficial Owner Nature of Beneficial Class
official Owner Owner
<S> <C> <C> <C>
Common Stock Dr. M. G. "Pat" Robertson, 4,150,000 (1) 20.75%
Chairman
977 Centerville Turnpike
Virginia Beach, VA 23463
Common Stock Jim W. Foshee, President 0 0
1201US Highway 1, Suite 205
N. Palm Beach, FL 33408
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Common Stock Richard Jurgenson, Board Member 0 0
1201US Highway 1, Suite 205
N. Palm Beach, FL 33408
Common Stock Joseph S. Kroll, Vice President 0 0
1201US Highway 1, Suite 205
N. Palm Beach, FL 33408
Common Stock Ann M. Owen, Secretary 17,000 0.085%
1201US Highway 1, Suite 205
N. Palm Beach, FL 33408
Common Stock Kathleen M. Smith, Treasurer 0 0
1201US Highway 1, Suite 205
N. Palm Beach, FL 33408
Common Stock George Janke, Trustee, 4,889,000 24.449%
Janke Family Vinasz T rust,
511 New Hope Road
Lahaska, PA 18938
Common Stock J. Nelson Happy, 0 0
Board Member
1201US Highway 1, Suite 205
N. Palm Beach, FL 33408
Common Stock Robert E. Freer 7,000 0.035%
Board Member
1201US Highway 1, Suite 205
N. Palm Beach, FL 33408
Common Stock Directors and Officers 4,913,000 30.946%
as a group
</TABLE>
- ----------------------------------------
(1) See Footnote (2) of Item 4. Security Ownership of Certain Beneficial Owners
and Management, (a) Security Ownership of Certain Beneficial Owners.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
(a) Identification of Directors and Executive Officers
44
<PAGE>
Dr. M. G. "Pat" Robertson, age 69, is Chairman of the Board of NSC. Dr.
Robertson is an internationally known religious broadcaster, businessman,
educator, philanthropist and former candidate for the Presidential nomination
for the Republican Party. Dr. Robertson is also the former Chairman and
controlling shareholder of International Family Entertainment, Inc., which was
sold in 1997 for $1.82 billion dollars to a subsidiary of Rupert Murdoch's News
Corporation.
Currently, Dr. Robertson is Chairman of Zhaodaola China Interest, Ltd.,
Freedon Gold, CENCO Refining Company and serves in the non-profit world as
Chairman of the Christian Broadcasting Network, Chancellor of Regent University,
Chairman of Operation Blessing International Relief and Development, and
President of the American Center for Law and Justice.
Jim W. Foshee, age 50, is President and chief executive officer of NSC.
Upon the voluntary resignation of Mr. Richard Jurgenson in November 1999, the
Board of Directors appointed Mr. Foshee President of the Company. Mr. Foshee
brings to the Company extensive financial and marketing experience with major
corporations. From 1987 until 1992 Mr. Foshee held various executive positions
with the AMF Companies("AMF") located in Richmond, Virginia. His primary duties
as Controller for AMF entailed the preparation of budgets, treasury functions,
department consolidation, operations downsizing and the supervision of
professional and clerical staffing. From 1993 until 1995 Mr. Foshee was the Vice
President , Chief Operating Officer and Chief Financial Officer for Bradley,
Inc.("Bradley") of Mechanicsville, Virginia. At Bradley Mr. Foshee maintained
,among other responsibilities, relationships with the financial service sector
and various other critical professional relationships vital to Bradley's
success. From 1995 until 1998 Mr. Foshee was the President of North American
Marketing, Inc.("North American") of Richmond, Virginia. As President Mr. Foshee
effected a $725,000 turnaround in the North American's profitability and
successfully implemented a long range business plan for the company. Immediately
prior to joining the Company, Mr. Foshee was the President of Prime Property
Developers, Inc.("Prime") of Richmond, Virginia. As President of Prime Mr.
Foshee applied his financial and marketing expertise to focus Prime upon a
strategically successful path to address the marketing challenges of the future.
Richard Jurgenson, age 65, is a Board Member. Mr. Jurgenson was one of the
original founders of Minnesota Corn Processors (MCP), a nearly one billion
dollar- per-year corn wet milling operation that produces cornstarch, corn
sweeteners, and fuel alcohol. MCP also produces the material marketed under ICE
BAN(R). Mr. Jurgensen had served as MCP's Board Chairman for the first 10 years
of its operation and guided MCP to a preeminent position within its industry.
Mr. Jergenson retired after serving as President and General Manager of MCP. Mr.
Jurgenson has also served on the Board of Director's of other corporations for a
cumulative total of over 40 years.
Joseph S. Kroll, age 42, is Vice President and COO of NSC. Mr. Kroll has
held these positions within the Company since 1997. He has a background in Civil
Engineering and Survey Engineering and was the Operations/ Maintenance Director
for the Indian Trail Improvement District from 1990 until assuming his position
with the Company.
Ann M. Owen, age 58, is Secretary of NSC. Since April 1997 Ann M. Owen has
served the Company in various capacities. Prior to becoming Secretary and
officer of the Company, she has served the Company as a corporate and executive
secretary as well as office manager. From December 1995 through January 1997,
Ms. Owen served a CPA firm during the tax season, handling all aspects of office
procedures. From December 1993 through November 1995, she worked directly with
the President of American Jai-Alai, Inc. helping to secure and organize the
setting up of a fronton facility in Tallahassee, Florida. Ms. Owen serves her
community through various community projects. She was co-chair of an
organization that built a community health eye and ear screening service with
children in Boca Raton, Florida. For this service she was voted Junior Woman of
the Year for 1973. Her service to the City of Palm Beach Gardens, Florida, had
earned her the Girl of the Year Award for 1976-1977. Ms. Owen is a graduate of
Seacrest High School, Delray Beach, Florida and has participated in various
continuing education programs.
Kathleen M. Smith, age 37, is Treasurer of NSC . From July 1997 to the
present, Ms. Smith has served the Company as Controller. On November 12, 1998
she was appointed Treasurer of the Company. From November 1996 through December
1997, she served as an accountant for a medical practice in Jupiter, Florida.
From November 1994 through November 1996, Ms. Smith served as an accountant with
the firm of Wisneski, Blakiston & Leslie, P.A., located in Jupiter, Florida. Ms.
45
<PAGE>
Smith also served as an accountant for New Concept Marketing, Inc. from October
1989 through November 1994. Ms. Smith is currently attending Palm Beach
Community College where she is studying for her A.S. in Accounting Technology.
George Janke, age 59, is a Board Member of NSC. Mr. Janke, up until May 3,
1999, had been Chairman of the Board of Directors since NSC's incorporation (as
Ice Ban America, Inc.) in August 1996. From May 1997 to August 1999, he has
served as President and Treasurer of IBA. On November 10, 1998, Mr. Janke was
awarded the very prestigious international Charles W. Pankow 1998 Award for his
ICE BAN(R) product. The Award is given each year by the American Society of
Civil Engineers, Research Foundation (CERF) for the best innovative technology.
The ICE BAN(R) technology won out of a field of over two hundred technology
applications from all over the world. From December 1989 to the present, Mr.
Janke has been general partner of the Retirement Facility at Palm Aire, Ltd.,
which developed a retirement facility known as "The Preserve"; Mr. Janke is also
President and Director of Parc M Inc., the corporate general partner of the
project. From December 1993, Mr. Janke has had ongoing involvement in the
development of ICE BAN(R) products. Since April 1995, Mr. Janke has been
President and Chief Executive Officer (CEO) of IBUSA, the exclusive assignee of
the patent rights for North America which are NSC's de-icing and anti-icing
products. Mr. Janke is a graduate of Lafayette College with a B.S. degree in
business administration. He is a Commander (Retired), in the United States Naval
Reserve.
J. Nelson Happy, age 56, is a Board Member of NSC. Since 1993, Mr. Happy
has been Dean and Professor of Regent University School of Law. Prior to his
position with Regent, Mr. Happy practiced business and civil litigation law. He
has lectured at the University of Kansas and has been a faculty member at the
National Institute of Trial Advocacy at Northwestern University in Chicago. He
is a national faculty member of the West Bar Review. He has been an attorney
since 1967 and has been an executive officer and director of numerous business
enterprises in a variety of industries. Mr. Happy is a graduate of Columbia
University Law School and has an undergraduate degree in communications from
Syracuse University.
Robert E. Freer, Jr., age 58, is a Board Member of NSC. Mr. Freer has been
a director of the Company since April 1998. He is an attorney and has been an
officer and director of the Washington, D.C. law firm of Baise, Miller & Freer
P.C., and was involved with the firm's predecessor organization for the past 5
years. Mr. Freer is the editor and co-author of "Finding Our Roots, Facing Our
Future: America in the 21st Century", recently published by Madison Books. Mr.
Freer has previously been engaged as one of the Company's outside counsel. Prior
to entering private law practice, Mr. Freer served in several senior level
positions at the Federal Trade Commission and the U.S. Department of
Transportation. For almost ten years, Mr. Freer was Vice President and
Washington Counsel for Kimberly Clark Corporation., where he was also General
Counsel in Roswell, Georgia from 1983 to 1984. Mr. Freer was appointed by
President Reagan as a member of the President's Commission on White House
46
<PAGE>
Fellowships, served as one of the founders and the first General Counsel of the
Republican National Lawyers Association, National Chairman of Corporate Counsel
for Reagan-Bush 1984, and was Assistant General Counsel of the 1988, 1992, and
1996 Republican Conventions. Mr. Freer is a graduate of Princeton University and
the University of Virginia Law School.
J. Carter Beese, Jr., age 43, is a Board Member of NSC. Mr. Beese is
currently President of Riggs Capital Partners a division of Riggs National Bank
and a Vice Chairman of Riggs & Co. Prior to joining Riggs Capital Partners Mr.
Reese was Managing Director of the Global Banking Group at BT Alex Brown. In
1992, Mr. Beese was nominated by President Bush to be the 71st Commissioner of
the U.S. Securities and Exchange Commission (SEC). Upon confirmation Mr. Beese
served as SEC Commissioner until 1996. Prior to joining the SEC, Beese was a
partner at Alex Brown & Sons, the oldest investment banking firm in the United
States. In 1990, Mr. Beese was appointed as a Director of the Overseas Private
Investment Corporation (OPIC). Currently, Mr. Beese serves as Senior Advisor to
the Washington based Center for Strategic and International Studies (CSIS), a
non-partisan think tank that has been at the forefront of shaping public policy
for over 30 years. In addition, he is involved with the World Economic Forum,
the Council on Foreign Relations and serves on the Boards of various public and
private institutions, including Internet Securities, China.com and Aether
Systems, Inc.
(b) Identify Significant Employees.
Not Applicable.
(c) Family Relationships.
There are no family relationships among directors, executive officers, or
persons nominated or chosen by the issuer to become directors or executive
officers.
(d) Involvement in Certain Legal Proceedings.
The Company is not aware of any involvement by its current officers,
directors, or other applicable persons regarding any civil, criminal, or
bankruptcy proceeding or any other event that is required to be disclosed that
relates to the past five years that are material to an evaluation or integrity
of any director, person nominated to become a director, executive officer,
promoter or control person of the issuer.
47
<PAGE>
Item 6. Executive Compensation.
<TABLE>
<CAPTION>
Name and Post Year Annual LT
Annual Comp Annual Comp LT
Comp Bonus Comp Rest Comp LTIP All Other
Salary ($) Other Stock Options Payouts (1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dr. M. G. "Pat" 1999 0
Robertson,
Chairman
Jim W. Foshee 1999 $100,000
President(8)
Richard 1999 0 $5,000 per
Jurgenson, month(2),(3)
Past President (8)
Joseph S. Kroll, 1999 $52,000 $5,260 (4) Car
Vice President Allowance,
Commissions,
Health Insurance.
Ann M. Owen, 1999 $34,320 (5), (7), Dental
Secretary Insurance
Kathleen M. 1999 $34,320 (6), Health
Smith, Treasurer Insurance
</TABLE>
- --------------------------------------
(1) This includes any fringe benefits that the stated employees are currently
receiving.
(2) Richard Jurgenson is to receive $5,000 per month. Such amounts began to
accrue on August 1, 1999 and will continue until January 1, 2000. It is
uncertain whether the Company will, or will otherwise be able to, pay Mr.
Jurgenson "back-pay" for the months he worked without receiving any salary.
(3) On February 17, 1999, Richard Jurgenson was granted a non-qualified stock
option to purchase 50,000 shares of common stock in the Company at $1.05/per
share. The stock option expires on February 17, 2009.
(4) On February 17, 1999, Joseph S. Kroll was granted an incentive stock option
to purchase 25,000 shares of common stock in the Company at $1.05/per share. The
stock option expires on February 17, 2009.
(5) On February 17, 1999, Ann M. Owen was granted an incentive stock option to
purchase 25,000 shares of common stock in the Company at $1.05/per share. The
stock option expires on February 17, 2009.
(6) On February 17, 1999, Kathleen Smith was granted an incentive stock option
to purchase 15,000 shares of common stock in the Company at $1.05/per share. The
stock option expires on February 17, 2009.
(7) On August 22, 1997 and June 12, 1998, Ann M. Owen was issued 2000 shares and
10,000 shares, respectively, of restricted common stock in the Company in
payment of professional services rendered.
(8) In November 1999, Mr. Jurgenson voluntarily resigned as President of Natural
Solutions, Inc. and the Board of Directors appointed Mr. Foshee President to
replace Mr. Jurgenson.
48
<PAGE>
1999 Stock Option Plan
On November 11, 1998, one and one-half million (1.5 million) shares of
restricted stock was set aside for compensation and outlined as non-qualified
options at seventy-five cents ($0.75) per share. On February 19, 1999, the
Company amended the vote of the Board of Directors to now include an Incentive
Stock Option Plan whereby nine-hundred thousand (900,000) shares of restricted
stock was to be set aside under the Non-Statutory Stock Option Plan for
non-employee members of the Board of Directors, key personnel, consultants or
independent contractors, and an Incentive Option Plan to include employees, and
key personnel who render services which contribute to the success of the growth
of the Company, whereby six-hundred thousand (600,000) shares of restricted
stock was set aside. The price per share of the options is one dollar and five
cents ($1.05). The Company's Incentive Stock Option Plan and Non-Statutory Stock
Option Plan are both articulated within one plan titled "1999 STOCK OPTION
PLAN".
Summary of Non-Qualified Stock Options
<TABLE>
<CAPTION>
Name Number of Grant Expiration Price
Shares Date Date
<S> <C> <C> <C> <C> <C>
Board of Directors
George Janke (1) 150,000 2/17/99 2/17/2009 $1.10/per
share
J. Carter Beese 50,000 2/17/99 2/17/2009 $1.05/per
share
William O. 30,000 2/17/99 2/17/2009 $1.05/per
Dannhausen share
Richard Jurgenson 50,000 2/17/99 2/17/2009 $1.05/per
share
Robert E. Freer 45,000 2/17/99 2/17/2009 $1.05/per
share
Other Key Personnel
Floyd Chapman 25,000 2/17/99 2/17/2009 $1.05/per
share
James McCann 25,000 2/17/99 2/17/2009 $1.05/per
share
Raymond Marshall 25,000 2/17/99 2/17/2009 $1.05/per
share
Libo Fineberg 10,000 2/17/99 2/17/2009 $1.05/per
share
Dorothy Morgan 5,000 2/17/99 2/17/2009 $1.05/per
share
Dr. Robert Hartley 5,000
Total Non- 420,000
Qualified
Options
</TABLE>
49
<PAGE>
- --------------------------------------------
(1) George Janke has expressed that under his current employment contract he was
granted stock due in 1998. George Janke deferred or waived this stock. The
position of the Company is that George Janke deferred or waived his rights to
future payment of any kind under this contract after his termination as Chief
Executive Officer until the Company determines it has reached a profit level
satisfactory to the Board of Directors. Mr. Janke contends the contract was
simply a waiver for only one(1) year and that the Company remains obligated for
the balance of the contract term. The issue remains unresolved. George Janke,
however, has expressed that he would like to have the 150,000 shares that were
deferred or waived due under the option as outlined above, and each year
thereafter according to the terms and conditions of said employment contract.
<TABLE>
<CAPTION>
Summary of Incentive Stock Options
Name Number Grant Date Expiration Date Price
of
Shares
<S> <C> <C> <C> <C>
Ann M. Owen 25,000 2/17/99 2/17/2009 $1.05/per share
Dave Cook 5,000 2/17/99 2/17/2009 $1.05/per share
Donald Addison 5,000 2/17/99 2/17/2009 $1.05/per share
Harry Pack 25,000 2/17/99 2/17/2009 $1.05/per share
Joseph Kroll 25,000 2/17/99 2/17/2009 $1.05/per share
Kathleen Smith 15,000 2/17/99 2/17/2009 $1.05/per share
Kim Wilkins 5,000 2/17/99 2/17/2009 $1.05/per share
Leo C. Palmer 25,000 2/17/99 2/17/2009 $1.05/per share
Richard Weinert 5,000 2/17/99 2/17/2009 $1.05/per share
Ryan Bridges 5,000 2/17/99 2/17/2009 $1.05/per share
Sandra Funk 5,000 2/17/99 2/17/2009 $1.05/per share
Sandra Wolfe 10,000 2/17/99 2/17/2009 $1.05/per share
Valerie Muzzio 5,000 2/17/99 2/17/2009 $1.05/per share
155,000
</TABLE>
Total Stock Options 575,000
(Non-Qualified + Incentive Stock Options)
50
<PAGE>
Item 7. Certain Relationships and Related Transactions.
On August 20, 1996, the then Vice President of the Company, George
Janke, and the Company entered into a five year Employment Agreement at an
annual salary of $85,000 per year with cost of living increases. The agreement
also provided for up to 150,000 common shares to be issued on December 1 per
year, for five years if certain performance goals are achieved. On August 10,
1997, the 1996 agreement was superseded by a new agreement retroactive to
January 1, 1997. The term and salary of the new agreement remain essentially the
same as the previous agreement but define the exercise dates and exercise prices
of the options portion of the agreement. The position of the Company is that
George Janke deferred or waived his rights to future payment of any kind under
this contract after his resignation as Chief Executive Officer on July 30, 1999.
Mr. Janke contends the contract was simply a waiver for only one(1) year and
that the Company remains obligated for the balance of the contract term. The
issue remains unresolved. See Part I, Item 6.
Executive Compensation, "1999 Stock Option Plan".
Prior to the August 31, 1996 execution of the licensing agreement
described below, on August 16, 1996, in consideration of obtaining such
licensing agreement concerning intellectual property rights related to de-icing
and anti-icing products, and payment of five thousand dollars ($5,000), the
Company issued founders shares to George Janke, in his capacity as trustee for
certain family members, and to Warren D. Johnson, Jr. George Janke, as trustee,
received five million eight-hundred thousand (5,800,000) shares of common stock
and Warren D. Johnson, Jr. received six million four-hundred thousand
(6,400,000) shares of common stock. These shares were issued pursuant to the
exemption from registration provided by ss.4(2) of the Securities Act of 1933,
as amended (the "Act") and ss.517.061(11) of the Florida Code.
On August 31, 1996, IBA entered into an exclusive licensing agreement
with Ice Ban USA, Inc. ("IBUSA") to exploit certain patents, patents pending and
trademarks assigned to IBUSA. IBUSA is a Company owned by ICE BAN(R)'s inventor
George Janke and Warren D. Johnson, Jr. The patents cover the use of
agricultural by-products as road de-icing and anti-icing agents. The product is
currently marketed as ICE BAN(R). The territory granted under this license
included all
51
<PAGE>
of the United States except for upstate New York (north of the 42nd parallel)
and Erie, Pennsylvania. These territories were later added to the Company's
rights through subsequent corporate acquisition of Ice Ban, Inc. ("IBNY"). These
areas, termed "out-territories" in the licensing agreement, were the subject of
a previously extended non-assignable license to IBNY, a New York corporation. On
March 30, 1998, IBUSA and IBA entered into an addendum to their previous
agreement. The terms of the addendum state that IBUSA shall transfer one hundred
and twenty-five thousand ($125,000) dollars to IBA's account for it to use such
to pay for inventory and operations, at the sole discretion of IBA. IBA agreed
to pay one ($1.00) dollar per ton additional fee to IBUSA for all IBA products
sold annually up to twenty-five thousand ($25,000) dollars per year for six
years, which would include interest and principal. The total repayment of the
loan is one hundred fifty thousand ($150,000) dollars. IBA also acquired the
exclusive right to market the trademarked product TEMBIND(R) from Tembec, Inc.
IBA acquired this right through its acquisition of IBNY. TEMBIND(R) is a
biodegradable, non-corrosive dust control and road stabilization product for use
in the maintenance of unpaved roads. The Company now markets this product under
the trademarked brands RB ULTRA(TM) Products. ICE BAN(R) and RB ULTRA(TM)
Products are the three primary products offered by the Company.
On August 31, 1996, IBUSA for consideration of one hundred thousand
dollars ($100,000) granted IBA the use of those rights in an exclusive license
agreement for the United States, excluding only counties in the State of New
York north of the 42nd parallel and also excluding Erie County, Pennsylvania.
IBUSA, is a Florida corporation controlled by Mr. George Janke, as trustee.
George Janke was the Vice President and Director of the Company. IBUSA acquired
the sole rights to the use of certain patent rights relating to roadway de-icing
and anti-icing products and their related compositions. In consideration for
obtaining said licensing agreement, and after having contributed five thousand
dollars ($5,000) in cash, the Company issued six million four-hundred thousand
shares (6,400,000) to Mr. Warren Johnson, a former President and Director of the
Company and a former officer of IBUSA, and five million eight-hundred thousand
shares (5,800,000) to Mr. George Janke, as trustee, for the benefit of certain
members of Mr. Janke's family. The license agreement term is for seven years
with one-year automatic renewals thereafter.
See Part I, Item 1. -(b) Business of Issuer, Risk 6. Risk of Effective Failure
of Certain Intellectual Property Rights; and Part I, Item 1. -(b) Business of
Issuer, Risk 13. Uncertainty Regarding Protection of Proprietary Rights. The
rights to the excluded territory were transferred to IBA on July 29, 1997 as a
result of the acquisition of IBNY by IBA in 1997 and an amendment to exclusive
license area agreement executed on August 31, 1998, between IBA and IBUSA. The
"Amendment to Exclusive License Area Agreement", executed on August 31, 1998,
extended the Company's license to cover the entire U.S. The amendment also
granted certain rights to trademarks. These trademark rights were identified and
listed as: (1) "ICE BAN", (2) "ICE BAN MAGIC" and (3) the ICE BAN(R) LOGO. These
trademarks are "for [sic] anti-icing and de-icing composition for use on
exterior surfaces."
On March 5, 1997, an agreement was executed between Sears Oil Co., Inc.
and IBNY, which calls for Sears to provide storage and thru-put services in
Rome, NY. Such service would include receiving product by rail or truck,
storage-in-tank, inventory control and reporting, provision of truck loading
facilities, equipment maintenance and provision of normal supplies. This
agreement also calls for minimum quantities of thru-put by IBNY. This contract
is binding on any successors of such corporations.
52
<PAGE>
On May 1, 1997, IBA and Jeff Johnson entered into an employment
agreement. Jeff Johnson was to receive a salary of thirty-six thousand ($36,000)
dollars per year for each year of his employment with IBA. Jeff Johnson was to
be Senior Vice President and Chief Operating Officer for a minimum term of three
years, subject to the discretion of the IBA Board of Directors. For each of the
three year term of the agreement, Johnson was to receive one hundred thousand
(100,000) shares of stock on the anniversary of each full year term of
employment for each of the years served. The total shares due under this
provision was three hundred thousand (300,000) shares. The contract was to
continue after the three year minimum time period until canceled or terminated
by either party subject to one hundred and eighty (180) days notice. This
employment agreement is currently the subject of arbitration. See Part II, Item
2. Legal Proceedings, Jeffrey Johnson vs. Natural Solutions.
On June 1, 1997, IBNY agreed to lease approximately 700 feet of office
space at 12118 East Yates Center Road, Lyndonville, New York at one thousand
dollars ($1,000) per month. The term commenced on June 1, 1997 and runs for
three (3) years, with first option to renew after the initial term. Mr. Jeffrey
A. Johnson was the owner of the property and lessor. Mr. Jeff Johnson was a
Senior Vice-President, Chief Operating Officer and a Director of the Company at
the time. See Part I, Item 7. "Certain Relationships and Related Transactions".
On July 1, 1998, an addendum to the lease was executed and an increase in the
monthly rent to one thousand thirty-five dollars ($1,035) commenced on July 1,
1998 due to installation of central air conditioning. On February 2, 1999, Ice
Ban America, Inc. entered into an "Exclusive Right to Lease Contract" with
Jeanne Whipple Realty concerning the property located at 12118 East Yates Center
Rd., Lyndonville, New York. Mr. Johnson refused to cooperate with the Company to
sublease the space and therefore effectively repudiated the contract.
On July 29, 1997, the Company purchased 100% of IBNY for one million
three-hundred thousand shares (1,300,000) of common stock of The Company. The
Company had issued common stock to secure this acquisition. IBNY was owned in
large measure by relatives of Warren D. Johnson, Jr., including Mr. Jeff
Johnson, the Vice President of The Company. Mr. Jeff Johnson, an officer and
director of the Company, was also an officer, director and shareholder of IBNY
prior to the acquisition. Furthermore, 100,000 shares of the common stock of The
Company was issued to IBUSA and as part of that transaction IBUSA received an
assignment of the Patent Application for the BCS by-product. Messrs. Janke and
Johnson control IBUSA through share ownership. IBUSA had previously assigned /
transferred rights to ICE BAN(R) to IBNY. Thus, IBNY owned the rights to ICE
BAN(R) for upstate New York (above the 42nd parallel), and owned the rights for
Erie County, Pennsylvania, and had owned these rights before The Company was
formed in 1996. IBNY also owned the rights to market TEMBIND in the United
States. The compensation for the acquisition was effectively determined by
George Janke and Warren D. Johnson, Jr. who, between them controlled both
companies.
On July 29, 1997, in an exchange of stock, the Company acquired IBNY,
the only licensee with territorial rights to ICE BAN(R) in the U.S. (i.e.
upstate New York and Erie, Pennsylvania) which was not included in the original
53
<PAGE>
license to the Company. This acquisition provided the Company with a fully
operational and cash generating company to enhance its business. The
acquisition, moreover, provided additional personnel experienced in the
Company's line of business. IBA issued 1.3 million shares of its common stock to
acquire 100% of the common stock of IBNY. In the same transaction, an additional
one hundred thousand (100,000) shares of the Company was issued to IBUSA, a
corporation which was owned by Warren D. Johnson, Jr. and George Janke, for the
waiver of its non-assignability provision in its licensing agreement. Mr. Janke
is the inventor of the patents that cover the ICE BAN(R) products. As a result
of this acquisition of IBNY, the Company's license now extends to the entire
United States. In acquiring IBNY, the Company had also acquired the national
distribution rights to the TEMBIND(R) product. TEMBIND is a by- product of wood
products. The Company would later re-brand the product as RB ULTRA(TM) Products.
IBNY owned the license to the ICE BAN(R) products in upstate New York
and Erie County, Pennsylvania, and also the license to market and distribute
TEMBIND(R) in the United States. Included within the overall structure of the
transaction was the obligation of IBNY to assign said rights to IBUSA (from
whence they came) with the further agreement that IBUSA would assign the rights
to the Company or its designee, which it did, in consideration for one hundred
thousand (100,000) shares of the Company's common stock. Pursuant to the
transaction, the 100,000 shares of the Company's common stock was issued to
IBUSA in consideration for the waiver of its non- assignability provision in its
licensing agreement with IBNY in regard to the license of ICE BAN(R) products in
upstate New York and Erie County, Pennsylvania. Furthermore, in addition to the
100,000 shares of the common stock of The Company , IBUSA received an assignment
of the Patent Application for the BCS by-product. The Company relied upon the
exemption from registration provided by ss.4(2) of the Act and Rule 506.
On August 10, 1997, IBA and George Janke entered into an employment
agreement with the Company. The agreement stated that George Janke was to be
Chief Executive Officer for a minimum term of five (5) years, from January 1,
1997 thru December 31, 2001. George Janke was to receive eighty-five thousand
dollars ($85,000.00) per year for each year of his employment with IBA, subject
to cost of living adjustments. He was given the right to defer his compensation
at his sole discretion, and may instead choose to receive payment in IBA stock
based on the amount of salary due and the price that the IBA stock is listed as
sold at the close of business on the last trading day each year. The agreement
provided for a "shares of stock bonus." This bonus consists of up to one hundred
and fifty-thousand (150,000) shares of restricted shares of common stock to be
issued, per year, for five (5) years if certain performance goals are met. The
agreement and Mr. Janke's employment with the Company, can be terminated after
the five(5) year base term, however, each party is required to provide one
hundred and eighty(180) days notice in writing of said termination or
resignation. The position of the Company is that George Janke deferred or waived
his rights to future payment of any kind under this contract after his
resignation as Chief Executive Officer on July 30, 1999. Mr. Janke contends the
contract was simply a waiver for only one(1) year and that the Company remains
obligated for the balance of the contract term. The issue remains unresolved.
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On October 17, 1997, the Company formed Tembind America, Inc., a Nevada
corporation. On July 22, 1998, the Company changed the name of Tembind America,
Inc. to Roadbind America, Inc. This Company is still a 100% owned subsidiary of
the Company. The rights to market the TEMBIND(R) product and the use of the
trademark as set forth in a distributor agreement dated October 12, 1995 were
assigned to Tembind America, Inc., from the Company, which had acquired the
rights through the acquisition of IBNY. Then, on December 12, 1997, the Company
caused ICE BAN Holdings, Inc. to be formed in Florida. The stock of IBNY was
transferred to Ice Ban Holdings, Inc. subsequent to its formation pursuant to
the Company's acquisition agreement dated July 29, 1997. Ice Ban Holdings, Inc.
is a 100% owned subsidiary of the Company.
On April 23, 1998, the Company issued 35,000 shares of its common stock
to Baise, Miller & Freer PC of Washington, D.C. as payment of professional fees.
The Company relied upon the exemption from registration provided by ss.4(2) of
the Act and Rule 506.
In June of 1998, the Company purchased one hundred thousand shares
(100,000) of the common stock of IBAC Corporation (the Canadian licensee of ICE
BAN(R) products under an agreement with IBUSA) for one hundred ten thousand
dollars ($110,000). The investment amounted to less than one percent (1%) of the
approximately thirteen million seven-hundred fifty- five thousand shares
(13,755,000) outstanding of IBAC Corporation. There exists a commonality of
members of the Board of Directors and officers of both the Company and IBAC
Corporation. There is also substantial ownership of stock in each company by
George Janke, as trustee. At the time Mr. Jeffrey Johnson was Vice President and
a Director of IBAC Corporation and the Company.
On June 4, 1998, a "Lease" was entered into between 1194 Corporation,
of North Palm Beach, Florida, and Tembind America, Inc. for a three year lease,
from July 1, 1998 to June 30, 2001, of property to be used for the sale and
storage of materials. George Janke and IBUSA agreed to share in the leasing of
this warehouse space.
On June 8, 1998, a "Commercial Contract & Lease" was entered into
between Ted Gaczynski, President of R. Conley, Inc. and Jeffrey Johnson, Vice
President of IBNY. IBNY agreed to lease from R. Conley, Inc. premises situated
in Erie, New York. This was a contract commencing on July 1, 1998 and
terminating on July 1, 1999 for the use and occupation of premises for storage
(tank) and handling of product.
During the Company's fiscal year ended July 31, 1998 the Company made
payments in both cash and stock to either Robert E. Freer, Jr., Esq., or two law
firms in which he was or is a principal. Mr. Freer became a Director of the
Company in April, 1998. Cash payments totaling $185,901 and 35,000 shares of
common stock valued at $139,344 were paid directly to these firms for legal
services performed and disbursements made on behalf of the Company prior to his
becoming a director. In addition 50,000 shares valued at $216,125 were issued
directly to Mr. Freer, also before he became a director.
On August 25, 1998, an agreement was entered into among Sears Petroleum
& Transport Corp., Sears Oil Co., Inc. ("Sears"), IBA and Sears Environmental
Applications Company, LLC ("SEACO"). The agreement provided for Sears to have
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the right to purchase up to one and one-half million gallons (1,500,000) of ICE
BAN(R), subject to certain provisions relating to resales to SEACO. On October
8, 1998, the Company issued 19,674 shares of its common stock to Baise, Miller &
Freer PC of Washington, D.C. in payment of professional fees. The Company relied
upon the exemption from registration provided by ss.4(2) of the Act and Rule
506.
On February 10, 1999, the Company issued 22,687 shares of its common
stock to Baise, Miller & Freer PC of Washington, D.C. as payment of professional
fees. The Company relied upon the exemption from registration provided by
ss.4(2) of the Act and Rule 506.
On April 16, 1999, the Company issued 17,957 shares of its common stock
to Baise, Miller & Freer PC of Washington, D.C. as payment of professional fees.
The Company relied upon the exemption from registration provided by ss.4(2) of
the Act and Rule 506.
On or about, May 5, 1999, Richard Jurgenson was elected Chairman of the
Board of Directors. Richard Jurgenson first joined the Company's board in April
1998 and was President of MCP as well as one of its founders.
In August 1999, NSC filed a claim against Jeffrey Johnson, a former
officer of the Company, members of the Warren Johnson, Jr. family and others
charging fraud, conversion of funds, civil theft, embezzlement, tortuous
interference and racketeering under the RICO statute. The Company requested the
trustee in Kapila Trustee vs. Warren Douglas, Jr. et al. (U.S. Bankruptcy Court,
Southern District of Florida Case No. 92-33339 BKC SHF Chapter 7) to rescind the
issuance of approximately five million shares of the Company's stock issued to
the Johnson Family and which has now been frozen by the Bankruptcy Trustee. The
lawsuits that were filed by the Johnsons and others alleged that the Company
does not have a legitimate ownership in one of the patents it claims and for
that reason investors and others were misled. This patent relates to the "Toth"
patent. See Part I., Item 1. Description of Business. -(b) Business of Issuer,
(4) "Competitive business conditions and issuer's competitive position in the
industry and methods of competition."
On October 29, 1999, the Company entered into a Stock Purchase
Agreement with Dr. Pat Robertson wherein he invested an additional one million
dollars ($1,000,000) in the Company in exchange for 4,000,000 shares of
restricted common stock, $0.001 par value per share. The Company relied upon the
exemption from registration provided by ss.4(2) of the Act and Rule 506 and
ss.13.1-507 of the Virginia Code. Mr. Robertson was elected Chairman of the
Board of Directors subsequent to the closing of the aforementioned Stock
Purchase Agreement.
Item 8. Description of Securities.
(a) Common or Preferred Stock.
The Company is authorized to issue 55,000,000 shares of common stock,
$0.001 par value per share (the "Common Stock"). As of September 30, 1999 there
were fifteen million eight
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hundred eighty-nine thousand (15,889,000) shares of common stock outstanding.
Subject to any superior rights of any outstanding preferred stock of
the Company, the holders of Common Stock (i) have equal rights to dividends from
funds legally available therefore, when, as and if declared by the Board of
Directors of the Company; (ii) are entitled to share ratably in all of the
assets of the Company available for distribution to holders of Common Stock upon
liquidation, dissolution or winding up of the affairs of the Company; (iii) do
not have preemptive, subscription or conversion rights and there are no
redemption or sinking fund provisions applicable thereto; and (iv) are entitled
to one non-cumulative vote per share on all matters on which stockholders may
vote at all meetings of shareholders. All of the shares of Common Stock now
outstanding are fully paid and non-assessable and all shares of Common Stock
which were subject to offerings, when issued, would have been fully paid and
non-assessable. Holders of the Common Stock of the Company do not have
cumulative voting rights, which means that the holders of a majority of such
outstanding shares, voting for the election of directors, can elect all of the
directors to be elected by the holders of the Common Stock if they so choose
and, in such event, the holders of the remaining shares will not be able to
elect any of the Company's directors.
The Company is authorized to issue 20,000,000 shares of preferred
stock, $0.001 par value per share (the "Preferred Stock"). The Preferred Stock
may be issued from time to time in one or more classes or series, each class or
series of which shall have the voting rights, designations, preferences and
relative rights as fixed by resolution of the Company's Board of Directors,
without the consent or approval of the Company's shareholders. The Preferred
Stock may rank senior to the Common Stock as to dividend rights, liquidation
preferences, or both, and may have extraordinary or limited voting rights. There
are no shares currently outstanding.
The transfer agent for the common stock of the Company is Atlas Stock
Transfer Company located at 5899 South State Street, Salt Lake City, Utah 84107.
(b) Debt Securities.
There are no debt securities to be registered and no provisions
required to be disclosed.
(c) Other Securities to Be Registered.
None.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters.
(a) Market Information.
The Company's common stock is traded on the NASD Over-the-Counter
Bulletin Board (OTC Bulletin Board). The Company's stock symbol is "ICEB". The
Company makes no assurances whether NSC will be able to maintain the
requirements necessary for such listing. The Company could become de-listed from
such market if certain regulatory requirements are not met; such regulatory
requirements which could risk de-listing include the timing of the filing of
this SEC
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disclosure document (Form 10-SB). As of November 15, 1999 there were nineteen
million nine hundred ninety-six thousand five hundred and forty (19,996,540)
shares outstanding. A summary of the historical quotes for the Company's common
stock is presented in table form below. Over- the-counter market quotations are
provided. The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions. The prices
(high/low) are rounded up or down to the nearest one-hundredth. The time periods
are the Company's fiscal year which begins on August 1 and ends the following
July 31; the comparative calendar year time period is displayed in parenthesis
under the time period heading for the normal calendar year. Data for the past
month of August 1999 (calendar) is also shown.
<TABLE>
<CAPTION>
Historical Quotes*
Fiscal Year Normal Calendar High Low Total Volume
Year
New Fiscal Year (August 1999) 2.69 0.81 31,400
<S> <C> <C> <C> <C>
4th Quarter 1999 (May 99-Jul 99) 1.56 0.81 21,500
3rd Quarter 1999 (Feb 99-Apr 99) 2.13 1.38 55,900
2nd Quarter 1999 (Nov 98-Jan 99) 5.00 2.00 71,200
1st Quarter 1999 (Aug 98-Oct 98) 6.50 3.88 112,600
4th Quarter 1998 (May 98-Jul 98) 7.00 4.66 41,900
3rd Quarter 1998 (Feb 98-Apr 98) 7.50 5.50 83,200
2nd Quarter 1998 (Nov 97-Jan 98) 14.25 6.55 101,500
1st Quarter 1998 (Aug 97-Oct 97) 14.25 5.00 91,200
</TABLE>
- --------------------------
* Data used in the construction of this chart was obtained from Yahoo!Finance.
(b) Holders.
As of November 15, 1999 the approximate number of holders of record of
the Company's common stock is 482.
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(c) Dividends.
The Company has never declared any dividends and does not intend to
declare any in the foreseeable future. The Company is, however, through its
Directors, authorized by "ARTICLE VI. DIVIDENDS" of its by-laws to declare
dividends from time to time.
Item 2. Legal Proceedings.
1. Jeffrey Johnson vs. Natural Solutions, Case No. CL-99-3185, in the
Circuit Court in and for Palm Beach County, Florida. This was a lawsuit by Jeff
Johnson filed on March 26, 1999, seeking to enforce his employment agreement.
The employment agreement called for arbitration and the Company successfully
moved to have the case arbitrated. Johnson has filed an arbitration proceeding
and the Company has responded with an answer and defenses. The Company expects
that this matter will be arbitrated sometime in January, 2000.
Dianne Johnson and Johnson Family vs. Ice Ban America, IBAC Corporation,
Case No. 99-8228, United States District Court, Southern District of Florida.
This lawsuit was filed on March 26, 1999. It is a lawsuit for securities fraud
by the Johnson family seeking damages for breach of various security regulations
and laws due to alleged violations by IBA and IBAC. IBA filed a Motion to
Dismiss. Natural Solutions Corporation and IBAC filed a Counterclaim to rescind
the sale of the founders stock. The stock owned by the Johnson family is
founders stock for which the Johnson family paid approximately $4,000 to Natural
Solutions Corporation and $6,000 to IBAC. Recently IBA and IBAC have filed a
substantial counterclaim, alleging breach of fiduciary duty, breach of
securities acts, RICO, fraud, etc. against the Johnson family arising out of the
actions of Warren D. Johnson, Jr., and the Johnson family in selling restricted
founders shares of stock in private sales before the restrictions were lifted.
Initial discovery has been done in this case. Although scheduled for trial in
January, 2000, the Plaintiffs have recently moved to extend the trial date.
Dianne Johnson and the Johnson Family vs. Natural Solutions Corporation,
Ice Ban USA, Inc. and George Janke, Case No. 99-5305, in the Circuit Court in
and for Palm Beach County. This is a lawsuit by the Johnson Family seeking to
rescind the sale of Ice Ban, Inc., (New York) to Natural Solutions Corporation,
which sale occurred in the summer of 1997, based upon alleged fraudulent
misrepresentations surrounding the ownership of the Toth patent. The Company has
filed an answer, affirmative defines, and counterclaim similar to the
counterclaim in item #2.
Minnesota Corn Processors vs. Natural Solutions Corporation, Ice Ban USA,
Inc., George A. Janke, Case No. 99-8405, in the United States District Court,
Southern District of Florida. This lawsuit was filed on May 28, 1999. This is a
lawsuit for fraudulent misrepresentation and for a recission of an Agreement of
Sale between MCP and NSC also based upon misrepresentations regarding the Toth
patent. The Company's legal counsel moved to dismiss the initial Complaint and
MCP filed an Amended Complaint. In the Amended Complaint, the same claims were
made, and the claims were made to collect approximately $230,000 purportedly due
and owed by NSC to MCP. The Company has not yet responded to the Amended
Complaint but is planning on responding with a Motion to Dismiss. The Company
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has recently filed a scheduling agreement and scheduling order which would set
this case for trial in September 2000. Discovery of MCP representatives had been
scheduled but was delayed due to settlement discussions. This case was resolved
by settlement on October 8, 1999. Final papers have been executed.
Natural Solutions Corporation and Ice Ban USA, Inc. vs. Sears Oil, Sears
Petroleum, et al., Case No. 99-3344. In the Circuit Court in and for Palm Beach
County. This is a lawsuit filed on April 6, 1999, by Natural Solutions
Corporation and Ice Ban USA for tortuous interference with NSC's rights to
acquire the Toth patent from the Hungarian inventors. This action also claims
breach of fiduciary duty, breach of a confidentiality agreement by Sears and
others acting in concert with Sears. Service has been obtained on most of the
Defendants, and motions to dismiss, motions for lack of personal jurisdiction,
and motions to transfer to New York were scheduled for late August 1999. Some
limited discovery on jurisdiction has been undertaken in this case.
Sears Oil Company vs. Natural Solutions Corporation, Ice Ban USA, George
Janke, et al., Case No. 99-CV-704-DNH. This is an action filed on January 25,
1999, in New York State Court, but removed to New York Federal Court. This
action alleges fraudulent misrepresentations based upon the ownership of the
Toth patent and fraudulent inducement into a certain contract for the
distribution of product in New England based upon fraudulent misrepresentations
regarding ownership of the Toth patent. Motions have been filed by IBUSA and
George Janke for lack of jurisdiction and motions have been filed by all
Defendants for failure to state a cause of action. No trial has been scheduled
in this case, and if the motions are unsuccessful, we contemplate filing
counterclaims similar to the case referenced in paragraph 5 above. Plaintiff has
recently amended their Complaint alleging patent infringement of the Toth
patent. In October 1999 Sears Oil and Sears Petroleum sought a temporary
restraining order that SeaCo was the exclusive distributor for Ice Ban(R)product
in the New England States. The Judge denied their request for TRO and Sears
withdrew its claim for injunctive relief in late October 1999.
Ice Ban America, Inc. vs. Innovative Municipal Products, Inc., Case No.
99-00710, State Court of New York. This lawsuit was filed on March 24, 1999, by
IBA to recover two hundred fifty-thousand dollars ($250,000) owed to it by its
New York distributor, Innovative Municipal Products, Innovative has filed
affirmative defenses and counterclaims based upon the misrepresentation
regarding the Toth patent. Natural Solutions has answered and filed affirmative
defenses on the counterclaim. Discovery is ongoing in this case, and it has not
been set for trial.
Item 3. Changes in and Disagreements with Accountants.
The Company's auditor is Cronin & Co., Certified Public Accountants,
with it principal address at 12 Blandford Lane, Fairport, NY 14450. The Company
has had no changes in its accountants or auditors, nor any disagreements with
such.
Item 4. Recent Sales of Unregistered Securities.
The Company relied upon ss.3(b) of the Act and Rule 504 for several
transactions regarding the issuance of its unregistered securities. In each
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instance, such reliance was based on the following: (i) the aggregate offering
price of the offering of the shares of Common Stock and warrants did not exceed
$1,000,000, less the aggregate offering price for all securities sold with the
twelve months before the start of and during the offering of shares in reliance
on any exemption under ss.3(b) of, or in violation of ss.5(a) of the Act; (ii)
no general solicitation or advertising was conducted by the Company in
connection with the offering of any of the shares; (iii) the fact the Company
has not been since its inception (a) subject to the reporting requirements of
ss.13 or ss.15(d) of the Securities Act of 1934, as amended, (b) and "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
or (c) a development stage company that either has no specific business plan or
purpose or has indicated that its business plan is to engage in a merger or
acquisition with an unidentified company or companies or other entity or person.
The Company relied upon ss.4(2) of the Act and Rule 506 for several
transactions regarding the issuance of its unregistered securities. In each
instance, such reliance was based upon the fact that (i) the issuance of the
shares did not involve a public offering, (ii) there were no more than 35
investors (excluding "accredited investors"), (iii) each investor who was not an
accredited investor either alone or with his purchaser representative(s) has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the prospective investment, or the
issuer reasonably believes immediately prior to making any sale that such
purchaser comes within this description, (iv) the offers and sales were made in
compliance with Rules 501 and 502, (v) the securities were subject to Rule 144
limitation on resale and (vi) each of the parties is a sophisticated purchaser
and had full access to the information on the Company necessary to make an
informed investment decision by virtue of the due diligence conducted by the
purchaser or available to the purchaser prior to the transaction.
The Company relied upon Florida Code ss.517.061(11) for several
transactions. In each instance, such reliance is based on the following: (i)
sales of the shares of Common Stock were not made to more than 35 persons; (ii)
neither the offer nor the sale of any of the shares was accomplished by the
publication of any advertisement; (iii) all purchasers either had a preexisting
personal or business relationship with one or more of the executive officers of
the Company or, by reason of their business or financial experience, could be
reasonably assumed to have the capacity to protect their own interests in
connection with the transaction; (iv) each purchaser represented that he was
purchasing for his own account and not with a view to or for sale in connection
with any distribution of the shares; and (v) prior to sale, each purchaser had
reasonable access to or was furnished all material books and records of the
Company, all material contracts and documents relating to the proposed
transaction, and had an opportunity to question the executive officers of the
Company. Pursuant to Rule 3E-500.005, in offerings made under ss.517.061(11) of
the Florida Statutes, an offering memorandum is not required; however each
purchaser (or his representative) must be provided with or given reasonable
access to full and fair disclosure of material information. An issuer is deemed
to be satisfied if such purchaser or his representative has been given access to
all material books and records of the issuer; all material contracts and
documents relating to the proposed transaction; and an opportunity to question
the appropriate executive officer. In the regard, the Company supplied such
information and was available for such questioning (the "Florida Exemption").
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The facts relied upon to make the New York exemption available include
the following: (i) the aggregate number of persons purchasing the Company's
stock during the 12 month period ending on the date of issuance did not exceed
40 persons (including offerees who reside outside the State of New York); (ii)
neither the offer nor the sale of any of the shares was accomplished by a public
solicitation or advertisement; (iii) that at the time of filing no offering had
yet been made to any resident of the State of New York, (iv) that the offering
is to be made to personal friends, relatives, and business associates and other
principals of the issuer, (v) these common shares have been issued or sold in
reliance of Section ss.359-f(2) of the New York General Business Law, (vi) each
purchaser executed a statement to the effect that the securities purchased have
been purchased for their own account and not for the resale to any other
persons; (vii) that they have adequate means of providing for their current
needs and possible personal contingencies; and (viii) they do not have a need
for liquidity of this investment.
The facts relied upon to make the Maryland exemption available include
compliance with ss.4(2) of the Act. Such a security is a covered security within
the meaning of ss.18(b)(4)(D) of the Act. Pursuant to ss.11-602 (15), ss.11-501
and Rule 9 of the Maryland Code, such securities are exempt from registration
requirements. The issuer is required under Maryland law to, no later than 15
days after the first sale of securities in Maryland, submit a notice filing
subject to certain guidelines and any applicable fees. The issuer has not as of
yet made the requisite notice filing in the State of Maryland.
The facts relied upon to make the Virginia exemption available include
compliance with ss.4(2) of the Act. Such security is a covered security within
the meaning of ss.18(b)(4)(D) of the Act. Pursuant to ss.13.1-507 of the
Virginia Code such securities are exempt from registration requirements.
Pursuant to Rule 21 VAC 5-40-120 of the Virginia Code such issuer is required to
submit a notice filing subject to certain guidelines and any applicable fees.
The issuer has not as of yet made the requisite notice filing in the State of
Virginia.
Prior to the August 31, 1996 execution of the licensing agreement, on
August 16, 1996, in consideration of obtaining such licensing agreement
concerning intellectual property rights related to de-icing and anti-icing
products, and payment of five thousand dollars ($5,000), the Company issued
founders shares to George Janke, in his capacity as trustee for certain family
members, and to Warren D. Johnson, Jr. George Janke, as trustee, received five
million eight-hundred thousand (5,800,000) shares of common stock and Warren D.
Johnson, Jr. received six million four-hundred thousand (6,400,000) shares of
common stock. These shares were issued pursuant to the exemption from
registration provided by ss.4(2) of the Securities Act of 1933, as amended (the
"Act") and ss.517.061(11) of the Florida Code.
During the period from September 23, 1996 through November 1, 1996, the
Company sold one million shares (1,000,000) of its common stock at ten cents
($0.10) per share, raising a total of $100,000. This offering was conducted
pursuant to ss.3(b) of the Act and Rule 504 of Regulation D promulgated
thereunder. This offering was made in the State of New York and to non-resident
foreign citizens. An offering memorandum was used in connection with the
offering.
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Commencing December 30, 1996 and through February 1, 1997, the Company
sold nine hundred thousand shares (900,000) of its common stock at one dollar
($1.00) per share, raising a total of $900,000. This offering was conducted
pursuant to ss.3(b) of the Act and Rule 504 of Regulation D promulgated
thereunder. This offering was made in the State of New York and to non-resident
foreign citizens. An offering memorandum was used in connection with the
offering.
On February 21, 1997, the Company entered into an agreement to sell
common stock to Minnesota Corn Processors Company (MCP) in exchange for supplies
of the by-product which MCP produces and which the Company brands ICE BAN(R).
This arrangement provided the Company with nearly fifty percent (50%) of the
Company's product supply. Mr. Richard Jurgenson, former President of MCP and the
executive that guided MCP to a preeminent position in the corn processing
industry, and who was instrumental in negotiating MCP's stock sale to ADM, also
at that time agreed to join the Board of Directors of the Company. In accord
with this agreement, on February 21, 1997, the Company committed one million
one-hundred seventy thousand (1,170,000) shares of common stock to MCP for the
exchange of raw material for the ICE BAN(R) product. The amount of raw material
is based on the market value of the product and the stock at the time of
shipment based upon a formula agreed to between the Company and MCP. The
contract's provisions include: (1) MCP agreed to conduct laboratory and field
testing of ICE BAN(R) and TEMBIND(R), (2) MCP agreed to use its resources to
promote further development of ICE BAN(R) and TEMBIND(R), (3) MCP agreed to
provide tankage and distribution as well as sales and service in its market, (4)
MCP agreed to confidentiality and non-compete provisions, (5) the Company
granted MCP an option to purchase an additional 1,170,000 shares on the same
terms as previously agreed to, and (6) IBA granted MCP pre-emptive rights to
maintain a 15% stake in the Company. The Company relied upon the exemption from
registration provided by ss.4(2) of the Act and Rule 506 of Regulation D ("Rule
506"), promulgated thereunder, and ss.80A.15 (Subd. 2)(h) of the Minnesota Code.
On July 29, 1997, in an exchange of stock, the Company acquired IBNY,
the only licensee with territorial rights to ICE BAN(R) in the U.S. (i.e.
upstate New York and Erie, Pennsylvania) which was not included in the original
license to the Company. This acquisition provided the Company with a fully
operational and cash generating company to enhance its business. The
acquisition, moreover, provided additional personnel experienced in the
Company's line of business. IBA issued 1.3 million shares of its common stock to
acquire 100% of the common stock of IBNY. In the same transaction, an additional
one hundred thousand (100,000) shares of the Company was issued to IBUSA, a
corporation which was owned by Warren D. Johnson, Jr. and George Janke, for the
waiver of its non-assignability provision in its licensing agreement. Mr. Janke
is the inventor of the patents that cover the ICE BAN(R) products. As a result
of this acquisition of IBNY, the Company's license now extends to the entire
United States. In acquiring IBNY, the Company had also acquired the national
distribution rights to the TEMBIND(R) product. TEMBIND is a by- product of wood
products produced by Tembec, Inc. The Company would later re-brand the product
as RB ULTRA(TM) PRODUCTS.
IBNY owned the license to the ICE BAN(R) products in upstate New York
and Erie County, Pennsylvania, and also the license to market and distribute
TEMBIND(R) in the United States. Included within the overall structure of the
transaction was the obligation of IBNY to assign said rights to IBUSA (from
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whence they came) with the further agreement that IBUSA would assign the rights
to the Company or its designee, which it did, in consideration for one hundred
thousand (100,000) shares of the Company's common stock. Pursuant to the
transaction, the 100,000 shares of the Company's common stock was issued to
IBUSA in consideration for the waiver of its non- assignability provision in its
licensing agreement with IBNY in regard to the license of ICE BAN(R) products in
upstate New York and Erie County, Pennsylvania. The Company relied upon the
exemption from registration provided by ss.4(2) of the Act and Rule 506.
On August 22, 1997, the Company issued to David Wright a total of 5,000
shares of its common stock, Ann M. Owen a total of 2,000 shares, Continental
Capital & Equity Corp. a total of 55,000 shares, and Cullen M. Ryan a total of
10,000 shares, all in payment of professional fees. The Company relied upon the
exemption to registration provided by ss.4(2) of the Act and Rule 506 and
ss.517.061(11) of the Florida Code. On the same date, the Company issued
Castlebar Industries Corp. Profit Sharing Plan a total of 10,000 shares in
payment of professional fees. The Company relied upon ss.49:3-50(b)(9) of the
New Jersey Code and upon ss.4(2) of the Act and Rule 506. Robert E. Freer was
issued 40,000 shares in payment of professional fees as well. The Company relied
upon the exemption from registration provided by ss.4(2) and ss.11-602 (15),
ss.11-501 and Rule 9 of the Maryland Code.
On or about November 7, 1997, Pat Robertson entered into an agreement
with the Company which allowed him to acquire up to one million shares of
restricted common stock over the next two years. On November 7, 1997, a total of
150,000 shares was issued at the purchase price of $7.50 per share, and warrants
to purchase an additional 1,000,000 shares of common stock were issued by and in
consideration for an aggregate price of $1,125,000 if all warrants are
exercised. The Company relied upon the exemption from registration provided by
ss.4(2) of the Act and Rule 506 and ss.13.1-507 of the Virginia Code.
Summary of Company's Warrants Issued to Pat Robertson on November 7, 1999
<TABLE>
<CAPTION>
Date Designation Exercise Exercise Exercise Shares Replaced by
Date Date Price
Starting Ending
<S> <C> <C> <C> <C> <C> <C>
11/07/97 W-1 11/07/97 6/07/99 $7.50/share 150,000 W-1A
(8/10/1999)
11/07/97 W-2 11/07/97 6/07/99 $12.00/share 350,000 W-2A
(8/10/1999)
11/07/97 W-3 11/07/97 1/07/00 $7.50/share 150,000 W-1A
(8/10/1999)
11/07/97 W-4 11/07/97 1/07/00 $15.00/share 350,000 W-2A
(8/10/1999)
Total 1,000,000
</TABLE>
64
<PAGE>
On December 19, 1997, the Company issued 4,651 shares of its common
stock to Minnesota Corn Processors (MCP) as payment for product. The Company
relied upon the exemption from registration provided by ss.4(2) of the Act and
Rule 506 and ss.80A.15 (Subd. 2)(h) of the Minnesota Code.
On February 20, 1998, the Company issued 25,391 shares of its common
stock to Minnesota Corn Processors (MCP) as payment for product. The Company
relied upon the exemption from registration provided by ss.4(2) of the Act and
Rule 506 and ss.80A.15 (Subd. 2)(h) of the Minnesota Code.
On March 4, 1998, the Company issued 10,000 shares of its common stock
to Robert E. Freer as payment of professional fees. The Company relied upon the
exemption from registration provided by ss.4(2) of the Act and ss.11-602 (15),
ss.11-501 and Rule 9 of the Maryland Code.
On April 23, 1998, the Company issued 35,000 shares of its common stock
to Baise, Miller & Freer PC of Washington, D.C. as payment of professional fees.
The Company relied upon the exemption from registration provided by ss.4(2) of
the Act and Rule 506.
On June 12, 1998, the Company issued 10,000 shares of its common stock
to Floyd Chapman and 10,000 shares of its common stock to Ann M. Owen, both were
for payment of professional fees. The Company relied upon the exemption from
registration provided by ss.4(2) of the Act and Rule 506 and ss.517.061(11) of
the Florida Code.
On June 16, 1998, the Company issued 914 shares of its common stock to
MCP in payment for product. The Company relied upon the exemption from
registration provided by ss.4(2) of the Act and Rule 506 and ss.80A.15 (Subd.
2)(h) of the Minnesota Code.
On July 17, 1998, the Company issued 20,000 shares of its common stock
to Richard Stanton as payment of professional fees. The Company relied upon the
exemption from registration provided by ss.4(2) of the Act and ss.11-602 (15),
ss.11-501 and Rule 9 of the Maryland Code.
On August 13, 1998, the Company issued 10,000 shares of its common
stock to Leo Palmer as payment of professional fees. The Company relied upon the
exemption from registration provided by ss.4(2) of the Act and Rule 506 and
ss.517.061(11) of the Florida Code.
On September 15, 1998, the Company issued 784 shares of its common
stock to MCP as payment for product. The Company relied upon the exemption
provided by ss.4(2) of the Act and Rule 506 and ss.80A.15 (Subd. 2)(h) of the
Minnesota Code.
On October 8, 1998, the Company issued 19,674 shares of its common
stock to Baise, Miller & Freer PC of Washington, D.C. in payment of professional
65
<PAGE>
fees. The Company relied upon the exemption from registration provided by
ss.4(2) of the Act and Rule 506.
On January 11, 1999, the Company issued 200 shares of its common stock
to Andrew Deggeller as an award. The Company relied upon the exemption provided
by ss.4(2) of the Act and Rule 506 and ss.517.061(11) of the Florida Code.
On January 21, 1999, the Company issued 9,465 shares of its common
stock to Minnesota Corn Processors (MCP) as payment for product. The Company
relied upon the exemption provided by ss.4(2) of the Act and Rule 506 and
ss.80A.15 (Subd. 2)(h) of the Minnesota Code.
On February 10, 1999, the Company issued 22,687 shares of its common
stock to Baise, Miller & Freer PC of Washington, D.C. as payment of professional
fees. The Company relied upon the exemption from registration provided by
ss.4(2) of the Act and Rule 506.
On March 25, 1999, the Company issued 24,761 shares of its common stock
to MCP as payment for product. The Company relied upon the exemption from
registration provided by ss.4(2) of the Act and Rule 506 and ss.80A.15 of the
Minnesota Code. Also, on March 25, 1999, the Company issued 3,056 shares of its
common stock to Nick D. Hansen for as payment for professional fees. The Company
relied upon the exemption from registration provided by ss.4(2) of the Act and
Rule 506 and ss.517.061(11) of the Florida Code.
On April 16, 1999, the Company issued 17,957 shares of its common stock
to Baise, Miller & Freer PC of Washington, D.C. as payment of professional fees.
The Company relied upon the exemption from registration provided by ss.4(2) of
the Act and Rule 506.
On August 11, 1999, Pat Robertson invested an additional seven hundred
fifty thousand dollars ($750,000) with the Company. In consideration for this
additional investment, Pat Robertson received stock warrants. NSC and Pat
Robertson executed a convertible debenture whereby the Company is to pay Pat
Robertson on August 11, 2001 the principal sum of seven hundred and
fifty-thousand dollars ($750,000), interest is ten percent (10%) per annum which
interest may be converted at the Company's election to pay in cash or shares of
its common stock, each share to be valued at seventy-five cents per share
($0.75/share). On August 11, 2001 upon the execution of Election to Convert, the
debenture may be converted to shares of stock on the outstanding amount due at
seventy-five cents per share ($0.75/share) or the Company will pay the debenture
back in cash. In the event that NSC is unable to pay back the debenture at the
end of two years and Pat Robertson does not wish to convert said debenture into
shares of NSC's stock, a third-party, namely George Janke, who is also a related
party of the Company, acting as Trustee for the Janke Family Trust, has secured
this debenture with collateral. In addition to this August 11, 1999 debenture,
the associated Warrants were executed on August 10, 1999. The Company relied
upon the exemption from registration provided by ss.4(2) of the Act and Rule 506
and ss.13.1-507 of the Virginia Code.
66
<PAGE>
Summary of Company's Warrants Issued to Pat Robertson on August 10, 1999
<TABLE>
<CAPTION>
Date Designation Exercise Exercise Exercise Shares Replaces the
Date Date Price following
Starting Ending warrants
<S> <C> <C> <C> <C> <C> <C>
08/10/99 W-1A 08/10/99 08/28/00 $0.75/share 1,000,000 W-1 and W-3
(from 11/07/97
Agreement)
08/10/99 W-2A 8/10/99 8/09/04 $0.75/share 2,000,000 W-2 and W-4
(From 11/07/97
Agreement)
Total 3,000,000
</TABLE>
On October 29, 1999, the Company entered into a Stock Purchase
Agreement with Dr. Pat Robertson wherein he invested an additional one million
dollars ($1,000,000) in the Company in exchange for 4,000,000 shares of
restricted common stock, $0.001 par value per share. The Company relied upon the
exemption from registration provided by ss.4(2) of the Act and Rule 506 and
ss.13.1-507 of the Virginia Code. Upon the closing of the above Stock Purchase
Agreement Mr. Robertson was appointed as Chairman of the Board of Directors of
the Company.
Item 5. Indemnification of Directors and Officers.
The Company's by-laws provide for indemnification of Directors and
Officers. Specifically, ARTICLE V. "INDEMNIFICATION OF OFFICERS AND DIRECTORS",
provides that the corporation shall indemnify any and all of its Directors and
Officers, and its former Directors and Officers, or any person who may have
served at the corporation's request as a Director or Officer of another
corporation in which it owns shares of capital stock or of which it is a
creditor. The indemnification covers actual and necessary expenses incurred by
them in connection with the defense of any action, suit or proceeding, in which
they, or any of them, are made parties, or a party, be reason of being or having
been a Director or Officer, except it does not provide coverage in relation to
matters as to which they shall have been adjudged in such action, suit or
proceeding to be liable for negligence or misconduct in the performance of duty.
PART F/S
The Financial Statements of Natural Solutions, INC., and Notes to Financial
Statements together with the Independent Auditor's Report of Cronin and Company,
CPA's, required by this Item 13 commence on page F-1 hereof and are incorporated
herein by this reference.
67
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report............................F-1
Balance Sheets..........................................F-2
Income Statement .......................................F-3
Statements of Cash Flows................................F-4
Statements of Changes in Stockholders' Equity...........F-5
Summary of Significant Accounting Policies..............F-6
Notes to Financial Statements...........................F-8
<PAGE>
Cronin & Company
Certified Public Accountants
1574 Eagle Nest Circle
Winter Springs, Florida 32708
Board of Directors and Shareholders
Natural Solutions Corporation
North Palm Beach, Florida
We have audited the accompanying consolidated balance sheet of Natural
Solutions Corporation as of July 31, 1999 and 1998 and the related consolidated
statements of income, cash flows and stockholders' equity for the years then
ended. The financial statements are the responsibility of the directors. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards except as described in the following paragraph. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Natural Solutions Corporation
as of July 31, 1999 and 1998 and the results of its operations, its cash flows
and changes in stockholders' equity for the years then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company has been in the development stage
since inception, August 14, 1996, and has incurred operating losses of $
5,133,173 through July 31, 1999. As a result of these continued losses, the
Company has been unable to generate sufficient cash flow from its operating
activities to support current operations. The Company's ability to generate
sufficient future cash flows from its operating activities in order to sustain
future operations cannot be determined at this time. The Company has primarily
funded its operations through the sale of its common stock. There can be no
assurance that the Company will be able to do so in the future, and, if so, will
provide sufficient capital and on terms favorable to the Company. These
uncertainties raise substantial doubt about the Company's ability to continue as
a going concern. The financial statements do not include any adjustments that
might arise from the outcome of these uncertainties.
September 2, 1999
(except for note 14 which is as of December 3, 1999)
/s/Cronin & Company
Certified Public Accountants
F-1
<PAGE>
<TABLE>
<CAPTION>
NATURAL SOLUTIONS CORPORATION
(a development stage company)
(formerly known as ICE BAN AMERICA, INC.)
Balance Sheet
July 31, 1999 and 1998
ASSETS
July 31, 1999 July 31, 1998
<S> <C> <C>
Current Assets:
Cash & Cash Equivalents $ 0 $ 125,265
Receivables -Trade 86,339 401,503
-Employees 0 11,221
-Other 5,375 122,746
Inventories 626,872 698,582
Prepaid Expenses 62,736 94,740
----------- ------------
Total Current Assets 781,322 1,454,057
Property & Equipment-Net 112,453 119,228
Investment in Affiliate 18,750 110,000
Other Assets:
Licensing Agreement (net of amortization) 419,620 522,341
Other Intangible Assets 3,686 3,686
Deferred Tax Asset 0 217,606
------------- ----------
Total Other Assets 423,306 743,633
Total Assets $ 1,335,831 $ 2,426,918
========= ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable-Trade $ 1,115,754 $ 430,391
Accrued Expenses 180,856 17,527
Current Portion of Long Term Debt 82,000 82,000
Current Portion of Long Term Debt-Related Parties 124,968 61,951
Liability to Issue Common Stock 0 50,000
-------------- ----------
Total Current Liabilities 1,503,578 641,869
Long Term Debt-Related Parties 132,032 195,049
Stockholders' Equity:
Common Stock Authorized-55 Million Shares
Issued-15.997 Million Shares 15,997 15,889
Additional Paid-in Capital 4,939,124 4,512,276
Other Comprehensive Income (121,727) (25,477)
Deficit Accumulated During Development Stage (5,133,173) (2,912,688)
----------- ----------
Total Stockholders' Equity (299,779) 1,590,000
Total Liabilities & Stockholders' Equity $ 1,335,831 $ 2,426,918
========= ===========
</TABLE>
F-2
See Summary of Accounting Policies and Notes
to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
NATURAL SOLUTIONS CORPORATION
(a development stage company)
(formerly known as ICE BAN AMERICA, INC.)
Income Statement
July 31, 1999 and 1998
Fiscal Year Fiscal Year Aug. 14, 1996
Ended Ended ( inception)
July 31, 1999 July 31, 1998 To July 31, 1999
------------- ------------- ----------------
<S> C> <C> <C>
Net Sales 2,100,199 $ 1,994,415 $ 4,594,662
Costs Applicable to Sales & Revenue 1,601,552 1,635,726 3,593,573
----------- ------------ -------------
Gross Profit 498,647 358,689 1,001,089
Selling, General & Administrative Expenses 2,455,157 2,953,134 6,104,507
Interest 47,017 2,485 49,502
------------ ------------- -------------
(Loss) Before Other Income And Income Taxes (2,003,527) (2,596,930) (5,152,920)
Other Income:
Investment Income 648 10,212 20,072
--------------- ------------- --------------
Net Income (Loss) Before Taxes (2,002,879) (2,586,718) (5,132,848)
Income Tax Expense (Benefit) 217,606 0 325
------------- -------------- -------------
Deficit Accumulated During Development
Stage $ (2,220,485) $ (2,586,718) $ (5,133,173)
============= ============ ==============
Basic Net Loss Per Common Share $ (0.14) $ ( 0.16)
============= ==========
Weighted Average Common Shares 15,923,733 15,753,032
=========== ============
Outstanding
</TABLE>
F-3
See Summary of Accounting Policies and Notes
to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
NATURAL SOLUTIONS CORPORATION
(a development stage company)
(formerly known as ICE BAN AMERICA, INC.)
Statement of Cash Flows
July 31, 1999 and 1998
Fiscal Year Fiscal Year Aug.14, 1996
Ended Ended (inception)
July 31, 1999 July 31, 1998 To July 31, 1999
------------- ------------- ----------------
<S> <C> <C> <C>
Operating Activities:
Deficit Incurred During Development Stage $ (2,220,485) $ (2,586,718) $ (5,133,173)
Non-Cash Expenses Included in Net Income:
Depreciation & Amortization 120,722 189,965 327,896
Bad Debts 340,781 116,932 457,713
Adjustment for Deferred Taxes 217,606 0 0
Product & Services Purchased for Stock & Options 426,957 1,732,612 2,159,569
Adjustments to Reconcile Net Loss to Cash
Provided (Consumed) by Operating Activities:
(Increase) in Accounts Receivable (25,617) (399,939) (475,536)
(Increase) Decrease in Inventory 71,710 (572,466) (596,007)
(Increase) Decrease in Prepaid Expenses (17,996) 24,331 (62,759)
Increase in Accounts Payable & Accruals 834,444 87,031 1,191,969
----------- ------------- -------------
Cash Consumed by Operating Activities (251,878) (1,408,252) (2,130,328 )
Financing Activities:
Proceeds From the Issuance of Common Stock 0 1,125,122 2,202,592
Payment of Offering Costs 0 0 (19,273)
(Payment) of Long Term Debt 0 0 (50,000)
Proceeds of Long Term Debt 0 62,000 62,000
(Payment) of Long Term Debt-Related Parties (5,037) (155,000) (160,037)
Proceeds of Long Term Debt-Related Parties 10,883 412,000 422,883
----------- ---------- -----------
Cash Generated by Financing Activities 5,846 1,444,122 2,458,165
Investing Activities:
Payment of Organization Costs 0 0 (905)
Expenditures on Research & Development 0 0 (30,784)
Fees Paid for Patents & Trademark Registration 0 0 (42,357)
Acquisition of Equipment (11,225) (89,483) (126,866)
Payment of Initial Licensing Fee 0 0 (100,000)
Advances to Affiliates & Employees 0 (114,870) (114,870)
Payments Collected on Advances 122,746 41,059 163,805
Purchase of Investment in Affiliate (5,000) (110,000) (115,000)
----------- ----------- ---------
Cash Expended on Investing Activities 106,521 (273,294) (366,977)
Net Decrease in Cash (139,511) (237,424) (39,140)
Cash & Cash Equivalents-Beginning 125,265 362,689 24,894
---------- ----------- ----------
Cash & Cash Equivalents-Ending-(Included in payables) $ (14,246) $ 125,265 $ (14,246)
=========== =========== ===========
</TABLE>
F-4
See Summary of Accounting Policies and Notes
to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
NATURAL SOLUTIONS CORPORATION
(a development stage company)
(formerly known as ICE BAN AMERICA, INC.)
Consolidated Statement of Changes in Stockholders' Equity
August 14, 1996 (inception) to July 31, 1999
Common Stock
Deficit
Accumulated
Additional Other During
Paid-in Comprehensive Development
Shares Par Value Capital Income Stage
<S> <C> <C> <C> <C> <C>
Balance July 31, 1997 15,400,000 $ 15,400 $ (25,477) $ (325,970)
1,062,997
Stock Issued to Secure Additional Licensing Rights 100,000 100
Stock Issued for Services 207,000 207 531,900
Stock Issued for Product 31,740 32 950,323
Stock Issued in Exchange for Cash 150,000 150 192,206
Options Issued Under Employment Agreements 1,124,850
Deferred Compensation Under Employment Options (4,086,920)
Net Loss July 31, 1998 (3,436,920) (2,586,718)
-------------- -------- ----------- ----------
Balance July 31, 1998 15,888,740 $ 15,889 $ (25,477) $ (2,912,688)
========== ======== =========== ============
$
Stock Issued for Services 73,574 74 4,512,276
=========
Stock Issued for Product 34,226 34
Valuation Charge-Marketable Securities 316,797 (96,250)
Net Loss July 31, 1999 110,051 (2,220,485)
------------ ------- ---------- -------------
Balance July 31, 1999 15,996,540 $ 15,997 $(121,727) $ (5,133,173)
========== ======== ---------- =========== ==============
$4,939,124
</TABLE>
F-5
See Summary of Accounting Policies and Notes
to Consolidated Financial Statements.
<PAGE>
NATURAL SOLUTIONS CORPORATION
(a development stage company)
(formerly known as ICE BAN AMERICA, INC.)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Year Ended July 31, 1999
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Ice Ban America, Inc., a Nevada
corporation, Ice Ban, Inc., a New York corporation, and Roadbind America,
Inc., a Nevada corporation and Ice Ban Holdings, Inc., a Florida
corporation,. The Ice Ban, Inc. combination is accounted for as a pooling
of interests. Roadbind America, Inc., Ice Ban America, Inc. and Ice Ban
Holdings, Inc. were formed by the Company as wholly owned subsidiaries. All
intercompany balances and transactions have been eliminated. For further
information see Note 5. The Investment in Unconsolidated Affiliate has been
accounted for under the equity method.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statement and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from the
estimates.
Cash & Cash Equivalents
For financial statement presentation purposes, the Company considers those
short-term, highly liquid investments with original maturities of three
months or less to be cash or cash equivalents.
Inventories
Inventories consist of de-icing and road binding agents held for resale and
are valued at average lower of cost (First in-First out) or market.
Property & Equipment
Property and equipment are recorded at cost. Depreciation is computed using
the straight line method over the estimated useful lives of the assets,
generally 10 years. Expenditures for renewals and betterments are
capitalized. Expenditures for minor items, repairs and maintenance are
charged to operations as incurred. Gain or loss upon sale or retirement due
to obsolescence is reflected in the operating results in the period the
event takes place.
Revenue Recognition
Sales are recognized when a product is delivered or shipped to the customer
and all material conditions relating to the sale have been substantially
performed.
Stock Based Compensation
Stock based compensation is accounted for by using the intrinsic value
based method in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). The Company has
adopted Statements of Financial Accounting Standards No. 123, "Accounting
for Stock Based Compensation, ("SFAS 123") which allows companies to either
continue to account for stock based compensation to employees under APB 25,
or adopt a fair value based method of accounting. The Company has elected
to continue to account for stock based compensation to employees under APB
25 but has made the required SFAS 123 pro forma disclosures in accordance
with SFAS 123.
Fair Value of Financial Instruments
Statements of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments. Fair value
F-6
<PAGE>
Summary of Accounting Principles (Cont'd)
Fair Value of Financial Instruments (Cont'd)
estimates discussed herein are based upon certain market assumptions and
pertinent information available to management as of July 31, 1999. The
respective carrying value of certain on-balance sheet financial instruments
approximated their fair values. These financial instruments include cash
and cash equivalents, marketable securities, trade receivables, accounts
payable and accrued expenses. Fair values were assumed to approximate
carrying values for these financial instruments since they are short term
in nature and their carrying amounts approximate fair values or they are
receivable or payable on demand. The fair value of the Company's notes
payable is estimated based upon the quoted market prices for the same or
similar issues or on the current rates offered to the Company for debt of
the same remaining maturities. The carrying value approximates the fair
value of the notes payable.
Earnings Per Common Share
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 128 "Earnings Per Share" ("SFAS 128"). SFAS 128 replaces the
previous "primary" and "fully diluted" earnings per share with "basic" and
"diluted" earnings per share. Unlike "primary" earnings per share that
included the dilutive effects of options, warrants and convertible
securities, "basic" earnings per share reflects the actual weighted average
of shares issued and outstanding during the period. "Diluted" earnings per
share are computed similarly to "fully diluted" earnings per share. In a
loss year, the calculation for "basic" and "diluted" earnings per share is
considered to be the same as the impact of potential common shares is
antidilutive. Potential common shares include 1,620,000 options.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
("SFAS 109") which requires recognition of estimated income taxes payable
or refundable on income tax returns for the current year and for the
estimated future tax effect attributable to temporary differences and carry
forwards. Measurement of deferred income tax is based on enacted tax laws
including tax rates, with the measurement of deferred income tax assets
being reduced by available tax benefits not expected to be realized.
Impairment of Long Lived Assets
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long Lived Assets and for Long Lived
Assets to be Disposed of," ("SFAS 121"). SFAS 121 requires impairment
losses to be recorded on long lived assets used in operations and goodwill
when indications of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the carrying amount
of the asset.
Recent Accounting Pronouncements
Effective for periods beginning after December 15, 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 131, "Disclosure about Segments of an Enterprise and Related
Information," ("SFAS 131"). SFAS 131 establishes standards for the way that
public companies report information about operating segments in annual
financial statements and requires reporting of selected information about
operating statements in interim financial statements issued to the public.
The Company has not determined the impact the adoption of this new
accounting standard will have on its future financial statements and
disclosures.
F-7
<PAGE>
NATURAL SOLUTIONS CORPORATION
(a development stage company)
(formerly known as ICE BAN AMERICA, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended July 31, 1999
1. The Company (a Nevada corporation) was formed August 14, 1996 to exploit
certain patents and rights to patents covered under a licensing agreement which
will enable Ice Ban America, Inc. to market an agricultural co-product as a road
de-icing and anti-icing product. The product will be marketed under the
copyright protected trade name of ICE BAN R. The original licensing agreement
covered all of the United States except for certain portions of New York State
and Erie County Pennsylvania. Natural Solutions Corporation. is a "Development
Stage" corporation. The Company is devoting substantially all its efforts to
establishing a new business. Planned principal operations have not commenced.
2. Investment in Unconsolidated Affiliate:
In June, 1998 the Company purchased 100,000 shares of IBAC Corporation stock for
$ 110,000. The investment amounts to less than 1% of the 13,755,000 outstanding
shares of IBAC Corporation. Due to factors such as the commonality of several
members of the Board of Directors and officers in each company and the
substantial ownership of stock in each company by Mr. George Janke, as trustee,
this investment has been accounted for under the equity method. Mr. George Janke
is the former President and Chairman of the Board of Directors of Natural
Solutions Corporation and current President and Chairman of the Board of IBAC
Corporation. The current market value for IBAC's common stock approximates its
carrying value at July 31, 1999. Natural Solutions Corporation's equity in the
net loss of its investee for the year ended July 31, 1999 is considered
immaterial.
3. Licensing Agreement & Note Payable:
Ice Ban USA, Inc., is a Florida corporation controlled by Mr. George Janke as
its President & Chairman of the Board of Directors. Ice Ban USA acquired the
sole rights to the use of certain patent rights relating to roadway de-icing &
anti-icing products and their related compositions. On August 31, 1996, Ice Ban
USA, Inc. granted the Company the use of those rights in an exclusive license
agreement for covering substantially all of the United States except for Erie
County, PA and New York State north of the 42nd parallel for consideration of $
100,000. The agreement is for a term of 7 years followed by one year automatic
renewals and is being amortized over the initial minimum term of 7 years. Mr.
George Janke is the former President & Chairman of the Board of Directors of
Natural Solutions Corporation. All rights to the excluded territory reverted to
the Company upon the acquisition of Ice Ban, Inc. on July 29, 1997 (see note 5).
The Company is also required to pay Ice Ban USA, Inc. fees (currently accrued at
$ 38,228) based upon the following schedule:
Period Covered Amount Payable Quarterly
- ----------------------------------------------------------------
September 1, 1996- August 31, 1997 No Fee Due
September 1, 1997- August 31, 1998 1% of Sales
September 1, 1998 and Thereafter 2% of Sales but not to
exceed $ 3/ton
or be less than $ 2/ton
- -----------------------------------------------------------------
On August 14, 1997 the Company issued 100,000 shares of its common stock (valued
at $ 532,000) to Ice Ban, USA, Inc. to acquire additional rights to use certain
other patents and secure a geographic marketing exclusivity agreement. The
marketing agreement allows the Company to market the RoadbindTM product in the
continental United States. This addition to the original licensing agreement of
1996 is being amortized over the 73 months which were remaining in the life of
the original agreement at the date of the addition. Amortization expense for the
years ended July 31, 1999 and 1998 was $102,721 and $102,721 respectively.
F-8
<PAGE>
(Notes to Consolidated Financial Statements Cont'd)
4. Income Taxes:
The Corporation has approximately $ 5,133,173 in net operating loss carryovers
available to reduce future income taxes. These carryovers may be utilized
through the year 2013. The Company has adopted SFAS 109 which provides for the
recognition of a deferred tax asset based upon the value the loss carryforwards
will have to reduce future income taxes and management's estimate of the
probability of the realization of these tax benefits. A summary of the deferred
tax asset presented on the accompanying balance sheet is as follows:
<TABLE>
<CAPTION>
July 31, 1999 July 31, 1998
<S> <C> <C>
Federal Deferred Tax Asset Relating to Net Operating Losses $ 1,603,443 $ 811,361
State Deferred Tax Asset Relating to Net Operating Losses 239,577 128,641
Less Valuation Allowance 1,843,020 722,396
----------- ----------
Total Deferred Tax Asset $ 0 $ 217,606
============== ===========
</TABLE>
5. Business Combination:
On July 29, 1997 the Company issued 1.3 million shares of its common stock to
acquire 100% of the common stock of Ice Ban, Inc. Ice Ban, Inc. is a New York
corporation engaged in the business of selling the Ice BanR product in upstate
New York. The combination is accounted for as a pooling of interests and,
accordingly, reflects the continuing accounting basis of the assets and
liabilities of the acquired corporation. No accounting adjustments were required
to achieve uniform accounting methods. A condensed balance sheet of each company
as well as the operating results of the separate companies prior to the
acquisition and combined results of operations is as follows:
<TABLE>
<CAPTION>
Ice Ban Combined
America, Inc. Ice Ban, Inc. July 31, 1997
<S> <C> <C> <C>
Assets $ 794,424 $ 313,412 $ 1,107,836
Liabilities 166,551 214,335 380,886
Shareholders' Equity 627,873 99,077 726,950
Revenues 0 500,048 500,048
Income/(Loss) ( 365,054) 39,084 ( 325,970)
</TABLE>
6. Major Customers/Suppliers:
At July 31, 1999 and 1998 transactions with two or more suppliers and/or
customers, in the aggregate, have accounted for 10% or more of purchases of
inventory or services and/or sales and also account for 10% or more of the
Company's accounts payable and accounts receivable at those dates as follows:
<TABLE>
<CAPTION>
Amounts Purchased Amounts Payable
Supplier Supplier Supplier Supplier Supplier Supplier
A B C A B C
<S> <C> <C> <C> <C> <C> <C>
July 31, 1998 44.9% 12.6% 20.9% 17.7% 28.3% 7.1%
1999 15.9% 15.3% 7.6% 18.5% 20.3% 0.6%
</TABLE>
<TABLE>
<CAPTION>
Amounts Sold Amounts Receivable
Customer Customer Customer Customer Customer Customer
A B C A B C
<S> <C> <C> <C> <C> <C> <C>
July 31, 1998 51.2% 9.7% 9.6% 37.4% 14.7% 7.4%
1999 25.7% 11.9% 11.9% 56.7% 16.4% 1.7%
</TABLE>
F-9
<PAGE>
(Notes to Consolidated Financial Statements Cont'd)
On February 21, 1997 the Company entered into an agreement with Minnesota Corn
Processors, Inc. (MCP) to purchase its Ice BanR product from MCP in exchange for
issuing up to 1,170,000 (Approx. 7.3% of the current outstanding shares issued)
shares of its common stock. The shares were to be issued over the 3 year term of
the agreement under a formula based upon the relationship of corn value price
per ton and the value of Natural Solutions Corporation stock on the day of
shipment. As of July 31, 1999, 65,966 common shares have been issued under this
agreement. In October 1999, in conjunction with the settlement of a lawsuit
described in note 13, this agreement was terminated and replaced with a fixed
price purchase agreement.
7. Notes Payable & Long Term Debt:
<TABLE>
<S> <C>
Notes Payable to Related Parties consist of two notes payable to Ice Ban USA,
Inc. bearing interest at 5.8% and 7%. $ 257,000
Three short term notes to unrelated individuals bearing interest at 6%-10% 47,000
Secured commercial loan guaranteed by an officer, director &
shareholder of the Corporation also requiring a compensating balance
held in savings for the
full amount of the unpaid balance of the loan, bearing interest at 7%. 35,000
----------
Total 339,000
Less Current Portion 206,967
----------
Total $ 132,033
==========
</TABLE>
A Summary of contractual maturities in each of the following fiscal years ended
July 31, is as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Year Ended Related
July 31: Party Debt Unrelated Total
- ----------- ---------- ------------ --------------
2000 $ 124,967 $ 82,000 $ 206,967
2001 64,144 0 64,144
2002 21,339 0 21,339
2003 22,604 0 22,604
Thereafter 23,946 0 23,946
---------- ------------ ----------
Totals $ 257,000 $ 82,000 $ 339,000
========== ========= ==========
</TABLE>
The Company is in default on $47,000 of unrelated or third party debt.
Subsequent to year end, the terms of repayment of amounts due to Ice Ban USA
were modified to become payable when the Company, in its sole discretion,
determines that it has achieved sufficient, reliable cash flow to satisfy the
notes without jeopardizing the Company's ability to pay its budgeted
expenditures.
8. Commitments:
The Company leases its three office locations, certain storage facilities and
rail cars. Rent expense for the year ended July 31, 1999 and future minimum
lease payments under these operating leases was and is as follows:
<TABLE>
<CAPTION>
Minimum Minimum Minimum Minimum
Description Expense Expense Payment Due Payment Due Payment Due Payment Due
July 31, 1998 July 31, 1999 July 31, 2000 July 31, 2001 July 31, 2002 July 31, 2003
- ----------------- -------------- ------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Office Space $ 32,096 $ 41,432 $ 42,969 $ 40,419 $ 21,996 $ 0
Storage Tanks 251,260 356,657 325,000 265,000 300,000 0
Rail Cars 52,290 39,030 37,080 37,080 3,090 0
----------- ---------- ----------- --------- ----------- -------------
Totals $ 335,646 $ 437,119 $ 405,049 $ 342,499 $ 325,086 $ 0
========== ========== ========== ========== ========== =============
</TABLE>
F-10
<PAGE>
(Notes to Consolidated Financial Statements Cont'd)
In addition, the Company is also obligated under employment agreements, to
provide minimum compensation to two principal officers in the annual amount of $
121,000 in cash plus certain stock options as outlined in notes 9 & 11. The
Company has recognized an aggregate of $ 85,000 and $686,000 in cash and option
based compensation under these agreements for the fiscal years ended July 31,
1999 and 1998 respectively.
9. Stockholders' Equity:
Common Stock Offering:
On March 31, 1997 the Company concluded two offerings of its common stock to
the public at $.10 and $ 1.00 per share. 1,900,000 shares of its $ 0.001 par
value common stock were issued. The Company received $ 1,000,000 as a result
of these offerings. The offerings were exempt from S.E.C. registration under
Rule 504 of Regulation D. Offering costs such as legal, accounting,
registration fees and filing fees of $ 19,273 were applied against additional
paid in capital and are treated as a reduction of the gross proceeds of the
offerings.
Stock Issued for Product & Services:
During 1999 and 1998, the Company issued an aggregate of 346,540 shares for
professional services, consulting and purchases of its principal products. The
value of these transactions is recorded at fair market value at the date of
contract or delivery, or by a predetermined formula stipulated by the terms of
underlying agreements. The following table summarizes these transactions
<TABLE>
<CAPTION>
1999 1998
------------------------- ---------------------
Weighted Weighted
Average Value Average Value
Shares Per Share Shares Per Share
<S> <C> <C> <C> <C>
Shares Issued for Product 34,226 $ 3.22 31,740 $ 6.06
Shares Issued for Professional Fees and Services 73,574 $ 4.31 207,000 $ 4.58
- --------------------------------------------------------- -------------- ------------- -------------
Total 107,800 238,740
======= =======
</TABLE>
For additional information see note 10.
Stock Based Compensation:
Stock based compensation is accounted for by using the intrinsic value based
method in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). The Company has adopted
Statements of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation, ("SFAS 123") which allows companies to either continue to
account for stock based compensation to employees under APB 25, or adopt a
fair value based method of accounting. The Company has elected to continue to
account for stock based compensation to employees under APB 25. APB 25
recognizes compensation expense for options granted to employees only when the
market price of the stock exceeds the grant exercise price at the date of the
grant. The amount reflected as compensation expense is measured as the
difference between the exercise price and the market value at the date of the
grant.
SFAS 123 requires pro forma disclosures regarding net income and earnings per
share as if the compensation expense had been determined in accordance with
the fair value based method described in SFAS 123. The Company estimates the
fair value of each stock option at the date of grant using the Black-Sholes
option pricing model with the following weighted average assumptions for
grants issued in 1998 and 1999
Dividend Yield None
Expected Life 2 Years
Expected Volatility 68%
Risk Free Interest Rate 6%
F-11
<PAGE>
(Notes to Consolidated Financial Statements Cont'd)
A Summary of employee and non employee options and warrants granted and
exercised for each of the fiscal years ended July 31, 1999 and 1998 is
presented below:
<TABLE>
<CAPTION>
1998 1999
-------------------------- ----------------------
Weighted Weighted
Average Average
Shares Exercise Price Shares Exercise Price
<S> <C> <C> <C> <C>
Balance at Beginning of Year - $ - 1,900,000 $ 6.58
Grants Made During Year:
Employment Agreements 900,000 0.90 570,000 1.05
Other 1,000,000 11.70 - -
Less Options Exercised During Year 0 - - -
Less Options That Expired During Year 0 - 850,000 6.26
------------ ---------- ----------- --------
Amount of Options Outstanding at End of Fiscal Year 1,900,000 $ 6.58 1,620,000 $ 4.80
=========== ======== ========= ==========
Options Exercisable at Year End 1,100,000 $ 10.64 1,170,000 $ 5.96
- --------------------------------------------------------------- ------------ ---------- -----------
Weighted Average Fair Value of Options Granted During Year $ 5.16 $ 0.74
- --------------------------------------------------------------- ------------- --------- -----------
</TABLE>
Summary information for Options outstanding at July 31, 1999 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted Average
Range of Number Outstanding Remaining Weighted Average Amount Exercisable Weighted Average
Exercise Prices at July 31, 1999 Contractual Life Exercise Price at July 31, 1999 Exercise Price
- ------------------- ------------------ ------------------ ------------------- ------------------ ----------------------
<S> <C> <C> <C> <C> <C>
$ 0.00-$ 2.70 1,120,000 78 Months $ 1.26 670,000 $ 0.89
$ 7.50-$15.00 500,000 4 Months $ 12.75 500,000 $ 12.75
</TABLE>
Had compensation cost been determined on the fair market value at the grant date
consistent with SFAS 123, the Company's net loss and loss per share would have
been increased to the pro forma amounts indicated below:
<TABLE>
<S> <C> <C>
1999 1998
Net loss applicable to common shareholders-as reported $(2,220,485) $ (2,586,718)
Net loss applicable to common shareholders-pro forma $(2,714,047) $ (2,714,445)
Basic loss per share-as reported $ ( 0.14) $ ( 0.16)
Basic loss per share-pro forma $ ( 0.17) $ ( 0.17)
</TABLE>
10. Supplemental Cash Flow Information:
Selected non cash investing and financing activities are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Cash Paid for Interest $ 1,973 2,485
- ------------------------------------------------------------- ------------- ------------
Non Cash Equity Transactions:
Issuance of Common Stock to Acquire Market & Patent Rights $ 0 $ 532,000
Issuance of Common Stock in Exchange for Product 110,086 192,238
Issuance of Common Stock in Exchange for Services 316,871 887,813
Issuance of Common Stock For Other Purposes 0 62,717
- ------------------------------------------------------------- ------------- ------------
</TABLE>
11. Related Party Transactions:
Ice Ban USA, Inc. is a Florida corporation controlled by Mr. George Janke, as
trustee. In consideration for obtaining the licensing agreement disclosed in
note 3, and after having contributed $ 5,000 in cash, the Company issued 6.4
million shares to Mr. Warren Johnson, a former President and director of the
Company and a former officer of Ice Ban USA, Inc., and 5.8 million shares to Mr.
Janke, as trustee, for the benefit of certain members of his family.
F-12
<PAGE>
(Notes to Consolidated Financial Statements Cont'd)
On July 29, 1997, the Company issued 1.3 million shares of its common stock to
acquire 100% of the stock of Ice Ban, Inc. Mr. Jeff Johnson, a former officer &
director of the Company, was also an officer, director & shareholder of Ice Ban,
Inc. prior to the acquisition.
On August 20, 1996, George Janke and the Company entered into a five year
Employment Agreement at an annual salary of $ 85,000 per year with cost of
living increases. The Agreement also provides for up to 150,000 common shares to
be issued on December 1 per year, for 5 years if certain performance goals are
met. . On August 10, 1997, the 1996 agreement was superseded by a new agreement
retroactive to January 1, 1997. The term and salary of the new agreement remain
essentially the same as the old agreement but define the exercise dates and
exercise prices of the options portion of the agreement. See note 9 for relevant
data on employment related stock options issued under this agreement. Mr. Janke
has waived all claims for option based compensation or salary through December
31, 1998 under this agreement.
On May 1, 1997, the Vice President of the Company and the Company entered into a
three year Employment Agreement at an annual salary of $ 36,000 per year with
cost of living increases. The Agreement also provides for additional
compensation to be paid in the form of 100,000 shares of common stock to be
issued on the Agreement anniversary date in each of the three years of the
Agreement. See note 9 for relevant data on employment related stock options
issued under this agreement. The Company has recognized an aggregate of $
686,000 in cash and option based compensation under this agreement for the
fiscal year ended July 31, 1998. In fiscal year 1999 the employment of the Vice
President and this agreement were terminated by the Company. Such termination is
the subject of a lawsuit disclosed on note 13.
In June, 1998 the Company purchased 100,000 shares of the common stock of IBAC
Corporation (the Canadian licensee of Ice BanR products under an agreement with
Ice Ban USA, Inc.) for $ 110,000. The investment amounts to less than 1% of the
13,755,000 outstanding shares of IBAC Corporation. There exists a commonality of
members of the Board of Directors and officers in both Natural Solutions
Corporation and IBAC Corporation as well as a substantial ownership of stock in
each company by Mr. George Janke, as trustee.
During the fiscal year ended July 31, 1999 the Company made payments in both
cash and stock to a law firm in which Robert E. Freer Jr., Esq. is a principal.
Mr. Freer became a Director of the Company in April, 1998. Cash payments
totaling $ 11,518 and 60,318 shares of common stock valued at $ 259,753 were
paid directly to this firm for legal services performed and disbursements made
on behalf of the Company. The Company owed approximately $ 79,020 in unpaid
legal fees to Mr. Freer's law firm at July 31, 1999.
During the fiscal year ended July 31, 1998 the Company made payments in both
cash and stock to either Robert E. Freer Jr., Esq., or to two law firms in which
he was a principal. Mr. Freer became a Director of the Company in April, 1998.
Cash payments totaling $ 185,901 and 35,000 shares of common stock valued at $
139,344 were paid directly to these firms for legal services performed and
disbursements made on behalf of the Company prior to his becoming a director. In
addition 50,000 shares valued at $216,125 were issued directly to Mr. Freer,
also before becoming a director. The Company owed approximately $ 87,000 in
unpaid legal fees to Mr. Freer's current law firm at July 31, 1998.
12. Subsequent Events:
On August 11, 1999 the Company received proceeds of $ 750,000 upon the issuance
of a convertible debenture. The debenture is due and payable on August 31, 2001
and bears interest at 10% per annum. Interest is payable semiannually and may be
paid in cash or, at the election of the Company, in shares of its common stock
valued at $ 0.75 per share. The debenture may be converted, at the option of the
holder, into common shares of the Company at $ 0.75 per share at any time prior
to maturity.
F-13
<PAGE>
(Notes to Consolidated Financial Statements Cont'd)
As an inducement, the Company also granted the holder warrants to acquire up to
3,000,000 shares of its common stock at $0.75 per share. These options expire
August, 2004. These options replace outstanding options on 500,000 shares at a
weighted average exercise price of $ 12.75 that existed at July 31, 1999.
On October 29, 1999 the Company also sold 4,000,000 shares of its common stock
for $1,000,000 in cash.
13. Contingencies and Legal Matters:
Employment Agreement
This lawsuit was filed by the former Vice President of the Company and seeks to
enforce his original employment agreement of an annual salary of $ 36,000 and
300,000 shares of common stock over a three year period. The agreement calls for
an arbitration proceeding that is currently at the initial scheduling conference
stage. The Company intends to defend its dismissal of the employee for good
cause. Management estimates the loss to be the 100,000 shares earned in the
first year under the agreement but not yet issued. The financial statements
reflect the future obligation to issue these shares.
Securities Fraud
This lawsuit seeks damages to certain shareholders for breach of various
security regulations and laws due to alleged violations by the Company. The
former shareholders of Ice Ban, Inc. claim of being defrauded in the receipt of
their stock in the Company in exchange for selling their company, Ice Ban, Inc.,
to Natural Solutions Corporation. The Company has filed a counterclaim alleging,
among other things, breach of fiduciary duty and violation of securities law.
This case is scheduled for trial in January, 2000. Management is uncertain of
the outcome of this case and, if unsuccessful, unable to estimate the amount or
range of potential loss.
Fraudulent Misrepresentation
The selling shareholders of Ice Ban, Inc. seek to rescind the sale of that
company to Natural Solutions Corporation in July of 1997. The suit alleges
management misrepresentation surrounding the ownership of the Toth Patent.
Management believes full and complete disclosure was made at the time of the
acquisition and has filed motions to dismiss and for summary judgment.
Management is uncertain of the outcome in this case but considers a successful
defense likely.
Minnesota Corn Processors (MCP) sued the Company for fraudulent
misrepresentation regarding the Toth Patent and sought to rescind the
exclusivity in its agreement to supply the Company with steepwater used in the
Company's "Ice Ban" product. The Company reached a settlement in October, 1999.
In the settlement, the Company agreed to pay the $235,000 owed to MCP which is
carried in accounts payable at July 31,1999. In addition the supply agreement
was amended as discussed in note 6.
Sears Oil Company alleges fraudulent misrepresentation and inducement regarding
the Toth Patent and seeks to rescind its distribution agreement for the New
England region. Plaintiffs seek damages of $400,000 plus dissolution of a New
York LLC in which both parties are principals. The Company has filed a motion
alleging patent infringement by Sears Oil Company as well as a motion for
failure to state a cause of action. No trial has been scheduled as of the date
of the issuance of these financial statements. Management is uncertain of the
outcome in this case nor unable to estimate the amount or range of potential
loss.
14. Inventory:
The Company retained outside consultants to measure and test its inventory held
in storage locations in New York and Florida. The results were delivered on
December 3, 1999.
F-14
<PAGE>
PART III
Item 1. Index to Exhibits
2.1 Ice Ban Board of Directors Mtg. Nov. 13, 1997
3.(i).1 Articles of Incorporation Ice Ban Aug. 14, 1996
3.(i).2 Articles of Incorporation Tembind (Roadbind) Oct. 17, 1997
3.(i).3 Articles of Incorporation Natural Solutions Corp.
3.(i).4 Ice Ban Articles of Inc. Amendment Nov. 11, 1998
3.(i).5 Amend. to Articles of Inc. for ICE BAN, INC. 12-02-98
3.(i).6 Amend. of Articles of Inc. ICE BAN 12-11-98
3.(ii).1 Ice Ban America By-Laws
3.(ii).2 Tembind America (Roadbind) Bylaws
10.1 PLM Investment Management
10.2 First Addendum to Crystal Tree Lease July 10, 1997
10.3 Second Addendum to Crystal Tree Lease Feb. 8, 1999
10.4 Tenant Estoppel Cert. Crystal Tree March 30, 1999
10.5 Lease Agreement, Medina NY Feb. 10, 1999
10.6 Office Lease Agreement-NY 6-1-97
10.7 Tembec & Ice Ban Dist Agreement
10.8 Addendum to Agreement between IBA and IBUSA
10.9 Agreement Mountain Products -- Ice Ban
10.10 Caloosa Shell Corp. Supply Agree
10.11 DEDERT- Rental 7-23-98
10.12 Elevage USA Corp
10.13 Lease IBA and Jeanne Whipple Realty
10.14 Na-Churs Plant Food Company
10.15 Roadway Solutions Inc. Sup Agree 4/19/99
<PAGE>
10.16 RPR, Inc. 2/24/99
10.17 Steuben Co-Op terminal agree.9/16/99
10.18 Sweetners Plus
10.19 Transmatrix, Inc. Contract
10.20 Warehouse Lease
10.21 CSX Transportation Agreement 5/12/98
10.22 Crystal Tree Corporate Centre Lease 4/11/97
10.23 Employment Agreement IBA and George Janke dated 8/10/96
Item 2. Description of Exhibits
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this Registration Statement to be signed on its behalf by the
undersigned, hereunto duly authorized
Natural Solutions Corporation
(Registrant)
Date: November15, 1999 By:/s/ Richard Jurgenson
-------------------------------
Richard Jurgenson, President and CEO
Date: November15, 1999 By:/s/ Ann M. Owen
-----------------------------
Ann M. Owen, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001096594
<NAME> Natural Solutions Corporation
<MULTIPLIER> 1
<CURRENCY> U.S. Currency
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Jul-31-1998
<PERIOD-START> Aug-01-1998
<PERIOD-END> Jul-31-1999
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 91,714
<ALLOWANCES> 0
<INVENTORY> 626,872
<CURRENT-ASSETS> 781,322
<PP&E> 112,453
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,335,831
<CURRENT-LIABILITIES> 1,503,578
<BONDS> 0
0
0
<COMMON> 15,997
<OTHER-SE> 299,779
<TOTAL-LIABILITY-AND-EQUITY> 1,335,831
<SALES> 2,100,199
<TOTAL-REVENUES> 498,647
<CGS> 1,601,552
<TOTAL-COSTS> 2,502,174
<OTHER-EXPENSES> 2,455,157
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,017
<INCOME-PRETAX> (2,002,879)
<INCOME-TAX> 217,606
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,002,879)
<EPS-BASIC> (0.14)
<EPS-DILUTED> 0
</TABLE>
