U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB AMENDMENT 3
Natural Solutions Corporation
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(Name of Small Business Registrant in its charter)
Nevada 88-0367024
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 Volvo Parkway, Suite 200
Chesapeake, Virginia 23320
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (757) 548-4242
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.
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PART I
Forward Looking Statements
This Form 10SB includes "forward looking statements". All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10SB 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 10SB 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.
Item 1. Description of Business
(a) Business Development
Ice Ban America, Inc., a Nevada corporation was incorporated on August 14, 1996.
On December 7, 1998, Ice Ban America, Inc. changed its name to Natural Solutions
Corporation (hereinafter referred to as "NSC" or the "Company"). NSC was formed
to market agricultural by-products for use as anti-icing and de-icing agents
under the trade name, ICE BAN(R). The Company later expanded into providing dust
control and road stabilization agents. On December 24, 1996, NSC's common stock
first began trading on the NASD Over-the-Counter (OTC) Bulletin Board under the
stock symbol "ICEB" (OTC BB:ICEB). Pursuant to Rule 6530 adopted by NASDAQ, the
Company filed this Form 10-SB on November 17, 1999 in order to become a fully
reporting company in accordance with the Securities Exchange Act of 1934. On
November 19, 1999, the Company's stock symbol changed to "ICEBE". On December
14, 1999, the Company's stock symbol was removed from the OTC BB and is
presently listed on the Over-the-Counter Pink Sheets (OTC PS). NSC has retained
"ICEB" as its stock symbol. NSC's current address is 100 Volvo Parkway, Suite
200, Chesapeake, Virginia 23320. The Company's Web-site address is
http://www.naturalsolutionscorp.com. The Company's telephone number is (757)
548-4242 and the consumer information number is 1-888-ICEBAN-1.
On August 31, 1996, NSC entered into a renewable, seven year, exclusive
licensing agreement with Ice Ban USA, Inc. ("IBUSA") to exploit certain patents,
patents pending and trademarks
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assigned to IBUSA. IBUSA is a Company partially owned by a trust created by ICE
BAN(R)'s co-inventor Mr. George Janke ("Mr. Janke"), and by NSC's chairman, Dr.
M.G. Robertson ("Dr. Robertson"). On April 27, 2000, Mr. Janke passed away. 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 includes all of the United States.
On March 30, 1998, IBUSA and NSC entered into an addendum to their previous
agreement, whereby NSC acquired the right to market the trademarked and
patent-pending product, TEMBIND(R), which 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 brand RB
ULTRA(TM). ICE BAN(R) and RB ULTRA(TM) are the primary products offered by the
Company.
The above license agreement, as amended, requires a quarterly royalty payment of
2% of sales, but not to exceed $3.00 per ton nor to be less than $2.00 per ton.
[See Part I, Item 7, Certain Relationships and Related Transactions.]
In January 1997, the Company engaged the American Association of Civil Engineers
Research Foundation ("Civil Engineers") to conduct testing of ICE BAN(R). The
Civil Engineers then instructed Highway Innovative Technological Evaluation
Center ("Highway Center") to evaluate the technical aspects and effectiveness of
ICE BAN(R). The reports that were produced indicate that in field and laboratory
tests the ICE BAN(R) product can indeed be an effective aid to snow and ice
control operations by melting snow and ice faster and at lower temperatures than
traditional ice control agents, with little or no adverse effects on roads,
infrastructure, or vehicles.
The Civil Engineers has another evaluation council named the Environmental
Technology Evaluation Center ("Environmental Center"), which conducts
environmental evaluations. The ICE BAN(R)product was selected by the Civil
Engineers to be the first full-scale environmental evaluation that the
Environmental Center conducted. The results of this evaluation are pending.
[See: Part III. Index to Exhibits. Item 10.24 Testing Consent Letters and HITEC
Test Results]
On February 21, 1997, the Company entered into an agreement to sell common stock
to Minnesota Corn Processors Company ("Minnesota Processors") in exchange for
supplies of the raw material by-product which Minnesota Processors 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
accordance with this agreement, on February 21, 1997, the Company committed one
million one hundred seventy thousand (1,170,000) shares of common stock to
Minnesota Processors for the purchase of raw materials provided by Minnesota
Processors for the ICE BAN(R) product. Over the life of the contract, the shares
that were issued had a fair market value of $296,827 and as of July 31, 2000
represent 65,966 shares or 0.23% of the issued and outstanding capital stock of
the Company on a fully diluted basis. The amount of raw material to be supplied
by Minnesota Processors was derived from a formula based on the market value of
the product and the price of the Company's stock at the time of shipment, based
upon a formula agreed to between the Company and Minnesota Processors. The
contract
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provided: (1) Minnesota Processors agreed to conduct laboratory and field
testing of ICE BAN(R), (2) Minnesota Processors agreed to use its resources to
promote further development of ICE BAN(R), (3) Minnesota Processors agreed to
provide tankage and distribution as well as sales and service in its market, (4)
Minnesota Processors agreed to confidentiality and non-compete provisions, (5)
the Company granted Minnesota Processors an option to purchase an additional one
million one-hundred seventy thousand (1,170,000) shares on the same terms as
previously agreed to, and (6) NSC granted Minnesota Processors 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. This agreement was superceded by a supply agreement on
October 19, 1999.
On July 29, 1997, in an exchange of stock, the Company acquired Ice Ban, Inc.
("IBNY"), the only licensee with territorial rights to ICE BAN(R) in the U.S.
(i.e. upstate New York and Erie, Pennsylvania) which were not included in the
original license to the Company. The Company issued one million three hundred
thousand (1,300,000) shares of its restricted common stock to acquire 100% of
the common stock of IBNY. At the time that the shares were issued, the shares
had a fair market value of $6,916,000 and as of July 31, 2000 represent 4.6% of
the issued and outstanding capital stock of the Company on a fully diluted
basis. 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.
As part of the transaction, IBNY was obligated to assign the above rights to
IBUSA 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. The shares had a fair market
value of $531,900 on the date of the transfer, and represent 0.35% of the issued
and outstanding capital stock of the Company. As part of this transaction, the
above mentioned 100,000 shares of the Company's common stock were issued to
IBUSA in consideration for IBUSA's expansion of the license of ICE BAN(R)
products to 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 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.
("Roadbind"). At that time, the Company at this time also discontinued use of
the TEMBIND(R) brand name and began marketing its dust control and road
stabilization product under brand names more related to its product
distinctions. The Company now uses the trademarked name RB ULTRA(TM).
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. The
new name was adopted to better describe the Company's commitment to developing
and marketing environmentally friendly product. The Company believes the new
name is more suggestive of the year round nature of the Company's operations.
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As a result of these events, NSC has a wholly owned subsidiary named Ice Ban
America, Inc. ("IBA").
On July 8, 1998, the Company, Sears Petroleum & Transport, Corp. ("Sears") and
Innovative Municipal Products, Inc. ("IMUS") created a limited liability
company, named Sears Environmental Applications Company, L.L.C. ("SEACO"), and
executed an Operating Agreement for the operation of SEACO. Each of the three
parties own a one-third interest in SEACO. SEACO's Articles of Organization were
filed with the New York Secretary of State. The purpose of SEACO was to engage
in the sale and distribution of ICE BAN(R), TEMBIND(R), and other related
products.
On November 10, 1998, ICE BAN(R) and its co-inventor, Mr. Janke, were awarded
the prestigious Charles W. Pankow Innovative Applications Award for 1998 from
the Civil Engineering Research Foundation of the Civil Engineers. The award is
presented each year after consideration and evaluation of various technological
innovations. The Civil Engineers selected ICE BAN(R) product and technology as
the winner of the Innovative Applications Award, 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 capabilities of ICE BAN(R).
On October 29, 1999, Dr. Robertson acquired in his individual capacity a 42.5%
equity interest in IBUSA, as well as 50% of the international rights to IBUSA's
and Mr. Janke's existing patents, patents pending and trademarks. The Company,
of which Dr. Robertson is presently the Chairman, is the exclusive licensee of
certain IBUSA U.S. patents being utilized exclusively by the Company in the
United States. In addition, the Company is the exclusive U.S. licensee of
certain pending IBUSA U.S. patent applications. Furthermore, the Company is an
U.S. Licensee of certain trademarks, including, the ICE BAN(R), ICE BAN MAGIC(R)
and the ICE BAN(R) names and logos. 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.
(b) Business of Issuer
Overview
Natural Solutions Corporation is a distributor of patented environmentally
friendly corrosion inhibiting 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) brand.
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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 as 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.
Chloride-based products, ICE BAN(R)'s primary competition, impose 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 is a professor of economics at the Rensselaer
Polytechnic Institute. His 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.
The Company believes ICE BAN(R) to be effective in melting snow and ice faster
and at lower temperatures than sodium chloride. The Civil Engineers have found
that 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 mixtures.
The Civil Engineers have found that ICE BAN(R) is economical and when used in a
mixture with various chloride salts ICE BAN(R) significantly lower salt's
corrosive effect. [See: HITEC, Technical Evaluation Report, Summary of
Evaluation Findings For The Testing of ICE BAN(R), Chapter 4, Summary and
Conclusions, Index to Exhibits.]
The Company believes that 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 long-term savings in reduced
damage to roadways, infrastructure, vehicles and the environment. [See: HITEC,
Technical Evaluation Report, Summary of Evaluation Findings For
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The Testing Of ICE BAN(R), Chapter 4, Summary and Conclusions, Index to
Exhibits.] ICE BAN(R) products also have potential special use applications such
as on airport runways, where salt is not suitable or approved. The use of ICE
BAN(R) by such specialized users, the Company believes, 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.
The Company believes that 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 chloride 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.
[See: HITEC, Technical Evaluation Report, Summary of Evaluation Findings For The
Testing of ICE BAN(R), Chapter 4, Summary and Conclusions, Index to Exhibits.]
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). [See: HITEC, Technical
Evaluation Report, Summary of Evaluation Findings For The Testing Of ICE BAN(R),
Chapter 4, Summary and Conclusions, Index to Exhibits.]
In addition, ICE BAN(R) reduces wintertime 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. [See:
HITEC, Technical Evaluation Report, Summary of Evaluation Findings For The
Testing of ICE BAN(R), Chapter 4, Summary and Conclusions, Index to Exhibits.]
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
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negative environmental impact was negligible or non-detectable. Commercial use
was significantly expanded in the New York State licensee area in the winter of
1996-1997.
RB ULTRA(TM)PRODUCTS (formerly marketed as TEMBIND(R))
RB ULTRA(TM) is an environmentally friendly liquid product used for unpaved road
stabilization and dust control. The distribution of RB ULTRA(TM) provides 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 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. Lignin 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. The Company
has blended lignin with other environmentally safe proprietary agricultural
additives. This blended product is then marketed under the RB ULTRA(TM) brand
name.
The Company believes that Roadbind products, when properly mixed and applied,
are more resilient, durable, long lasting and a more effective dust control
agent than other products currently 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. However, it
takes heavy and prolonged rains and traffic to substantially affect the RB
ULTRA(TM) treated surfaces.
The Company'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
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 on roadways, airstrips, helicopter pads,
campgrounds, parks, racetracks, parking areas, nature trails, and even for
embankment stabilization. The Company believes that NSC's products are a safe
and economic alternative for road stabilization and dust control.
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Distribution Methods
The Company's products, both its ICE BAN(R) products and its RB ULTRA(TM)
products, are sold by NSC principally in the United States. Sales are made
primarily through exclusive distributors, and agents, and the Company's sales
force.
NSC's ICE BAN(R) distributors, agents, and sales force service government
transportation departments and other potential users. The Company provides
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. 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 certain snow states; 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
supply agreements with a number of producers of its raw materials. Through these
agreements, 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 majority of the Company's RB ULTRA(TM) products
are stored in the State of Florida. Where economical, additional products are
purchased from a variety of suppliers.
Distribution and Transportation Agreements
On March 5, 1997, an agreement was executed between Sears and IBNY, which called
for Sears to provide storage and throughput (moving product in and out of
storage) services in Rome, NY. Such service included 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 called for minimum quantities of throughput
services to be provided by IBNY. This contract is binding on any successors of
such corporations. These
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services were billed monthly with 30-day credit terms. During the fiscal year
ended 1998, the Company paid $5,238, under the terms of this contract. [Part II
See Item 2. Legal Proceedings.]
On May 31, 1997, IBNY entered into a contract with Sweeteners Plus, Inc.
(Sweeteners) relating to the unloading, storage, reloading and delivery of ICE
BAN(R) products at Sweeteners' 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 Sweeteners Plus is from June 1, 1997 to May
31, 2002, with an automatic renewal from year to year after such five-year
effective date. These services are billed monthly with 30-day credit terms.
During the fiscal years ended 1998 and 1999, the Company paid $63,166, and
$129,777, respectively, under the terms of this contract.
In July 1997, pursuant to its acquisition of IBNY, the Company began making
payments to SRI, Inc. ("SRI") in connection with lignin storage in Jacksonville,
Fla. The agreement calls for a three-year term whereby SRI would provide various
transport and loading services and storage. These services are billed monthly
with 30-day credit terms. During the fiscal years ended 1998, and 1999, the
Company paid $213,201, and $207,916, respectively, under the terms of this
contract.
On June 4, 1998, a "Lease" was entered into between 1194 Corporation, of North
Palm Beach, Florida, and the Company 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.
These services are billed monthly in advance, at the rate of $716.
On June 8, 1998, a "Commercial Contract & Lease" was entered into between R.
Conley, Inc. and IBNY 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, a letter arrangement was entered into Sears, SEACO, and by
Jeffrey Johnson, purportedly on behalf of the Company. NSC disputes whether Mr.
Johnson had authority to sign the letter. The arrangement purportedly provided
for Sears 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. [Part II See Item 2. Legal Proceedings.]
On August 14, 1999, a "Terminal & Transloading Agreement" was entered into
between NSC 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, ICE BAN(R) and Magnesium Chloride
Solution. The materials will be delivered FOB to Na-Churs facility in NSC
designated trucks or tank cars and all the inventoried materials will be owned
by NSC. Na-Churs will store the materials in storage tanks having a capacity of
110,000 gallons. NSC guarantees a minimum of two hundred thousand (200,000)
gallons per calendar year to be placed through the Na-Churs facility. These
services are billed monthly with 30-day credit terms. The terms of this
agreement provide for an evergreen contract with an option to terminate the
agreement at any time upon 60 days notice.
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On October 14, 1999, a "Terminal & Transloading Agreement" was entered into
between NSC. and Steuben County Co-op, Angola, Indiana ("Steuben"). The
agreement calls for Steuben to receive, store and transload out RB ULTRA(TM),
ICE BAN(R) and Magnesium Chloride Solution. The materials will be delivered to
Steuben facility in NSC designated trucks or tank cars and all the inventoried
materials will be owned by NSC. Steuben will store the materials in storage
tanks having a capacity of 110,000 gallons. NSC guarantees a minimum of two
hundred thousand (200,000) gallons per calendar year to be placed through the
Steuben facility. These services are billed monthly with 30-day credit terms.
The terms of this agreement provide for an evergreen contract with an option to
terminate the agreement at any time upon 60 days notice.
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. These services
are billed monthly with 30-day credit terms.
Status of any publicly announced new product or service
None
Competition
The de-icing market is highly competitive. Although the Company is not to date 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.
There can be, however, no assurances that the Company will be able to
successfully compete against other companies, many of whom has much greater
resources than the Company.
The principal products in competition with ICE BAN(R) are salt or chloride based
de-icing and anti-icing products. The Company's ICE BAN(R) product competes with
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 are 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
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($1,000,000,000) 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.
Salt de-icing products cause certain environmental impacts including corrosion
that the Company believes could be (1) reduced by use of ICE BAN(R) if used in
mixtures with salt, or (2) effectively eliminated if ICE BAN(R) is 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, to extend
its effective application temperature and to 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 mixes with salt, 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 combination 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. In June of 1994,
Mr. Janke entered into an Assignment Agreement and an Agreement of Sale to
acquire all rights to the VINASZ patent from three Hungarians who purportedly
were the original inventors of the patent. As described below, there are
competing claims to this patent and the matter is in litigation. The Toth
patent, otherwise known as the VINASZ patent or '918 (U.S. Patent No.
4,676,918), is a patent which covers an mixture of water and a waste concentrate
of a molasses- based alcohol manufacturing procedure, which concentrated
molasses mixture 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, 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. The Company disputes this claim, and believes that it has the
US rights to the VINASZ patent. [See Part II Item 2. Legal Proceedings.]
Inflation may impact 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. The general level of inflation in the U.S. economy has been
at relatively low levels, and 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.
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, demand is stronger during the winter
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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, negatively 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 acquired IBNY
in 1997 in part to implement this plan.
RB ULTRA(TM) products' principal competition comes from other lignin products,
calcium chloride, cold mix asphalt, and various polymers. The Company recently
learned that three former executives of NSC have started a competing business
providing substantially the same products and services as the Company.
Management is in the process of determining the potential impact on sales and
the appropriate response, and the Company has filed suit against these
executives and their newly-established company. [See Part II Item 2. Legal
Proceedings.]
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). The Company
does not anticipate any shortage of reasonably priced raw materials necessary to
produce ICE BAN(R) since it is a by- product of the processing of corn. In
fiscal year ended 1999, the Company purchased raw materials from Minnesota
Processors totaling $252,304, or 15.75% of total Costs Applicable to Sales and
Revenues. While Minnesota Processors had been the Company's primary supplier of
ICE BAN(R) source material, the Company no longer uses Minnesota Processors or
any other single entity as a sole supplier of material. The Company is 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.
Prior to fiscal year ended 1999, the Company relied heavily upon 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
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. Beginning in 1999, the Company purchased only
limited quantities of raw materials from Tembec, Inc. and relied principally on
inventory on hand. 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 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.
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Dependence on one or a few major customers
Through February 1999, the Company was dependent on four major customers who
purchased in excess of 50% of the Company's total sales. These four major
customers were Sears Oil Company, Innovative Municipal Products, Inc, Mountain
Products, Inc. [See Part II, Item 2 Legal Proceedings], and Road-Way Solutions,
Inc. who accounted for 12.0%, 24.6%, 6.1%, 9.7% of the Company's total sales in
fiscal year ended 1999, respectively. From that point onward, the Company
revised its sales system reducing its dependence on specific customers and
established its own sales force and reduced the size of new and existing
distributor territories. 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 any
one or a few major customers for its product sales. In fact, in fiscal year
ended 2000, the Company expects to service more than 100 individual customers
and no single customer will represent more than 19% of total sales.
Patents, Trademarks and Licenses
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 U.S. 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), 5,922,240 (BCS), and 5,965,058
(CIP/STEEPWATER). 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.]
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)
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Date of Patent: June 3, 1997. Disclosed is a new and improved, environmentally
acceptable and negligibly corrosive de-icing composition comprising by-products
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: January 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: January 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: July 6, 1999. This patent is subject to a terminal disclaimer1.
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 a corrosion inhibiting composition comprised of whey.
(5) Patent Number 5,922,240 (Brewers' Condensed Solubles)
Date of Patent: July 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: August 3, 1999. This patent is subject to a terminal
disclaimer1. 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.
(7) Patent Number 5,965,058 (Steepwater Solubles; Steeping a Grain)
Date of Patent: October 12, 1999. This patent is subject to a terminal
disclaimer1. Disclosed is a new and improved, environmentally acceptable and
negligibly corrosive de-icing composition comprising by-products from the
steeping of grains, 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. The
invention also relates to a method for inhibiting corrosion.
1. A "terminal disclaimer" applies when two patents share a common application.
The patent period runs from the date of the first patent granted, so the
applicant must disclaim rights to the second patent for the period after the
first patent has expired. In each case, the Company has license rights to both
the first and second patents.
Trademarks
The Company is a U.S. licensee of certain federally registered and unregistered
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 NSC 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 subsidiary filed on February 2, 1999 to
register the trademark RB ULTRA(TM). The application has been approved for
publication. No final determination as the registrability of the mark has been
made as of the date of this filing. The Company, through licensing arrangements
with IBUSA, has a license to use the registered trade name "TEMBIND(R)."
Licenses of Dust Control and Road Stabilization Products
The Company is a distributor for the TEMBIND(R) product manufactured by Tembec,
Inc. This was accomplished by the acquisition of IBNY by NSC. 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
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the U.S. to highway superintendents and departments of transportation. The
Company currently markets its road binding and stabilization products under the
trademark RB ULTRA(TM).
Licenses of ICE BAN(R) Related Patents and Trademarks
On August 31, 1996, IBUSA 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 of which a
trust created by Mr. Janke is a major shareholder, as is Dr. Robertson. Mr.
Janke was then Vice President and Director of NSC. [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
acquired by NSC on July 29, 1997 as a result of the acquisition of IBNY by NSC
in 1997 and an amendment to exclusive license area agreement executed on August
31, 1998, between NSC 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 amended on August 31, 1998. The amendment
extended NSC'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(R)", (2) "ICE BAN MAGIC" and (3) the ICE BAN logo. These
trademarks are "for 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.]
Government Approval of Principal Products or Services
Sales of ICE BAN(R) products have, to date, been slow in part due to the
numerous testing requirements by municipalities and departments of
transportation. NSC expects the 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.
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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. Presently, a number of states west of the
Mississippi river have developed environmental standards, which are generally
referred to as the Pacific Northwest States (PNS) standards. These standards
have been implemented in many of those states and certain other states in the
eastern half of the United States. In preliminary testing, the Company has
determined that certain ICE BAN(R) product blends operate outside certain limits
set by these standards. However, state-by-state waivers have received by the
Company on an as-needed basis. Accordingly, the Company believes it is currently
in compliance with such laws and that such laws do not have a material impact on
its operations. However, future changes in these standards or the development of
other standards could have a material impact on its operations.
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. Mr. Janke performed ongoing research
and development for the Company. In addition, the Company maintains practice of
continuous product development and innovation in response to customer needs. The
Company does not plan any substantial product research and development ("R&D")
through fiscal year ended 2001. However, outside entities and institutions may
be conducting such R&D in their own interests. If deemed in the best interests
of the Company then NSC may in the future cause such further R&D to occur.
Environmental Laws
NSC's products are based upon natural ingredients 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. However, a number of states west of the
Mississippi river have developed environmental standards, which are generally
referred to as the Pacific Northwest States (PNS) standards. These standards
have been implemented in many of those states and certain other states in the
eastern half of the United States. In preliminary testing, the Company has
determined that certain ICE BAN(R) product blends operate outside certain limits
set by these standards. To date, state-by-state waivers have received by the
Company on an as-needed basis. Accordingly, the Company believes it is currently
in compliance with such laws. However, future changes in these standards or the
development of other standards could have a material impact on its operations.
The Company also 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 more
stringent environmental protection laws on the federal, state, and local level.
The Company does not
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foresee any problems, nor has it measured any material cost or effect, in
managing compliance with such to date.
Employees
The Company currently employs twelve (12) employees, six (6) of which are
salespersons. The full time employees receive annual salaries. The salespersons
are compensated by a base salary and commission.
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, Future Losses, Going Concern Considerations. For the year
ended as of July 31, 1999, the Company had total assets of $1,335,831, a net
loss of $2,220,485 on revenues of $2,100,199 and stockholders deficit of
$2,764,547. For the year ended 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.] Even though management believes
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 addition, there can be no assurances that the Company will be
able to secure additional capital contributions or loans in order to continue
its business. 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.
2. Dependence on Management. The possible success of the Company is expected to
be largely dependent on the continued services of its President, Jim Foshee 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 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. On March 17, 2000,
the Chief Operating Officer of the Company, voluntarily resigned and has not
been replaced. His duties have been assumed by the President and the Chief
Financial Officer, among others. The Company is in the process of
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analyzing the effect of this resignation, and is studying appropriate actions to
take. The Company does not have key man life insurance. The Company currently
does not have written employment agreements with its senior management, but is
in negotiation with such senior management over the terms of an employment
agreement.
3. 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 from financing activities, 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.
4. 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 or otherwise adversely
effected. [See Part III, Exhibits; see also Part I, Item 1. (b) Business of
Issuer, Risk Factors, 11 Uncertainty Regarding Protection of Proprietary
Rights.]
5. Variations in the Amount of Snow and Ice Precipitation. 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.
Purchasers of ICE BAN(R) place initial orders based on the season's
forecast of snow and ice. To the extent that actual weather conditions involve
less snow and ice, existing orders may be cancelled or delayed. 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.
6. Significant Customer and Product Concentration. Through February 1999, a
limited number of customers and distributors accounted for substantially all of
the Company's revenues with respect to product sales. From that point, the
management of the Company revised its sales system to reduce its dependence on
specific customers and establish its own sales force reducing the size of new
and existing distributor territories. 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
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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, 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.
7. 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. 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.
8. 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
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and salt related services concerning de-icing and 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. [See Part I, Item 1. Description of Business (b)
Business of Issuer, Governmental Regulations, and Environmental Laws]
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.
9. No Assurance of Product Quality, Performance and Reliability. The Company
expects that its salesmen, distributors 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, 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.
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10. Additional Capital May Not be Available on Attractive Terms or At All. 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. The Company is currently seeking
to raise an additional $3,000,000 in debt and equity to finance its current
operational plans and expand its sales, marketing, and distribution networks.
Dr. Robertson has committed $1,000,000 toward these efforts, having already
funded $600,000 of that, and the Company is seeking other qualified investors to
fund the remaining $2,000,000. NSC expects that these funds will be sufficient
to achieve operating profits and fuel its growth for the foreseeable future.
There can be no assurance, however, that the Company will secure such additional
financing. There also can be no assurance that any additional financing will be
available to the Company on acceptable terms, or at all. If issuing equity
securities raises additional funds, such securities may contain restrictive
covenants and result in further dilutions to the existing stockholders. 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
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could have a material adverse effect on the Company's business, financial
condition and result of operations. [See Part I, Item 2. (b) Business of Issuer,
Management's Discussion and Analysis or Plan of Operation, Liquidity and Capital
Resources]
11. 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 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, it 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 fore 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 right. 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 result of operation, regardless of the outcome
of the litigation.
12. Competition. The markets in which the Company operates 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 enter markets in other countries and engage its competition in such
countries when, if at all, it becomes feasible and appropriate.
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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.
13. 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) and RB
Ultra products are new and innovative methods for road maintenance. While they
provide an environmentally safer alternative to traditional icing control and
road stabilization products, they will often 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.
14. 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.
Through February 1999, substantially all of the Company's product sales have
been to a limited number of customers. Since that time, the Company has
increased its internal sales force to six direct sales staff, improved its
distributor network, and increased its direct customer numbers to nearly one
hundred. The Company's future results of operations will be dependent in
significant part on its ability to continue penetration of markets in the United
States and 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.
15. No Dividends. While payments of dividends on the Common Stock rests with 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 the Company will pay cash dividends on the
Common Stock in the foreseeable future.
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16. Control by Present Shareholders. 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 constitutes a quorum. The present shareholders of the Company's
common stock will, by virture of their percentage share ownership and lack of
cumulative voting, be able to elect the entire Board of Directors, establish the
Company's policies and generally direct its affairs. Accordingly, investors who
purchase shares of the Company's Common Stock will not have the power to elect
even a single director and, as a practical matter, the current shareholders will
continue to effectively control the Company. Dr. Robertson and the Janke Family
Trust hold 43.76% and 17.19% of the fully diluted outstanding common shares,
respectively. [See Part I, Item 4. Security Ownership of Certain Beneficial
Owners and Management]
17. 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."]
18. Risk of De-Listing from Market and Potential Illiquidity in Trading of
Common Stock. The Company's stock was traded on the NASDAQ Over-the-Counter
Bulletin Board (OTC BB) until December 14, 1999. The Company's stock symbol was
ICEB. The Company has no assurances that NSC will be able to meet the
requirements necessary for re-listing. The Company became de-listed from such
market because certain regulatory requirements were not met; including the
timing of the filing of this SEC disclosure document (Form 10-SB). Such
de-listing could affect the liquidity of the market for the Company's common
stock. On November 19, 1999, the Company's stock symbol changed to "ICEBE"
pursuant to RULE 6530 adopted by the NASDAQ, which requires all companies, which
trade on the OTC BB to become fully reporting public companies in accord with
the Securities Act of 1933. The Company filed its Form 10-SB Registration
Statement with the SEC on November 16, 1999 to comply with Rule 6530. On
December 14, 1999, the Company's stock symbol was officially removed from the
OTC BB. This de-listing could result in higher transaction costs in buying or
selling the 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
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its strategies, business plan, plan of operations, etc. However, the Company is
presently listed and trading on the Over-the-Counter Pink Sheets (OTC PS).
19. Possible Adverse Effect of Penny Stock Regulations on Liquidity of Common
Stock in any Secondary Market. It is possible that the value of the Company's
shares of Common Stock may come within the meaning of the term "penny stock"
under 17 CFR 240.3a51-1. This may occur when a small company issues such shares,
such shares are low-priced (under five dollars), and are not traded on NASDAQ or
on a national stock exchange. The Securities and Exchange Commission has
established risk disclosure requirements for broker-dealers participating in
penny stock transactions as part of a system of disclosure and regulatory
oversight for the operation of the penny stock market. Rule 15g-9 under the
Securities Exchange Act of 1934, as amended, obligates a broker-dealer to
satisfy special sales practice requirements, including a requirement that it
make an individualized written suitability determination of the purchaser and
receive the purchaser's written consent prior to the transaction. Further, the
Securities Enforcement Remedies and Penny Stock Reform Act of 1990 require a
broker-dealer, prior to a transaction in a penny stock, to deliver a
standardized risk disclosure instrument that provides information about penny
stocks and the risks in the penny stock market. Additionally, the customer must
be provided by the broker-dealer with current bid and offer quotations for the
penny stock, the compensation of the broker-dealer and the salesperson in the
transaction and monthly account statements showing the market value of each
penny stock held in the customer's account. For so long as the Company's Common
Stock is considered penny stock, the penny stock regulations can be expected to
have an adverse effect on the liquidity of the Common Stock in the secondary
market, if any, which develops.
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.
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Item 2. Management's Discussion and Analysis or Plan of Operation.
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.
On August 31, 1996, the Company, 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 of
agricultural co-products as road de-icing and anti-icing products. The product
is marketed under the name ICE BAN(R).
The Company also owns and has established the trademark RB ULTRA(TM) in the U.S.
RB ULTRA(TM) is a biodegradable, environmentally friendly, non-toxic,
non-corrosive dust control and road stabilization product for use in the
maintenance of unpaved roads. Both products are principally comprised of
lignosulphonates, or tree glue, a co-product of the papermaking process.
Since its inception, the Company has an accumulated deficit of $5.1 million. In
consideration of the ongoing losses, the Company's auditors have expressed
concern over the Company's ability to continue as a going concern. While there
can be no assurances that its plans will be successful, the Company's management
has developed plans, and is continuing to develop plans, to overcome these
financial difficulties. The elements of those plans include, but are not limited
to the following:
a) The Company sought and obtained additional debt and equity investment
of $2,350,000 in the Company [See: Part II. Item 4. Recent Sales of
Unregistered Securities];
b) The Company is currently seeking to raise an additional $3,000,000 in
debt and equity to finance its current operational plans and expand
its sales, marketing, and distribution networks. Dr. Robertson has
committed $1,000,000 toward these efforts, having already funded
$600,000 of that, and the Company is seeking other qualified investors
to fund the remaining $2,000,000. NSC expects that these funds will be
sufficient to achieve operating profits and fuel its growth for the
foreseeable future. [See Part I, Item 1, (b) Business of Issuer, Risk
Factors, 10 Additional Capital May Not be Available on Attractive
Terms];
c) The directors of the Company have hired a new president and chief
financial officer, each of whom has senior leadership experience, to
better plan and manage operations;
d) New operating personnel have been hired to provide better product
delivery and customer satisfaction including, a director of sales and
marketing and a logistics manager. The Company is currently seeking to
hire a product engineer and operations manager;
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e) The New York office has been closed and other steps have been taken to
reduce operating costs, including the reduction of administrative
staff and associated expenses; and,
f) Marketing and sales plans are being developed and refined to further
penetrate the anti-icing, de-icing, dust suppression, and road
stabilization markets.
Plan of Operation
NSC's mission is to distribute its environmentally friendly, anti-corrosive
products for anti- icing, de-icing, dust control and road stabilization, 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 materials.
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.
Sales and Marketing Plan
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 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(R) Opportunities for Growth
IBA, now operating as a wholly owned subsidiary of NSC, has been engaged in
unique market opportunities. Currently, NSC has focused on new products and
applications technologies. NSC 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.
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Potential new market areas are being examined. NSC is continuing to develop ICE
BAN(R) products for airports and runways, and is continuing study of such
products for de-icing of airplanes is being investigated by both the FAA and
NASA. NSC also has been seeking the development of ICE BAN(R) products for the
retail market and home use.
Roadbind Opportunities for Growth
Roadbind is examining potential expansion of the use of RB ULTRA(TM) 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.
Roadbind is seeking further opportunities to continue development of aviation
runway stabilization projects in rural unimproved airports in the West and
Alaska. Roadbind 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. Roadbind is seeking to develop agreements with Central and South
American countries for testing and product sales for unpaved road and airport
runway stabilization projects. If it is to enter into such agreements, Roadbind
will need to acquire international license rights from IBUSA and/or Dr.
Robertson and the estate of Mr. Janke.
RESULTS OF OPERATIONS
Fiscal 1999 Compared to Fiscal 1998
Net Sales for the fiscal year ended July 31, 1999 for continuing operations by
the Company were $2,100,199. Net sales for the fiscal year 1998 were $1,994,415.
ICE BAN(R) sales in the fiscal year 1999, totaled $1,439,192 compared to
$1,700,646 in fiscal 1998. In fiscal 1999, RB ULTRA(TM) sales were $661,007
compared to $293,769 in the prior year. The decline in ICE BAN(R) sales in
fiscal year 1999, was due to numerous factors which include, among others, two
consecutive years of below average snowfall, changes in personnel, turnover of
early distributors, and distractions from recent litigation, all of which
resulted in delayed market penetration and increased competition. Roadbind sales
growth resulted from a full year of sales compared to the shorter introduction
period in 1998.
Cost of Products Sold. The Company's cost of product sold in fiscal year ended
July 31, 1999 was $1,601,552 (or approximately 76% of Net Sales), while the cost
of product sold for 1998 was 1,635,726 (or 82% of net sales). The reduction in
the cost of products sold relative to net sales is attributed to cost savings
achieved in the purchase of raw materials.
Selling and Administrative Expenses. Selling and administrative expenses for the
fiscal year 1999 were $2,455,157 (or approximately 116 % of net sales), while
selling and administrative expenses for 1998 were $2,953,134 (or approximately
148 % of net sales). The reduction in selling and administrative expenses is
primarily due to a $639,774 decline in legal and
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professional fees associated with legal disputes and financing matters. [See
Part II, Item 2 Legal proceedings]
Net Income (Loss). The Company had a net loss of 2,220,485 for fiscal year 1999
compared to a net loss of $2,586,718 for the fiscal year 1998.
The Six Months Ended January 2000 Compared to the Six Months Ended January 1999
Net sales for the six months ended January 31, 2000 for continuing operations by
the Company were $1,132,733 compared to $1,542,799 for the same period last
year; resulting in a decline of $410,111. The reduction in sales from the prior
year is primarily due to the Company's decision to restructure its sales
organization and reduce its dependence on a limited number of specific
customers. In doing so, the Company established its own sales force, recruited
new distributors, and reduced the size of new and existing distributor
territories. The gross profit for the current period totaled $288,339, or 25% of
sales, compared to $524,976, or 34% for the comparable period in the prior year.
The decline in profit margin is primarily due to increased price competition
from former ICE BAN(R) distributors.
Selling and administrative expenses totaled $1,065,352 compared to $1,266,736
for the same period last year. Increases in personnel costs, advertising, and
travel were more than offset by a reduction in bad debt expense of $259,912,
resulting in a reduction in expenses in the current period in the amount of
$210,384.
Losses from operations totaled $776,143 compared to losses in the prior year of
$746,760, an increase of $34,383. Other expenses totaled $31,984 bringing the
net loss to $808,127 compared to a net loss of $741,760 for the same period last
year.
While 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.
Management will seek to increase sales, lower fixed costs as a percentage of
sales and either settle or see through to successful conclusion the
non-productive litigation, which this year has burdened the Company s bottom
line. There can be no assurances that such efforts will be successful.
Liquidity and Capital Resources:
In the year ended July 31, 1999, operating activities consumed $251,878 in cash
as compared to $1,408,252 of cash consumed in the comparable period in 1998.
This decrease in cash consumed is largely due to a reduction in net loss of
$366,233 and an increase in accounts payable and accruals of $834,444. In
addition, cash consumed by operations in the prior year was reduced by the
payment of stock and options to purchase product and services totaling $426,957.
In the six months ended January 31, 2000, operating activities consumed
$1,603,404 in cash as compared to $98,945 of cash consumed in the comparable
period in 1999. This increase in cash consumed from fiscal year 1999 to 2000 is
largely due to increases in receivables, inventories,
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and prepaid expenses associated with the timing of sales, which occurred later
in the current year winter selling season compared to the same period last year.
In addition, cash consumed by operations in the prior year was reduced by the
payment of stock and options to purchase product and services totaling $370,463.
That practice was discontinued in the current year.
The Company has recorded an infusion of $2,350,000 from financing activities
since the end of its fiscal year. The infusion of funds took place in four
separate transactions with Dr. Robertson.
a) The first was a $750,000 convertible debenture bearing interest at 10%
per annum and maturing on August 11, 2001. Prior to repayment, the
principal and accrued and unpaid interest may be converted into the
Company's common stock at a price of $0.75 per share. The debenture
includes two detachable warrants entitling the holder to purchase up
to three million shares of the Company s common stock at a price of
$0.75 per share. The warrants expire as follows: one million shares on
July 28, 2000 and two million shares on August 9, 2004. As a part of
the transaction, Mr. Janke agreed to vote his shares consistent with
the desires of this investor. Certain terms of the debenture and
warrants were amended as a part of a further financing transaction
dated June 1, 2000, described below.
b) The second financing transaction, dated October 29, 1999, was for $1
million through the sale of four million shares of common stock to Dr.
Robertson. As a part of the transaction, Dr. Robertson acquired, among
other rights, the right to name up to three of seven of the directors
of the Company.
c) On June 1, 2000 Dr. Robertson invested an additional $250,000 in the
form of a convertible debenture bearing interest at 10%, maturing on
June 1, 2005, and secured by the assets of the Company. The principal
amount and unpaid accrued interest may be converted into common stock
of the Company at a rate of $0.25 per common share at anytime prior to
repayment. As a condition of the debenture, the Company amended the
terms of the $750,000 debenture and detachable warrants, dated August
11, 1999, from $0.75 to $0.25 per common share and secure the
debenture with the assets of the Company.
d) On July 31, 2000 Dr. Robertson invested an additional $350,000 in the
form of a convertible debenture bearing interest at 10%, maturing on
July 31, 2005, and secured by the assets of the Company. The principal
amount and unpaid accrued interest may be converted into common stock
of the Company at a rate of $0.25 per common share at anytime prior to
repayment.
The Company believes that it is necessary to raise additional debt or equity
capital in order to meet its short-term liquidity and solvency needs over the
next twelve months while maintaining operations and supporting the further
expansion of the sales and distribution network throughout the United States.
Currently, sales volumes do not produce sufficient profits to support the
expansion planned for the remainder of the current fiscal year. The Company is
currently seeking to raise an additional $3,000,000 in debt and equity to
finance its current operational plans and expand its sales, marketing, and
distribution networks. Dr. Robertson has committed $1,000,000 of these funds, of
which $600,000 has already been invested in the Company, and the Company is
seeking other qualified investors to fund the remaining $2,000,000. NSC expects
that these
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funds will be sufficient to achieve operating profits and fuel its growth for
the foreseeable future. There can be no assurance, however, that the Company
will secure such additional financing. There also can be no assurance that any
additional financing will be available to the Company on acceptable terms, or at
all. If issuing equity securities raises additional funds, such securities may
contain restrictive covenants and result in further dilutions to the existing
stockholders. [See Part I, Item 1, (b) Business of Issuer, Risk Factors, 10
Additional Capital May Not be Available on Attractive Terms]
The Company also believes that increased sales are necessary in order to achieve
adequate liquidity and solvency in the short-term as well as the long-term.
Stockholders' Equity consisted of 20,000,000 shares of preferred stock
authorized, none issued or outstanding at July 31, 1999, and 55,000,000 shares
of common stock authorized and 15,996,540 issued and outstanding on July 31,
1999. The common stock account was $15,997 and $15,889, on July 31, 1999 and
July 31, 1998, respectively. Additional paid in capital was $4,939,124 and
$4,512,276, on July 31, 1999 and July 31, 1998, respectively. Total
stockholders' equity (deficit) was ($299,779) and $1,590,000, on July 31, 1999
and July 31, 1998, respectively.
Uncertainties Relating to the Outcome of Patent Litigation
An adverse result in one or more of the actions referred to in Part II, Item 2
Legal Proceedings could result in a material adverse effect on the Company's
ability to distribute its products by allowing other parties to distribute
competing products under the "Toth" patent. In addition an adverse outcome could
result in a monetary damage award against the Company, which exceeds the liquid
resources available to the Company.
Year 2000
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 have 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.
To date, the Company has not experienced any noticeable Year 2000 difficulties.
The Company intends to continue to monitor its Year 2000 compliance and to
correct any noncompliance as it is discovered.
34
<PAGE>
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. Historically, there has been little inflationary impact on raw
material prices for the company. This is due to by-product nature and abundant
supply of raw materials. In addition a significant portion of the raw materials
used by the Company is also used by its competitors, which would result in
upward pressure on prices for everyone in the market place. These factors work
to reduce the impact of inflation on profit margins.
Seasonality
Due 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 fiscal quarters. However, periods of no ice and snow affect
profitability, especially during the first and fourth calendar quarters. New
management is evaluating the relative 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. The
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.
Product Research and Development
Mr. Janke performed ongoing Research and Development for the Company. In
addition, the Company maintains the practice of continuous product development
and innovation in response to customer needs. The Company does not plan any
substantial product research and development ("R&D") through fiscal year ended
2001. 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 through fiscal
year ended 2001. The Company has recently moved its operations to Chesapeake,
Virginia.
Internal Employment Level
The Company does not expect any significant changes in the number or
compensation of its employees. On March 17, 2000, Joseph S. Kroll voluntarily
resigned his position as Vice President and Chief Operating Officer of the
Company. His duties have been assigned to the President and Chief Financial
Officer, among others. The Company is in the process of analyzing the effect of
this resignation, and is studying appropriate actions to take.
35
<PAGE>
Item 3. Description of Property.
The Company does not currently own any real property and leases its corporate
headquarters and sales office at 100 Volvo Parkway, Suite 200, Chesapeake,
Virginia 23320. The Company leases its executive offices pursuant to a lease
dated January 10, 2000 from Suntrust Bank. The Company currently rents
approximately 2,399 square feet at a base monthly rent of $2,799. The current
lease term commenced on January 10, 2000 and will terminate on May 31, 2005.
The Company also leases 2,043 of office space at its former headquarters at 1201
US Highway 1, suite 205, North Palm Beach, Florida 33408 at a monthly rent,
including common area maintenance of $2,950. This lease expires March 31, 2002.
The Company is working with the landlord to locate a replacement tenant for this
location.
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 was 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 there were halted in August 1999. The lease was terminated on
February 8, 2000.
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, the
Company 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 the Company believes he effectively repudiated the
contract.
36
<PAGE>
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:
[GRAPHIC?OMITTED]
(1) (2) (3) (4)*
Title of Name and Address Amount and Percent of
Class of Beneficial Owner Nature of Beneficial Class
---------- ------------------- -------------------- ----------
Common Stock Warren D. Johnson, Jr. 4,929,524 (1) 17.34%
5111 S.W. Bay Point Circle
Palm City, FL 54990
Common Stock Janke Family Vinasz Trust, 4,889,000 17.19%
511 New Hope Road
Lahaska, PA 18938
Common Stock Dr. M. G. "Pat" 12,440,000 (2) 43.76%
Robertson,Chairman
977 Centerville Turnpike
Virginia Beach, VA 23463
----------------------
* Based on 28,426,540 fully diluted shares outstanding on July 31, 2000.
(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. These shares are also subject
to stock rescission litigation by the Company.
(2) Included in the total shares owned by Dr. Robertson are 4,040,000 share
owned directly, a right to convert the $750,000, $250,000, and $350,000
debentures at $0.25 per share totaling 5,600,000 common shares, expiring on
August 11, 2001, June 1, 2005, and July 26, 2005, respectively. Also, included
in the total shares owned by Dr. Robertson is an option to exercise stock
warrants to purchase an additional 3,000,000 shares of the Company's common
stock exercisable at $.25 a share and expiring on June 1, 2005. As of the date
of this filing these warrants have not been exercised. (See Part II, Item 4.
Recent Sales of Unregistered Securities.)
37
<PAGE>
(b) Security Ownership of Management.
For directors and officers:
(1) (2) (3) (4)*
Title of Name and Address Amount and Percent of
Class of Beneficial Owner Nature of Beneficial Class
---------- ------------------- -------------------- ----------
Common Stock Dr. M. G. "Pat" Robertson, 12,440,000 (1) 43.76%
Chairman
977 Centerville Turnpike
Virginia Beach, VA 23463
Common Stock Jim W. Foshee, President 0 0
100 Volvo Parkway, Suite 200
Chesapeake, VA 23320
Common Stock Michael Klansek, Treasurer 0 0
100 Volvo Parkway, Suite 200
Chesapeake, VA 23320
Common Stock Louis A. Isakoff, Secretary 0 0
977 Centerville Turnpike
Virginia Beach, VA 23463
Common Stock J. Nelson Happy, 0 0
Director
100 Volvo Parkway, Suite 200
Chesapeake, VA 23320
Common Stock Robert E. Freer 7,000 0.02%
Director
100 Volvo Parkway, Suite 200
Chesapeake, VA 23320
Common Stock Lowell W. Morse 150,000 0.52%
Director
100 Volvo Parkway, Suite 200
Chesapeake, VA 23320
Common Stock Total Directors & Officers 12,597,000 44.31%
-------------------
* Based on 28,426,540 fully diluted shares outstanding on July 31, 2000
(1) Included in the total shares owned by Dr. Robertson are 4,040,000 share
owned directly, a right to convert the $750,000, $250,000, and $350,000
debentures at $0.25 per share totaling 5,600,000 common shares, expiring on
August 11, 2001, June 1, 2005, and July 26, 2005, respectively. Also, included
in the total shares owned by Dr. Robertson is an option to exercise stock
warrants to purchase an additional 3,000,000 shares of the Company's common
stock exercisable at $.25 a share and expiring on June 1, 2005. As of the date
of this filing these warrants have not been exercised. [See Part II, Item 4.
Recent Sales of Unregistered Securities. and See Footnote (2) (a) of Item 4.
Security Ownership of Certain Beneficial Owners and Management, (a) Security
Ownership of Certain Beneficial Owners.]
38
<PAGE>
Item 5. Directors, Executive Officers, Promoters and Control Persons.
(a) Identification of Directors and Executive Officers
Dr. M. G. "Pat" Robertson, age 70, has served as Chairman of the Board of NSC
since December 10, 1999. He serves for a three year term and until his successor
is duly elected an qualified. Dr. Robertson is an internationally known
religious broadcaster, businessman, educator, and philanthropist and former
candidate for the Presidential nomination for the Republican Party. He has
served as Chairman of the Board of The Christian Broadcasting Network, Inc.
("CBN"), a global Christian ministry, since January 1960, Chief Executive
Officer and President of CBN from January 1960 to January 1987 and from January
1990 to September 1993, and Chief Executive Officer of CBN from September 1993.
Dr. Robertson served as the Chairman and controlling shareholder of
International Family Entertainment, Inc., the owner of The Family Channel cable
television network, from 1989 until its sale to a subsidiary of News Corporation
in 1997.
Currently, Dr. Robertson is also Chairman of Zhaodaola Limited, Freedom Gold,
Ltd., and CENCO Refining Company and in addition to his role at CBN, serves in
the nonprofit world as 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, has been the President and Chief Executive officer of the
Company since November 1999. He serves for an open-ended term. From 1987 until
1992 Mr. Foshee held various executive positions with the AMF Companies ("AMF")
located in Richmond, Virginia. AMF is an international manufacturer of bowling
equipment. 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., a home heating equipment and supply distributor
headquartered in Mechanicsville, Virginia. From 1995 until 1998 Mr. Foshee was
the President of North American Marketing, Inc., a direct mail production and
marketing company in Richmond, Virginia. Immediately prior to joining the
Company, Mr. Foshee was the President of Prime Property Developers, Inc., a home
construction company in Richmond, Virginia.
Michael Klansek, age 44, has been the Chief Financial Officer of the Company
since December 1999. He serves for an open-ended term. From 1997, Mr. Klansek
has held the position of Chief Financial Officer of Robertson Asset Management,
an investment management organization owned by Dr. Robertson. From 1987 to 1996,
he held the positions of Chief Financial officer and Controller for Oster
Communications, Inc., a publishing and communications concern. From college to
1987, Mr. Klansek spent nine years at KPMG Peat Marwick, the international
accounting and consulting firm.
J. Nelson Happy, age 56, was a member of the Board of Directors of the Company
from April 8, 1998 until a leave of absence beginning June 30, 1998 and ending
August, 1999. At the December 10, 1999 Annual Shareholder Meeting, Mr. Happy was
re-elected to a three year term as director. Since 1998, Mr. Happy has served as
the Chief Executive Officer of Cenco Refining
39
<PAGE>
Company, Inc. located in Santa Fe Springs, California. From 1993 to 1999, Mr.
Happy was Dean and Professor of Regent University School of Law (Regent). 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, has been a Board Member of the Company since April
8, 1998. On November 12, 1998, Mr. Freer was re-elected as director to a term
ending in November, 2000. 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 practiced with the
firm's predecessor organization since 1995. Mr. Freer is a Registered Investment
Advisor and President of Monticello Capital, Ltd., and Black Hawk Bermuda, Ltd.
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
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, has been a Board Member of NSC since April 8,
1998. On November 12, 1998, Mr. Beese was re-elected to a term ending November,
2001. Mr. Beese joined Riggs & Co. in 1998, and is currently President of Riggs
Capital Partners an investment 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. Mr. Beese was
with BT Alex Brown from 1995 to 1997. In 1992, Mr. Beese was nominated by
President Bush to be a 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.
Lowell W. Morse, age 62, has been a Board Member of the Company since November
9, 1999. At the Annual Meeting of Shareholders on December 10, 1999, Mr. Morse
was elected to a three year term as director. Mr. Morse has served as the
chairman of Morse & Associates, Inc., and
40
<PAGE>
real estate and investment management company, since 1972. In addition, Mr.
Morse is the founder and has been the Chairman of The Bagel Basket, Inc. a chain
of bagel stores, since 1993, and is the founder and has been the Chairman of
Cypress Ventures, Inc. a real estate development company, since 1989. Mr. Morse
has also served as the former Chairman of the Board of Trustees of Regent
University, and a director of Comerica California, Inc. a subsidiary of
Comerica, Inc. a publicly traded bank holding company. Mr. Morse is also a
member of the board of directors of Christianity.com, Inc. and Zhaodaola
Limited.
(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.
Item 6. Executive Compensation.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
--------------------- -----------------------------
-------------------- -----------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted Securities
Annual Stock underlying LTIP All Other
Name and Principal Compensa- Award(s) options/ Payouts Compensa-
Position Year Salary ($) Bonus ($) tion ($) ($) SARS (#) ($) tion ($)
-------------------- ----- ----------- ---------- ---------- ----------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dr. M. G. Robertson, 1999 $ 0 $ 0 $ 0 $ 0 0 $ 0 $ 0
Chairman 2000 $ 0 $ 0 $ 0 $ 0 0 $ 0 $ 0
Jim W. Foshee, 1999 $ 0 $ 0 $ 0 $ 0 0 $ 0 $ 0
President 2000 $100,000 $ 0 $ 0 $ 0 0 $ 0 $ 0
Michael D. Klansek, 1999 $ 0 $ 0 $ 0 $ 0 0 $ 0 $ 0
Treasurer 2000 $ 75,000 $ 0 $ 0 $ 0 0 $ 0 $ 0
Louis Isakoff, 1999 $ 0 $ 0 $ 0 $ 0 0 $ 0 $ 0
Secretary 2000 $ 0 $ 0 $ 0 $ 0 0 $ 0 $ 0
-------------------- ----- ----------- ---------- ---------- ----------- ----------- -------- -----------
</TABLE>
41
<PAGE>
1999 Stock Option Plan
On November 11, 1998, one and one-half million (1,500,000) 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".
<TABLE>
<CAPTION>
SUMMARY OF NON-QUALIFIED STOCK OPTIONS
--------------------------------------------------------------------------------
Percent of
Shares
Issued in
Number of Fiscal Year Grant Expiration
Name Shares 1999 Date Date Price
<S> <C> <C> <C> <C> <C>
Board of Directors:
--------------------- ---------- ----------- ------- ----------- ----------------
George Janke(1) 150,000 34.5%1 2/17/99 2/17/09 $1.10 per share
--------------------- ---------- ----------- ------- ----------- ----------------
J. Carter Beese 50,0000 11.5% 2/17/99 2/17/09 $1.05 per share
--------------------- ---------- ----------- ------- ----------- ----------------
Robert E. Freer 45,0000 10.3% 2/17/99 2/17/09 $1.05 per share
--------------------- ---------- ----------- ------- ----------- ----------------
Lowell W. Morse - 0.0%
--------------------- ---------- ----------- ------- ----------- ----------------
Other Key Personnel:
--------------------- ---------- ----------- ------- ----------- ----------------
Floyd Chapman 25,000 5.7% 2/17/99 2/17/09 $1.05 per share
--------------------- ---------- ----------- ------- ----------- ----------------
James McCann 25,000 5.7% 2/17/99 2/17/09 $1.05 per share
--------------------- ---------- ----------- ------- ----------- ----------------
Raymond Marshall 25,000 5.7% 2/17/99 2/17/09 $1.05 per share
--------------------- ---------- ----------- ------- ----------- ----------------
Libo Fineberg 10,000 2.3% 2/17/99 2/17/09 $1.05 per share
--------------------- ---------- ----------- ------- ----------- ----------------
Dorothy Morgan 5,000 1.1% 2/17/99 2/17/09 $1.05 per share
--------------------- ---------- ----------- ------- ----------- ----------------
Dr. Robert Hartley 5,000 1.1% 2/17/99 2/17/09 $1.05 per share
--------------------- ---------- ----------- ------- ----------- ----------------
Total Non-Qualified
Options 340,000 78.2%
--------------------- ---------- ----------- ------- ----------- ----------------
</TABLE>
(1) George Janke expressed that under his current employment contract he was
granted stock due in 1998. George Janke waived this stock. The position of the
Company is that Mr. Janke waived his rights to future payment of any kind under
this contract after his termination as Chief Executive Officer. Mr. Janke
contended the contract was simply a waiver for only one (1) year
42
<PAGE>
and that the Company remains obligated for the balance of the contract term. The
issue remains unresolved. Mr. Janke, however, has expressed that he would like
to have the 150,000 shares that were waived due under the option as outlined
above, and each year thereafter according to the terms and conditions of said
employment contract. With the death of Mr Janke, this matter is resolved.
(2) Lowell Morse was appointed to the Board on November 9, 1999 and was not
entitled to Non- qualified Options as of the date of this registration
statement.
<TABLE>
<CAPTION>
SUMMARY OF NON-QUALIFIED STOCK OPTIONS
--------------------------------------------------------------------------------
Percent of
Shares
Issued in
Number of Fiscal Year Grant Expiration
Name Shares 1999 Date Date Price
<S> <C> <C> <C> <C> <C>
--------------------- ---------- ----------- ------- ----------- ----------------
Dave Cook 5,000 1.1% 2/17/99 11/29/99 $1.05 per share
--------------------- ---------- ----------- ------- ----------- ----------------
Donald Addison 5,000 1.1% 2/17/99 8/5/00 $1.05 per share
--------------------- ---------- ----------- ------- ----------- ----------------
Harry Pack 25,000 5.7% 2/17/99 11/13/99 $1.05 per share
--------------------- ---------- ----------- ------- ----------- ----------------
Kim Wilkins 5,000 1.1% 2/17/99 4/13/00 $1.05 per share
--------------------- ---------- ----------- ------- ----------- ----------------
Leo C. Palmer 25,000 5.7% 2/17/99 2/17/09 $1.05 per share
--------------------- ---------- ----------- ------- ----------- ----------------
Richard Weinert 5,000 1.1% 2/17/99 5/15/00 $1.05 per share
--------------------- ---------- ----------- ------- ----------- ----------------
Ryan Bridges 5,000 1.1% 2/17/99 6/14/00 $1.05 per share
--------------------- ---------- ----------- ------- ----------- ----------------
Sandra Funk 5,000 1.1% 2/17/99 4/20/00 $1.05 per share
--------------------- ---------- ----------- ------- ----------- ----------------
Sandra Wolfe 10,000 2.3% 2/17/99 11/29/99 $1.05 per share
--------------------- ---------- ----------- ------- ----------- ----------------
Valerie Muzzio 5,000 1.1% 2/17/99 4/13/00 $1.05 per share
--------------------- ---------- ----------- ------- ----------- ----------------
Total Incentive Options 95,000 21.8%
--------------------- ---------- ----------- ------- ----------- ----------------
Total Non-Qualified and 435,000 100.0%
Incentive Options
--------------------- ---------- ----------- ------- ----------- ----------------
</TABLE>
Item 7. Certain Relationships and Related Transactions.
The Company believes that the terms of the transactions provided in the
remainder of this section are at least as favorable as those that could have
been secured in an arm's length transaction.
43
<PAGE>
1. On August 16, 1996, the Company issued six million four hundred thousand
shares of its restricted common stock (6,400,000) to Mr. Warren Johnson, a
former President and Director of the Company, and five million eight-hundred
thousand shares (5,800,000) to Mr. Janke, as trustee, for the benefit of certain
members of Mr. Janke's family. NSC received a total of $12,200 from the founders
(Mr. Warren Johnson and Mr. Janke) as consideration for the above shares. The
6,400,000 shares of common stock issued to Mr. Warren Johnson are subject to a
recession action on the part of the Company.
2. On August 20, 1996, the then Vice President of the Company, Mr. 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 redefine the exercise dates and exercise prices of the options
portion of the agreement. Mr. Janke resigned from his position of Chief
Executive Officer on July 30, 1999. He later accepted a position performing
product research at an annual salary of $40,000. Mr. 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 contended that the contract was
simply a waiver for only one (1) year and that the Company remains obligated for
the balance of the contract term. With his death on April 26, 2000, the issue of
future stock options under the contract is resolved. [See Part I, Item 6.
Executive Compensation, "1999 Stock Option Plan".]
3. On August 31, 1996, NSC entered into an exclusive licensing agreement with
IBUSA to exploit certain patents, patents pending and trademarks assigned to
IBUSA. IBUSA is a Company partially owned by a trust created by ICE BAN(R)'s
co-inventor, Mr. Janke , and by NSC's chairman, Dr.. Robertson. 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 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
IBNY. Prior to the acquisition of IBNY, the rights in the "out-territories" to
patent and trademark rights were in dispute. The corporate acquisition,
development, and registration of intellectual property rights resolved the
disagreements. On March 30, 1998, IBUSA and NSC entered into an addendum to
their previous agreement. Under the terms of the addendum IBUSA loaned one
hundred and twenty- five thousand ($125,000) dollars to NSC's account for it to
use such to pay for inventory and operations, at the sole discretion of NSC. NSC
agreed to pay one ($1.00) dollar per ton additional fee to IBUSA for all NSC
products sold annually up to twenty-five thousand ($25,000) dollars per year for
six years, which would include interest and principal. NSC also acquired the
right to market the trademarked product TEMBIND(R) from Tembec, Inc. NSC
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). ICE BAN(R) and RB ULTRA(TM) are the
primary products offered by the Company. The above license agreement, as
amended, requires a quarterly royalty payment of 2% of sales, but not to
44
<PAGE>
exceed $3.00 per ton nor to be less than $2.00 per ton. [See Part I, Item 1,
Description of Business, (a) Business Development.]
4. On August 31, 1996, IBUSA, for consideration of one hundred thousand dollars
($100,000), granted NSC the use of certain patent rights related to use in
roadway deicing and anti-icing products, 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. 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 Uncertainty Regarding Protection of Proprietary Rights.] The rights
to the excluded territory were transferred to NSC on July 29, 1997 as a result
of the acquisition of IBNY by NSC in 1997 and an amendment to exclusive license
area agreement executed on August 31, 1998, between NSC 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(R)", (2) "ICE BAN MAGIC" and (3) the ICE BAN(R) logo.
These trademarks are "for anti-icing and de-icing composition for use on
exterior surfaces." The Company did not pay any royalties in 1997 and paid
$13,430, and $24,799_in royalty payments to IBUSA in fiscal years ended 1998,
and 1999, respectively.
5. On March 5, 1997, an agreement was executed between Sears and IBNY, which
called for Sears to provide storage and throughput (moving product in and out of
storage) services in Rome, NY. Sears is considered a related party, because of
its membership in the SEACO or which the Company is a party. Such service
included 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
called for minimum quantities of throughput services to be provided by IBNY.
This contract is binding on any successors of such corporations. These services
were billed monthly with 30-day credit terms. The Company paid $5,239 under the
terms of this agreement in fiscal year ended 1999. No other amounts have been
paid. The terms of the agreement are subject to legal disputes, which are
unresolved at this time. [See Part II, Item 2. Legal Proceedings]
6. 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 Johnson
was the owner of the property and lessor. Mr. Jeffrey Johnson was a Senior
Vice-President, Chief Operating Officer and a Director of the Company at the
time.
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.
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7. 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, valued at
$6,916,000. IBNY was owned in large measure by relatives of Warren D. Johnson,
Jr., including Mr. Jeffrey Johnson, who became the Vice President and a director
of the Company. Mr. Jeffrey Johnson was also an officer, director and
shareholder of IBNY prior to the acquisition. Furthermore, 100,000 shares of the
common stock of the Company, valued at $531,900, was issued to IBUSA and as part
of that transaction IBUSA received an assignment of the Patent Application for
the Brewers Condensed Solubles (BCS) by-product. IBNY claimed the rights to ICE
BAN(R) for upstate New York (above the 42nd parallel), and owned the rights for
Erie County, Pennsylvania, and claimed these rights before the Company was
formed in 1996. IBNY also owned the rights to market TEMBIND(R) in the United
States.
8. On April 23, 1998, the Company issued 35,000 shares of its common stock,
valued at $139,344, to Baise, Miller & Freer PC of Washington, D.C. as payment
of professional fees. One of the principals in that firm, Robert E. Freer, Jr.,
is also a Director of the Company. The Company relied upon the exemption from
registration provided byss.4(2) of the Act and Rule 506.
9. 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. At the time, there existed a
commonality of members of the Board of Directors and officers of both the
Company and IBAC Corporation. There was also substantial ownership of stock in
each company by Mr. Janke, and Mr. Jeffrey Johnson was Vice President and a
Director of IBAC Corporation and the Company.
10. 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. Mr. Janke and IBUSA agreed to share in the leasing of this
warehouse space, which is $716 per month.
11. 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.
12. On August 25, 1998, a letter arrangement was entered into Sears, SEACO, and
by Jeffrey Johnson, purportedly on behalf of the Company. NSC disputes whether
Mr. Johnson had authority to sign the letter. The arrangement purportedly
provided for Sears to purchase up to one and one-half million gallons
(1,500,000) of ICE BAN(R), subject to certain provisions relating to resale to
SEACO. The terms of the agreement are subject to legal disputes, which are
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unresolved at this time. [See Part II, Item 2. Legal Proceedings] This agreement
has recently expired.
13. On October 8, 1998, the Company issued 19,674 shares of its common stock
valued at $108,323 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.
14. On February 10, 1999, the Company issued 22,687 shares of its common stock
valued at $109,143 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.
15. On April 16, 1999, the Company issued 17,957 shares of its common stock
valued at $42,287 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.
16. On or about, May 5, 1999, Richard Jurgenson was elected Chairman of the
Board of Directors. Mr. Jurgenson first joined the Company's board in April 1998
and was President of Minnesota Processors as well as one of its founders. In
August 1999 he became Chief Executive Officer of the Company. On November
22,1999 he voluntarily resigned the position. On January 5, 2000 Mr. Jurgenson
voluntarily resigned from the Board of Directors.
17. On August 11, 1999, the Company borrowed $750,000 from Dr. Robertson in the
form of a convertible debenture bearing interest at 10% per annum and maturing
on August 11, 2001. Prior to repayment, the principal and accrued and unpaid
interest may be converted into the Company's common stock at a price of $0.75
per share. The debenture includes two detachable warrants entitling the holder
to purchase up to three million shares of the Company's common stock at a price
of $0.75 per share. On June 1, 2000, the warrants were cancelled and replaced by
Warrant W-3A, for three million shares at an exercise price of $0.25 per share.
Warrant W- 3A expires on May 15, 2005. 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.
18. On October 31, 1999, the Company sold four million shares of common stock to
Dr. Robertson for $1 million. As a part of the transaction, Dr. Robertson
acquired, among other rights, the right to name up to three of seven of the
directors of the Company. 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. Dr. Robertson was elected Chairman of the Board of Directors
subsequent to this transaction.
19. On June 1, 2000 Dr. Robertson invested an additional $250,000 in the form of
a convertible debenture baring interest at 10%, maturing on June 1, 2005, and
secured by the assets of the Company. The principal amount and unpaid accrued
interest may be converted into common stock of the Company at a rate of $0.25
per common share at anytime prior to repayment. As a condition of the debenture,
the Company amended the terms of the $750,000 debenture and detachable
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warrants, dated August 11, 1999, reducing the price from $0.75 to $0.25 per
common share and secure the debenture with the assets of the Company. 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.
20. On July 31, 2000 Dr. Robertson invested an additional $350,000 in the form
of a convertible debenture bearing interest at 10%, maturing on July 31, 2005,
and secured by the assets of the Company. The principal amount and unpaid
accrued interest may be converted into common stock of the Company at a rate of
$0.25 per common share at anytime prior to repayment. 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.
Item 8. Description of Securities.
(a) Common or Preferred Stock.
The Company is authorized to issue 20,000,000 or preferred stock, $0.01 par
value per share (the "Preferred Stock"), and 55,000,000 shares of common stock,
$0.01 par value per share (the "Common Stock"). As of January 31, 2000 there
were no shares of preferred stock outstanding and 19,996,540 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, $0.01
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.
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(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.
On November 19, 1999, the Company's stock symbol changed from "ICEB" to "ICEBE"
pursuant to RULE 6530 adopted by NASDAQ which requires all companies which trade
on the OTC BB to file an SEC disclosure document (Form 10-SB) and become a fully
reporting public company in accord with the Securities Act of 1933. On December
14, 1999, the Company's stock symbol was officially removed from the OTCBB and
is presently listed on the Over-the- Counter Pink Sheets (OTC PS) and is trading
under the symbol "ICEB". As of January 31, 2000 there were 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,
markdown 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.
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<TABLE>
<CAPTION>
Historical Quotes*
Fiscal Year Normal Calendar High Low
Year
---------------- ------------------ ----- ----
<S> <C> <C> <C>
2nd Quarter 2000 Nov 99 to Jan 00 1.87 .62
1st Quarter 2000 (Aug 99 to Oct 99) 2.69 0.81
4th Quarter 1999 (May 99-Jul 99) 1.56 0.81
3rd Quarter 1999 (Feb 99-Apr 99) 2.13 1.38
2nd Quarter 1999 (Nov 98-Jan 99) 5.00 2.00
1st Quarter 1999 (Aug 98-Oct 98) 6.50 3.88
4th Quarter 1998 (May 98-Jul 98) 7.00 4.66
3rd Quarter 1998 (Feb 98-Apr 98) 7.50 5.50
2nd Quarter 1998 (Nov 97-Jan 98) 14.25 6.55
1st Quarter 1998 (Aug 97-Oct 97) 14.25 5.00
</TABLE>
--------------------------
* Data used in the construction of this chart was obtained from Yahoo!
Finance.
(b) Holders.
As of January 31, 2000 the approximate number of holders of record of the
Company's common stock is 482.
(c) Dividends.
To date the Company has not 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.
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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 Mr. 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. Mr. Johnson has filed an arbitration proceeding and
the Company has responded with an answer and defenses. The arbitration
proceeding has commenced hearing, but is currently in recess until November 27,
2000.
2. Dianne Johnson et al. vs. Ice Ban America, et al., 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 NSC and IBAC, Inc. NSC has successfully filed two Motions
to Dismiss. NSC and IBAC filed a counterclaim to rescind the sale of the
founders stock in July 1999. The stock owned by the Johnson family is founders
stock for which the Johnson family paid approximately $4,000 to NSC and $6,000
to IBAC. NSC and IBAC also filed a 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. On July
5, 2000, the plaintiffs voluntarily dismissed the action against the Company,
but have indicated that they may attempt to amend the complaint discussed in
item 3. below, to raise similar claims. The Company's counterclaims remain
active in this proceeding.
3. Dianne Johnson et al. vs. Natural Solutions Corporation, et al., 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 IBNY to the Company, which
sale occurred in the summer of 1997, based upon alleged fraudulent
misrepresentations surrounding the ownership of the so-called Toth patent. The
Company has filed an answer, affirmative defenses, and a counterclaim similar to
the counterclaim in item #2, immediately above. Discovery is proceeding, and the
case is not set for trial in February 2001.
4. Natural Solutions Corporation et al. vs. Sears Oil, 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 the Company and IBUSA for tortious interference with the
Company's rights to the so-called Toth patent acquired by Mr. Janke 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
are scheduled. Some limited discovery on jurisdiction has been undertaken in
this case.
5. 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 the United States District Court
for the Northern District of New York. This action alleges fraudulent
misrepresentations based upon the ownership of the Toth patent and fraudulent
inducement with respect to a certain contract for the distribution of product in
New England, based
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upon misrepresentations regarding ownership of the Toth patent. The Plaintiff
amended their Complaint to allege 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 products in the New England
States. The Judge denied the Plaintiff's request for a temporary restraining
order and Sears withdrew its claim for injunctive relief. NSC will answer the
complaint and file a counterclaim in the next twenty days. The case is not set
for trial.
6. Ice Ban America, Inc. vs. Innovative Municipal Products, Inc., Case No.
99-00710, in the Supreme Court of Oneida County, State of New York. This lawsuit
was filed on March 24, 1999, by NSC to recover two hundred fifty-thousand
dollars ($250,000) owed to it by its New York distributor, Innovative Municipal
Products ("Innovative"). Innovative has filed affirmative defenses and
counterclaims based upon the alleged misrepresentation regarding the Toth
patent. NSC has answered and filed affirmative defenses to the counterclaim.
Discovery is ongoing in this case, and it has not been set for trial, although
the Company has filed a certificate that it is ready to proceed to trial.
7. Natural Solutions Corporation v. Terrabind International, Inc., Richard
Jurgenson, Joseph Kroll, Richard Weinert: This case was filed by the Company on
May 15, 2000 in the Circuit Court of Palm Beach County, Florida, seeking damages
and injunctive relief against three former corporate officers, who formed
Terrabind International, Inc. The lawsuit claims that the three officers
breached their fiduciary duties to the Company by usurping certain corporate
opportunities, both in prospective sales and potential patent applications, in
the Company's Roadbind America Division. The action seeks damages and injunctive
relief to prevent usurpation of other corporate opportunities and inventions
developed by the Company.
Item 3. Changes in and Disagreements with Accountants.
The Company's auditor was Cronin & Co., Certified Public Accountants, with it
principal address at 12 Blandford Lane, Fairport, NY 14450. The Company has had
no disagreements with Cronin & Co. At the 1999 annual meeting of shareholders,
the shareholders approved a change in auditors to PriceWaterhouseCoopers to
serve as the independent public accountants of Natural Solutions Corporation for
its fiscal year ending July 31, 2000. The Company appointed
PriceWaterhouseCoopers to serve as its auditors on June 20, 2000.
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 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
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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").
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
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<PAGE>
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.
On August 16, 1996 Mr. Janke, as trustee, received five million eight--hundred
thousand (5,800,000) shares of common stock, $0.001 par value per share or
$5,800, and Warren D. Johnson, Jr. received six million four hundred thousand
(6,400,000) shares of common stock, $0.001 par value per share or $6,400. 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.
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 July 29, 1997, in an exchange of stock, the Company acquired IBNY, the only
claimant to territorial rights to ICE BAN(R) in the U.S. (i.e. upstate New York
and Erie, Pennsylvania) which were not included in the original license to the
Company. The Company issued 1,300,000 shares of its restricted common stock
valued at $6,916,000 to acquire 100% of the common stock of IBNY. 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
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from IBUSA to the TEMBIND(R) product. As part of the transaction, IBNY was
obligated to assign the above rights to IBUSA 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 valued at $531,900. As part of this transaction, the above mentioned
100,000 shares of the Company's common stock were issued to IBUSA for 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. Such reliance was based upon the fact that
(i) the issuance of the shares did not involve a public offering and (ii) each
of the parties is an accredited investor and had full access to the information
regarding the Company necessary to make an informed investment decision by
virture of his or her position as an employee, officer, and/or director of the
Company and/or as a party related to an officer or director.
On August 22, 1997, the Company issued to David Wright a total of 5,000 shares
of its common stock for professional services rendered to the Company valued at
$21,875, Ann M. Owen a total of 2,000 shares of its common stock for
professional services rendered to the Company valued at $8,750, Continental
Capital & Equity Corp. a total of 55,000 shares of its common stock for
professional services rendered to the Company valued at $240,625, and Cullen M.
Ryan a total of 10,000 shares of its common stock for professional services
rendered to the Company valued at $43,750. 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 of its common stock for professional services
rendered to the Company valued at $43,750. 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 of its common stock for
professional services rendered to the Company valued at $175,000. 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.
55
<PAGE>
Summary of Company's Warrants Issued to Dr. Robertson on November 7, 1999
<TABLE>
<CAPTION>
Date Designation Exercise Exercise Exercise Shares Replaced
Date Date Price by
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>
On December 19, 1997, the Company issued 4,651 shares of its common stock
valued at $24,947 to Minnesota Processors 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
valued at $153,729 to Minnesota Processors 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 valued at
$41,125 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 valued
at $139,350 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 valued at
$65,000 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 valued at
$4,695 to Minnesota Processors in payment for product. The Company relied upon
the exemption from
56
<PAGE>
registration provided byss.4(2) of the Act and Rule 506 andss.80A.15 (Subd.
2)(h) of the Minnesota Code.
On July 17, 1998, the Company issued 20,000 shares of its common stock valued at
$103,750 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 valued
at $50,000 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 valued
at $3,371 to Minnesota Processors 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 valued
at $108,323 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 January 11, 1999, the Company issued 200 shares of its common stock valued at
$626 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 valued
at $41,089 to Minnesota Processors 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
valued at $109,143 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 valued
at $68,997 to Minnesota Processors 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 valued at $6,493 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 valued
at $42,287 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.
57
<PAGE>
On August 11, 1999, the Company borrowed $750,000 from a related party in the
form of a convertible debenture bearing interest at 10% per annum and maturing
on August 11, 2001. Prior to repayment, the principal and accrued and unpaid
interest may be converted into the Company's common stock at a price of $0.75
per share. The debenture includes two detachable warrants entitling the holder
to purchase up to three million shares of the Company's common stock at a price
of $0.75 per share. The warrants expired as follows: one million shares on July
28, 2001 and two million shares on August 9, 2004. 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. In the event that the Company is unable to pay
back the debenture at the end of two years and Dr. Robertson or the holder does
not wish to convert said debenture into shares of the Company's stock, Mr.
Janke, has secured this debenture with collateral. 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. Certain terms of the debenture and detachable
warrants were amended in conjunction with the convertible debenture dated June
1, 2000.
Summary of Company's Warrants Issued to Pat Robertson on August 10, 1999 as
follows:
<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 31, 1999, the Company sold four million shares of common stock to Dr.
Robertson for $1 million. As a part of the transaction, Dr. Robertson acquired,
among other rights, the right to name up to three of seven of the directors of
the Company. 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. Dr.
Robertson was elected Chairman of the Board of Directors subsequent to the
closing of the aforementioned stock purchase agreement. 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 June 1, 2000 Dr. Robertson invested an additional $250,000 in the form of a
convertible debenture baring interest at 10%, maturing on June 1, 2005, and
secured by the assets of the Company. The principal amount and unpaid accrued
interest may be converted into common stock of the Company at a rate of $0.25
per common share at anytime prior to repayment. As a condition of the debenture,
the Company amended the terms of the $750,000 debenture and detachable
58
<PAGE>
warrants, dated August 11, 1999, to reduce the exercise price from $0.75 to
$0.25 per common share and to secure the debenture with the assets of the
Company. 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 July 31, 2000 Dr. Robertson invested an additional $350,000 in the form of a
convertible debenture bearing interest at 10%, maturing on July 31, 2005, and
secured by the assets of the Company. The principal amount and unpaid accrued
interest may be converted into common stock of the Company at a rate of $0.25
per common share at anytime prior to repayment. 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 Warrant Issued to Dr. Robertson as of June 1, 2000 is as
follows:
Date Designation Exercise Exercise Exercise Shares Replaces the
Date Date Price following
Starting Ending warrants
-------- ----------- -------- -------- ----------- -------- ------------
5/15/2000 W-3A 5/15/2000 5/15/2005 $0.25/share 3,000,000 W-1A and W-2A
from 8/11/99
Agreement)
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.
59
<PAGE>
PART F/S
Financial Statements for the Fiscal Years 1998 and 1999
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.
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-9
60
<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.
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 report dated September 2, 1998, we expressed an opinion that the 1998
financial statements fairly presented the financial position, results of
operations, cash flows, and changes in stockholders' equity. As described in
Note 5, the Company has changed its method of accounting and restated the 1998
financial statements for the acquisition of Ice Ban, Inc. from the pooling of
interest method to the purchase accounting method, with which we concur.
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 incurred losses since its
inception, August 14, 1996, and has aggregate 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. Management plans to overcome this
problem are described in note 15. September 2, 1999, except for note 14, which
is as of December 3, 1999, and except for note 5, which is August 7, 2000
S/S Cronin & Company
Certified Public Accountants
F-1
61
<PAGE>
NATURAL SOLUTIONS CORPORATION
<TABLE>
<CAPTION>
(Formerly known as Ice Ban America, Inc.)
Consolidated Balance Sheets
July 31, 1999 and 1998
See Summary of Accounting Policies and Notes
to Consolidated Financial Statements.
ASSETS
1999 1998
----------------- ---------------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ - $ 125,265
Accounts Receivable - Trade 86,339 401,503
Other Receivables 5,375 133,967
Inventories 626,872 698,582
Prepaid Expenses 62,736 94,740
Total Current Assets 781,322 1,454,057
Property and Equipment, net 112,453 119,228
Investment in Affiliate 18,750 110,000
Licensing Agreement, net 419,620 522,341
Deferred Tax Asset - 217,606
Other 905 905
----------------- ---------------
$ 1,333,050 $ 2,424,137
================= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable - Trade $ 1,115,752 $ 430,391
Accrued Expenses 180,858 17,527
Current Portion of Long Term Debt 82,000 82,000
Current Portion of Related Party Debt 124,968 61,951
Liability to Issue Common Stock - 50,000
Total Current Liabilities 1,503,578 641,869
Long Term Debt to Related Parties 132,032 195,049
Stockholders' Equity:
Common Stock, $0.01 par value,
55,000,000 shares authorized,
15,996,540 issued and outstanding 15,997 15,889
Additional Paid-in Capital 11,770,954 11,344,106
Other Comprehensive Income (96,250) -
Accumulated Deficit (11,993,261) (9,772,776)
Total Stockholders' Equity (302,560) 1,587,219
$ 1,333,050 $ 2,424,137
================= ===============
</TABLE>
F-2
62
<PAGE>
<TABLE>
<CAPTION>
NATURAL SOLUTIONS CORPORATION
(Formerly known as Ice Ban America, Inc.)
Consolidated Statement of Operations
Fiscal Years Ended July 31, 1999 and 1998
See Summary of Accounting Policies and Notes
to Consolidated Financial Statements.
1998 1999
------------------ ---------------
<S> <C> <C>
Net Sales $ 2,100,199 $ 1,994,415
Costs Applicable to Sales 1,601,552 1,635,726
------------------ ---------------
Gross Profit (Loss) 498,647 358,689
Operating Costs and Expenses:
Selling and Administrative Expenses 2,455,157 5,226,802
Valuation Adjustment - Goodwill - 4,547,336
------------------ ---------------
Losses from Operations (1,956,510) (9,415,449)
Other Income (Expense), net (46,369) 7,727
------------------ ---------------
Loss Before Taxes (2,002,879) (9,407,722)
Income Taxes (217,606) -
------------------ ---------------
Net Loss $ (2,220,485) $ (9,407,722)
================== ===============
Loss per Share $ (0.14) $ (0.60)
================== ===============
Weighted Average Common
Shares Outstanding 15,923,733 15,753,032
================== ===============
</TABLE>
F-3
63
<PAGE>
<TABLE>
<CAPTION>
NATURAL SOLUTIONS CORPORATION
(Formerly known as Ice Ban America, Inc.)
Consolidated Statement of Cash Flows
Fiscal Years Ended July 31, 1999 and 1998
See Summary of Accounting Policies
and Notes to Consolidated Financial Statements.
1999 1998
------------------ ---------------
<S> <C> <C>
Operating Activities:
Net Loss $ (2,220,485) $ (9,407,722)
Non-Cash Expenses Included in Net Loss:
Depreciation and Amortization 120,722 2,463,633
Bad Debts 340,781 116,932
Valuation Adjustment to Goodwill - 4,547,336
Adjustment for Deferred Taxes 217,606 -
Product and Services Purchased for Stock
and Options 426,957 1,732,612
Adjustments to Reconcile Net Loss to Cash
Provided (Consumed) by Operating Activities:
(Increase) in Accounts and Other Receivables (25,617) (399,939)
(Increase) Decrease in Inventories 71,710 (572,466)
(Increase) Decrease in Prepaid Expenses (17,996) 24,331
Increase in Accounts Payable and Accrued Expenses 848,690 87,031
Cash Consumed by Operating Activities (237,632) (1,408,252)
Financing Activities:
Proceeds from Issuance of Common Stock - 1,125,122
Proceeds from Issuance of Long Term Debt - 62,000
(Payment) of Long Term Debt - Related Parties (5,037) (155,000)
Proceeds from Long Term Debt - Related Parties 10,883 412,000
Cash Generated by Financing Activities 5,846 1,444,122
Investing Activities:
Acquisition of Equipment (11,225) (89,483)
Advances to Affiliates & Employees - (114,870)
Payments Received on Advances to Related Parties 122,746 41,059
Investment in Affiliate (5,000) (110,000)
Cash Provided (Used) in Investing Activities 106,521 (273,294)
Net Decrease in Cash (125,265) (237,424)
Cash and Cash Equivalents - Beginning 125,265 362,689
------------------ ---------------
Cash and Cash Equivalents - Ending $ - $ 125,265
================== ===============
</TABLE>
F-4
64
<PAGE>
<TABLE>
<CAPTION>
NATURAL SOLUTIONS CORPORATION (Formerly
known as Ice Ban America, Inc.)
Consolidated Statement of Changes in Stockholders' Deficit
Fiscal Years Ended July 31, 1999 and 1998
See Summary of Accounting Policies
and Notes to Consolidated Financial Statements.
Additional Other
Paid-in Comprehensive Accumulated
Shares Par Value Capital Income Deficit
------------- ------------ ---------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Balance July 31, 1997 15,400,000 $ 15,400 $ 7,894,827 $ - $ (365,054)
Stock Issued to Secure
Additional Licensing Rights 100,000 100 531,900 - -
Stock Issued for Services 207,000 207 950,323 - -
Stock Issued for Product 31,740 32 192,206 - -
Stock Issued in for Cash 150,000 150 1,124,850 - -
Options Issued Under
Employment Agreements - - 4,086,920 - -
Write-off of Goodwill
Deferred Compensation Under
Employment Options - - (3,436,920) - -
Net Loss July 31, 1998 - - - - (9,407,722)
------------- ------------ ---------------- ------------- ----------------
Balance July 31, 1998 15,888,740 $ 15,889 $ 11,344,106 $ - $ (9,772,776)
============= ============ ================ ============= ================
Stock Issued for Services 73,574 74 316,797 - -
Stock Issued for Product 34,226 34 110,051 - -
Valuation Charge on
Marketable Securities - - - (96,250) -
Net Loss July 31, 1999 - - - - (2,220,485)
------------- ------------ ---------------- ------------- ---------------
Balance July 31, 1999 15,996,540 $ 15,997 $ 11,770,954 $ (96,250) $ (11,993,261)
============= ============ ================ ============= ===============
</TABLE>
F-5
65
<PAGE>
NATURAL SOLUTIONS CORPORATION
(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 under purchase
accounting. 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.
F-6
66
<PAGE>
Summary of Accounting Principles (Cont'd)
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 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.
F-7
67
<PAGE>
Summary of Accounting Principles (Cont'd)
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 discounted cash flows
estimated to be generated by those assets are less than the carrying amount
of the asset.
F-8
68
<PAGE>
NATURAL SOLUTIONS CORPORATION
(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.
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
was the former President and Chairman of the Board of Directors of Natural
Solutions Corporation and was 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
F-9
69
<PAGE>
(Notes to Consolidated Financial Statements Cont'd)
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.
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 carry-forwards
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 $ 1,603,443 $ 811,361
Losses 239,577 128,641
State Deferred Tax Asset Relating to Net Operating Losses 1,843,020 722,396
---------- ----------
Less Valuation Allowance
$ 0 $ 217,606
=========== ==========
Total Deferred Tax Asset
The Components of the Valuation Allowance are:
Amount Due to Federal Net Operating Losses $ 1,603,443 $ 623,410
Amount Due to State Net Operating Losses 239,577 98,896
----------- -----------
Total $ 1,843,020 $ 722,396
=========== ==========
</TABLE>
F-10
70
<PAGE>
(Notes to Consolidated Financial Statements Cont'd)
5. Business Combination and Restatement of Financial Statements:
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 BAN(R) product in upstate
New York. The combination is accounted for using the purchase method of
accounting, and the results of the acquired business have been included in the
consolidated financial statements since the date of acquisition. The purchase
price of 1.3 million shares of common stock was valued at $6,916,000 or $5.32
per share plus assumed debt. The transaction was recorded as follows:
Total Consideration Paid $ 6,916,000
Less Fair Value of Assets Acquired $ (309,331)
Debt Assumed $ 214,335
------------------
Excess Cost Over Fair Value of
Assets Acquired $ 6,821,004
During the fourth quarter of 1998, the Company completed an evaluation of the
economic value of the acquisition's goodwill through an updated analysis of the
expected cash flows. It was determined during the evaluation that the cash flow
to be generated from this acquisition would be less than the recorded investment
and unamortized goodwill balance on July 31, 1998. Accordingly, the Company
recorded an impairment of goodwill of $4,547,336, reducing goodwill to zero.
In 1998 and 1997, the Company accounted for the acquisition of Ice Ban, Inc. as
a pooling of interest, which management has determined to be incorrect. In the
current year, the Company restated the financial statements for 1998 to reflect
the purchase accounting method. The effect of this restatement was as follows:
1998 as
Previously 1998 as
Presented Restated
--------------- -------------
Additional Paid-in Capital $ 4,512,276 $ 11,344,106
Other Comprehensive Income $ (25,477) $ -
Accumulated Deficit $ (2,912,688) $ (9,772,776)
Selling and Administrative Expenses $ 2,953,134 $ 5,226,802
Valuation Adjustment - Goodwill $ - $ 4,547,336
F-11
71
<PAGE>
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:
Amounts Purchased Amounts Payable
------------------------------ -----------------------------
Supplier Supplier Supplier Supplier Supplier Supplier
A B C A B 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%
------------- ---------- ----------- ---------- ---------- --------- ---------
Amounts Sold Amounts Receivable
------------------------------ -----------------------------
Customer Customer Customer Customer Customer Customer
A B C A B 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%
------------- ---------- ----------- ----------- --------- --------- ---------
On February 21, 1997 the Company entered into an agreement with Minnesota Corn
Processors, Inc. (MCP) to purchase its ICE BAN(R) 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,
this agreement was terminated and replaced with a fixed price purchase
agreement. In the settlement, the Company also agreed to pay the $235,000 owed
to MCP which is carried in accounts payable at July 31,1999.
F-12
72
<PAGE>
(Notes to Consolidated Financial Statements Cont'd)
7. Notes Payable & Long Term Debt:
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
=========
A Summary of contractual maturities in each of the following fiscal years ended
July 31, is as follows:
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
================= ================= ==============
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.
F-13
73
<PAGE>
(Notes to Consolidated Financial Statements Cont'd)
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
Payment Payment Payment Payment
Description Expense Expense Due Due Due Due
July 31, July 31, July 31, July 31, July 31, July 31,
1998 1999 2000 2001 2002 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>
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 SEC 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 predetermined formula resulted in transaction
values equal to fair market value at the date of contract or delivery. The
following table summarizes these transactions
F-14
74
<PAGE>
(Notes to Consolidated Financial Statements Cont'd)
<TABLE>
<CAPTION>
1999 1998
---------------------- -----------------
Weighted Weighted
Average Average
Shares Value Shares Value
Per Share 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-15
75
<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 Shares Exercise
Price 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
the 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 $ 5.16 $ 0.74
Granted During Year
</TABLE>
Summary information for Options outstanding at July 31, 1999 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------- ---------------------
Weighted
Range of Number Average Weighted Amount Weighted
Exercise Outstanding Remaining Average Exercisable Average
Prices at July 31, Contractual Exercise at July 31, Exercise
1999 Life Price 1999 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>
F-16
76
<PAGE>
(Notes to Consolidated Financial Statements Cont'd)
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:
1999 1998
Net loss applicable to common
shareholders-as reported $(2,220,485) $ (9,407,772)
Net loss applicable to common
shareholders-pro forma $(2,714,047) $ (9,835,449)
Basic loss per share-as reported $ ( 0.14) $ ( 0.60)
Basic loss per share-pro forma $ ( 0.17) $ ( 0.61)
10. Supplemental Cash Flow Information:
Selected non-cash investing and financing activities are summarized as follows:
1999 1998
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
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.
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
F-17
77
<PAGE>
(Notes to Consolidated Financial Statements Cont'd)
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 BAN(R) 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.
F-18
78
<PAGE>
(Notes to Consolidated Financial Statements Cont'd)
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. The conversion
price exceeded fair market value on the date of the transaction. Accordingly, no
discount provision was recognized on the convertible debenture.
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. The
Company estimates the fair value of each stock option at the date of grant using
the Black-Sholes option-pricing model. The conversion features and warrants were
determined to have no material value. Accordingly, no amount was recorded as
capital for the warrants.
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
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.
F-19
79
<PAGE>
(Notes to Consolidated Financial Statements Cont'd)
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.
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 not yet filed its
counterclaims in this matter. 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 and 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 of these tests were
delivered on December 3, 1999.
F-20
80
<PAGE>
15. Substantial Doubt about the Company's Ability to Continue as a Going Concern
and Management's Plans:
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company has incurred losses since its
inception, August 14, 1996, and has aggregate 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. Management's plan to overcome
this problem is as follows:
1.The Company believes it has secured sufficient capital to maintain its
current operations through the sale of $750,000 of convertible debt and
$1,000,000 of its common stock.
2.The Company's Board of Directors has made recent changes to its management
team by replacing is President and Chief Financial Officer.
3.The Company is in the process of significantly revamping its sales strategy
and has taken steps to reduce its inventory carrying costs.
4.The Company is also in the process of streamlining its central organization
and eliminating unnecessary overhead costs.
F-21
81
<PAGE>
Interim Financial Statements
The Interim Financial Statements of Natural Solutions, Inc., and Notes to the
Interim Financial Statements commence on page F-21 hereof and are incorporated
herein by this reference.
INDEX TO INTERIM FINANCIAL STATEMENTS
Consolidated Balance Sheets as of
January 31, 2000 and 1999, and July 31, 1999...........................F-23
Consolidated Statements of Operations for the Three and Six Months Ended
January 31, 2000 and 1999 .............................................F-24
Statements of Consolidated Cash Flows for the Six Months Ended
January 31, 2000 and 1999..............................................F-25
Notes to the Consolidated Financial Statements..............................F-26
F-22
82
<PAGE>
<TABLE>
<CAPTION>
NATURAL SOLUTIONS CORPORATION
Consolidated Balance Sheets
(Unaudited) (Unaudited)
January 31, 2000 January 31, 1999 July 31, 1999
------------------ ------------------ -------------------
<S> <C> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 146,596 $ 65,559 $ 0
Accounts Receivable - Trade 731,302 642,124 86,339
Other Receivables 187,431 74,643 5,375
Inventories 727,660 405,358 626,872
Prepaid Expenses 102,249 106,693 62,736
------------------ ------------------ -------------------
Total Current Assets 1,895,238 1,294,377 781,322
Property and Equipment, net 103,453 127,488 112,453
Investment in Affiliate 18,750 110,000 18,750
Licensing Agreement, net 386,118 470,980 419,620
Other 3,686 221,292 3,686
------------------ ------------------ -------------------
$ 2,407,245 $ 2,224,137 $ 1,335,831
================== ================== ===================
Current Liabilites:
Accounts Payable - Trade 1,106,215 552,839 1,115,754
Accured Expenses 259,923 13,444 180,856
Note Payable 60,000 - -
Current Portion of Long Term Debt 82,000 82,000 82,000
Current Portion of Related Party Debt 61,951 124,968
------------------ ------------------ -------------------
Total Current Liabilities 1,508,138 710,234 1,503,578
Long Term Debt to Related Parties 257,000 195,049 132,032
Convertible Debenture 750,000
Stockholders' Equity:
Preferred Stock, $0.01 par value,
20,000,000 shares authorized, no shares
have been issued or are outstanding - - -
Common Stock, $0.01 par value,
55,000,000 shares authorized,
19,996,540 issued and outstanding 19,997 15,993 15,997
Additional Paid-in Capital 5,935,124 4,907,158 4,939,124
Other Comprehensive Income (121,727) - (121,727)
Accumulated Deficit (5,941,287) (3,604,297) (5,133,173)
------------------ ------------------ -------------------
Total Stockholders' Equity (107,893) 1,318,854 (299,779)
------------------ ------------------ -------------------
$ 2,407,245 $ 2,224,137 $ 1,335,831
================== ================== ===================
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-23
83
<PAGE>
<TABLE>
<CAPTION>
NATURAL SOLUTIONS CORPORATION
Consolidated Income Statements
For the Three Months For the Six Months
Ended January 31 Ended January 31
2000 1999 2000 1999
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Net Sales $ 939,396 $ 914,492 $ 1,132,733 $ 1,542,799
Costs Applicable to Sales 647,081 551,406 843,524 1,017,823
-------------- --------------- -------------- --------------
Gross Profit 292,315 363,086 289,209 524,976
Selling and Administrative Expenses 580,968 717,204 1,065,352 1,266,736
-------------- --------------- -------------- --------------
Losses from Operations (288,653) (354,118) (776,143) (741,760)
Other Expense, net (19,095) - (31,984) -
-------------- --------------- -------------- --------------
Net Loss Before Taxes (307,748) (354,118) (808,127) (741,760)
Income Taxes - - - -
-------------- --------------- -------------- --------------
Net Loss $ (307,748) $ (354,118) $ (808,127) $ ($741,760)
============== =============== ============== ==============
Weighted Average Common Shares
Outstanding 17,923,733 15,929,306 17,923,733 15,915,827
-------------- --------------- -------------- --------------
Loss per Share $ (0.02) $ (0.02) $ (0.05) $ (0.05)
============== =============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-24
84
<PAGE>
<TABLE>
<CAPTION>
NATURAL SOLUTIONS CORPORATION
Consolidated Statements of Cash Flows
For the Six Months Ended January 31
2000 1999
-------------- --------------
<S> <C> <C>
Operating Activities:
Net Loss $ (808,127) $ (741,760)
Non-Cash Expenses Included in Net Loss:
Depreciation and Amortization 42,515 60,360
Bad Debts - 289,481
Product and Services Pruchased for Stock
and Options - 370,463
Adjustments to Reconcile Net Loss to Cash
Provided (Consumed) by Operating Activities:
(Increase) in Accounts Receivable (644,963) (479,951)
(Increase) in Other Receivables (182,056)
(Increase) Decrease in Inventories (100,788) 293,224
(Increase) in Prepaid Expenses (39,513) 9,128
Increase in Accounts Payable and
Accrued Expenses 69,528 118,366
-------------- --------------
Cash Consumed by Operating Activities (1,663,404) (98,945)
Financing Activities:
Proceeds from Issuance of Note Payable 60,000 -
Proceeds from Issuance of Long Term Debt 750,000 -
Proceeds from Issuance of Common Stock 1,000,000 -
-------------- --------------
Cash Generated by Financing Activities 1,810,000 -
Investing Activities:
Acquisition of Equipment - (16,813)
Advances to Related Parties - (4,943)
Payments Recevied on Advances to Related
Parties - 60,995
-------------- --------------
Cash Provided (Used) in Investing Activities - 39,239
Net Increase (Decrease) in Cash 146,596 (59,706)
Cash and Cash Equivalents - Beginning - 125,265
-------------- --------------
Cash and Cash Equivalents - Ending $ 146,596 $ 65,559
============== ==============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-25
85
<PAGE>
NATURAL SOLUTIONS CORPORATION
Notes to Interim Financial Statements
January 31, 2000
Note 1. The interim financial statements include all adjustments, which, in the
opinion of management, are necessary in order to make the financial statements
not misleading. The unaudited consolidated financial statements and notes are
presented as permitted by Form 10- QSB. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted. The
accompanying consolidated financial statements and notes should be read in
conjunction with the audited financial statements and notes of the Company for
the year ended July 31, 1999. The results of operations for the three-month and
six-month periods ended January 31, 2000 are not necessarily indicative of those
to be expected for the entire year.
Note 2. The financial statements as of January 31, 1999 and for the periods
ended January 31, 1999 have been restated to reflect year end adjustments to
provide an additional allowance for doubtful accounts totaling $259,912, which
have been allocated back to the applicable quarters. The result of this
adjustment is to increase the loss per weighted average common share outstanding
by $0.016 for the three months and six months ended January 31, 1999.
Note 3. On September 15, 1999 the Company signed an unsecured short-term note
payable for $60,000. The note is due in twelve installments of $5,000 plus
interest at 7% per annum.
Note 4. On August 11, 1999, the Company borrowed $750,000 from a related party
in the form of a convertible debenture bearing interest at 10% per annum and
maturing on August 11, 2001. Prior to repayment, the principal and accrued and
unpaid interest may be converted into the Company's common stock at a price of
$0.75 per share. The debenture includes two detachable warrants entitling the
holder to purchase up to three million shares of the Company s common stock at a
price of $0.75 per share. The warrants expire as follows: one million shares on
July 28, 2000 and two million shares on August 9, 2004.
Note 5. On October 31, 1999, the Company sold four million shares of common
stock to a related party for $1 million. As a part of the transaction, the
purchaser acquired, among other rights, the right to name up to three of seven
of the directors of the Company.
F-26
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<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 Master of By-Laws for Ice Ban Holdings, Inc
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<PAGE>
3.(ii).3 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 NSC 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 NSC and Jeanne Whipple Realty
10.14 Na-Churs Plant Food Company
10.15 Roadway Solutions Inc. Sup Agree 4/19/99
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
88
<PAGE>
10.23.1.1 Employment Contract
10.23.2 Testing Consent Letters and HITEC Test Results
10.24 Highway Innovative Technology Evaluation Center (HITEC)
Report (Hard Copy Provided Separately)
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: August 31, 2000 By: /s/ Jim W. Foshee
-------------------------------
Jim W. Foshee, President and CEO
Date: August 31, 2000 By: /s/ Michael Klansek
--------------------------------
Michael Klansek, Chief Financial Officer
89
