<PAGE>


                         SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C. 20549

                                     FORM 10-K
(Mark one)
[ X ]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934
          For the Fiscal Year Ended June 30, 1997
OR
[   ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934

Commission File No.    0-15474

                                AMERALIA, INC.
           ----------------------------------------------------------
              (Exact name of Company as specified in its charter)

      Utah                                            87-0403973
----------------                              ------------------------
(State or other jurisdiction of                   (I.R.S. Employer
incorporation or organization)                   Identification No.)

        1155 Kelly Johnson Blvd, #111, Colorado Springs, CO 80902
      --------------------------------------------------------------
              (Address of Principal Executive Offices)

Company's telephone number, including area code:      (719) 260-6011

Securities registered pursuant to Section 12(b) of the Act:    None.

Securities to be registered pursuant to Section 12(g) of the Act:
                     Common Stock - $.01 Par Value
                    -------------------------------
                           (Title of Class)

Indicate by checkmark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.                      YES /X/      NO /  /

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be included herein and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K:                           [  ]

Shares of common stock, $.01 par value, outstanding as of September 3, 1997:
3,355,535.  Aggregate market value of the voting stock held by non-affiliates
of the Company as of September 3, 1997 was approximately $1,700,000.  The
estimate is based on an average of 


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bid and ask price per share and 1,750,000 shares estimated to be held by 
non-affiliates. Shares of preference stock, $.05 par value, outstanding as of 
September 3, 1997: 720,596.


                             PART I

ITEM 1.   BUSINESS

(a)  GENERAL DEVELOPMENT OF THE BUSINESS

     AmerAlia, Inc. (the "Company") was originally incorporated under the laws
of the State of Utah on June 7, 1983, as Computer Learning Software, Inc.
After a change in control of the Company in January, 1984, the Company has been
primarily engaged in establishing a chemical business in the manufacture of
sodium bicarbonate and related products in Colorado, United States.  It also
acquired various investments in Australia which have since been sold.  The
majority of the Company's Management are citizens of Australia.  All dollar
amounts in this report are in United States dollars ($) unless specifically
referenced as Australian dollars (A$).

     On January 19, 1993 the Company effected a reverse split of its common
stock of 40 to 1.  All shares numbers hereinafter stated have been adjusted to
reflect the effect of the reverse split.

     On November 15, 1989, the Company acquired Denison Resources (USA)
Corporation ("Denison") which had subleased an interest in a federal sodium
lease from an unaffiliated owner.  Subsequently, on December 10, 1992, the
Company received an assignment of the lease from the previous owner.  This
lease includes a substantial, naturally occurring, rare deposit of sodium
bicarbonate in Colorado, USA as more fully set out below.  Denison has not
maintained its corporate charter under Delaware law and, therefore, has no
remaining interest in the Lease.

     The Company's primary objective is to recover from this lease through
solution mining naturally occurring sodium bicarbonate for the animal feed,
industrial, pharmaceutical and food grade markets.  The production of sodium
bicarbonate will also enable the production of soda ash and caustic soda,
chemicals which are widely used in the manufacture of glass, detergents and a
variety of inorganic and organic chemicals.  Potentially, sodium bicarbonate
might be used as an agent for flue gas desulfurization, a market the Company
expects will expand as the requirements of the Clean Air Act amendments of 1990
impact industry more significantly.  It proposes to achieve this objective by:

                                     -2-
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(a)  finalizing approval of a Mining Plan to enable the construction of a mine
     and associated plant for the production of sodium bicarbonate;

(b)  the raising of sufficient capital to commence mining and processing
     operations on the company's lease; or

(c)  seeking qualified joint venture partners for the development of its sodium
     bicarbonate resource if that is more beneficial to the Company.

     The Company has entered into two agreements and one letter of intent with
three long standing distributors of sodium bicarbonate to the livestock
industry, although none of these distributors has any obligation to purchase
any sodium bicarbonate from the Company, even should the Company achieve
production of sodium bicarbonate from its lease (which cannot be assured).
These distributors cover most of the United States.  Animal feed quality sodium
bicarbonate has a current market price between $200 and $240 per ton delivered.
Sodium bicarbonate is used in the preparation of animal feed mixes where it
acts as a rumen buffer to increase dairy cow milk production.

     The Company has been involved in no bankruptcy, receivership, or similar
proceedings, except that a secured creditor, NZI Securities Australia Ltd.
("NZI"), declared a default on indebtedness of approximately A$1,200,000 in
September 1996 and advised the Company that NZI intended to immediately
exercise its power of sale over the RIT units NZI held as collateral.  This
debt was subsequently acquired from NZI by the THG Partnership ("THG"), an
affiliate of the Company, and the Company then concluded an agreement with THG
to settle the debt as discussed more fully in the Company's filing on Form 10-K
for the year ended 30 June 1996.  The only material reorganization in which the
Company has been the acquisition of the federal sodium lease in December 1992,
as described in more detail, below.

(b)  FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.

     The Company is currently involved in only one industry segment, chemical
manufacture, and, therefore, this information is not material.

(c)  NARRATIVE DESCRIPTION OF THE BUSINESS.

INTRODUCTION

     The Company conducts its mining exploration activities directly.  Prior to
the 1993 fiscal year, the Company conducted its mining exploration through its
wholly-owned subsidiary, Denison 

                                     -3-
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Resources (USA) Corporation ("Denison").  On November 15, 1989, the Company 
acquired all the outstanding issued common stock of Denison from Denison 
Resources Ltd., an unaffiliated company of Brisbane, Queensland, Australia.  
The Company issued 407,866 shares of unregistered common stock in the Company 
in exchange for the Denison Stock.  This acquisition is referred to hereafter 
as the "Denison Acquisition."


GENERAL DISCUSSION

     THE PICEANCE CREEK BASIN.  The Rock School Lease is one of three federal
leases granted within the Piceance Creek Basin which covers a unique, major
natural resource of a mineral called nahcolite (natural sodium bicarbonate).
The Company has performed surface geological investigation of the 1,320 acre
lease and has reviewed data assembled by other investigators in the Piceance
Creek Basin, including a 1974 report published by the United States Geological
Survey entitled "Stratigraphy and Nahcolite Resources of the Saline Facies of
the Green River Formation, Rio Blanco County, Colorado." (John R. Dyni, USGS
Report 74-56). This report analyzed the results of a detailed study of ten core
holes from the saline zone, including a core hole known as Dunn 20-1 which is
approximately 800 feet to the east of the Company's proposed initial mine site
on the Rock School lease.

     From this core hole, Mr. Dyni estimated the total nahcolite content of the
saline zone in this area at 315 million tons per square mile. Using this figure
translates to a total estimated nahcolite content of the Rock School lease of
649 million short tons for the 1,320 acre lease. Due to lateral persistence of
this deposit, which allows correlation of beds over distances of many miles, it
is reasonable to assume that the concentrations found in the Dunn 20-1 hole
also exist beneath the Rock School Lease.

     In 1996 the Company drilled a core hole to positively determine the extent
of mineralization and the strength of the rocks in the proposed solution mining
area.  The drill encountered nahcolite in three separate resource intervals,
below the lower salt horizon, over 510 feet and averaged 26.4% nahcolite.  The
Company engaged Agapito & Associates to supervise the core hole drilling and to
conduct studies on core assays, rock strength and geological evaluation.

     Based on the foregoing information the Company believes that the nahcolite
deposit within the Rock School lease is of significant size. However, not all
of this resource can be recovered with existing technology and within existing
BLM sodium mining lease conditions.  Until the resource is brought into

                                     -4-
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production, or until substantial additional engineering work is accomplished, 
the viability of economic recoverability cannot be established.

     The Company's activities in pursuing the conduct of mining operations are
set out more fully below.  (See "Exploration and Development Work To Date.")

     THE SODIUM BICARBONATE MARKET.  The existing and long established market
for sodium bicarbonate is principally for food grade, animal feed and
commercial usage with delivered sale prices in the range of $200-400 per ton,
depending on grade.  It is dominated by a few suppliers who produce synthetic,
high cost sodium bicarbonate from soda ash (sodium carbonate) and sell under
well established brand names.  The United States and Canadian markets currently
absorb about 495,000 tons annually.

     The animal feed market accounts for approximately 118,000 tons of the
existing annual USA/Canada market for sodium bicarbonate.  It is the lower
priced market with delivered prices in the range of $200-240 per ton.  Other
markets are at higher prices with pharmaceutical grade selling for
approximately $400 per ton.  These markets are mature and stable experiencing
modest growth. The Company plans to initially supply  the animal feed market
where it will be used as a rumen buffer, principally for dairy cows.  Small
amounts in feed rations re-establish normal rumen balance thereby controlling
acidotic stress conditions and increasing yields of both milk and butter fat.
The Company has entered into marketing arrangements to sell sodium bicarbonate
for animal feed. (see "Marketing Arrangements")

     In addition to the animal feed market, there are other potential markets
for sodium bicarbonate that may be recovered from the Company's lease, such as
the pharmaceutical, industrial and food grade markets.  Sodium bicarbonate also
might be used as an agent for flue gas desulfurization, a market the Company
expects will expand as the requirements of the Clean Air Act amendments of 1990
impact industry more significantly.  The Company has not, however, negotiated
any relationships with respect to these markets.

     MARKETING ARRANGEMENTS.  The Company has signed two agreements and one
letter of intent with three long standing distributors of sodium bicarbonate to
the livestock industry, although none of these distributors has any obligation
to purchase any sodium bicarbonate from the Company, even should the Company
achieve production of sodium bicarbonate from its lease (which cannot be
assured).  These distributors cover most of the United States and Canada.
Sodium bicarbonate is used in the preparation of feed mixes.  The distributors,
which have exclusive arrangements with 

                                     -5-
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the Company, will have the opportunity to acquire sodium bicarbonate from the 
Company at a wholesale price.  The contracts will only become effective when 
the buyers place their first order after the Company commences production.  
The Company has no estimate as to when it will have production for sale.  The 
Company has also received a letter from a third distributor indicating a 
capacity to distribute additional tonnage of sodium bicarbonate.

     COMPETITION.  Any production that may be obtained by the Company or any
other person from the Rock School Lease will be marketed in the traditional
sodium bicarbonate market in competition with large and well established
companies. The animal feed market is subject to competition from other rumen
buffers in addition to that from other sodium bicarbonate producers.  The
resources of those companies far exceed those of the Company.

     However, the Company believes that in the long term its recovery of
naturally occurring sodium bicarbonate from its lease will enable it to enjoy a
significant cost advantage over competitors which currently dominate the
industry but rely on higher cost synthetic manufacture.  This cost advantage
will enable the Company to penetrate the animal feed market.

     Two unaffiliated companies hold adjacent or nearby sodium leases issued by
the BLM.  The adjacent lease is owned by White River Nahcolite Minerals Ltd.
Liability Co. (WRNM), a wholly owned subsidiary of North American Chemical
Company ("NACC") since August, 1995.

     NaTrona Resources, Inc. ("NaTrona") owns a 39.58% interest in the Yankee
Gulch Joint Venture Sodium lease which was issued January 1, 1992.

     Although the sodium resource in the Piceance Creek Basin is believed to be
of substantial size, the leases to the Company, WRNM and the Yankee Gulch Joint
Venture are the only leases currently issued by the BLM.   Competition in the
long term is not regarded as being significant since the size of the potential
market is so large.

THE ROCK SCHOOL LEASE

     BACKGROUND AGREEMENTS.  As noted above, the Company has purchased United
States Sodium Lease No. C-0119985 (known as the "Rock School Lease") including
1,320 acres in Rio Blanco County, Colorado, USA (the "Rock School Property").
Prior to December 1992, the Rock School Lease was owned by E. E. Kinder Co., an
unaffiliated Colorado general partnership ("Kinder") which had subleased the
property to Denison pursuant to the "Denison Agreement."  Pursuant to the terms
of the Denison Agreement, 

                                     -6-
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Denison was required to meet certain requirements sufficient to obtain an 
extension of the lease, proceed with mining operations and to pay minimum 
annual royalties of $100,000 commencing January 1, 1992.  In June, 1991 the 
Federal Bureau of Land Management issued the lease renewal, effective July 1, 
1991, for a period of ten years.

     On December 10, 1992 the Company purchased the Rock School Lease from
Kinder; the acquisition terms were amended by Kinder and AmerAlia in July 1994,
and again in January 1996.  As amended, the acquisition agreement provided for
the following consideration:

      (i) a cash payment of $600,000;
     (ii) the issuance of 50,000 shares of Common Stock;
    (iii) the granting of an option for two years to acquire 50,000 shares of
          restricted common stock at $3 per share (which option has expired);
     (iv) commencing July 1, 1994, the reservation of a production royalty of
          $1.50 per ton for all production, due and payable on the last day of
          the month following the month of production with a minimum annual
          royalty of $75,000 payable monthly in arrears; and
      (v) also commencing July 1, 1994, the establishment of a consulting
          arrangement between Kinder and the Company providing for a consulting
          fee of $25,000 per year, payable monthly in arrears.  The Company is
          negotiating certain adjustments in this contract at Kinder's request.

     As a result of the agreement, Kinder assigned to the Company all of its
right, title and interest in both the federal lease and the Denison Agreement.
Kinder also agreed to provide all documentation, files and records in its
possession pertaining to the exploration of and development plans for the
mining of the Rock School Lease; warranted that it had not assigned to any
third party or dealt in any way with its interest in either the Rock School
Lease or the Denison Agreement and granted the Company an option for two years
to acquire its royalty interest for the consideration of $2 million.  This
option expired without being exercised.  The assignment of the interest in the
Rock School Lease was subject only to approval by the BLM, which approval was
granted effective January 1, 1996.

     As a result of the assignment of the Rock School Lease to the Company, the
failure of Denison to comply with certain terms of the Denison Agreement, and
the failure of Denison to maintain its corporate charter in Delaware, the
Denison Agreement has been cancelled and is of no further effect.

     ROCK SCHOOL LEASE -- TERMS.  Under the terms of the Rock School Lease, the
leaseholder has a preferential right to renew the 

                                     -7-
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Lease at the end of the Lease term under such terms and conditions as may be 
then prescribed by the Secretary of the Interior, or by applicable law.  The 
Lease currently requires, as a condition to renewal, that sodium must be 
produced from the lease in paying quantities.  Rental is payable annually in 
advance at the rate of $1 per acre. In addition, production royalties equal 
to 5% of the gross value of the output at the point of shipment to market are 
payable.  Minimum annual production and rental payments have been agreed upon 
at the rate of $3 per acre annually.

     EXPLORATION AND DEVELOPMENT WORK TO DATE.  When Ameralia acquired Denison,
approximately $493,000 had already been invested in various geological,
engineering and marketing studies associated with sodium bicarbonate.
Following the Denison Acquisition, the Company has invested a further
$1,512,236 in direct expenditures for lease payments, geological and
engineering studies including the drilling of a core hole, legal expenses,
technical consultants, and advances to the Bureau of Land Management in order
to advance the project's development.  In addition to this, there were other
direct expenditures incurred by the Company in negotiating with and meeting
prospective joint venture partners.  These amounts have not been precisely
determined as they have been expensed in the Company's accounts.

     The Company is carrying out further exploration work on the Rock School
Lease.  The Company's principal efforts are directed towards obtaining the
necessary permits and identifying the requirements of the permitting agencies.
Because the Piceance Creek Basin is known to contain a substantial amount of
oil shale, the BLM has prohibited mining operations which adversely affect oil
shale.  The federal agency has, however, accepted the proposed solution mining
method and approval of a 50,000 tons/year pilot mining operation is now
expected.  The BLM requested that the Company drill a core hole on the Rock
School Property and obtain site specific underground data prior to the
commencement of operations.

     The Company drilled this core hole in early 1996.  The drill encountered
nahcolite in three separate resource intervals, below the lower salt horizon,
over a depth of 510 feet and averaged 26.4% nahcolite.  The Company engaged
Agapito & Associates to supervise the core hole drilling and to conduct studies
on core assays, rock strength and geological evaluation.  Their report on rock
mechanics and cavity design is now completed and provides further design data.
These reports have been submitted to the BLM and will be submitted to other
regulatory agencies of the federal, state and county administrations.  The BLM
will consider the reports, the revised plant design and data from the mine plan
submitted in 1989 and will be asked to come to a finding of no significant
environmental impact ("FONSEI").  If they so conclude, the Company, 

                                     -8-
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subject to satisfactory financial capability, will proceed with a plant to 
produce 50,000 tons per year.

     The BLM's principal concern is the assessment of the effect of the
proposed cavities on the geological environment, as well as on any existing
aquifers located above the proposed leaching caverns.  While it is the
Company's belief that the BLM is favorably disposed to the proposed development
and that the reports will conclude that the environmental impact will be
minimal, no guarantee can be given that a "FONSEI" will be forthcoming.
Management will proceed with its planning in the expectation of approval.
Should the Company wish to expand its production in the future beyond 50,000
tons per year, it will be required to produce an Environmental Impact Statement
("EIS").  An EIS would be expensive and time consuming and the Company does not
contemplate undertaking one until operational data is available from the
initial 50,000 tons per year project.

     PROPOSED DEVELOPMENT PROGRAM.  The Mine Plan submitted to the BLM for
approval envisages the development of the resource in stages starting with a
plant to produce 50,000 tons per year and then expanding to 500,000 tons per
year. Production will be from a 500 foot thick zone at a depth of 2,000 feet to
2,500 feet.  Hot water will be injected into the nahcolite bearing rock; the
nahcolite will dissolve and be brought to the surface in solution where it will
be recrystallized and dried prior to despatch.  This in situ solution mining
technique has been previously tested in the same resource by Shell Oil (1970-
1972) and has been found to be feasible.  Solution mining in other resources is
well established. The company's cash cost of production is expected to be about
$65 per ton, one-half of estimated existing average industry cash costs.

     AmerAlia is currently engaged in securing permits from the Department of
Interior, BLM and the Environmental Protection Agency as well as State agencies
necessary to proceed to mine the property.  The Company is also seeking
financing (which cannot be assured), to commence development work on the Rock
School Lease.  It is anticipated that the cost to construct a mine and
associated plant on the property, as anticipated in the preliminary mine plan
submitted to the BLM, will be in excess of $30 million for a 50,000 ton per
year plant.  The Company has had numerous discussions with industry partners
and investors or investment representatives who have expressed interest in
financing the development of the property, but has not reached agreement with
any.  If the Company is not able to obtain outside financing for the project,
or if it is unable to obtain all necessary permits, it may not be able to
complete the development of the property and commence mining.

     ACCESS.  The Rock School Property is accessible by a county 

                                     -9-
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maintained gravel road which is sufficient for the exploration and 
development work to be accomplished.  Access is difficult during the winter 
and early spring because of heavy snows in the area.  Should the property be 
placed into production, the road will have to be improved to allow 
all-weather access.

AUSTRALIAN ACTIVITIES

     The Company previously owned real estate and beef cattle in Australia.
The real estate was sold in 1989 to an unaffiliated, public Australian real
estate investment trust, known as "The Rural Investment Trust" ("RIT").  The
Company transferred its interest in the RIT to the THG Partnership ("THG") as
part of its settlement of debt referred to above and reported in the Company's
filing on Form 10-K for the year ended 30 June 1996.  As a result of this
agreement to settle the debt, THG has an option to sell this RIT investment to
the Company until 18 October 1998 for 450 shares of Series D Convertible
Preferred Stock, or alternatively, an option to subscribe $450,000 in cash for
450 shares of the Series D Preferred Stock.

EMPLOYEES

     The Company has no salaried employees other than Mr. Marvin Hudson, Vice
President, Investor Relations, who together with Mr. Bill H. Gunn, Chairman and
President, and Mr. Robert van Mourik, Executive Vice President, handle the day
to-day business activities of the Company as well as maintain its books and
records.

     Mr Bill H. Gunn was diagnosed in July 1996 with Lymphoma and has been
undergoing treatment in Australia.  This has restricted his ability to travel
to the United States but he has continued to perform his duties as President
and Chief Executive Officer.  He has been advised by his doctors that, based
upon statistical evidence of people with similar disease receiving the same
treatment, he has reason to expect a full remission and return to his normal
level of activity by early 1998.  He has been advised that he is well enough to
travel to the United States in the meantime should that be required.

     The services of Mr. Gunn, Mr. van Mourik and Mr. Robert Cameron, a 
director who provides mining and geological consulting services, are provided 
to the Company under management services agreements with affiliated entities. 
See Item 11. - "Executive Compensation".

ITEM 2.   PROPERTIES

     The Company is a lessee of United States Sodium Lease No. C-0119985
affecting 1,320 acres in Rio Blanco County, Colorado, USA, 

                                    -10-
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and described more fully in Item 1. - "Business", above.

ITEM 3.   LEGAL PROCEEDINGS

     The Company is a not a party to any material threatened or pending claims
as of the date of this report.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     None.

                                    -11-
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                            PART II


ITEM 5.   MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)  MARKET INFORMATION.

     The Company's Common Stock is publicly traded in the over-the-counter
market and, since August 1987, has been quoted on the National Association of
Securities Dealers, Inc.'s Automated Quotation System ("NASDAQ") under the
symbol "AALA."  The range of closing bid quotations for the Company's Common
Stock as provided by NASDAQ for the past two fiscal years is provided below.
These over-the-counter market quotations reflect inter-dealer prices without
retail markup, markdown or commissions and may not necessarily represent actual
transactions.

     ------------------------------------------------------
                                        Average Closing
          For the Quarter Ended              Bid
     ------------------------------------------------------

     1995
          September 30                       $2.00
          December 31                        $2.25

     1996
          March 31                           $2.41
          June 30                            $2.33
          September 30                       $2.00
          December 31                        $1.10

     1997
          March 31                           $0.90
          June 30                            $1.65

     ------------------------------------------------------


(b)  HOLDERS.

     (b)(1)  The number of record holders of the Company's Common Stock on
September 3, 1997 was approximately 446.  (This does not include an
indeterminate number of shareholders whose shares are held by brokers in street
name.)

     (b)(2)  Not applicable.

                                     -12-
<PAGE>


(c)  DIVIDENDS

     The Company has paid no dividends with respect to its Common Stock and has
no plans to pay cash dividends in the future.  The Company's ability to pay
dividends to holders of its common stock is limited as a result of the issuance
of its outstanding shares of Series A, B, C and D Preferred Stock.


ITEM 6.   SELECTED FINANCIAL DATA

     The following information has been derived from the financial statements
of the Company appearing elsewhere in this Annual Report, and should be read in
conjunction with the financial statements and notes thereto.  The per share
amounts and the weighted average number of shares outstanding have been
adjusted to give effect to the stock splits approved by the Company's
shareholders in January 1993.

-------------------------------------------------------------------------------

                         SELECTED FINANCIAL DATA
                     AMOUNTS IN THOUSANDS OF DOLLARS
                         (EXCEPT PER SHARE DATA)

                                     Year Ended June 30
                          1997     1996     1995     1994     1993
                          ----     ----     ----     ----     ----
Revenues                    2       60       49       49       60
Net Loss                 (769)    (751)  (1,007)    (569)    (580)
Loss per Share           (.25)    (.28)    (.41)    (.24)    (.29)
Total Assets            3,008    3,608    2,985    3,262    2,868
Total Current
 Assets                    12      232      338      755      739
Total Current
 Liabilities              650    1,481    1,539    1,199      728
Long Term Debt              4        9       14       24        -
Shareholders'
 Equity                 2,354    2,118    1,432    2,039    2,140
Weighted Average
 No. of Shares          3,014    2,653    2,463    2,330    2,257

-------------------------------------------------------------------------------

     This summary should be read in conjunction with the Company's Financial
Statements and Notes, included in Part IV of this Annual Report.  The Company
has not paid a cash dividend since the date of its inception, and does not
anticipate doing so in the foreseeable future.

                                     -13-
<PAGE>


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATION


LIQUIDITY AND CAPITAL RESOURCES

SUBSEQUENT TO JUNE 30, 1997

     As detailed below, funds have been held in an escrow account pursuant to
an agreement between the Company and the Jacqueline Badger Mars Trust.  Since
June 30, 1997 the remaining balance of $240,000 has been withdrawn from the
escrow account and received by the Company.  Additional short term notes
payable have been issued raising a further $33,000.

JUNE 30, 1997 AS COMPARED TO JUNE 30, 1996:

     As previously reported in the Company's Annual Report on Form 10-K for
year ended 30 June 1996, the Company negotiated a settlement in November 1996
with the THG Partnership ("THG"), a related party, which had acquired a debt
previously due to a secured creditor, NZI Securities Australia Ltd.  In
summary, the Company transferred to THG its interests in the Rural Investment
Trust ("RIT"), two notes receivable, two shareholder receivables and an issue
of 100 shares of Series D Preferred Stock in settlement of the debt, so
enabling the Company to record an additional capital contribution of $116,000
on the value of the assets transferred to THG.  In addition, THG has an option
until 18 October 1998 to sell the RIT units to the Company for $450,000 payable
by the issuance of 450 shares of Series D Preferred Stock, or alternatively, if
THG does not exercise this option, to subscribe $450,000 to purchase 450 shares
of Series D Preferred Stock.

     The Company received two other subscription applications for the issue of
293,500 shares of common stock at $1 per share from two unaffiliated investors.
These funds were also used to retire debt.  Additional capital of $405,000 was
received for the issue of 405 shares of Series D Preferred Stock pursuant to an
agreement between the Company and the Jacqueline Badger Mars Trust.  A total of
233,790 shares of common stock were issued in lieu of dividends on Series A, B
& D Preferred Stock and 65,000 shares valued at $65,000 were issued as employee
compensation.  Finally, $51,000 was received by the Company in settlement of an
alleged short swing trading violation.

     Further funding of $62,000 was received through an increase in the
Company's accounts payable to $263,000 of which $227,000 is due to eight
creditors, the largest of whom is owed $167,000.  However, $214,000 of the
accounts payable is outstanding more than 90 days.

                                    -14-
<PAGE>


     Funds were applied to the operating loss of the Company, $20,000 was
expended in the development of the Rock School Lease project and $225,000 was
outlayed in fees in anticipation of a capital raising.

     The Company has historically derived its liquidity from equity investment
from existing shareholders as well as new investors.  The Company's ability to
ensure its long term survival continues to be dependent upon the Company
obtaining all permits necessary for the construction of the proposed plant and
financing for its construction, estimated to be in excess of $30 million.
While the Company is engaged in discussions with prospective investors and
financiers to achieve this objective, there can be no assurance that the
Company will be able to achieve such financing.

     Total assets decreased during the year to $3,008,000 (1996: $3,608,000;
1995: $2,985,0000) while shareholders funds increased to $2,354,000 (1996:
$2,118,000; 1995: $1,432,000).

JUNE 30, 1996 AS COMPARED TO JUNE 30, 1995:

     In October 1995, the Company accepted two subscription applications for
issues of Series D Convertible Preferred Stock.  The Series D Stock has a
liquidation preference equal to $1,000 per share, pays quarterly dividends at
the rate of 10% p.a., commencing December 31, 1995 and is payable in common
stock of the company at $1 per share.  The Series D Stock carries voting rights
at the rate of 1,000 votes per share and can be converted into common stock
until October 31, 2000 on the basis of 1,000 common shares per share of Series
D Stock.

     The first subscription agreement for $2,000,000 was received from the
Jacqueline Badger Mars Trust which is an existing holder of common stock,
Series A and B Preferred Stock.  The funds were held in an Escrow Account with
the Norwest Bank, Denver.  An Escrow Agreement between the parties determined
the manner in which the money would be released to the Company and then shares
of Series D Stock issued to the trust in proportion to the receipt of funds.

     The second subscription agreement for 80 shares of Series D Stock was
received from The Bromley Family Trust, an existing holder of common stock and
Series B Stock, the funds received and the stock issued.

     In addition, $14,000 was raised through the issue of short term notes
payable whilst notes payable were repaid in the amount of $68,000.  Preferred
stock dividends amounting to $169,315 were paid through the issuance of 107,285
shares of common stock and $23,400 in cash which was reinvested in a
subscription for Series D stock.  The Company held notes receivable from an
Australian 

                                    -15-
<PAGE>


debtor and an Australian finance company.  The Company recovered from the 
latter $115,000 in cash and was able to assign a portion of the note in the 
amount of $113,250 for the payment of expenses incurred by the Company. The 
balance of the notes outstanding was subsequently assigned to the THG 
Partnership as reported above.

     During the year the Company invested a further $675,000 in developing its
Rock School Lease investment, while $41,000 was advanced to related parties and
$31,000 in the issuance of a note receivable which was recovered by the Company
subsequent to year end.  Accounts payable were reduced by $123,000 and the
Company paid $57,000 to NZI Securities in part payment of interest accrued on
the note payable.  This note was subsequently acquired by the THG Partnership
as discussed above.

     Total assets increased during the year to $3,608,000 (1995: $2,985,000;
1994: $3,262,000) while shareholders funds increased to $2,118,000 (1995:
$1,432,000; 1994: $2,039,000).

RESULTS OF OPERATIONS

JUNE 30, 1997 AS COMPARED WITH JUNE 30, 1996:

     Historically, revenue has been derived from income distributions from the
Company's investment in the Rural Investment Trust and from interest received
from two notes receivable.  As these assets were deployed early in the year to
settle a substantial debt, the Company no longer receives this income.
Consequently, revenue was reduced to $2,000 (1996: $60,000; 1995: $49,000).

     General and administrative expenses of $692,000 were comparable to 1996
($682,000) and less than for 1995 ($919,000) as a result of there being no
additional provisions for bad debts.  However, the Company does incur an annual
liability of $100,000 as a result of royalties due to E. E. Kinder Co. for the
Rock School Lease.  Consequent to the Company's substantial reduction in debt
owing, interest expense was reduced to $70,000 compared with 1996 ($124,000)
and 1995 ($105,000).  As the Company no longer has assets or liabilities in
Australia, there was not a foreign currency gain in 1997 compared with $7,000
in 1996 and $3,000 in 1995.  Ultimately, the loss for the year of $769,000 was
similar to that for 1996 ($751,000) and substantially less than that in 1995
($989,000).

JUNE 30, 1996 AS COMPARED WITH JUNE 30, 1995:

     Revenue was derived from income distributions from the Company's
investment in the Rural Investment Trust with income of $17,000 exceeding
income from prior years (1995: $10,000; 1994: 

                                    -16-
<PAGE>


$8,000).  Income was also derived from interest on notes receivable $43,000 
(1995: $49,000; 1994: $49,000), however due to difficulties in collecting 
notes receivable as discussed above, accrued interest was written off as bad 
debts.

     General and administrative expenses of $682,000 were lower than for 1995,
$919,000 as a result of there being minimal additional provision for bad debts;
but greater than for 1994 ($546,000) as a result of royalties now being paid to
E. E. Kinder Co. for the Rock School Lease.  Interest expense due principally
to NZI Securities Australia Ltd. and Raytheon increased to $124,000 over 1994
($105,000) but was less than for 1993 ($140,000).  Net foreign currency gains
totalled $7,000 compared with 1995 ($3,000) and 1994 ($89,000) due to much
lower fluctuations in the relative values of the Australian and United States
dollars.  Consequently, the loss for the year of $751,000 compared favorably
with that for 1995 ($989,000) and 1994 ($648,000).


IMPACT OF INFLATION

     The Company believes that its activities are not materially affected by
inflation.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Financial statements prepared in accordance with Regulation S-X follow the
signature page and are listed in Item 14 of Part IV of this Annual Report on
Form 10-K.

ITEM 9.   DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     None.

                                     -17-
<PAGE>


                                   PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

(a)(b)    IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS.

     The following table sets forth the names and ages of all the Directors and
Executive Officers of the Company, positions held by each such person, and when
such person was first elected or appointed.  The directors each serve until
their successors are duly elected and qualified;  officers are appointed by,
and serve at the pleasure of, the Board of Directors.

     --------------------------------------------------------------------------
                                                                    First
                                                                    Elected or
     Name & Age          Position                                   Appointed
     --------------------------------------------------------------------------
     Bill H. Gunn        Chairman of the Board,                     02/08/84
       Age 55            President, & Chief
                         Executive Officer

     Robert van Mourik   Director,                                  09/26/90
       Age 44            Executive Vice President                   01/25/89
                         Chief Financial Officer,
                         Secretary & Treasurer

     Neil E. Summerson   Director                                   09/26/90
       Age 49

     Robert A. Cameron   Director                                   09/26/90
       Age 58

     Marvin Hudson       Vice President,                            11/01/90
       Age 53            Investor Relations
     --------------------------------------------------------------------------


(c)  SIGNIFICANT EMPLOYEES.

     The Company does not employ any persons who are not executive officers but
who made significant contributions to its business.

(d)  FAMILY RELATIONSHIPS.

     There are no family relationships among the officers or directors.

                                     -18-
<PAGE>


(e)  BUSINESS EXPERIENCE.

     (e)(1)  BACKGROUND.  Brief biographical information and a recitation of
the business experience of each officer and director of the Company is set
forth below:

BILL H. GUNN

     Mr. Gunn graduated in Commerce from the University of Queensland in 1963,
achieving his Accounting Certificate from the University of Queensland in the
same year.  Subsequently, he was admitted as a member of the  Australian
Society of Accountants, rising to the position of Senior Associate.  He now
holds the position of Certified Practicing Accountant (CPA) in Australia, and
has successfully completed and passed the examinations for admittance as a
Certified Public Accountant (CPA) in the USA.

     Since March, 1977, Mr. Gunn has been a self-employed investor, CPA, and a
Director of several Stock Exchange listed public companies, as well as a number
of majority owned private corporations. These companies have been active in the
field of retailing, hotels, feed mills, mining exploration, automotive
components, securities investment, financing, property development and numerous
related fields.

     During his business experience, Mr. Gunn has been exposed to a wide
variety of corporate investments and has been involved in major business
acquisition and development activities. He is particularly knowledgeable on
business activities and investments in the Queensland region of Australia,
which is widely regarded as the major Australian growth state. His principal
activity is now acting as Chairman and President of the Company.

ROBERT VAN MOURIK

     Mr. van Mourik graduated in 1974 with a Bachelor of Applied Science
(Chemistry) and worked for six years as an Industrial Chemist in Quality
Control and Production. While completing studies in a Masters Degree in
Business Administration at Newcastle University, he worked in Corporate
Financial Planning for Australian Wire Industries, a subsidiary of Broken Hill
Proprietary Ltd. After completing this degree in 1981, he moved to Queensland
to participate in real estate development and its sales and marketing. In 1983,
he joined United Capital as an Investment Consultant and became Executive
Director of United Capital in April, 1986. In that position, he was
instrumental in United Capital's reconstruction and has since been heavily
involved in the development of Ameralia's activities. Since January 25, 1989,
he has served as Executive Vice President, Chief Financial Officer, 

                                     -19-
<PAGE>


Treasurer and Secretary of the company, and on September 26 1990, he was 
appointed a director of the Company.

NEIL E. SUMMERSON

     Mr. Summerson until 31 July 1997 was the senior partner, and for five
years prior was managing partner, in the international accounting firm of Ernst
& Young, at its offices in Brisbane, Australia. Prior to 1992, he worked in the
Corporate Recovery and Insolvency Division, which is involved in the
administration of insolvent companies, as well as providing counsel to small
businesses in the area of taxation, audit procedures and management advisory
services. Mr. Summerson received his Bachelor of Commerce degree from the
University of Queensland in 1968.  He is a Fellow of the Institute of Chartered
Accountants, an Associate of the Australian Institute of Credit Management, a
Registered Public Accountant in Queensland, a registered Company Liquidator in
Queensland, an Official Liquidator, and an Officer of the Supreme Court of
Queensland.

     On November 17, 1989, Mr. Summerson was appointed Receiver and Manager of
Denison Resources Ltd., an affiliate of the Company,  and in his official
capacity, controls the vote of 407,866 common shares of the Company's stock.

ROBERT A. CAMERON

     Mr. Cameron graduated with Honors in Metallurgical and Chemical
Engineering from the University of Adelaide, Australia in April, 1961.  Prior
to Mr. Cameron's formation of Denison Resources Ltd in 1983, Mr. Cameron was
employed in both Australia and the United Kingdom accruing approximately 24
years of senior management experience, not only in the Australian mining
industry regarding both large and small companies, but also specific experience
in the exploration for and mining of soda products.  This includes 16 years as
Chief Executive Officer and director of a number of Australian public
companies.  Mr. Cameron has been responsible for developing a number of mining
operations involving such industrial minerals as rutile, zircon, ilmenite,
bentonite clay, calcium carbonate and silver and gold properties.  From 1983,
Mr. Cameron was Chairman of the Board of Directors of Denison Resources Ltd.,
an Australian stock exchange listed public company formed for the specific
purpose of exploring and developing underground natural soda resources in
Queensland, Australia.  In January, 1989 Denison Resources (USA) Corporation, a
wholly owned subsidiary of Denison Resources Ltd., acquired the "Rock School
Lease".  In early November 1989, the Australian Stock Exchange suspended
Denison Resources Ltd. from quotation of its shares at the request of its
directors.  On November 17 & 20, 1989, Mr. Neil E. Summerson was appointed
Receiver and Manager for Denison Resources Ltd. by two 

                                     -20-
<PAGE>


creditors as a result of Denison Resources Ltd. being in default under 
certain loan agreements which were secured by an equitable mortgage over 
Denison Resources Ltd.  Under Australian law, the creditors' action did not 
require court approval or supervision, and the receivership continues.

MARVIN H. HUDSON

     Mr. Hudson was appointed Vice President, Investor Relations on November 1,
1990. Prior to that he was a principal of Broadmoor Investments Inc., a
brokerage firm which held a franchise to the Broker Dealers, First Eagle
Corporation from June, 1989 to September, 1990, and Darnell Kemna from
February, 1989 to June, 1989. From January, 1988 to December, 1988 he was
employed by Greystone Nash, Inc. as a stockbroker.

     (e)(2)  DIRECTORSHIPS.  No director of the Company is a director of a
company having securities registered under Section 12 or subject to Section
15(d) of the Securities Exchange Act of 1934 or a company registered under the
Investment Company Act of 1940.

(f)  INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS:

     During the past five years, no director or officer of the Company has:

    (f)(1)     Filed or has had filed against him a petition under the federal
bankruptcy laws or any state insolvency law, nor has a receiver, fiscal agent
or similar officer been appointed by a court for the business or property of
such person, or any partnership in which he was a general partner, or any
corporation or business association of which he was an executive officer at or
within two years before such filings;

    (f)(2)     Been convicted in a criminal proceeding or is a named subject of
a pending criminal proceeding (excluding traffic violations and other minor
offenses);

    (f)(3)     Been the subject of any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining such person from, or
otherwise limiting, the following activities:

              (i)   Acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the Commodity
Futures Trading Commission, or an associated person of any of the foregoing, or
as an investment adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director, or employee of any investment company, 

                                     -21-
<PAGE>


bank, savings and loan association or insurance company, or engaging in or 
continuing any conduct or practice in connection with such activity;

             (ii)   Engaging in any type of business practice; or

            (iii)   Engaging in any activity in connection with the purchase or
sale of any security or commodity or in connection with any violation of
federal or state securities laws or federal commodities laws;

    (f)(4)     Been the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any federal or state authority
barring, suspending or otherwise limiting for more than 60 days the right of
such person to engage in any activity described in paragraph (3)(i) above, or
to be associated with persons engaged in any such activity; or

    (f)(5)     Been found by a court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission (the "Commission") to have
violated any federal or state securities law, and the judgment in such civil
action or finding by the Commission has not been subsequently reversed,
suspended, or vacated; or

    (f)(6)     Been found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have violated any
federal commodities law, and the judgment in such civil action or finding by
the Commodity Futures Trading Commission has not been subsequently reversed,
suspended or vacated.

(g) PROMOTERS AND CONTROL PERSONS:

     No promoter or control person of the Company has been involved in any of
the events enumerated in Item 10(f) above.

(h)  COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

    Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and officers and persons who own more than ten
percent of the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC").
Directors, officers and greater than ten-percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) reports
filed.

    Based solely on its review of the copies of the reports it received from
persons required to file, the Company believes that during the period from
November 1, 1992 through October 13, 1997 all filing requirements applicable to
its officers, directors and 

                                    -22-

<PAGE>


greater than ten-percent shareholders were complied with in accordance with 
the requirements of said Section 16(a) except as follows: Mr. Marvin Hudson 
filed Forms 4 in October 1997 reporting transactions which took place in 
November 1996 and July 1997.  Mr. Bill Gunn filed a Form 4 in October 1997 
reporting a transaction which took place in November 1996.  The Company has 
no evidence that the Jacqueline Badger Mars Trust, the THG Partnership or 
Miss M. L. Tiscornia have made any required filings during the 1997 fiscal 
year or subsequently under said Section 16(a) although the Company believes 
all these required filings will be completed in October 1997.

ITEM 11.  EXECUTIVE COMPENSATION

(a) SUMMARY COMPENSATION TABLE.

   The following table sets forth information regarding compensation paid to
the officers of the Company during the three fiscal years ended June 30, 1997.
Two executive officers received compensation in excess of $100,000 during
fiscal 1997, as shown below.

<TABLE>
<CAPTION>

                              Annual Compensation ($$)     Long Term Compensation
                            --------------------------------------------------------
                                                                 Awards         Payouts
                                                            -----------------   -------
       (a)            (b)    (c)        (d)        (e)      (f)         (g)       (h)         (i)
                                                            Restricted
     Name and                                               Stock       Options   LTIP        Other
     Position         Year   Salary     Bonus      Other    Awards      & SARs   Payouts   Compensation
-------------------   ----   ------     -----      -----    ------      ------   -------   ------------
<S>                   <C>    <C>        <C>        <C>      <C>         <C>      <C>       <C>
                              ($$)      ($$)       ($$)      ($$)        (##)     ($$)        ($$)

Bill H. Gunn
as President and      1997  100,000      -0-     8,000(1)     -0-         -0-      -0-         -0-
Chief Executive       1996  100,000      -0-     8,000(1)     -0-      70,000(2)   -0-         -0-
Officer               1995  100,000      -0-     8,000(1)     -0-         -0-      -0-         -0-

Robert van Mourik     1997   55,000      -0-     8,000(1)     -0-         -0-      -0-         -0-
as Chief Financial    1996   55,000      -0-     8,000(1)     -0-         -0-      -0-         -0-
Officer               1995   55,000      -0-     8,000(1)     -0-         -0-      -0-         -0-

Marvin H. Hudson      1997  174,000      -0-        -0-       -0-         -0-      -0-         -0-
as Vice President,    1996   55,000      -0-        -0-       -0-      70,000(2)   -0-         -0-
Investor Relations    1995   55,000      -0-        -0-       -0-         -0-      -0-         -0-

</TABLE>

NOTES:    (1)  Directors fees
          (2)  See (c) below

     Compensation to Mr. Gunn is paid to Gunn Development Pty. Ltd., of which
Mr. Gunn is a controlling shareholder.  Compensation to Mr. Van Mourik is paid
to Ahciejay Pty. Ltd. of which Mr. van Mourik is a controlling shareholder.

     The Company has no plans which result in the payment or accrual for
payment of any amounts to any executive officer in connection with his
resignation, retirement, or other termination, 

                                    -23-
<PAGE>


or change of control or change in the executive officer's responsibilities.

     The Company has not adopted a medical insurance, life insurance, or other
benefit plan for its employees.  The Company currently has no stock ownership
or other profit-sharing or pension plans, but may adopt such plans in the
future.  The Company has no retirement plans and, therefore, has made no
contributions to any such plan on behalf of the named officers.

     The Company acquired a vehicle during the 1994 year for the use of Mr.
Gunn.

(c)  OPTION/SAR GRANTED DURING YEAR ENDED JUNE 30, 1997

      Effective August 31, 1996, the Company issued to each of Mr. Gunn and Mr.
Hudson 65,000 stock bonus shares.  Mr. Gunn declined the issuance of the bonus
shares to him and, therefore, the shares were never delivered.

     On June 28, 1996 the Company granted to each of Messrs Bill H. Gunn and
Marvin Hudson 70,000 stock appreciation rights comprising a right until June
28, 2006, while employed by the Company, to receive $1.50 for each SAR if the
average bid price of the Company's stock is sustained at a minimum level of
$3.50 for a period of six months, and to have the indebtedness of the Company
satisfied through the issuance of restricted common stock at $1.50 per share.

     The Company has not adopted any other stock option or stock appreciation
rights plan.  No other stock appreciation rights were granted to any executive
officer during the year ended June 30, 1997.

(d)  AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE
     TABLE.

     No executive officer exercised any options or stock appreciation rights
during the 1997 fiscal year.  The following table sets forth the fiscal year-
end value of the options held by the Company's executive officers:

   (a)               (b)           (c)       (d)                (e)
                                                              Value of
                                                              Unexercised
                                            Number of         In-the-money
                                            options at        options at
                                              6/30/97          6/30/97
                                            -----------       --------------
                 Shares Acquired  Value     Exercisable       Exercisable
      Name       on Exercise      Realized  Not-exercisable   Not-exercisable
--------------   ---------------  --------  ---------------   ----------------
                 (##)           ($$)        (##)                ($$)

                                     -24-
<PAGE>


Mr. Bill H. Gunn              -0-          -0-       140,000        -0-
Mr. Robert van Mourik         -0-          -0-        75,000        -0-
Mr. Marvin H. Hudson          -0-          -0-       140,000        -0-

*    Based on the last trade price on June 30, 1997, of $1.31 per share.  These
     options, which are held by Gunn Development Pty. Ltd. and Ahciejay Pty.
     Ltd., affiliates of Mr. Gunn and Mr. van Mourik respectively, and Mr.
     Hudson, are exercisable at $1.50 per share and were "out of the money" at
     6/30/97.


(e)  LONG TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR

     The Company has no long term incentive plans, and consequently has made no
such awards.

(f)  DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE

     Not applicable since the Company has not defined benefit or actuarial
plans.

(g)  COMPENSATION OF DIRECTORS

     (g)(1)  STANDARD ARRANGEMENTS.

     The directors of the Company each receive $8,000 cash compensation for
their services per year.  In connection with certain consulting services
rendered by them, the Company paid an affiliate of Robert A. Cameron $2,538 for
services rendered during the fiscal year ended June 30, 1997, and the Brisbane
office of Ernst & Young, of which Neil E. Summerson was managing partner,
$8,000 for services rendered during the last fiscal year.  In each case, the
payments were determined at the following rates:  Mr. Cameron: $600 per day;
Ernst & Young: normal professional charge out rates per hour.  In each case,
Messrs. Cameron and Summerson were reimbursed for expenses incurred on behalf
of the Company on a fully-accountable basis.

     (g)(2)  OTHER ARRANGEMENTS.

     Except as described herein, no officer or director of the Company has been
or is being paid any cash compensation, or is otherwise subject to any deferred
compensation plan, bonus plan or any other arrangement and understanding
whereby such person would obtain any cash compensation for his services for and
on behalf of the Company.

(h)  EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-
     CONTROL ARRANGEMENTS.

     The Company has no compensation plan or arrangement with 

                                     -25-
<PAGE>


respect to any executive officer which plan or arrangement results or will 
result from the resignation, retirement or any other termination of such 
individual's employment with the Company.  The Company has no plan or 
arrangement with respect to any such persons which will result from a change 
in control of the Company or a change in the individual's responsibilities 
following a change in control.

(i)  REPORT ON REPRICING OF OPTIONS/SARS.

     Not applicable, as no options or SARs were repriced during the fiscal year
ended June 30, 1997.

(j)  ADDITIONAL INFORMATION WITH RESPECT TO COMPENSATION COMMITTEE INTERLOCKS
     AND INSIDER PARTICIPATION.

     A Compensation Committee comprising the non-executive directors of the
Board was formed early in 1993 and determined the management fees payable to
Messrs. Gunn and van Mourik, as set out above, and the salary paid to Mr.
Hudson.  Prior to then, the full board of directors was responsible for all
compensation decisions.  The Compensation Committee is now Mr. Summerson who
has not been an officer nor employee of the Company or any of its subsidiaries
during the fiscal year ended June 30, 1997, or subsequently.  Mr. Summerson
does not have any other direct or indirect relationship with the Company
requiring disclosure by the Company pursuant to Item 401 of Regulation S-K.
Furthermore, no executive officer of the Company served as a member of the
Compensation Committee (or similar committee) of another entity which dealt
with compensation paid to any member of the Company's Compensation Committee,
or with which any other interlocking relationship exists.  However, the Company
has paid fees to an affiliate of Mr. Summerson as set out in paragraph g(1)
above.

(k)  BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

     As described above, compensation is paid to Messrs. Gunn and van Mourik
under a management services agreement which retains affiliates of Messrs. Gunn
and van Mourik.  The compensation comprises amounts determined on the basis of
salary and an additional amount equal to the directors fees paid to non-
executive directors.   Mr. Hudson receives his compensation directly as an
employee.

      The Compensation Committee intends to relate future salary increases for
the chief executive officer to the Company's financial performance and stock
market performance as compared to other companies in the specialty chemicals
and mineral exploration industry, as well as to compensation paid to the chief
executive officers of companies similarly situated.

                                    -26-
<PAGE>


By the directors comprising the Compensation Committee:
     Neil A. Summerson

     NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY OF THE COMPANY'S
FILINGS WITH THE SEC UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT OF 1934, THIS SECTION ENTITLED "BOARD COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION" SHALL NOT BE INCORPORATED INTO ANY FUTURE
FILINGS WITH THE SEC.

(l)  PERFORMANCE GRAPH

     Not applicable.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     A capitalization table is helpful in understanding the security ownership
of certain beneficial owners and management of the Company.  The following
table sets forth this capitalization information as of June 30, 1997:

                                Number of             Voting Rights
Description of Class             Shares                 per share
--------------------             ------                 ---------
Common Stock                   3,309,331     one vote per share
Series A Preferred Stock         666,666     one vote per share
Series B Preferred Stock          51,000     five votes per share
Series C Preferred Stock             750     ten votes per share
Series D Preferred Stock           2,180     1,000 votes per share

(a) AND (b)    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following table sets forth information as of September 3, 1997 with
respect to the ownership of the Common Stock for each director, all officers
and directors as a group, and all beneficial owners of more than five percent
of the Common Stock.  The following shareholders have sole voting and
investment power with respect to the shares, unless indicated otherwise.  (This
does not include shares held in the name of known depositories, such as CEDE &
Co., for the benefit of the underlying beneficial shareholders).

                                     -27-
<PAGE>

----------------------------------------------------------------------

Name & Address            Amount & Nature    Percent   Percent
     of                   of Beneficial      of        of Voting
Beneficial Owner            Ownership        Class     Securities
-----------------------------------------------------------------------

Mr N. E. Summerson          493,116  (1)     14.37%     6.44%
c/o Ernst & Young
1 Eagle St
Brisbane, Qld,
Australia

Bill H. Gunn                899,460  (2)     22.40%     3.69%
"Codrington"
Bowenville, Qld
Australia

Robert van Mourik           220,384  (3)      6.42%     2.24%
127 Central Ave
St Lucia, Qld
Australia

Madeline Ahern              318,755  (4)      8.94%     4.91%
atf The Bromley Family Trust
8th fl, 87 Wickham Tce,
Brisbane,  Qld
Australia

Robert A. Cameron            75,000  (5)      2.19%     -0-%

Marvin H. Hudson            861,813  (6)      20.94%    3.11%



OFFICERS & DIRECTORS
AS A GROUP:               2,074,773          45.59%    15.08%

Jacqueline Badger Mars    3,283,910  (7)     53.42%    50.55%
atf the Jacqueline
Badger Mars Trust dated
Feb 5, 1975 as amended
6885 Elm St., McLean, VA

Mary L Tiscornia            758,095  (8)     18.64%     2.24%
770 Tamalpais Dr, #200
Corte Madera, CA

                           (continued on next page)


                                     -28-
<PAGE>

-------------------------------------------------------------------------------

Name & Address            Amount & Nature    Percent   Percent
     of                   of Beneficial      of        of Voting
Beneficial Owner            Ownership        Class     Securities
-------------------------------------------------------------------------------

The THG Partnership         550,000  (9)      15.92%    1.54%
c/o M.L. Tiscornia
770 Tamalpais Dr, #200
Corte Madera, CA
-------------------------------------------------------------------------------

(1)  Represents 407,866 shares held as Receiver & Manager for Denison Resources
     Ltd. (Receiver & Manager appointed), 10,250 shares held by Glendower
     Investments Pty. Ltd., as trustee of a superannuation fund of which Mr
     Summerson is a beneficiary and shareholder, as well as options to acquire
     75,000 shares for $1.50 up to June 28, 2006 held by Glendower Investments
     Pty. Ltd. as trustee of a trust of which Mr. Summerson and his family are
     beneficiaries.

(2)  Comprises 7,500 shares owned by Bill H. Gunn and 131,960 shares owned by
     Gunn Development Pty. Ltd. (of which Mr. Gunn is a controlling
     shareholder); options to acquire 140,000 shares at $1.50 up to June 28,
     2006; 70,000 Stock Appreciation Rights; and an interest in the THG
     Partnership as set forth above.

(3)  Comprises 500 shares held directly by Mr. van Mourik, 131,259 shares owned
     by Ahciejay Pty. Ltd. as Trustee for The R.C.J. Trust, and 13,625 shares
     owned  by the R.C.J. Superannuation Fund, both of which Mr. van Mourik and
     his family are beneficiaries as well as options to acquire 75,000 shares
     of common stock at $1.50 up to June 28, 2006.

(4)  Comprises 108,755 shares, 26,000 shares of Series B Preferred Stock and 80
     shares of Series D Preferred Stock.  The Bromley Family Trust is a trust
     for the benefit of relatives of Robert van Mourik's spouse.  Neither Mr.
     van Mourik nor his wife has any direct or indirect interest in the Bromley
     Family Trust, although Mrs. van Mourik is a contingent, unnamed
     beneficiary.  Neither Mr. nor Mrs. van Mourik has received any
     distributions from the Bromley Family Trust and neither influences nor
     controls the decisions of the trustee.  See Item 13. Certain Relationships
     and Related Party Transactions.

(5)  Comprises options held by Jacinth Pty. Ltd. a company in which Robert
     Cameron, a director of the company, is a controlling shareholder, to
     acquire 75,000 shares at $1.50 up to June 28, 

                                     -29-
<PAGE>

     2006.

(6)  Comprises 101,813 shares of common stock, options to acquire 140,000
     shares at $1.50 up to June 28, 2006; 70,000 Stock Appreciation Rights; and
     an interest in the THG Partnership as set forth above.

(7)  Comprises 492,244 shares, 666,666 shares of Series A Preferred Stock,
     25,000 shares of Series B Preferred Stock and 2,000 shares of Series D
     Preferred Stock.

(8)  Comprises 45,595 shares, options to acquire 162,500 shares of common stock
     at $2 up to December 31, 1998 and an interest in the THG Partnership as
     set forth above.

(9)  Comprises 100 shares of Series D Preferred Stock and an option until 18
     October 1998 to acquire 450 shares of Series D Preferred Stock.

     The foregoing table does not include the possible effect of issuance of up
to 113,333 shares pursuant to the exercise of options held by persons who are
neither officers, directors, nor significant shareholders of the Company, which
options are exercisable as follows:

           13,333 at $1.50 until 31 July     1998
           87,500 at $2.00 until 31 December 1998
          100,000 at $1.00 until  1 March    1999

     As noted above, the Company has issued shares of Series A, B, C and D
Preferred Stock.  The Company issued 666,666 shares of Series A Preferred Stock
at $1.50 per share to the Jacqueline Badger Mars Trust ("Mars Trust").  The
shares were convertible into 666,666 shares of common stock until December 10,
1996 and carried a 9% dividend payable annually in restricted common stock.  On
September 18, 1996, the Mars Trust agreed to extend the period during which the
Company would be able to draw down funds then in the Escrow Account which had
been created pursuant to an agreement between the Mars Trust and the Company
and described above at Item 7.  At that time $570,000 remained in that Escrow
Account.  In consideration for the extension of time to draw down the funds
under the Escrow agreement, the Company agreed to extend the time for
conversion of the Series A Stock until November 30, 1997.  Subsequently, the
Company was advised by counsel that it lacked the capacity to make such an
extension.  When informed of this fact, the Mars Trust stated its wish to
convert its Series A Stock and its willingness to do so on the same terms.  The
Company is discussing the matter with counsel and with the Mars Trust and
expects to effect the conversion prior to November 30, 1997.  Shareholders of
the Company, other than the Mars Trust which is the 

                                     -30-
<PAGE>


majority stockholder of the Company, will be asked to approve the exchange 
ratio agreed upon.  Should that exchange ratio not receive shareholder 
approval, the Mars Trust will have the right to submit the matter to 
independent arbitration for resolution.

     There are 51,000 shares of Series B Stock issued at $10 per share.  Each
share is convertible into five shares of common stock until October 29, 1997
and carries a 9% dividend payable annually at the option of the stockholder in
restricted common stock at $2 per share.  The Mars Trust holds 25,000 shares
and an unaffiliated Australian investor holds 26,000 shares.  The Mars Trust
has notified the Company of its intention to exercise its conversion rights
into common stock for the Series B Stock and accrued and unpaid dividends
effective October 29, 1997, notwithstanding that the established conversion
price of $2 per share of common stock exceeds the current value of the
Company's common stock.

     The Series C Stock comprises 750 shares issued at $80 per share.  Each
share is convertible until April 22, 2005 into common stock on the basis of 53
shares of common stock for each share of Series C Stock and carries a 5%
dividend payable annually in cash.  The Series C Stock is redeemable at the
option of the Company after December 31, 1998 upon giving one month's written
notice, but only if the holder fails to exercise its conversion rights.

     The Series D Stock consists of 2,180 shares issued at $1,000 per share.
The stock is entitled to a dividend preference of 10% per year, payable
quarterly in restricted common stock valued at $1 per share through October 31,
2000.  The Series D Stock is convertible into common stock at the option of the
holder until October 31, 2000 on the basis of 1,000 shares per share of Series
D Stock.  The Company may redeem all or any portion of the outstanding shares
of Series D Stock at any time upon giving six months notice, but only if the
holder fails to exercise its conversion rights.  Due to clerical errors the
statement of preferences establishing the class of Series D Stock was
incorrectly filed with the State of Utah Division of Corporations and a
shareholders meeting will be held to rectify deficiencies in the filing.

     To the best knowledge of the Company, there are no arrangements,
understandings or agreements relative to the disposition of any of the
Company's securities, the operation of  which would at a subsequent date result
in a change in control of the Company.

                                     -31-
<PAGE>


(c)  CHANGES IN CONTROL.

     The Company knows of no arrangement, the operation of which may, at a
subsequent date, result in a change in the control of the Company.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

(a)  TRANSACTIONS WITH MANAGEMENT AND OTHERS.

     The following sets out information regarding transactions between
officers, directors and significant shareholders of the company.

     Loans made to the Company by related parties as detailed in Note 8 to the
Financial Statements which states that the Company owed $80,000 to directors
and affiliates of the Company at June 30, 1997. This comprised advances to the
Company, compensation and directors fees accrued but unpaid.

     As of June 30, 1996  the Company had advances of $35,719 to Gunn
Development Pty. Ltd., an affiliate of Mr. Bill H. Gunn, and $26,811 to Mr.
Marvin Hudson, an officer of the Company.  As of June 30, 1997 the advance to
Gunn Development Pty. Ltd. had been repaid and Gunn Development Pty. Ltd. had
advanced further funds to the Company; and the advance to Mr. Marvin Hudson had
been reduced.  The following summarizes these advances during the fiscal year
ended June 30, 1997:

     Related Party:                                   Gunn
                                             Development Pty. Ltd.
                                             ---------------------
     Balance at June 30, 1996:                    $ 35,719
     Repayments made during year:                   49,096
     Advances made during year:                       Nil
     Interest accrued:                                Nil

     Balance at June 30, 1997:                    $(13,377)
                                                  ---------

     Officer:                                   Mr. M. Hudson
                                                -------------

     Balance at June 30, 1996:                     $26,811
     Advances made during year:                     49,354
     Repayments made during year                    66,101
     Interest accrued:                                 Nil

     Balance at June 30, 1997:                     $10,064
                                                   -------

     These advances bear no interest, are due on demand, and are not evidenced
by promissory notes.  Mr. Marvin Hudson repaid his 

                                     -32-
<PAGE>


entire balance due following the end of the fiscal year.

     During the year, dividends of $233,790 became payable on the Series A,
Series B and Series D Preferred Stock and the Company, upon the agreement of
the investors, paid this dividend through the issuance of 233,790 shares of
restricted common stock in accordance with the statements of preferences.  In
October 1995, the Jacqueline Badger Mars Trust, holder of all the Series A
Preferred Stock and a portion of the  Series B Preferred Stock, entered into an
agreement to purchase 2,000 shares of Series D Preferred Stock, which shares
have the preferences and conversion privileges discussed elsewhere herein.  The
funds used to subscribe for the shares were held in an escrow account, pending
disbursement in accordance with the provisions of the escrow agreement.  As at
June 30, 1997 $1,760,000 was disbursed under the agreement for the issue of
1,760 shares of Series D Preferred Stock. The remaining $240,000 was disbursed
in September 1997 for the issue of another 240 shares.

     In September 1996, a secured creditor, NZI Securities Australia Ltd.
("NZI"), declared a default on indebtedness of approximately A$1,200,000 and
advised the Company that NZI intended to immediately exercise its power of sale
over the RIT units NZI held as collateral.  This debt was subsequently acquired
from NZI by the THG Partnership ("THG"), an affiliate of the Company, and the
Company then concluded an agreement with THG to settle the debt as discussed
more fully in the Company's filing on Form 10-K for the year ended 30 June
1996.

     As a part of the settlement the Company agreed to issue to THG 100 shares
of its Series D Convertible Preferred Stock. In addition, THG has an option
until 18 October, 1998, to sell the RIT units to the Company for $450,000
payable by the issue of 450 shares of Series D Preferred Stock.  If THG chooses
not to exercise this option, THG may, in its discretion during the option
period pay $450,000 in cash to purchase 450 shares of Series D Preferred Stock.

Satisfaction of Section 16(b) Liability

     As a result of a sale of the Company's common stock made by Mr. Hudson in
May 1996 and an acquisition in August 1996, allegations were made on behalf of
a shareholder that Mr. Hudson was liable under Section 16(b) of the Securities
Exchange Act of 1934 for certain profits.  The Company engaged in discussions
with Mr. Hudson as to the existence of these liabilities and a resolution was
achieved in January 1997 when Mr. Hudson tendered $51,727 to the Company in
satisfaction of his alleged liability of $52,000.  In addition, Mr. Hudson
surrendered 5,000 shares of common stock to the Company for cancellation in
July 1997.

                                     -33-
<PAGE>


Conversion of Series of Preferred Stock into Common Stock

     Mrs Jacqueline Badger Mars has notified the Company of her intention as
trustee of the Jacqueline Badger Mars Trust to convert its holdings of Series A
and Series B Convertible Preferred Stock into common stock as discussed above
more fully at Item 12..




(b)(1)-(4)     CERTAIN BUSINESS RELATIONSHIPS

     See Item 13(a), above.

(b)(5)  No nominee or director of the Company is, or has been, a partner or
executive officer of any investment banking firm that has performed services
for the Company during the last fiscal year or that the Company proposes to
have perform services during the current year.

(b)(6)  The Company is not aware of any other relationship between its
directors and the Company that are similar in nature and scope to those rela
tionships listed in paragraphs (b)(1) through (5) of this Item 13 except as
described above.

(c)  INDEBTEDNESS OF MANAGEMENT.

     No director, executive officer, nominee for election as a director, any
member of the immediate family of any of the foregoing, or any corporation or
organization of which any of the foregoing persons is an executive officer,
partner or beneficial holder of ten percent or more of any class of equity
securities, or any trust or other estate in which any such person has a sub
stantial beneficial interest or as to which such person serves as a trustee or
in a similar capacity, was indebted to the Company at any time, except as
disclosed in Item 13(a), above.

(d)  TRANSACTIONS WITH PROMOTERS:  Not applicable.

                                     -34-
<PAGE>


                            PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  EXHIBITS.

     Certain of the following exhibits are hereby incorporated by reference
pursuant to Rule 12b-23 as promulgated under the Securities and Exchange Act of
1934, as amended, from the reports noted below:

Exhibit
 Number   Description
-------   -----------
3.1 (a)   Articles of Incorporation and Amendment.

3.2 (a)   Bylaws of AmerAlia, Inc.

3.3 (a)   Statement of Preferences for Series A Convertible Preferred Stock.

3.4 (f)   Statement of Preferences for Series B Preferred Stock, as amended.

10.1 (b)  Agreement with Eagle Star Nominees Ltd. as trustee for The Rural
          Investment Trust for sale of property in consideration for issuance
          of vendor units in the Rural Investment Trust.

10.2 (c)  "Mineral Lease with Option to Purchase" agreement between Denison
          Resources (USA) Corporation and E.E. Kinder Co.

10.3 (c)  First Amendment to Mineral Lease With Option to Purchase.

10.4 (c)  "Rock School Joint Venture Agreement" between Denison Resources (USA)
          Corporation and Gale Peters & Associates.

10.5 (d)  Success Fee Agreement with United Capital Pty. Ltd. dated November
          14, 1988.

10.6 (e)  Form of Distributor agreements for marketing of sodium bicarbonate.

10.7 (e)  General Services Agreement with Raytheon Engineers & Constructors,
          Inc.

10.8 (f)  First Amendment to Special Warranty Assignment, Royalty Reservation,
          and Minimum Royalty Payment between AmerAlia and E.E. Kinder Co.

                                     -35-
<PAGE>


10.9 (f)  Consulting Agreement between AmerAlia and E.E. Kinder Co.

10.10 (f) U.S. Government Sodium Lease

21.1      Subsidiaries of the Registrant.
               Denison Resources (USA), Inc., a defunct Delaware corporation


(a)  INCORPORATED BY REFERENCE FROM THE COMPANY'S FORM 10 GENERAL REGISTRATION
     STATEMENT FILED WITH THE COMMISSION ON MARCH 5, 1987.

(b)  INCORPORATED BY REFERENCE FROM THE COMPANY'S FORM 10-K FOR ITS YEAR ENDED
     JUNE 30, 1989.

(c)  INCORPORATED BY REFERENCE FROM THE COMPANY'S FORM 10-K FOR ITS YEAR ENDED
     JUNE 30, 1990.

(d)  INCORPORATED BY REFERENCE FROM THE COMPANY'S FORM 10-K FOR ITS YEAR ENDED
     JUNE 30, 1992.

(e)  INCORPORATED BY REFERENCE FROM THE COMPANY'S FORM 10-K FOR ITS YEAR ENDED
     JUNE 30, 1993.

(f)  INCORPORATED BY REFERENCE FROM THE COMPANY'S FORM 10-K FOR ITS YEAR ENDED
     JUNE 30, 1995.


     (b)   During the last quarter of the period covered by this report the
Company filed no current reports on Form 8-K.

     (c)  Required exhibits are attached hereto and are listed in Item 14(a)(3)
of this Report.

     (d)  Item 14(a)(2) of this Report lists all required financial statement
schedules to be attached hereto.

                                     -36-
<PAGE>


                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.

Date:  October 13, 1997

                                       AMERALIA, INC.



                                       By: /s/ Bill H. Gunn
                                           -----------------------
                                           Bill H. Gunn, President

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.




  /s/ Bill H. Gunn          Principal Executive    Date:  10/13/97  
--------------------------- Officer and Director        --------------
Bill H. Gunn                
                            



 /s/ Robert van Mourik      Secretary, Treasurer   Date:  10/13/97  
--------------------------- Principal Financial         --------------
Robert C. J. van Mourik     and Accounting Officer,
                            and Director


 /s/ Robert A. Cameron      Director               Date:  10/13/97  
---------------------------                             --------------
Robert A. Cameron


 /s/ Neil E. Summerson      Director               Date:  10/13/97  
---------------------------                             --------------
Neil E. Summerson




<PAGE>








                        AMERALIA, INC.

                      Financial Statements

                     June 30, 1997 and 1996

<PAGE>
                        C O N T E N T S


Independent Auditors' Report................................... 3

Balance Sheets................................................. 4

Statements of Operations....................................... 6

Statements of Stockholders' Equity............................. 7

Statements of Cash Flows....................................... 9

Notes to the Financial Statements............................. 11


<PAGE>

                  INDEPENDENT AUDITORS' REPORT


Board of Directors and Shareholders of Ameralia, Inc.
Colorado Springs, Colorado

We have audited the accompanying balance sheets of Ameralia, Inc. as of 
June 30, 1997 and 1996, and the related statements of operations, stockholders' 
equity and cash flows for the years ended June 30, 1997, 1996 and 1995.  
These financial statements are the responsibility of the Company's 
management.  Our responsibility is to express an opinion on these financial 
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audits 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 audits provide a 
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in 
all material respects, the financial position of Ameralia, Inc. as of June 
30, 1997 and 1996, and the results of its operations and its cash flows for 
the years ended June 30, 1997, 1996 and 1995 in conformity with generally 
accepted accounting principles.

The accompanying financial statements have been prepared assuming that the 
Company will continue as a going concern.  As discussed in Note 19 to the 
financial statements, the Company has suffered recurring losses and has a 
working capital deficit which raises substantial doubt about its ability to 
continue as a going concern.  Management's plans in regard to these matters are 
also described in Note 19.  The financial statements do not include any 
adjustments that might result from the outcome of this uncertainty.

Jones, Jensen & Company
September 12, 1997

<PAGE>

                            AMERALIA, INC.
                            Balance Sheets
                           Amounts in $'000
<TABLE>
<CAPTION>
                                    ASSETS
                                                                         June 30,
                                                                  ---------------------
                                                                    1997       1996
                                                                  ---------   ---------
<S>                                                               <C>         <C>
CURRENT ASSETS

 Cash (Note 1)                                                    $       2   $      21
 Accounts receivable                                                    -            39
 Related party receivables (Note 2)                                      10          69
 Net realizable value of notes receivable - current (Note 3)            -           103
                                                                  ---------   ---------

    Total Current Assets                                                 12         232
                                                                  ---------   ---------

FIXED ASSETS, net (Note 7)                                               16          25
                                                                  ---------   ---------
OTHER ASSETS

 Note receivable, net (Note 6)                                          -           131
 Lease acquisition, exploration and development costs (Note 4)        2,755       2,735
 Investment (Note 5)                                                    -           485
 Deferred stock offering costs (Note 1)                                 225         -
                                                                  ---------   ---------

    Total Other Assets                                                2,980       3,351
                                                                  ---------   ---------
    TOTAL ASSETS                                                  $   3,008   $   3,608
                                                                  ---------   ---------
                                                                  ---------   ---------
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       4

<PAGE>

                            AMERALIA, INC.
                      Balance Sheets (Continued)
                           Amounts in $'000


                 LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                            June 30,
                                                                     ---------------------
                                                                       1997       1996
                                                                     ---------   ---------
<S>                                                                  <C>         <C>
CURRENT LIABILITIES

 Accounts payable                                                    $     263   $     201
 Due to related parties (Note 8)                                            80          53
 Notes payable - current portion (Note 9)                                  284         844
 Interest payable                                                           23         383
                                                                     ---------   ---------

    Total Current Liabilities                                              650       1,481
                                                                     ---------   ---------

LONG-TERM LIABILITIES

Notes payable (Note 9)                                                      4           9
                                                                     ---------   ---------

     Total Long-Term Liabilities                                             4           9
                                                                     ---------   ---------

     Total Liabilities                                                     654       1,490
                                                                     ---------   ---------

COMMITMENTS AND CONTINGENCIES (Note 13)


STOCKHOLDERS' EQUITY

 Preferred stock, $0.05 par value; 1,000,000 authorized;
  720,356 and 719,851 issued and outstanding,
  respectively                                                              36          36
 Common stock, $0.01 par value; 100,000,000 shares 
  authorized; 3,329,331 and 2,717,041 issued and 
  outstanding, respectively                                                 33          27
 Additional paid-in capital                                             10,744       9,486
 Unrealized gain on securities available for sale, net (Note 5)            -            25
 Accumulated deficit                                                    (8,582)     (7,579)
 Foreign currency translation adjustment (Note 1)                          123         123
                                                                     ---------   ---------

     Total Stockholders' Equity                                          2,354       2,118
                                                                     ---------   ---------
     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                      $   3,008  $    3,608
                                                                     ---------   ---------
                                                                     ---------   ---------

</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       5

<PAGE>

                            AMERALIA, INC.
                       Statements of Operations
                           Amounts in $'000

<TABLE>
<CAPTION>
                                                     For the Years Ended June 30,
                                                  ---------------------------------
                                                     1997        1996        1995
                                                  ---------   ---------   ---------
<S>                                               <C>         <C>         <C>
REVENUES

  Investment income                               $     -      $     17   $      10
  Interest                                                2          43          39
                                                  ---------   ---------   ---------
     Total Revenues                                       2          60          49
                                                  ---------   ---------   ---------

EXPENSES

  General and administrative                            692         682         919
  Depreciation and amortization                           9          12          14
  Interest                                               70         124         105
                                                  ---------   ---------   ---------
     Total Expenses                                     771         818       1,038
                                                  ---------   ---------   ---------
LOSS FROM OPERATIONS                                   (769)       (758)       (989)
                                                  ---------   ---------   ---------
OTHER INCOME (EXPENSE)

  Foreign currency gain (loss)                          -             7           3
  Realized gain (loss) on non-current asset             -          -            (21)
                                                  ---------   ---------   ---------
     Total Other Income (Expense)                       -             7         (18)
                                                  ---------   ---------   ---------
NET LOSS BEFORE INCOME TAX EXPENSE                     (769)       (751)     (1,007)

  Income tax expense                                    -          -            -
                                                  ---------   ---------   ---------
NET LOSS                                          $    (769)   $   (751)  $  (1,007)
                                                  ---------   ---------   ---------
                                                  ---------   ---------   ---------
LOSS PER SHARE                                    $   (0.26)   $  (0.28)  $   (0.41)
                                                  ---------   ---------   ---------
                                                  ---------   ---------   ---------
WEIGHTED AVERAGE NUMBER OF
 SHARES OUTSTANDING                                   3,014       2,653       2,463
                                                  ---------   ---------   ---------
                                                  ---------   ---------   ---------

</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       6

<PAGE>

                                           AMERALIA, INC.
                                 Statements of Stockholders' Equity
                                          Amounts in $'000

<TABLE>
<CAPTION>

                                                                             Unrealized                           Foreign
                                  Preferred Stock    Common Stock  Additional   Gain                              Currency
                                  --------------- ----------------  Paid-in  (Loss) on  Subscription Accumulated Translation
                                  Shares  Amount   Shares   Amount  Capital  Securities  Receivable    Deficit   Adjustment   Total
                                  ------- ------  --------- ------ --------- ----------  ----------  ----------  ----------  ------
<S>                               <C>     <C>     <C>       <C>    <C>       <C>         <C>         <C>         <C>         <C>
Balance, June 30, 1994            717,666 $    36 2,378,506 $   24 $   7,512 $    -      $      (78) $   (5,578) $      123  $2,039

Shares issued for cash and
 extinguishment of debt               -      -      160,000      1       261      -            -          -             -       262

Shares issued in lieu of dividends    -      -       71,250      1       111      -            -          -             -       112

Issuance of Series C preferred
 for cash                             750    -          -      -          60      -            -          -             -        60

Payment received on Series B
 stock subscriptions                  -      -          -      -         -        -              78       -             -       -

Dividends paid                        -      -          -      -         -        -            -           (112)        -      (112)

Net loss for the year ended
 June 30, 1995                        -      -          -      -         -        -            -         (1,007)        -    (1,007)
                                  ------- ------  --------- ------ --------- ----------  ----------  ----------  ----------  ------
Balance, June 30, 1995            718,416     36  2,609,756     26     7,944      -            -         (6,697)        123   1,432

Shares issued in lieu of dividends    -      -      107,285      1       107      -            -            -           -       108

Issuance of series D preferred
 stock for cash                     1,435    -          -      -       1,435      -            -            -           -     1,435

Dividends paid                        -      -          -      -         -        -            -           (131)        -      (131)

Unrealized gain on securities
 available for sale                   -      -          -      -         -         25          -            -           -        25

Net loss for the year
 ended June 30, 1996                  -      -          -      -         -        -            -           (751)        -      (751)
                                  ------- ------  --------- ------ --------- ----------  ----------  ----------  ----------  ------
Balance, June 30, 1996            719,851 $   36  2,717,041 $   27 $   9,486 $      25   $      -        (7,579) $      123  $2,118
                                  ------- ------  --------- ------ --------- ----------  ----------  ----------  ----------  ------

</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       7

<PAGE>

                                           AMERALIA, INC.
                           Statements of Stockholders' Equity (Continued)
                                          Amounts in $'000

<TABLE>
<CAPTION>

                                                                             Unrealized                           Foreign
                                  Preferred Stock    Common Stock  Additional   Gain                              Currency
                                  --------------- ----------------  Paid-in  (Loss) on  Subscription Accumulated Translation
                                  Shares  Amount   Shares   Amount  Capital  Securities  Receivable    Deficit   Adjustment   Total
                                  ------- ------  --------- ------ --------- ----------  ----------  ----------  ----------  ------
<S>                               <C>     <C>     <C>       <C>    <C>       <C>         <C>         <C>         <C>         <C>

Balance, June 30, 1996            719,851 $   36  2,717,041 $   27 $   9,486 $     25    $     -     $   (7,579) $      123  $2,118

Shares issued for cash and
 extinguishment of debt               -      -      358,500      4       354      -            -            -           -       358

Shares issued in lieu of dividends    -      -      233,790      2       232      -            -            -           -       234

Issuance of Series D preferred
 stock for cash                       405    -          -      -         405      -            -            -           -       405

Issuance of Series D preferred
 stock for extinguishment of
 debt (Note 16)                       100    -          -      -         100      -            -            -           -       100

Dividends paid                        -      -          -      -         -        -            -           (234)        -      (234)

Unrealized loss on securities
 available for sale                   -      -          -      -         -        (25)         -            -           -       (25)

Additional capital contributed        -      -          -      -         167      -            -            -           -       167

Net loss for the year ended
 June 30, 1997                        -      -          -      -         -        -           (769)         -                  (769)
                                  ------- ------  --------- ------ --------- ----------  ----------  ----------  ----------  ------
Balance, June 30, 1997            720,356 $   36  3,309,331 $   33 $  10,744 $    -      $     -     $   (8,582) $      123  $2.354
                                  ------- ------  --------- ------ --------- ----------  ----------  ----------  ----------  ------
                                  ------- ------  --------- ------ --------- ----------  ----------  ----------  ----------  ------

</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       8


<PAGE>

                             AMERALIA, INC.
                        Statements of Cash Flows
                            Amounts in $'000

<TABLE>
<CAPTION>
                                                               For the Years Ended June 30,
                                                         ---------------------------------------
                                                           1997            1996          1995
                                                         --------        --------      --------
<S>                                                      <C>             <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES

  Net loss                                               $   (769)       $  (751)      $(1,007)
  Adjustments to Reconcile Net Loss to Net
   Cash Used by Operating Activities:
     Bad debt                                                 -                62           267
     Stock issued for services rendered                        65             -             -
     Expenses paid with note receivable and note payable      -               136           -
     Depreciation                                               9              12            14
     Exchange (gain) loss                                     -                (7)           (3)
     Realized loss on investments                             -               -              21
  Change in operating Assets and Liabilities
    (Increase) decrease in accounts and
     interest receivable                                       39             (76)           26
    (Increase) decrease in related party receivables           59             (41)          -
    (Increase) decrease in other assets                      (225)            -             -
    (Increase) decrease in loss on disposal of assets         -               -               1
    Increase (decrease) in accounts payable                    89            (123)          209
    Increase (decrease) in interest payable                    13               8            77
                                                         --------        --------      --------
          Net Cash Used in Operating Activities              (720)           (780)         (395)
                                                         --------        --------      --------

CASH FLOWS FROM INVESTING ACTIVITIES

  Lease acquisition, exploration and development
   expenditure                                                (20)           (675)          (49)
  Purchase of property and equipment                          -                (2)          -
  Cash received from notes receivable                         -               115             6
                                                         --------        --------      --------
          Net Cash Used in Investing Activities          $    (20)       $   (562)     $    (43)
                                                         --------        --------      --------
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       9

<PAGE>

                             AMERALIA, INC.
                  Statements of Cash Flows (Continued)
                            Amounts in $'000

                                                               
<TABLE>
<CAPTION>
                                                               For the Years Ended June 30,
                                                         ---------------------------------------
                                                           1997            1996          1995
                                                         --------        --------      --------
<S>                                                      <C>             <C>           <C>
CASH FLOWS FROM FINANCING ACTIVITIES

  Cash received from issuance of preferred stock         $    405        $  1,412      $     60
  Cash received from issuance of common stock                 -               -             150
  Cash received from notes                                    321              14           132
  Cash received from stock subscriptions                      -               -              78
  Payments on note payable                                    (55)            (68)          -
  Additional capital contributed                               50             -             -
                                                         --------        --------      --------
      Net Cash Provided by Financing Activities               721           1,358           420
                                                         --------        --------      --------
NET INCREASE (DECREASE) IN CASH                               (19)             16           (18)
CASH AND CASH EQUIVALENTS AT
 BEGINNING OF YEAR                                             21               5            23
                                                         --------        --------      --------
CASH AND CASH EQUIVALENTS AT
 END OF YEAR                                             $      2        $     21      $      5
                                                         --------        --------      --------
                                                         --------        --------      --------
SUPPLEMENTAL DISCLOSURE OF CASH
 FLOW INFORMATION

  Income taxes                                           $    -          $    -        $    -
  Interest                                               $     48        $     82      $      3
NON-CASH FINANCING ACTIVITIES

  Common stock issued for payment of obligations         $    393        $    -        $    112
  Common stock issued for services rendered              $     65        $    -        $    -
  Payment of preferred stock dividends through
   the issuance of additional common stock               $    234        $   108       $    112
  Conversion of accounts payable and accrued
   interest into a note payable                          $    -          $   -         $    299
  Payment of series B dividend by issuing series
   D preferred stock                                     $    -          $    23       $    -
  Unrealized gain on securities available-for-sale       $   (25)        $    25       $    -

</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       10

<PAGE>

                            AMERALIA, INC.
                  Notes to the Financial Statements
                        June 30, 1997 and 1996
                           Amounts in $'000

NOTE 1 -    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      a.  Organization

      Ameralia, Inc. (the "Company") was originally incorporated under the
      laws of the State of Utah on June 7, 1983, as Computer Learning
      Software, Inc.  After a change in control of the Company in January,
      1984, the Company has been primarily engaged in establishing a chemical
      business in the manufacture of sodium bicarbonate and related products
      in Colorado, United States.

      On January 19, 1993, the Company effected a reverse split of its common
      stock of 40 to 1.  All shares have been adjusted to reflect the effect
      of the reverse split.

      On November 15, 1989, the Company acquired Denison Resources (USA)
      Corporation ("Denison") which had subleased an interest in a federal
      sodium bicarbonate lease from an unaffiliated owner.  Subsequently, on 
      December 10, 1992, the Company received an assignment of the lease from 
      the previous owner.  This lease incudes a substantial, naturally 
      occurring, rare deposit of sodium bicarbonate in Colorado, USA.  Denison 
      has not maintained its corporate charter under Delaware law and, 
      therefore, has no remaining interest in the lease.

      The Company's primary objective is  to recover from this lease through
      solution mining the naturally occurring sodium bicarbonate for the
      animal feed, industrial, pharmaceutical and food grade markets.  The
      production of sodium bicarbonate will also enable the production of soda
      ash and caustic soda, chemicals which are widely used in the manufacture
      of glass, detergents and a variety of inorganic and organic chemicals.
      Potentially, sodium bicarbonate might be used as an agent for flue gas
      desulfurization, a market the Company expects will expand as the
      requirements of the Clean Air Act amendments of 1990 impact industry
      more significantly.  It proposes to achieve this objective by:

      1)  finalizing approval of a Mining Plan to enable the construction of 
          a mine and associated plant for the production of sodium bicarbonate;

      2)  the raising of sufficient capital to commence mining and processing 
          operations on the Company's lease; or

      3)  seeking qualified joint venture partners for the development of its 
          sodium bicarbonate resource if that is more beneficial to the 
          Company.

      The Company has entered into two agreements and one letter of intent
      with three longstanding distributors of sodium bicarbonate to the
      livestock industry, although none of these distributors has any
      obligation to purchase any sodium bicarbonate from the Company, even
      should the Company achieve production of sodium bicarbonate from its
      lease (which cannot be assured).  These distributors cover most of the
      United States.  Sodium bicarbonate is used in the preparation of animal
      feed mixes where it acts as a rumen buffer to increase dairy cow milk
      production.

      b.  Accounting Method

      The Company's financial statements are prepared using the accrual method
      of accounting.  The 

      Company has elected a June 30, year-end.

                                      11

<PAGE>


                            AMERALIA, INC.
                  Notes to the Financial Statements
                        June 30, 1997 and 1996
                           Amounts in $'000


NOTE 1 -    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

      c.  Cash

      The Company considers all highly liquid investments with a maturity of
      three months or less when purchased to be cash equivalents.

      d.  Reporting Currency and Remeasurement

      The Company's financial statements are reported in its reporting
      currency, the United States dollar.  Remeasurement of Australian assets,
      liabilities and operations into United States dollars results in foreign
      currency gains and losses which are reflected in the statements of
      operations.

      e.  Property and Equipment

      Property and equipment are stated at cost, less accumulated
      depreciation.  Depreciation is determined using the straight-line method
      over the estimated useful lives of the assets ranging from 3 to 30
      years.  Expenditures for property additions and betterments are
      capitalized at cost.  Maintenance and repairs are charged to expense
      when incurred.

      f.  Income Taxes

      At June 30, 1997, the Company had net operating loss carryforwards of
      approximately $2,440 that may be offset against future taxable income
      from the year 2000 through 2012.  No tax benefit has been reported in
      the June 30, 1997 financial statements because the Company believes that
      the carryforwards are more likely than not to expire unused.
      Accordingly, the potential tax benefit is offset by a valuation
      allowance of the same amount.

      g.  Net Loss Per Share

      Net loss per share is computed using the weighted average number of
      common shares outstanding during the applicable period.  The Company's
      outstanding stock purchase warrants and options have been excluded from
      the calculation as they are anti-dilutive.  In January, 1993 the Company
      reverse split its shares of common stock on a one for forty basis.  All
      references to shares outstanding and earnings per share have been
      restated to reflect the reverse stock split on a retroactive basis.

      h.  Estimates

      Management uses estimates and assumptions in preparing financial
      statements.  Those estimates and assumptions affect the reported amounts
      of assets and liabilities, the disclosure of contingent assets and
      liabilities, and the reported revenues and expenses.

                                      12

<PAGE>

                            AMERALIA, INC.
                  Notes to the Financial Statements
                        June 30, 1997 and 1996
                           Amounts in $'000

NOTE 1 -  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

       i.  Concentrations of Risk

       The Company records receivables from advances to related parties and
       from uncollected investment revenues.

       Credit losses, if any, have been provided for in the financial
       statements and are based on management's expectations.  The Company's
       accounts receivable are subject to potential concentrations of credit
       risk.  The Company does not believe that it is subject to any unusual
       risks, or significant risks in the normal course of its business.

       j.  Investments

       Securities to be held for indefinite periods of time and not intended to
       be held to maturity or on a long-term basis are classified as available-
       for-sale and are carried at fair value.

       Realized gains and losses on dispositions are based on the net proceeds
       and the adjusted book value of the securities sold, using the specific
       identification method.  Unrealized gains and losses on investment
       securities available-for-sale are based on the difference between book
       value and fair value of each security.  These gains and losses are
       credited or charged to stockholders' equity, whereas realized gains and
       losses flow through the Company's statement of operations.

       k.  Deferred Stock Offering Costs

       The Company has incurred costs of $225 in connection with a proposed
       stock offering of $30,000.  The fund raising agreement is still in
       effect although the funds have not been raised.  If the offering is
       completed, the stock offering costs will be netted with the proceeds.
       If the offering fails, the costs will be expensed.

NOTE 2 -  RELATED PARTY RECEIVABLES

       The Company occasionally issues advances to related parties who have
       supported the Company over the years.  The balance due from related
       parties at June 30, 1997 and 1996 totals $10 and $69, respectively.

NOTE 3 -  NET REALIZABLE VALUE OF NOTES RECEIVABLE

       The Company held at June 30, 1996,  an unsecured note receivable from an
       unrelated Australian finance company as a result of placing funds from a
       stock issuance on deposit.  The note receivable was due upon demand,
       earning 4% per annum.  The note receivable was transferred to a related
       company prior to June 30, 1997 in payment of an outstanding debt (See
       Note 16).


                                                        June 30,
                                                    ------------------
                                                     1997        1996
                                                    -------    -------
        Principal                                   $  -       $  748
        Accrued interest                               -           85     
        Less allowance for uncollectables              -         (730)
                                                    -------    -------
        Net balance                                 $  -       $  103
                                                    -------    -------
                                                    -------    -------


                                      13

<PAGE>

                            AMERALIA, INC.
                  Notes to the Financial Statements
                        June 30, 1997 and 1996
                           Amounts in $'000


NOTE 4 -  LEASE ACQUISITION, EXPLORATION AND DEVELOPMENT COSTS

       In December 1992, the Company acquired from an unrelated party
       ("Kinder"), BLM Sodium Lease C-0119985 known as the Rock School Lease,
       including 1,320 acres, in Rio Blanco County, Colorado, USA.  The Company
       acquired the Rock School Lease from Kinder for consideration comprising
       (i) a cash payment of $600; (ii) the issuance of 50,000 shares of common
       stock; and (iii) commencing July 1, 1994, the reservation of a
       production royalty of $2 per ton which was amended January 1, 1996 to
       $1.50 per ton for all production, due and payable on the last day of the
       month following the month of production provided that a minimum annual
       royalty of $100 (which was changed to $75 on January 1, 1996) be paid
       monthly in arrears, which began in July 1994.  Kinder assigned to the
       Company all of its rights, title and interest in the federal lease to
       the Company.  Kinder also agreed to provide all documentation, files and
       records in its possession pertaining to the exploration of and
       development plans for the mining of the Rock School Lease; warranted
       that it had not assigned to any third party or dealt in any way with its
       interest in the Rock School Lease and granted the Company an option to
       acquire its royalty interest.  The assignment of the interest in the
       Rock School Lease from Kinder was approved by the BLM on January 1,
       1996.

       The Rock School Lease was renewed July 1, 1991 for a period of ten years
       and is renewable under terms and conditions prescribed by the Secretary
       of the Interior.  The lease is currently undeveloped, although the
       adjoining lease has been brought into production.  The Company has
       obtained the necessary permits from the appropriate regulatory
       authorities to mine its lease.  As a part of obtaining the approval of
       the Bureau of Land Management to solution mine the property, the Company
       drilled its first core hole during 1996.  The completed core hole has
       provided specific data which prove the existence and continuity of the
       nahcolite beds through the Rock School Lease as described below.

       The Company has engaged engineering consultants to form preliminary
       estimates of the cost of constructing a 50,000 ton per year plant.  The
       Company estimates that $30 million or more will be required for
       construction and annual operating costs will be up to $5 million for
       mining operations.  The Company is seeking potential investors that
       would provide the necessary funds to construct a plant.  The decision as
       to when these funds will be available rests with the prospective
       investors.

       The lease is one of three federal leases which cover a unique, major
       natural resource of nahcolite (naturally occurring sodium bicarbonate).
       The Company has performed surface geological investigation of the 1,320
       acre lease and has reviewed data assembled by other investigators in the
       Piceance Creek Basin, including a 1974 report published by the United
       States Geological Survey entitled "Stratigraphy and Nahcolite Resources
       of the Saline Facles of the Green River Formation, Rio Blanco County,
       Colorado." (John R. Dyni, USGS Report 74-56).  This report analyzed the
       results of a detailed study of ten core holes from the saline zone,
       including a core hole known as Dunn 209-1 which is approximately 800
       feet to the east of the Company's proposed initial mine site on the Rock
       School lease.

                                      14

<PAGE>

                            AMERALIA, INC.
                  Notes to the Financial Statements
                        June 30, 1997 and 1996
                           Amounts in $'000


NOTE 4 - LEASE ACQUISITION, EXPLORATION AND DEVELOPMENT COSTS (Continued)

       From this core hole, Mr. Dyni estimated the total nahcolite content of
       the saline zone in this area at 315 tons per square mile.  Using this
       figure translates to a total nahcolite content of the Rock School Lease
       of 649 million short tons for the 1,320 acre lease.  Due to lateral
       persistence of this deposit,  which allows correlation of beds over
       distances of many miles, it is reasonable to assume that the
       concentrations found in the Dunn 20-1 hole also exist beneath the Rock
       School Lease.

       Based on the foregoing information, the Company believes that the
       nahcolite deposit within the Rock School Lease is of significant size.
       However, not all of this resource can be recovered with existing
       technology.  Until the resource is brought into production or until
       substantial additional engineering work is accomplished, the viability
       of economic recoverability cannot be established.

       The Company has capitalized costs associated with the acquisition of the
       lease site and certain other costs associated with the development of
       the resource.  All other costs incurred in developing the resource are
       expensed as period costs (Note 14).

NOTE 5 - INVESTMENT IN THE RURAL INVESTMENT TRUST

       On November 16, 1988, the Company acquired 1,059,459 units valued at
       $790 in The Rural Investment Trust ("RIT") as a result of the sale of
       property to the Trust.  The RIT is an Australian public, unlisted real
       estate investment trust which invests in agriculturally oriented
       properties.  It is managed by a wholly-owned subsidiary of National
       Mutual Life, a large life insurance company in Australia.

       As discussed in Note 16, the Company transferred all of its rights and
       ownership in the investment trust to a related company in payment of an
       outstanding debt.  This transaction occurred prior to June 30, 1997.

NOTE 6 - NOTE RECEIVABLE

       In June, 1991 the Company sold its entire breeding herd of cattle and
       received a 6% note from the purchaser in the amount of $296, repayable
       over three years in quarterly payments of $25 due at the end of March,
       June, September and December of each year.  The note was secured by a
       stock mortgage over the cattle herd.  As discussed in Note 16, this
       receivable was transferred  to a related company in payment of an
       outstanding debt prior to June 30, 1997.

                                                        June 30,
                                                    ------------------
                                                     1997        1996
                                                    -------    -------
           Note receivable                          $   -      $   179
           Less allowance for uncollectibles            -          (48)
                                                    -------    -------
           Net balance                              $   -      $   131
                                                    -------    -------
                                                    -------    -------

                                      15

<PAGE>

                            AMERALIA, INC.
                  Notes to the Financial Statements
                        June 30, 1997 and 1996
                           Amounts in $'000

NOTE 7 -  FIXED ASSETS

       Fixed assets consist of office furniture and equipment as follows:

                                                        June 30,
                                                    ------------------
                                                     1997        1996
                                                    -------    -------
          Vehicle                                   $    34    $    34
          Equipment                                      34         34
          Less accumulated depreciation                 (52)       (43)
                                                    -------    -------
                                                    $    16    $    25
                                                    -------    -------
                                                    -------    -------


       Depreciation expense for the years ended June 30, 1997, 1996 and 1995
       was $9, $12 and $14, respectively.

NOTE 8 -  DUE TO RELATED PARTIES

       The Company owed $80 and $53 to affiliates of the Company at June 30,
       1997 and 1996, respectively.  This liability is comprised of advances to
       the Company, accrued compensation and unpaid directors fees at June 30,
       1997.

                                      16

<PAGE>

                            AMERALIA, INC.
                  Notes to the Financial Statements
                        June 30, 1997 and 1996
                           Amounts in $'000

NOTE 9 -  NOTES PAYABLE - LONG TERM

        Notes payable consist of  the following amounts:
                                                                 June 30,
                                                             ----------------
                                                              1997      1996
                                                             -------  -------
        Note payable to investors; unsecured, due on         
         demand; at 10% interest.                            $     4   $   21
        Notes payable to investors; unsecured, due on
         demand; interest free.                                  -          8
        Note payable to financial institution; principal
         and interest payment of $568 due monthly;
         at 9.5% interest; secured by vehicle.                     10       15
        Note payable to an investor; unsecured, due
         December 9, 1997; at 20% interest.                        2      -
        Note payable Raytheon Engineers & Constructors,
         Inc; unsecured, due upon a 90 day demand; at
         12% interest.                                           272      272

        Note payable to NZI Securities Australia Ltd; past
         due as of January 27, 1992; interest due quarterly
         at 2.5% over the 90 day bankbill rate; secured by a
         charge over the RIT investment (See Note 16).           -        537
                                                             -------  -------
                                                                 288      853

           Less current portion                                 (284)    (844)
                                                             -------  -------
           Total Long-Term Notes Payable                     $     4  $     9
                                                             -------  -------
                                                             -------  -------
        Principal maturities are as follows:

           1998                                                       $   284
           1999                                                             4
           2000 and thereafter                                            -
                                                                      -------
                                                                      $   288
                                                                      -------
                                                                      -------

NOTE 10 - SEGMENT INFORMATION

        The Company previously was engaged in the acquisition of diverse
        business investments in North America and Australia.  However, the
        current focus of the Company is the development of its sodium
        bicarbonate lease in Colorado.  The Company has been engaged in rural
        operations which consisted of cattle management, trading, breeding and
        embryo transplants.  Other investments consisted of an investment in
        The Rural Investment Trust (See Note 5).

                                      17

<PAGE>

                            AMERALIA, INC.
                  Notes to the Financial Statements
                        June 30, 1997 and 1996
                           Amounts in $'000

NOTE 10 - SEGMENT INFORMATION (Continued)

        Summarized financial information concerning these industry segments
        follows:

<TABLE>
<CAPTION>
                                                  Mining   Investments and
                                                Operations     Corporate     Consolidated
                                                ----------  --------------   ------------
        <S>                                     <C>         <C>              <C>
        1997
        ----
        Revenue - non-affiliates                $    -      $      2         $    2
        Net (loss)                                 (513)        (256)           (769)
        Depreciation and amortization
         expenses                                   -              9               9
        Identifiable assets                       2,755          253           3,008
        Purchase of property and equipment          -            -               -

        1996
        ----
        Revenue - non-affiliates                $   -       $      60        $    60
        Net (loss)                                 (375)         (376)          (751)
        Depreciation and amortization
         expenses                                   -              12             12
        Identifiable assets                       2,735           873          3,608
        Purchase of property and equipment          -               2              2

        1995
        ----
        Revenue - non-affiliates                $   -       $      49        $    49
        Net (loss)                                 (300)         (707)        (1,007)
        Depreciation and amortization
         expenses                                   -              14             14
        Identifiable assets                       2,060           925          2,985
        Purchase of property and equipment          -             -              -

</TABLE>

        There are no customers, or foreign or domestic governments which
        account for 10 percent or more of revenues from non-affiliates.

NOTE 11 - OFFICER COMPENSATION

        The Company paid $100 to Gunn Development Pty. Ltd. and $55 to Ahciejay
        Pty. for management fees.  These companies are affiliates of Mr. Bill
        H. Gunn, Chairman and President of the Company, and Mr. Robert van
        Mourik, Executive Vice President, Secretary & Treasurer.  The Company
        paid $174 in compensation to Mr. Marvin Hudson, Vice President,
        Investor Relations.  Additional fees totaling $3 have been paid to
        Jacinth Pty. Ltd., an affiliate of Robert Cameron, a director of the
        Company. In addition, all directors received $8 for directors fees.

        In June 1996, the Company agreed to grant 70,000 Stock Appreciation
        Rights ("SAR's") to each of Mr. Bill Gunn and Mr. Marvin Hudson.  The
        terms require that should the average bid price of the Company's stock
        rise to $3.50 per share and be sustained at that level for a period of
        six months, then the Company would be required to pay the indebtedness
        to the holders through the issuance of restricted common stock at $1.50
        per share.

                                      18

<PAGE>
                            AMERALIA, INC.
                  Notes to the Financial Statements
                        June 30, 1997 and 1996
                           Amounts in $'000


NOTE 11 - OFFICER COMPENSATION (Continued)

        Holders of SAR's may at any time after the share price has sustained an
        average bid price of more than $3.50 per share for a six month period
        and before June 28, 2006, can advise the Company of their decision to
        have the Company redeem their outstanding SAR's.  The SAR's can either
        be converted in whole or in part at the holder's option.  The redeemed
        SAR's will be satisfied by the issuance of common stock on a one for
        one basis.  If the holders are terminated as directors or employees
        prior to the conversion of all or part of the SAR's, the remaining
        SAR's are to be canceled.

NOTE 12 - OUTSTANDING STOCK OPTIONS AND PURCHASE WARRANTS

        The following summarizes the exercise price per share and expiration
        date of the Company's outstanding options and warrants to purchase
        preferred and common stock at June 30, 1997:

                 Expiration Date          Exercise Price    Number
             ---------------------        --------------    -------
                  October 18, 1998            $1.00           450
                     July 31, 1998            $1.50            13
                 December 31, 1998            $2.00           250
                     June 28, 2006            $1.50           505
             June 26, 2006 (SAR's)            $1.50           140
                                                            -----
                                                            1,358
                                                            -----
                                                            -----

        The 450 options at an exercise price of $1.00 represent options to
        acquire 450 shares of Series D Cumulative Convertible Preferred shares
        and expire on October 18, 1998.

        During the year ended June 30, 1997, no options expired.  During the
        year ended June 30, 1996, options to acquire 260,000 shares, at up to
        $4.00 per share expired or were surrendered.  During the year ended 
        June 30, 1995, options to acquire 52,500 shares exercisable up to $8.00 
        per share expired.

NOTE 13 - COMMITMENTS AND CONTINGENCIES LIABILITIES

        The Company is a party to certain claims and lawsuits arising from its
        business activities.  Management, after consultation with counsel, is
        of the opinion that these actions will not have a materially adverse
        effect on the financial condition or results of operations of the
        Company.

        On December 10, 1992, the Company acquired the Rock School Lease from
        Kinder; the acquisition terms were amended by Kinder and the Company on
        January 1, 1996.  As amended, the acquisition agreement provides for
        the following consideration:

        1. Commencing January 1, 1996, the reservation of a production royalty 
           of $1.50 per ton for all production, due and payable on the last day 
           of the month following the month of production subject to a minimum 
           annual royalty of $75 in arrears;

                                      19

<PAGE>

                            AMERALIA, INC.
                  Notes to the Financial Statements
                        June 30, 1997 and 1996
                           Amounts in $'000

NOTE 13 - COMMITMENTS AND CONTINGENCIES LIABILITIES (Continued)

         2.  Starting January 1, 1996, the establishment of a consulting 
             arrangement between Kinder and the Company providing for an 
             annual consulting fee of $25 payable monthly in arrears.

             Minimum amounts due are as follows:

               1998                                      $     100
               1999                                            100
               2000                                            100
               2001                                            100
                                                         ---------
                    Total                                $     400
                                                         ---------
                                                         ---------

             These payments will continue while the Company holds the Rock
             School Lease.

NOTE 14 - RECOVERABILITY OF LEASE ACQUISITION, EXPLORATION AND DEVELOPMENT
 COSTS

        The recoverability of this investment is dependent upon the Company
        developing mining operations on the lease so that the profitability of
        mining operations, or prospective mining operations, is sufficient to
        enable the Company to be able to sell its investment and recover the
        lease acquisition, exploration and development costs, as well as any
        subsequent capitalized expenditures.

NOTE 15 - STOCK TRANSACTIONS

        During the year ended June 30, 1997, the Company issued 294 shares
        of its common stock in payment of outstanding debt totaling $294.

        On October 10, 1995, an agreement was signed by the Jacqueline Badger
        Mars Trust to invest $2,000 by subscribing for 2,000 shares of Series D
        Cumulative Convertible Preferred Stock.  The preferred stock carries a
        10% dividend payable quarterly in restricted common stock at $1.00 per
        share.  The cash has been deposited into an escrow account and as of
        June 30, 1997, $1,760 of the total has been exercised.  The preferred
        stock is convertible into 2,000 shares of common stock until
        October 31, 2000.  Since June 30, 1997, the Company has drawn the
        remaining $240 from the escrow account and issued the remaining 240
        shares of Series D Cumulative Convertible Preferred Stock (See Note
        20).

        On October 26, 1995, the Bromley Family Trust, an existing stockholder
        in the Company, subscribed $80 for 80 shares of Series D Convertible
        Preferred Stock.

        Effective August 31, 1996, the Company issued to each Mr. Gunn and Mr.
        Hudson 65 shares of common stock as a bonus.  Mr. Gunn declined the
        issuance of bonus shares to him, therefore, the shares were never
        delivered.

                                      20

<PAGE>

                            AMERALIA, INC.
                  Notes to the Financial Statements
                        June 30, 1997 and 1996
                           Amounts in $'000

NOTE 16 - DEBT SETTLEMENT

        In early 1994, NZI Securities Australia Ltd. ("NZI") threatened to sue
        the Company based on the principal and interest outstanding on the note
        payable, secured by the Company's investment in the Rural Investment
        Trust.  In view of the Company's capital requirements for other
        purposes, principals of the Company were unable to resolve the
        situation with NZI, but (at the Company's suggestion) a significant
        shareholder, Miss Mary L. Tiscornia, agreed to attempt to do so
        provided that appropriate arrangements for satisfaction of the debt
        could be achieved, including among other things, payment in shares of
        the Company's stock.  In October 1994, Miss Tiscornia, through a
        partnership consisting of herself and Mr. Bill H. Gunn and Mr. Marvin
        Hudson, executive officers of the Company, (THG Partnership, "THG")
        entered into an agreement with NZI to assign the indebtedness from NZI
        to THG.  This assignment was completed on October 5, 1996.

        Once the note was assigned, the Company's directors engaged in
        negotiations with THG which in November 1996 resulted in an agreement
        to fully satisfy the full NZI debt effective November 21, 1996 by
        transferring and issuing to THG the following:

           Note receivable South Pacific Grazing                   $  103
           Note receivable Wood Rural Finance                         131
           Two shareholder receivables (Tiscornia and Hudson)          36
           Investment in Rural Investment Trust (present value)       450
           100 shares of Series D Convertible Preferred Stock         100

        In addition, THG has an option until October 18, 1998, to sell the RIT
        units to the Company for $450, payable by the issuance of 450 shares of
        Series D Preferred Stock.  If THG chooses not to exercise this option,
        THG may, in its discretion during the option period, pay $450 in cash
        to purchase 450 shares of Series D Preferred Stock.

        The net effect of this settlement to the Company is to record an
        additional capital contribution of $116 on the recovery of the assets
        assigned to THG.

NOTE 17 - CONSULTING AGREEMENT

        On December 21, 1994, the Company entered into a non-exclusive
        consulting agreement with an engineering firm for a term of five years.
        The agreement requires the Company to pay a consulting fee equal to 2.5
        times the standard rates of the engineering firm's employees for its
        services provided to the Company.  The Company has the option to pay
        for these services by issuing convertible preferred stock.

                                      21

<PAGE>

                            AMERALIA, INC.
                  Notes to the Financial Statements
                        June 30, 1997 and 1996
                           Amounts in $'000

NOTE 18 - PREFERRED STOCK

        The following are terms of the various series of preferred stock:

        1. The Company has issued 667 shares of Series A Convertible 
           Preferred Stock at $1.50 (not in $'000) per share.  The shares were 
           convertible into 666,666 shares of common stock until December 10, 
           1996 and carried a 9% dividend payable annually in restricted common 
           stock. In December 1996, the Company agreed to extend the time for
           conversion until November 30, 1997.  The Company subsequently found
           that it was not within the capacity of the parties to extend the
           time for conversion.  Therefore, the Company is currently trying to
           negotiate an exchange of the Series A stock for common stock.
           Negotiations are being held to determine the fair value of both the
           Series A and the common stock.

        2. There are 51 shares of Series B Preferred Stock issued at $10 (not in
           $'000) per share.  Each share is convertible into 5 shares of common 
           stock until October 29, 1997 and carries a 9% dividend payable 
           annually at the option of the stockholder in restricted common 
           stock at $2 per share.

        3. Series C Convertible Preferred Stock consists of 750 shares issued 
           at $80 per share.  Each share is convertible into common stock until 
           April 22, 2005 on the basis of 53 shares of common stock for each 
           share of Series C and carries a 5% dividend payable annually in 
           cash. The Series C stock is redeemable at the option of the Company 
           after December 31, 1998 upon giving one month's written notice, but 
           only if the holder fails to exercise its conversion rights.
           
        4. There is a provision to issue a total of 2,180 (not in $'000) shares 
           of Series D Cumulative Convertible Preferred Stock as detailed 
           Note 15 of which 1,940 (not in $'000) were issued at June 30, 1997.  
           The terms of the Series D Cumulative Preferred Stock are also 
           disclosed in Note 15.

NOTE 19 - GOING CONCERN

        The Company's financial statements are prepared using generally
        accepted accounting principles applicable to a going concern which
        contemplates the realization of assets and liquidation of liabilities
        in the normal course of business.  However, the Company does not have
        significant cash or other material assets, nor does it have an
        established source of revenues sufficient to cover its operating costs
        and to allow it to continue as a going concern.  It is the intent of
        the Company to generate revenue through the manufacture and sales of
        its sodium bicarbonate products.  However, the Company cannot begin
        mining the product until a substantial amount of money is raised and
        funded to the Company.  The Company is in the process of trying to
        raise $30,000 through an investment broker, although these funds have
        not been raised as of the date of this audit report.

                                      22

<PAGE>

                            AMERALIA, INC.
                  Notes to the Financial Statements
                        June 30, 1997 and 1996
                           Amounts in $'000

NOTE 20 - SUBSEQUENT EVENTS

        Since June 30, 1997, the following events occurred:

        1) The Company has drawn the remaining $240 from the Jacqueline Badger 
           Mars Trust escrow and issued the remaining 240 shares of Series D 
           Cumulative Convertible Preferred Stock.

        2) An additional $33 was raised through the issuance of two notes 
           payable to related parties.

        3) The Company granted an additional 100,000 options to acquire common 
           stock at $1.00 per share until March, 1999, pursuant to a public 
           relations agreement entered into by the Company.

                                      23