UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




FORM 10-KT/A




o
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 OR
 
 x
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from July 1, 2010 to December 31, 2010


Commission file number: 000-15474










NATURAL RESOURCES USA CORPORATION
 (Exact Name of Registrant as Specified in its Charter)


Utah

87-0403973(State of other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)3200 County Road 31, Rifle, Colorado

81650(Address of principal executive offices)

(Zip Code)






(214) 253-2556(Registrant’s Telephone Number, including Area Code)






SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:None





SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:  Common Stock, $0.01 par value





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes oNo x





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes oNo x





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 xNo o


Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes oNo o
 
 Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. o
 
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,”  “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):
 Large Accelerated Filer o
Accelerated Filer oNon-Accelerated Filer o
Smaller Reporting Company x
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes oNo x
 
 State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter:  $8,235,935 as of December 31, 2010, based on the last sale price on the OTCBB of $0.71.
 
 The number of shares of the Registrant’s Common Stock, $0.01 par value, outstanding as of March 24, 2011 was 352,413,582.











Cautionary Note RegardingForward Looking Statements




The information in this Transition Report on Form 10-KT/A contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties regarding the intent, belief or current expectations of the Company, its directors or its officers.  Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expect", "plan", "intend", "anticipate", "believe", "estimate", "predict", "potential" or "continue", the negative of such terms or other
comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks we outline from time to time in other reports we file with the Securities and Exchange Commission (the “SEC”) and under the heading “Risk Factors” in this Annual Report. These factors may cause our actual results to differ materially from any forward-looking statement. We disclaim any obligation to publicly update these forward-looking statements, or disclose any difference between our actual results and those reflected in these statements, except as required by law. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.




We qualify all forward-looking statements in this Transition Report by the foregoing cautionary note.




Cautionary Note to US Investors





The SEC limits disclosure for U.S. reporting purposes to mineral deposits that a company can economically and legally extract or produce. The reader is cautioned that the term "resource" is not recognized by SEC guidelines for disclosure of mineral properties.





Terminology





The following definitions are used in this report:


·
“tons” means U.S. Short Tons unless otherwise specified;


·
“acre foot” and “AF” are equal to approximately 325,851 U.S. gallons or approximately 1,233 cubic meters;


·
“cubic feet per second of time” and “c.f.s” are equal to approximately 449 U.S. gallons per minute of time or approximately 0.028 cubic meters per second of time;


·
“barrel” is equal to approximately 42 U.S. gallons or approximately 159 liters or approximately 0.159 cubic meters









TABLE OF CONTENTS





Item

PagePART I1
Business
3Overview and History of Corporate Structure Activities of Natural Soda Holdings & Natural Soda
41.   Sodium Leases
72.   Natural Soda’s Sodium Bicarbonate Business
103.   Natural Soda’s Water Rights
144.  Oil Shale Potential
191A
Risk Factors
202
Properties
273
Legal Proceedings
28PART II5
Market for Common Equity, Related Stockholder Matters and Issuer Purchase of Securities
296
Selected Financial Data
317
Management’s Discussion and Analysis of Financial Condition and Results of Operation
328
Financial Statements and Supplemental Data
389
Changes in and Disagreements on Accounting and Financial Disclosure
699A
Controls and Procedures
699B
Other Information
71PART III10
Directors, Executive Officers and Corporate Governance
7211
Executive Compensation
7712
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
8113
Certain Relationships and Related Transactions, and Director Independence
8314
Principal Accountant Fees and Services
85PART IV15
Exhibits
87SIGNATURES





Table Of Contents


Explanatory Notes:





We are filing this Amended Transition Report on Form 10-KT/A (the “Amended Filing” to our Transition Report on Form 10-KT for the six months ended December 31, 2010 (the “Original Filing”) to amend and restate our audited consolidated financial statements and related disclosures for the six months ended December 31, 2010 as included in Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operation”. The Original Filing was filed with the SEC on March 25, 2011.





Background of the restatement




The financial statements have been restated to correct the errors in the tax provision and the amounts recorded for our asset retirement obligation.  The Company concluded that it was not eligible to file its tax return on a consolidated basis and therefore the losses incurred at one entity during this six months ended December 31, 2010 were not allowed to be offset against profits incurred at another which resulted in the understatement of the Company's current and deferred tax provision. Additionally, the Company also concluded that, as a result of its practice to offset the anticipated salvage value of the buildings and plant against the estimated cost of asset retirement, the amount recorded for its
asset retirement obligation was understated. See Note 24 - Restatement for additional information.





We intend to seek relief from the Internal Revenue Service (“IRS”) which, if granted, would allow us to file our tax returns for this transition period on a consolidated basis thus reducing or eliminating the additional provision and payments required due to filing on an individual basis. We anticipate that the IRS will make a determination on this matter within six months.  The Company will adjust its tax provision if and when such relief is granted.





For the convenience of the reader, this Amended Filing sets forth the Original Filing in its entirety, as modified and superseded only where necessary to reflect the restatement.  The following items have been amended principally as a result of, and to reflect the restatement as follows:





Part I
Item 1A. Risk Factors;


Part II
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for the discussion of the six months ended December 31, 2010;





Part II
Item 8. Restated Financial Statements and Supplementary Data; and




Part II
Item 9A. Controls and Procedures.





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The sections of the Form 10-KT/A which were not amended continue in full force and effect as originally filed.  This Amended Filing speaks as of the date of the Original Filing on the Form 10-KT/A and has not been updated to reflect events occurring subsequent to the Original Filing date other than those associated with the investigation and resulting restatement of the Company’s audited consolidated financial statements and the correction to a risk factor.





Restatement of Other Financial Statements





We do not intend to file any other amended Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q for periods affected by the restatement.  The consolidated financial statements and related financial information contained in any of the Company’s filings with the SEC during the restated period and information reported in the tax footnote of previous Forms 10-K should no longer be relied upon.





Internal Control Considerations





Management has identified: (i) control deficiencies in its internal controls associated with the preparation of tax returns and tax provisions for accounting purposes processes that constitute material weaknesses, (ii) control deficiencies in its internal controls associated with its financial reporting processes as discussed in Part II, Item 9A of this amended filing, and (iii) the need to restate prior period consolidated financial statements.





A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected.  Management has also determined that the Company’s disclosure controls and procedures were ineffective as of December 31, 2010.  For a discussion of management’s consideration of the Company’s disclosure controls and procedures and material weaknesses identified, see Part II, Item 9A included in this Amended Filing.





If not remediated, these control deficiencies could result in future material misstatements to the Company’s consolidated financial statements.  Accordingly, management determined that these control deficiencies represented material weaknesses in internal control over financial reporting.





Short Form Merger





On August 8, 2011, GSR filed a Schedule 13E-3 with the Securities and Exchange Commission to disclose its intent to take the Company private pursuant to a short form merger (“Merger”) under the Utah Revised Business Corporation Act (the “URBCA”).  The terms of the Merger are described in more detail in the transaction statement filed as Exhibit (a)(1) to the Schedule 13E-3 filed by GSR on August 8, 2011 (the “Transaction Statement”).  In addition, we have corrected the Risk Factor “GSR owns more than 90% of our shares and can take complete control of the company” to delete the fourth sentence of the first paragraph.


2
 Table Of Contents
  PART I





ITEM 1.
BUSINESS





The terms “we,” “us,” “our,” “Natural Resources,”  “AmerAlia” and the “Company” used in this Transition Report refer to Natural Resources USA Corporation, unless otherwise indicated.




Natural Resources USA Corporation was incorporated in Utah on June 7, 1983 as Computer Learning Software, Inc., renamed AmerAlia, Inc. in January 1984 and again renamed Natural Resources USA Corporation on September 14, 2010.





Our business is to identify and develop natural resource assets.  Our wholly owned subsidiary, Natural Soda Holdings, Inc. (“Natural Soda Holdings” or ”NSHI”) and Natural Soda Holdings’ wholly-owned subsidiary, Natural Soda, Inc. (“Natural Soda” or ‘NSI”) own substantial natural sodium bicarbonate resources and water rights located in the State of Colorado, United States.





Previously, we owned 18% of Natural Soda Holdings; however, on June 30, 2010 we completed an exchange reorganization with Sentient USA Resources Fund, LP, (“Sentient”) our former major shareholder, whereby we acquired all the outstanding shares of Natural Soda Holdings in exchange for the issue of 286,119,886 shares of our common stock.  After the exchange reorganization we owned 100% of Natural Soda Holdings and Sentient owned 94.8% of Natural Resources.





On March 15, 2011 as a result of the closing of an Exchange Agreement and Plan of Reorganization entered into between Sentient and Green SEA Resources Inc. (“GSR”), Sentient exchanged all its 334,074,381 shares of Natural Resources common stock and its limited right to subscribe for 5,500,000 additional shares for an issue of 20,084,954 shares of GSR common stock.  GSR is a private corporation majority owned and controlled by Sentient and its affiliates.  GSR’s board of directors and management include Bill Gunn, Alan De’ath, Leigh Hall, Wayne Richardson and Alan You Lee who are directors of Natural Resources.  GSR now beneficially owns 94.8% of our
shares.









Figure 1:  Natural Soda’s Plant Operations, Rifle, Colorado




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Natural Soda owns various water rights in the Piceance Creek Basin in northwest Colorado, a part of the Colorado River drainage system.  These various rights allow Natural Sodato draw up to a maximum of 108,812 acre feet (35.46 billion gallons) annually and to store up to 7,980 acre feet of water.  Some of the water rights owned by Natural Soda are conditional rights and are subject to a requirement to demonstrate reasonable diligence.  Every six years, Natural Soda must file an application to support its claim.  In April 2010, the District Court in and for Water Division No 5 State of Colorado determined that Natural Soda had
met the standard of Reasonable Diligence with respect to a portion of its conditional water rights and continued the conditional water rights for a period of six years.  Natural Soda has filed additional applications for Findings of Reasonable Diligence with respect to other water rights and the applications are pending in the District Court in and for Water Division No. 6 State of Colorado.





Natural Soda Holdings and Natural Soda also own the largest Bureau of Land Management (“BLM”) sodium leases in the Piceance Creek Basin which contains the largest known deposits of nahcolite, naturally occurring sodium bicarbonate, in the world.  Natural Soda Holdings’ and Natural Soda’s leases are located near the depositional center of the Piceance Creek Basin where the nahcolite beds are thickest and most concentrated.  Consequently, we believe these deposits are unique and capable of producing sodium bicarbonate and related sodium products for many generations.





Natural Soda Holdings first acquired its interest in a sodium lease known as the Rock School lease in 1989.  Natural Soda acquired its operating assets and additional sodium leases in 2003, an acquisition financed by loans from a trust and a fund (the “Sentient Entities”) managed by Sentient Asset Management, an international private equity group specializing in the development of natural resources (the “WRNM Acquisition”).





Natural Soda’s business is to produce and sell natural sodium bicarbonate, commonly known as baking soda, for use in a wide variety of products and activities. Natural Soda’s immediate objectives are, firstly, to be a low cost producer of sodium bicarbonate and to leverage that low cost advantage to achieve superior profit margins; and secondly, to profitably develop and utilize its water assets.





Deposits of oil shale lie below, above and are interspersed within the nahcolite contained within our sodium leases.  In December 2009 Natural Soda Holdings applied to the BLM for a Research Development and Demonstration (“RD&D”) lease for the purpose of investigating the recovery of oil from oil shale.  In October 2010, the Washington office of the BLM advanced our nomination and has now requested its Colorado office to conduct a review of the project in accordance with the National Environmental Policy Act (“NEPA”).  Our nomination will be reviewed by an agreed upon third party consultant who then reports its assessment to the BLM.  A successful
outcome will culminate in a decision of record.  We were required to submit a comprehensive Plan of Operation by March 2, 2011 and we have complied with this request.  Ultimately, if we are granted a RD&D lease we will be allowed to conduct oil shale research during a ten year period over a 160 acre lease adjoining our existing sodium leases.  If we can meet substantial due diligence requirements, including the ability of our technology to recover oil from oil shale in a cost effective manner, we could be granted a production lease over an additional 480 acres.





Shell Frontier Oil & Gas Co. (“Shell”) has three research, development and demonstration leases adjacent to Natural Soda’s sodium leases.  A Shell fact sheet, “Shell Exploration & Production Technology - to secure our energy future – Mahogany Research Project” reports an estimated potential recovery rate of up to one million barrels of oil per surface acre.  If we obtain the right to exploit all or part of the oil shale in the proposed RD&D lease area, we plan to independently determine possible recovery rates and attempt to develop an economically feasible plan to recover oil from the oil shale contained within the area where Natural Soda
Holdings’ and Natural Soda’s sodium leases are located.  However, we cannot assure anyone that we will succeed in obtaining any rights to this oil shale or that our technology will result in an economically viable operating business.




OVERVIEW & HISTORY OF CORPORATE STRUCTURE





Prior to May 2007, we owned 100% of the outstanding common stock of Natural Soda Holdings, which in turn owned 100% of the outstanding common stock of Natural Soda, as shown below.  Natural Soda is an operating company that produces and sells sodium bicarbonate (baking soda).  Natural Soda has several active sodium leases, owns water rights and a sodium bicarbonate production facility in the Piceance Creek Basin area of Colorado.


4
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In 2003, the Sentient Entities provided Natural Soda Holdings with short-term debt financing which was refinanced on a long term basis in 2004.  In May 2007, the Sentient Entities converted a portion of the debt owed by Natural Soda Holdings and Natural Soda into a 53.5% equity interest in Natural Soda.  In August 2007, the Sentient Entities purchased approximately 46% of the equity in AmerAlia from a major shareholder of AmerAlia, and also acquired additional debt obligations of AmerAlia from the same major shareholder.  These events are reflected in the ownership structure shown below.







As part of a restructuring transaction in October 2008:




·
the Sentient Entities transferred their various interests to Sentient;


·
Natural Soda became a wholly-owned subsidiary of Natural Soda Holdings;


·
Sentient converted its loans to Natural Soda Holdings into Natural Soda Holdings equity and AmerAlia’s ownership in Natural Soda Holdings was reduced from 100% to 18%; and


·
Sentient converted its loans to AmerAlia into additional common stock of AmerAlia.




This reorganization resulted in the ownership structure shown below.


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In connection with this restructuring, AmerAlia also received approximately $10 million in cash, settled approximately $12 million of debt, terminated indemnification rights relating to the extinguishment of an AmerAlia $9.9 million bank loan and extinguished other obligations in exchange for the issue of 48,961,439 shares of its common stock.





Finally, as discussed above, on June 30, 2010, we issued 286,119,886 shares of our common stock to Sentient in exchange for the 82% of Natural Soda Holdings it held with the following resulting structure shown below.










In June 2010, Bill Gunn ceased to be the President of the Company whilst remaining Chief Executive Officer, and while Robert van Mourik continued as Chief Financial Officer, Treasurer and Secretary, he ceased to be Executive Vice President.  Bradley F. Bunnett, who was already President of Natural Soda Holdings and Natural Soda, was appointed to the positions of President and Chief Operating Officer of the Company.  Paul Henri Couture, Alan De’ath and Michel Marier were appointed to the board of directors.





On September 14, 2010 at a Special Meeting of the Shareholders, the shareholders approved the amendment of the articles of incorporation to change the name of the Company to Natural Resources USA Corporation.





At a meeting of the shareholders held on February 9, 2011 Robert van Mourik, James Riley, Robert C Woolard and Michel Marier retired as directors of the company.  In their place the shareholders elected Leigh Hall, Wayne Richardson and Alan You Lee.  Consequently, the board of directors now comprises nine individuals of whom three are independent; Neil Summerson, Geoffrey C Murphy and J. Jeffrey Geldermann; and six who are not independent: Bill Gunn, Alan De’ath, Wayne Richardson, Leigh Hall and Alan You Lee who are directors or officers of GSR, a private corporation majority owned and controlled by Sentient, and Paul Henri Couture who is President of Sentient Asset Management Canada,
another Sentient affiliate.


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 Table Of Contents




On March 15, 2011 as a result of the closing of an Exchange Agreement and Plan of Reorganization entered into between Sentient and GSR, Sentient exchanged all its 334,074,381 shares of Natural Resources common stock and its limited right to subscribe for 5,500,000 additional shares of Natural Resources common stock for an issue of 20,084,954 shares of GSR common stock.  Sentient is the majority and controlling shareholder of GSR and, consequently is an indirect beneficial owner of our shares.




ACTIVITIES OF NATURAL SODA HOLDINGS& NATURAL SODA





1.           Sodium Leases





Sodium Leases and Operations





Nahcolite, a naturally occurring mineral form of sodium bicarbonate, is only known to exist in large quantities in the Piceance Creek Basin in northwest Colorado.  Access to these deposits is governed by the BLM, a part of the Department of Interior, which has granted some leases to allow recovery of the sodium bicarbonate.  Natural Soda owns four sodium leases, collectively known as the Wolf Ridge Mining Unit, and Natural Soda Holdings owns the adjoining Rock School lease.





The geology of the Piceance Creek Basin has been described and discussed in numerous reports.  In March 1983, Rex D. Cole, Ph.D. Consulting Geologist, Grand Junction, Colorado, issued a report “Geologic Framework of Federal Sodium Lease C-0118326, Piceance Creek Basin, Colorado”.  On Page 3 of “Summary and Conclusions” the report states “Total nahcolite resources for the lease area are between 6 and 8 billion tons.”  The lease to which Cole refers (C-0118326) is the Wolf Ridge lease, one of the four leases comprising the Wolf Ridge Mining Unit being mined by Natural Soda; therefore, Natural
Soda’s holdings extend beyond the particular lease to which Cole refers.





A second report by Cole, Daub & Weston entitled “Review of Geology, Mineral Resources, and Ground-Water Hydrology of the Green River Formation, North-Central Piceance Creek Basin, Colorado” was published by the Grand Junction Geological Society, Grand Junction, Colorado, in 1995.  The authors state “...subsequent drilling established that the world’s largest deposits of naturally occurring sodium bicarbonate (nahcolite) are present in the Piceance Creek Basin” and “...the estimated in-situ resources of nahcolite and dawsonite are placed at 29 and 19 billion tons, respectively”.  A more recent USGS Nahcolite and Dawsonite Piceance Creek
Basin resource estimate in 2009 placed the nahcolite at 43.3 billion short tons.  However, Natural Soda Holdings’ and Natural Soda’s leases only cover a portion of this area.





We are engaged in a program to further define the nahcolite resources adjacent to our current production cavities and processing plant.  To this end we have in the period June to August, 2010 drilled three exploration wells to determine the nature and extent of the nahcolite contained within the Boies Bed, the particular bed from which we are currently producing.  We intend to drill further exploration wells in the future to further determine the Boies Bed and other nahcolite beds that lie below the Boies Bed.  This exploration program will require the issuance of further permits from the BLM which may impose conditions that cannot currently be predicted or
determined.  Based on recent drilling, we believe that we will have sufficient nahcolite available to us for the foreseeable future.


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 Table Of Contents




Figure 2:  NSHI’s and NSI’s Sodium Leases are locatedabout

54 miles northwest of Rifle, Colorado





We first acquired a participatory interest in the Rock School lease in Rio Blanco County, Colorado in 1989 and subsequently acquired the lease in 1992.  We have never produced sodium bicarbonate from the Rock School lease which is now owned by Natural Soda Holdings and remains an untapped asset.





Natural Soda Holdings’ and Natural Soda’s leases are located near the depositional center of the Piceance Creek Basin where the nahcolite beds are thickest with the highest concentration of nahcolite. The Wolf Ridge Mining Unit leases issued to Natural Soda cover a total of 8,223 acres.  When combined with the Rock School lease issued to Natural Soda Holdings, the leases cover a total of 9,543 acres.





The four Wolf Ridge leases and the Rock School lease were renewed effective July 1, 2001 for a ten year term with a preferential right to subsequent renewals provided that sodium is being produced in paying quantities.  Under the unit agreement, production in paying quantities from one lease is sufficient to extend all four Wolf Ridge leases.  The leases bear a production royalty payable to the federal government of 2.0% of the gross value of the production exiting the processing plant.  Each of these leases contains covenants to protect the in situ oil shale, water, and historical resources.  The sodium leases  will expire on July 1, 2011, and we are asking the
BLM to renew them.  We believe that the conduct of Natural Soda Holdings and Natural Soda’s activities will be sufficient to enable lease renewals with the BLM based on the BLM’s past practice.  However, there can be no assurance that the conduct of such activities or additional development will be sufficient for the BLM to grant further lease renewals and there is the possibility that all or a portion of the sodium leases will not be renewed, or will be renewed with additional terms and conditions.  With respect to the Rock School lease, there has not been any production of sodium bicarbonate from the lease property and it is possible that the BLM will not renew the Rock School lease or will renew the Rock School lease with additional terms and conditions.


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Production Cavities and Solution Mining





The Wolf Ridge leases contain the unique Boies Bed, which we believe is the richest and most economically recoverable bed of nahcolite in the Piceance Creek Basin.  The Boies Bed contains an interval at an approximate depth of 1,900 feet that, while variable, averages approximately 26 feet thick with nahcolite constituting over 80% of the material in that interval.  Solution mining requires pumping hot water into the nahcolite-bearing rock zone, the nahcolite dissolves and is pumped to the surface in near saturated solution referred to as pregnant liquor and brought into the plant for the sodium bicarbonate to be crystallized, dried, graded and bagged in 50 pound or 2,000 pound bags or stored
for bulk sales.  The remaining underground cavity comprises a honeycomb like rock rubble.  The spent liquor is reheated and recycled underground to continue the solution mining process.





Figure 3:  Samples of nahcolite





Natural Soda’s operations to recover sodium products from these leases are governed by a BLM approved mine plan defining our cavity program to support our solution mining process.  Natural Soda has invested $15,784,131 developing the well field and its cavities up to December 31, 2010.  In the past, as the need for an additional cavity has arisen, Natural Soda has submitted applications for a new production well set in accordance with the approved mine plan, the drilling is then approved, and drilling commences.  Once completed and after a period of consultation, the BLM authorizes the recovery of an amount of additional sodium bicarbonate.  Consequently, Natural Soda
has been able to maintain its operations.  In early September 2009, Natural Soda completed a new cavity, 10H, and in late 2009 also completed another drilling program to establish another new well, 11H.  Our investment in these two wells required approximately $1.19 million for exploration costs and $4.39 million in drilling costs.  Together, these wells added 814,220 tons to our authorized recovery.   The following table illustrates this process for the last five and a half years:





Authorized Recovery (tons)Year ending

Additions


Production


BalanceJune 30, 2005








467,271June 30, 2006


-



(90,369
)


376,902June 30, 2007


-



(98,145
)


278,757June 30, 2008


150,000



(100,189
)


328,568June 30, 2009


-



(99,293
)


229,275June 30, 2010


814,220



(108,159
)


935,336December 31, 2010


-



(64,436
)


870,900





Along with these additional wells, Natural Soda has installed an additional pipeline and associated pumping facilities to carry the recovered liquor to the plant at a cost of approximately $1.45 million.  This pipeline will support 10H, 11H and up to an additional eight future well sets.  These activities are part of an exploration and production well set installation program which is expected to cost approximately $9 million over time.


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Figure 4: A general illustration of the solution mining process





Products & Other Potential Uses





Sodium bicarbonate is used as a component in animal feed, human food, pharmaceutical and industrial applications, especially as an environmentally benign cleaning agent.  Sodium bicarbonate can also be used as an agent for flue gas desulfurization, a market that we may expand into in the future.





Currently, the oil shale in the Piceance Creek Basin is the subject of considerable interest as a result of the increasing recognition of the need for the United States to become more self-sufficient in energy and reduce its reliance on foreign energy sources.  If that interest led to Federal approval to develop the oil shale resource, Natural Soda’s proximity to the oil shale industry may allow it to benefit from any increased demand for its water or for the oil shale industry’s potential need for processing of excess sodium mineral byproducts from their oil processing activities.




2.           Natural Soda’s Sodium Bicarbonate Business





Natural Soda’s business is to produce and sell natural sodium bicarbonate, commonly known as baking soda, for use in a wide variety of products and activities.  Natural Soda is a wholly-owned subsidiary of Natural Soda Holdings.




The Sodium Bicarbonate Market





According to the 2009 Chemical Economics Handbook – SRI Consulting, the United States production of sodium bicarbonate in 2008 was 662,000 metric tons and domestic consumption was 602,000 metric tons.  The Handbook reports an anticipated average annual growth rate between 2008 and 2013 of 1.2%, reaching a level of 640,000 metric tons.





In addition, the Handbook reports U.S. consumption of sodium bicarbonate by end user (thousands of metric tons) in 2008.  For convenience, the equivalent U.S. Short Tons is also shown:


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End User

Metric Tons (‘000)


Equivalent U.S. Short Tons (‘000)Animal Feed


178



196Food


124



137Chemicals


48



53Cleaning Products


47



52Hemodialysis


45



50Water Treatment


38



42Pharmaceuticals and Personal Care


37



41Flue Gas Desulfurization


35



39Blast Media


19



21Fire Extinguishers


9



10Other


22



24Total


602



665




The market use is dominated by the food industry (baking soda) and animal nutrition (rumen buffer), accounting for a majority of the total market.  The remaining market is split between a variety of uses from pharmaceuticals, personal care (toothpaste), deodorizers, industrial uses, cleaning products, chemical, blasting media, etc.  Presently, Natural Soda’s share of the animal feed and food segments is in line with its share of industry production capacity, however, it is underrepresented in the specialty segments.




The Plant





The 26,500 square foot processing plant located on one of the Wolf Ridge leases consists of a single building with crystallizers, boilers, centrifuge, dryers and other equipment capable of producing various grades of sodium bicarbonate.





There are also several other buildings associated with the plant - one building of approximately 50 feet in diameter used for bulk storage with a storage capacity of 3,000 tons - and three small sheds (lube storage shed, fire pump house shed and hazardous materials shed).  The plant, the bulk storage facility and one of the sheds are of metal construction; the other two sheds are of wood construction, each on concrete pads.





There is no rail transportation to the plant.  Product that is to be shipped by rail is transported by truck to a rail loading facility in Rifle, Colorado that is operated by a third party.  Water for operations is available from water wells on Natural Soda’s property (see Water Rights below).  Electric power and gas are provided by local suppliers.





In FY2009 the plant produced 99,293 tons for sale, in FY2010 it produced 108,159 tons for sale and in the six months to December 31, 2010 another 64,436 tons as a result of drilling programs completed during the year to obtain higher levels of production by drilling more well sets and further improving the efficiency and output of the surface plant and facilities.  Natural Soda has contracted with HPD, LLC of Chicago, IL to install a new boiler system which will provide additional heating capability to our well sets. We believe this may allow us to produce over 125,000 tons annually. The BLM approved our updated mine plan in November, 2010 to increase our authorized annual production from 125,000 tons to
250,000 tons.  This enables us to recover higher volumes should the new boiler meet our expectations.  We estimate the project will be completed by September of 2011.  Natural Soda intends to construct a secondary processing line to expand the production capacity of the plant by a significant amount.  It is currently developing designs for this expansion and reviewing cost estimates.  After a review of management’s business plan for the expansion, the board of directors approved the project pending the review and approval of acceptable project financing arrangements.  There is no guarantee we can obtain suitable financing to progress the project.




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Figure 5:  A Finished Product Sample





Marketing Arrangements





Natural Soda sells animal feed grade product through five independent distributors.  The largest of these is Bunnett & Company of Lago Vista, Texas which represents the largest part of our animal feed sales.  The principal of Bunnett & Company is Bill Bunnett, father of Brad Bunnett who is a director of both NSHI and Natural Soda and President of the Company and also Natural Soda.  The majority of Natural Soda’s industrial and United States pharmaceutical (“USP”) grade products is distributed by an agent, Vitusa Products, Inc. of Berkeley Heights, New Jersey.  Sales distributed through Bunnett & Company accounted for 22% of Natural Soda’s
sales revenues in the six months ended December 31, 2010 and sales distributed through Vitusa Products accounted for 22% of our sales revenues during the same period.  A third distributor, Agri Dealers, Inc. of Louisville, Kentucky, an animal feed distributor, accounted for 11% of Natural Soda’s sales revenues during the same period.  There are no other significant marketing relationships that constitute more than 10% of our sales.





Historically, the plant has shipped up to approximately 55% of its production as bulk product and the remainder as bagged product.  Natural Soda packages product in various grades distinguished by crystal sizes in 50 lb. bags, 2000 lb. “supersacks”, or in bulk.  The product is transported to its customers by truck or rail.  Natural Soda sells most of its products throughout the United States, Canada and Mexico.





Natural Soda’s products have many uses and applications.  They include sales to the animal feed, industrial, food and pharmaceutical grade markets.  Sodium bicarbonate is used in baking products, personal care products including toothpaste and antacid remedies; household products including deodorizers, cleaning products, detergents, carpet cleaners, bath salts and cat litter.  Sodium bicarbonate is also used in industrial situations such as fire extinguishers, blast media and waste water treatment.


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Competitive Advantage





There are five other competitors in the sodium bicarbonate market according to the 2009 Chemical Economics Handbook – SRI Consulting.  Natural Soda’s principal competitors are Church & Dwight, manufacturers of the Arm & Hammer brand; FMC Corporation and Solvay.  Church & Dwight is by far the largest manufacturer in the United States and Natural Soda’s competitors have far greater financial resources than Natural Soda.  Natural Soda is the only producer of sodium bicarbonate from nahcolite, the naturally occurring form of sodium bicarbonate.  All other production of sodium bicarbonate utilizes trona, a mixed form of sodium bicarbonate and sodium
carbonate, from Green River, Wyoming.  An alternative method is to produce sodium carbonate synthetically from sodium chloride in an industrial plant.  We believe that both of these production methods are more expensive than Natural Soda’s method of solution mining nahcolite from our well sets and re-crystallizing sodium bicarbonate in our processing facility.  Due to the nature of our resource and our efficient processing method, we believe that Natural Soda is the lowest cash cost producer.  Natural Soda competes on the basis of service and price.





In addition, there are significant barriers to overcome for competitors seeking to establish solution mining operations on BLM leases in the Piceance Creek Basin.  The only other sodium leases issued by the BLM in the Piceance Creek Basin are the 4,956 acre Yankee Gulch lease, and the Nielsen-Juhann-Hogle lease covering 2,186 acres.  The Nielsen-Juhann-Hogle lease has not been permitted and we believe that it would require filing a mine plan with the BLM, an environmental impact study and a series of public meetings to secure extensive government approvals before it can be brought into production.





We believe that Natural Soda Holdings and Natural Soda have the largest available resource of nahcolite in the Piceance Creek Basin that is currently able to be mined.





Sales and Revenue Performance





Natural Soda’s recent annual sales in tonnages and gross revenues, as reported in our financial statements, are shown in the following tables:




Fiscal Year

Sales (tons)


% Changeending

June 30




on prior FY2006


88,910



+ 4.62007


101,970



+14.72008


101,614



- 0.42009


97,729



-3.82010


107,179



+9.7Fiscal Year

Gross Revenues


% Changeending

June 30

($)


on prior FY2006


15,293,688



+ 8.12007


16,951,997



+ 10.82008


17,947,800



+ 5.92009


19,835,160



+ 10.52010


21,981,038



+10.8





For the six months ending December 31, 2010 we sold 65,820 tons and earned gross revenue of $12,924,583.





During 2010, as a result of the increased production and supply capability, Natural Soda was able to sell additional product to new customers.  Natural Soda’s recent sales history is illustrated on a quarterly basis in the following graph.


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Environmental Issues





The sodium bicarbonate production is licensed under the EPA and BLM as a zero water emission business.   Natural Soda must not allow any water stream from the production process to enter the environment, except for water lost in the production cavities. All breaches must be reported.





Waste water streams are collected in two ponds where the water is evaporated and the residual salts collected for disposal by an approved method.





During the six months ended December 31, 2010 Natural Soda did not allow any water stream to enter the environment and consequently no breaches were reported.




3.           Natural Soda’s Water Rights





General





Natural Soda owns numerous water rights in Northwestern Colorado in the Piceance Basin from the Piceance and Yellow Creeks and the Yellow River.  Piceance and Yellow Creeks flow into the White River, which flows into the Green and Colorado Rivers.  In addition, Natural Soda owns several well water rights and a judicially approved plan that incorporates well water rights, direct flow water rights and storage water rights into an integrated water supply system.  One storage water right is diverted from the White River and is called Wolf Ridge Reservoir, and another storage water right is called Larson Reservoir, which is located at the headwaters of Piceance Creek.


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The Colorado River Basin covers 244,000 square miles and provides water for 30 million people.   The river has an average flow of around 14 million acre feet per year which occasionally increases to 18 million in wet years and decreases to about 12 million in dry years.





On the basis of the Colorado River Compact of 1922, the Colorado River Basin is divided into the Upper Colorado River Basin and Lower Colorado River Basin at Lee’s Ferry just below the confluence of the Paria River and the Colorado River near the Utah-Arizona border.  The upper Basin and the lower Basin were each apportioned a consumptive use of 7.5 million acre feet of water annually, based on an assumption of 15 million acre feet of available water for the Colorado River.   The assumption was demonstrated to be an overestimate and reduced to 12 million acre feet in a hydrologic study by the U.S. Bureau of Reclamation (CWCB 2004).  In the Upper Colorado River Basin Compact
of 1948, the water of the Upper Colorado River Basin was further allocated among the states of Arizona, Colorado, New Mexico, Utah, and Wyoming.  Arizona has a fixed allocation of 50,000 acre feet annually.  The remainder is shared by Colorado (51.75%), New Mexico (11.25%), Utah (23%), and Wyoming (14%).





By treaty, Mexico must receive 1.5 million acre feet of water annually.  California has a right to a minimum of 4.4 million acre feet while the upper Basin where Natural Soda is located has an accumulated withdrawal allotment of around 3.6 million acre feet.   The Central Arizona Project, a 335 mile canal and the largest water transfer system ever built, has the capacity to withdraw more than 2 million acre feet. State by State allotments are shown in the following table:





Water Allocation from The Colorado River SystemState

Allocation

(Acre Feet per year)California


4,400,000Colorado


3,881,250Arizona


2,800,000Utah


1,725,000Mexico


1,500,000Wyoming


1,050,000New Mexico


845,750Nevada


300,00016,502,000





In Colorado the state requires that groundwater removed from an aquifer be augmented (i.e. replaced) from surface water sources.  Thus, new groundwater pumping rights cannot be used for any length of time without an approved plan to augment the water removed from the groundwater wells.





Colorado operates under the “Prior Appropriation Doctrine” with respect to water rights.  The Prior Appropriation Doctrine essentially provides that any person or entity that diverts water and applies the water to beneficial use before another person or entity has the first and prior right to divert water under the water right.  The doctrine is also commonly known as the “First in Time – First in Right”.  To the extent that a water right was appropriated prior to another water right, the Prior Appropriation Doctrine provides that a senior water right is entitled to be fully satisfied before the junior water right is allowed to take any
water.  The Colorado General Assembly requires the claimants of a water right to create documentary evidence by obtaining a decree from a court confirming the existence of the water right.




Natural Soda’s water rights were incorporated into a Decree entered by the District Court in and for Water Division No. 5 in Case No. 88CW420 on August 13, 1991 (the “Decree”).  The Decree is crucial for continued operations of the sodium mining business. Natural Soda’s water rights were combined in the Decree to ensure the reliability of the water supply for mining operations.  In addition, since all the water rights are under common ownership, the ability to maximize the use and value of the water rights is enhanced if the water rights could be used for any purpose associated with the mining operations or other purposes.  Another factor leading to the
inclusion of all the water rights in the Decree was that some of the water rights and facilities for the water rights had not been developed, and the conditional portion of the water rights could be maintained by legally integrating and attributing work on some of the water rights to other conditional water rights.


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However, even though all of the water rights were integrated into the Decree, various water rights may be separated from the water supply required for mining operations.  As discussed below, Natural Soda’s substitution and exchange rights and augmentation plan provide additional flexibility in how we can manage access to Natural Soda’s water rights.




Figure 6:  Colorado River System





The Decree also includes a Water Court approved “plan for augmentation”.  This is a plan that can considerably aid operational flexibility.  Natural Soda’s augmentation plan includes rights under Colorado law of “substitution and exchange”.  Substitution and exchange enables delivering water at one point on a stream and taking water out at another point on the stream.  Water rights may be acquired to enable substitution and exchange.  While this concept may not seem significant, “substitution and exchange” can save millions of dollars in dam and pipeline construction costs and pumping costs to a user of water rights that is
not close in proximity to the source of these water rights.





For example, under the Decree, Natural Soda may deliver fully consumable agricultural water rights to Piceance Creek at its headwaters, and “substitute and exchange” this water depleted from Piceance Creek by the operation of its wells at the plant site.  Natural Soda thereby avoids the necessity to pipe water from the headwaters of Piceance Creek to its operations.  Further, because Piceance Creek is such a dry stream, the substitution and exchange ability is limited and at a premium.  While someone else may acquire the right to operate a substitution and exchange on the two streams, that use would be subordinate to Natural Soda’s own substitution and exchange
rights.





Under current operations, the water supply for the mining operations is provided by two wells constructed by Natural Soda on the sodium leases.  The pumping of water from these wells causes depletions to Piceance Creek and Yellow Creek.  Colorado law requires that depletions to Piceance Creek and Yellow Creek must be replaced with other water from the same drainage system.  The Decree provides that senior water rights on Piceance Creek are used to replace the depletions to Piceance Creek and part of the depletions to Yellow Creek.  Hence in order to protect mining operations, it is necessary to maintain ownership of well water rights to supply mining operations and senior
water rights to replace the depletions caused to Piceance Creek and Yellow Creek.  Natural Soda has several different sources of water to replace the depletions to the streams.  Currently, Natural Soda’s water requirements for its sodium operations are approximately 130 acre feet of water per year, which is currently withdrawn through the two wells.  The withdrawal of the approximately 130 acre feet of water per year results in a depletion to the Piceance Creek and Yellow Creek stream systems of less than two and one-half acre feet of water per year, which is replaced by Natural Soda’s senior surface water rights and storage water rights.


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Some of the water rights owned by Natural Soda are conditional rights and are subject to a requirement to demonstrate reasonable diligence in the development of the water rights.  Every six years Natural Soda must file an application with the appropriate court to demonstrate reasonable diligence in the development of the water right  In March 2010, the District Court in and for Water Division No. 5 State of Colorado, entered a decree finding that Natural Soda had exercised reasonable diligence in the development of the exchange water rights that were decree in Case No. 88CW420, and in April 2010, the same court entered decrees finding that Natural Soda had exercised reasonable diligence in the
development of the Wolf Ridge Pumping Pipeline water right, the Wolf Ridge Reservoir water right, and five well water rights.  As of December 31, 2010, Natural Soda has eight cases pending in the District Court in and for Water Division No. 6 State of Colorado for determination of reasonable diligence in the development of well water rights.  In addition, Natural Soda has an application pending in the District Court in and for Water Division No. 5 State of Colorado for determination of an additional storage water right.





There are other factors independent of the Decree that enhance the value of Natural Soda’s water rights.  First, no other large capacity plan for augmentation has been approved by the Water Court within the Piceance Creek Basin thereby providing Natural Soda a significant competitive advantage in the water supply available to its activities.  There is also a value associated with having the augmentation plan approved and Natural Soda’s Decree completed.  Litigation is always an uncertain venture, and any new augmentation plan application that is filed will be scrutinized by all the other water rights owners in the Piceance Creek and Yellow Creek drainages, including the
major oil companies that have a presence in these Basins.  Potential users of Natural Soda’s water rights may find that constructing a pipeline for delivery of water may be more reliable and cheaper than obtaining a judicially approved plan for augmentation.





Based on the judicial decrees that have been entered with respect to Natural Soda’s water rights, the total potential volume of the water rights exceeds more than 100,000 acre feet per year.  We believe that these water rights can generate a future revenue stream and have increasing value, especially as any prospective development of the oil shale resources of the Piceance Creek Basin may require very large volumes of water.  It is our objective to develop and further utilize the water rights Natural Soda owns.





Agreement with Shell Frontier Oil & Gas, Inc.





Natural Soda entered into a contract on January 29, 2007 with Shell, effective January 1, 2007, to sell up to 120 acre feet of water per year at a price equal to $8,146 per acre foot.  Shell has been awarded three 160 acre oil shale research, design and development leases by the Bureau of Land Management contiguous with Natural Soda’s sodium leases and Shell may use water supplied by Natural Soda on the lease obtained by Shell, but is not required to purchase such water supplies.  If Shell purchases any water, it will remove the water using water transport trucks or by constructing a pipeline at its own expense from the Natural Soda wells.





Natural Soda will provide water to Shell from one of its existing water wells.  The water will be recovered from the geologic formation commonly known as the “A Groove” and the quality of the water shall be “as is” upon withdrawal from the geologic formation without any treatment by Natural Soda.  The initial term of the agreement is five years and renewable thereafter with the purchase price adjusted according to a formula based on movement in the consumer price index.  A condition of the agreement is that Natural Soda may sell water to other users provided that such delivery is subordinate to the delivery of water to Shell.  Shell did not purchase
any water during the six month period ended December 31, 2010.





The agreement may be extended automatically for successive periods of five years although Shell may elect to terminate the agreement by providing written notice prior to the end of the initial term or each subsequent renewal date. Similarly, Natural Soda can terminate the agreement by providing written notice on the same basis.  In addition, the agreement terminates if Natural Soda ceases to have an interest in the sodium leases.  See Item 3 “Legal Proceedings” for additional information.





Appraisals





While water rights are assets routinely bought and sold in the State of Colorado, the current value of Natural Soda’s water rights is unknown.


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A significant portion of the value of the Natural Soda water rights is associated with the supply of water to the sodium bicarbonate mining operations.  As discussed above, the Natural Soda water rights may also be developed and used for other purposes.  Such additional development and use will require permits and judicial proceedings regarding the water rights.  Litigation is an uncertain venture and other entities may assert that the use of the Natural Soda water rights should be limited or restricted.





Identification of Water Rights





Our water rights can be categorized and summarized as follows:


Water Flow Rights
Location

Flow Rate


Flow Rate


Percent of(c.f.s.)


(acre ft/yr)


Annual FlowDirect pumping
13 wells on site


45.0



32,579



30
%Direct Flow rights
Piceance Creek


5.3



3,837



3
%River pumping
White River


100.0



72,397



67
%Total flow



150.3



108,813



100
%





Water Storage
Location

Volume


Percent ofRight


(acre feet)


StorageWolf Ridge Reservoir
White River


7,380



92
%Larson Reservoir
Piceance Creek headwaters


600



8
%Total flow



7,980



100
%





The projections of the flow rates for the water rights are predicated on the decrees that have been entered with respect to the water rights.  Further judicial proceedings may modify the flow rates.





Direct Pumping Rights   - Well Water





Natural Soda owns thirteen well water rights located adjacent to the sodium bicarbonate process plant as described in the Decree.  These rights have priority dates from the 1970s so they are very “junior” water rights.  Under Colorado law, the Well Water Rights cannot divert water without having a plan of augmentation approved by the Water Court.  Natural Soda’s Decree includes a plan for augmentation authorizing, among other things, wells that have a hydraulic connection to the surface stream to pump water, provided that depletions to the surface stream caused by well pumping are augmented (i.e. replaced) with other water supplies.  As discussed above, the
Well Water Rights are included within the Decree.




Senior Direct Flow Water Rights in the Piceance Creek Basin





Natural Soda owns the following senior direct flow water rights:




Name
Appropriation Date
Decree Date
Flow Rate (c.f.s)Morgan Ditch No. 1
April 15, 1883
April 28, 1890
1.00Enlargement and Extension of Morgan Ditch No. 1
September 27, 1886
April 28, 1890
0.40Morgan No. 2 Ditch
September 27, 1886
April 28, 1890
0.40Home Supply Ditch
September 19, 1886
May 10, 1889
1.00Larson Ditch
September 17, 1886
May 10, 1889
2.50





The direct flow water rights located adjacent to the Larson Reservoir on the upper reaches of Piceance Creek are among the most senior water rights in the Piceance Creek Basin.  They were originally decreed for agricultural irrigation however the Water Court in its Decree changed the direct flow water rights for numerous purposes including commercial and industrial purposes.  In addition, the Water Court imposed certain terms and conditions on the use of the water, including annual volumetric limitations on the use of the water rights.  The average annual amount of water that may be diverted and consumed pursuant to the direct flow rights is approximately 234 acre feet.


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Wolf Ridge Reservoir and Feed Pipeline Water Rights to the White River





The Wolf Ridge Reservoir and Wolf Ridge Feeder Pipeline water rights (“Wolf Ridge Water Rights”) were decreed in the 1970s.  However, unlike the Well Water Rights that divert water from the aquifer tributary to Piceance Creek, the Wolf Ridge Water Rights are decreed for diversion of water primarily from the White River approximately 12 miles from the current sodium bicarbonate production operations.  Piceance Creek has lower flows in the summer, but the White River is a much larger stream.  Hence a 1970s water right diverting out of the White River is anticipated to have water available for diversion on a yearly basis.  As discussed above, the Wolf Ridge Water
Rights originally contemplated construction of a reservoir originally intended to be adjacent to the current sodium bicarbonate processing facility to contain a maximum of 7,379.70 acre feet.  This reservoir could be fed by the Wolf Ridge feeder Pipeline at the rate of 100 c.f.s.  (44,800 gallons per minute) and Natural Soda asserts that the total amount of water that could be delivered would be approximately 72,396 acre feet per year.





Larson Reservoir and Larson Reservoir Enlargement Water Rights





The Larson Reservoir located on the upper reaches of the Piceance Creek was originally decreed for 62 acre feet of water storage rights with an appropriation date of July 20, 1888 and a decree date of May 10, 1889.  Hence it is a very “senior” water right.  The Water Court Decree changed the uses of the Larson Reservoir Right to include industrial and commercial uses and allows the consumption of approximately 39 acre feet of fully consumable water per year.





The Decree also approved an additional water right referred to as the Larson Reservoir Enlargement Water Right.  It has an appropriation date of April 5, 1988 and may store up to 600 acre feet of water, with the right to refill the Larson Reservoir with 600 acre feet of water per year.  This has not been constructed but could be constructed on land entirely owned by Natural Soda.  The Larson Reservoir Enlargement Water Right could only divert water during the early spring runoff period.  Natural Soda intends to evaluate the possibility of reconstructing and enlarging the reservoir to provide for a greater storage capacity.




4.           Oil Shale Potential





The Energy Policy Act of 2005 directed the Task Force on Strategic Unconventional Fuels to make recommendations and develop an integrated program to coordinate and accelerate the development of fuels from domestic unconventional fuels resources.  The Task Force found in February, 2007:





“Global and domestic demand for crude oil and refined products continues to expand, driven by rapid economic growth in developing economies and domestic consumer habits.  At the same time, finding and producing oil reserves to meet rising demand is increasingly difficult and costly.  Companies are failing to replace produced reserves, shrinking the world’s conventional oil reserves base.  Excess production capacity is also shrinking, reducing the ability to supply disruptions, increasing price volatility, and driving up prices.  Domestic crude oil production is declining as demand rises, increasing our dependence on imports of oil and refined
products..........Increasingly, oil and refined products must be imported from nations unfriendly to the United States or threatened by political instability, reducing the security and reliability of supplies critical to our economy, our military, and our national security.” (Page ES-1). “Oil shale is extremely well suited for producing premium quality refinery feedstocks for diesel and jet fuels.  The manufacturing processes can also yield significant quantities of value-added chemical by-products.......America’s commercial quality oil shale resources exceed 2 trillion barrels, including about 1.5 trillion barrels of oil equivalent in high quality shales concentrated in the Green River Formation in Colorado, Utah and Wyoming.” (Page I-16).





The Cole report described on Page 5 of this Annual Report, states “Shale-Oil resources for the Saline zone under the lease are between 12 and 14 billion barrels.”  The Saline zone sits under one of Natural Soda’s sodium bicarbonate leases from the BLM.  We have not conducted any additional studies on oil shale on this specific lease nor the Rock School lease or the other Wolf Ridge leases.


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In 2006, the BLM issued five oil shale research leases adjacent to Natural Soda’s sodium bicarbonate operations in accordance with its regulations at that time.  Three of these leases were issued to Shell, as mentioned above.  We believe that the US Government will evaluate the results achieved by existing holders of these research leases before any commercial leases will be issued.  In addition, the current Secretary of the Interior, Ken Salazar, has indicated in the settlement of certain litigation regarding the issuance of the research leases that the BLM will reconsider and revise the rules and regulations pertaining to research leases, and such action may have an adverse
effect on issuance of commercial leases by the BLM.





We currently do not have the right to evaluate or extract oil shale.  In December, 2009, Natural Soda Holdings filed a Nomination for an Oil Shale Research, Development and Demonstration (R, D, & D) Lease, under the provisions of the“Notice of Potential for Oil ShaleDevelopment: Call for Nominations—Oil Shale Research, Development
andDemonstration Program,”as detailed in the United States Government, Federal Register Vol. 74, No. 211, on Tuesday, November 3, 2009, Notices, Page 56867.  In October 2010, the Washington office of the BLM advanced our nomination and has now requested its Colorado office to conduct a review of the project in accordance with the National Environmental Policy Act (“NEPA”).  Our nomination will be reviewed by an agreed upon third party consultant who then reports its assessment to the BLM.  A successful outcome will culminate in a decision of record.  We were required to submit a comprehensive Plan of Operation by March 2, 2011 and we have complied with this
request.  Ultimately, if we are granted a R, D & D lease we anticipate we will be allowed to conduct oil shale research during a ten year period over a 160 acre lease area adjoining our existing sodium leases.  If we can meet substantial due diligence requirements, we may be granted a production lease over an additional 480 acres.





At this time, we do not know if a R, D & D Lease will be issued to Natural Soda Holdings or, if a R, D & D Lease is issued, whether production of oil shale will be economically viable.




EMPLOYEES





The Company’s day to-day business activities are managed by Bill H. Gunn, Chairman and CEO; Bradley F. Bunnett, President and COO; and Robert van Mourik, Chief Financial Officer, Secretary and Treasurer.





Natural Soda has 39 employees in production, sales & marketing, financial, environmental compliance and human resources roles.




ITEM 1A:
RISK FACTORS





We have large accumulated losses, we may not maintain profitability and we require additional capital to expand our operations.





We have incurred substantial losses to support our activities through the development stage, complete our acquisition of the assets, refurbish Natural Soda’s plant, expand Natural Soda’s cavities and complete our restructuring and reorganization while sustaining our activities to date.  Our unconsolidated, aggregated accumulated losses were approximately $109 million at December 31, 2010.  While our business was profitable in calendar year 2010 we must continue to operate profitably or else, ultimately, we cannot remain in business.




We rely on key employees in Natural Resources and its subsidiaries to manage its operations and may have difficulty replacing them if they were to leave our employ.





We conduct our operations with a relatively small management team so the loss of an employee through an extended illness or resignation could adversely impact our capacity to successfully fulfill our obligations and thereby impact our sales, margins and profitability.


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Our plant located near Rifle, Colorado, relies on supplies of gas and electricity to operate and to generate heat to recover pregnant liquor from the underground cavities.





If these supplies are interrupted for any extensive period of time then our ability to produce finished product will be adversely impacted.  A lengthy interruption may cause our plant to shut down and our underground wells to lose heat that will require very large amounts of heat at very large cost to restore to operating condition.  The need to use alternative sources of power may result in higher than anticipated costs, which will affect operating costs. Continued power shortages and increased costs may adversely affect our operational results and financial position.





There are restrictions on our ability to transport finished goods from our plant during the winter thaw period that might potentially impact our supply of product to customers.





Local government agencies limit the size of loads on trucks during spring to help preserve road conditions.  Road closures due to weather may result in a reduced ability to transport finished goods from site and receive key input products and, therefore, may affect supply and production of product.  This potentially limits our revenues.





We rely on contract drillers with specialist expertise to drill our underground well sets.  We compete for their services.





To maintain our production capability we must drill additional wells using the services of drilling contractors who also provide services to the oil and gas industry.  Increased competition for their services may increase our drilling costs and limit their availability when we want to drill new cavities.





We are reliant on our boilers to produce the heated solution to dissolve nahcolite and to operate our plant.  If our boilers fail then our operations will cease until we can replace or repair them.





Replacing or repairing our boilers may take an extended period of time during which we could not produce finished product.  We would have to default on our sale agreements or buy product from our competitors to meet our obligations at a cost to our profitability.





We maintain extensive amounts of data on our computers and a failure in our computer systems would be very disruptive to our business.





While we have back up facilities to retain our data, failure of our computer systems will be disruptive to our business and costly.





Natural Soda’s pricing of its products is determined in a competitive environment in which it is not generally able to lead prices.





Our industry is dominated by Church & Dwight, a long time manufacturer of the Arm & Hammer brand of baking soda and related products.  Natural Soda’s major competitors also include FMC and Solvay, major corporations with considerable resources, marketing expertise and broader access to customers than we do.  Consequently, if there is a price war with the major companies that dominate the industry Natural Soda’s margins and profitability may be threatened.  In addition, Natural Soda’s business has high fixed costs.  From time to time, Natural Soda may need to reduce prices for some of its products to respond to competitive and customer pressures and
to maintain market share. Consequently, Natural Soda’s operating results may suffer.  Any decline in prices for some of its products can:





·
Reduce revenues further through reduced production causing uneconomic operations;


·
Halt or delay the development of new projects; and


·
Reduce funds available for drilling new well sets;


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The loss of any of Natural Soda’s principal customers could significantly lower its sales and profitability.





Natural Soda primarily sells its animal feed grade product through customers who act as distributors.  The largest of these in volume and revenues is Bunnett & Company which accounts for the majority of Natural Soda’s animal feed sales.  In addition, Natural Soda sells most of its higher grade products through Vitusa Products, Inc. of Berkeley Heights, New Jersey.  Another animal feed grade customer, Agri Dealers, Inc., represented approximately 10% of Natural Soda’s sales and together these three constituted approximately 55% of Natural Soda’s sales for the six months ended December 31, 2010 and about 63% of Natural Soda’s accounts receivable at December
31, 2010.  Consequently, there is also a concentration of credit risk associated with the continuing reliance on these customers.  The loss of all or part of their business could be injurious to Natural Soda’s sales, margins and profitability.





Natural Soda may not be able to continue to recover sodium bicarbonate economically or at all from the cavities if there are failures in the underground operations.





Natural Soda recovers its sodium bicarbonate from cavities that are about 1,900 feet underground and does so by pumping hot water through a pipe into the cavity and then recovering the pregnant liquor through a recovery pipe that is about 8 inches in diameter.  If portions of an underground cavity collapse or if there are blockages in the wells, Natural Soda’s ability to recover pregnant liquor can be severely affected.  It is possible a well may become unusable so that Natural Soda would have to drill a new cavity and associated injection and recovery wells at considerable expense and delays to its production.  As continuity of production requires having operational cavities
and as it can take some months to drill new cavities and bring them into production, failure of existing cavities can severely jeopardize Natural Soda’s production capability.





Natural Soda’s resource of naturally occurring sodium bicarbonate has a zone that contains some sodium chloride.  The presence of too much sodium chloride in the pregnant liquor impacts plant productivity and could cause a reduction in the amount of sodium bicarbonate that might be recovered from a cavity.





This is a high fixed cost business and if there are underground production problems or if Natural Soda is unable to sell sufficient tonnages, the relatively high fixed operating costs applied to a low volume of sales may threaten the viability of our business.





Increasing gas, power and fuel costs could erode Natural Soda’s profit margins and harm operating results.





Energy costs and transport costs represent a major component of Natural Soda’s cost structure.  Because of our remote location, we are dependent on limited means of transportation to bring our products to market.  It may be difficult to pass on increased costs to its customers so that Natural Soda’s profitability may be adversely impacted.  This could harm Natural Soda’s financial condition and operating results.





Regulations and pending legislation governing issues involving climate change could result in increased operating costs which could have a material adverse effect on our business.




Energy is a significant input to our operation, with our principal energy sources being electricity, natural gas and petroleum products (for transport).





A number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to the potential impacts of climate change that are viewed as the result of emissions from the combustion of carbon-based fuels. The U.S. Congress and several U.S. states have initiated legislation regarding climate change that will affect energy prices and demand for carbon intensive products.





Legislation and increased regulation regarding climate change could impose increased costs on us and our suppliers.   These increased costs include increased energy, capital equipment, environmental monitoring and reporting and other costs to comply with such regulations.  Until the timing, scope and extent of any future regulation becomes known, we cannot predict their effect on our financial condition and ability to compete.


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Natural Soda’s operations are subject to a significant amount of regulatory scrutiny and regulation by federal and state authorities.





Natural Soda’s mining and processing operations operate under permits from several state and federal authorities, including the Environmental Protection Agency, the Bureau of Land Management, the Colorado Department of Natural Resources and the Colorado Division of Minerals and Geology.Failure to comply with government conditions and permitting requirements may cause these permits to be revoked with material and adverse effects on Natural Soda, Natural Soda Holdings and Natural Resources.  If Natural Soda loses its permits, Natural Soda may have to cease operations while it seeks the reinstatement of these permits.  If Natural
Soda cannot reinstate its permits, it will be out of business.  Natural Soda also requires BLM approval in accordance with Natural Soda’s approved mine plan to establish new cavities.  If this approval is denied, then Natural Soda will lose its ability to recover sodium bicarbonate from the lease.  In addition, regulatory authorities may suddenly impose additional compliance obligations which may cause closure of the plant if not met or may refuse to renew leases.





Natural Soda’s ability to successfully obtain key future permits and approvals for its operation may be affected by governmental delays and scrutiny which could adversely affect our operation.





Our operation is subject to extensive laws and regulations regarding worker health and safety and the protection of the environment.  We have made, and expect to make in the future, significant expenditures to comply with such laws and regulations.  Compliance with these laws and regulations imposes substantial costs and burdens and can cause delays in obtaining, or failure to obtain, government permits and approvals which may adversely impact our operation. Future changes in applicable laws, regulations and permits, or changes in their enforcement or regulatory interpretation could substantially increase costs to achieve compliance.





Stakeholder concern can exist about the real and perceived detrimental effects of the operation and its consequences include reputational damage, legal suits, increased regulatory scrutiny, and social investment obligations.




Natural Soda’s and Natural Soda Holdings’ sodium leases are due for renewal on June 30, 2011 and there is no assurance the BLM will renew any or all of the leases.





The sodium leases contain terms with which Natural Soda and Natural Soda Holdings must comply and the renewal of those leases is subject to the discretion of the Department of Interior, Bureau of Land Management.  There is a risk the BLM will not renew the Rock School Lease.  The loss of any of these leases could be injurious to our business and diminish shareholder value.





The oil shale industry has attempted to exploit oil shale commercially in the past and has been unable to do so in an economically feasible manner.  Even if Natural Soda Holdings and/or Natural Soda obtain a research/commercial oil shale lease, the technology may not exist during the term of the lease to exploit oil shale in an economically feasible manner.  If Natural Soda Holdings and Natural Soda are unable to exploit their potential oil shale leases the value of their assets would be materially and adversely affected.





In the past, the oil industry has attempted to exploit oil shale to produce commercial quantities of oil.  Each time the industry has failed to develop technology that would allow it to produce commercial quantities of oil in an economically feasible manner.




Recently, large volatility in the price of oil has led the oil industry to rethink the economic feasibility for producing oil from oil shale.  However, it is still uncertain whether production of oil from oil shale is economically viable even with significant increases in oil prices.  It is also unclear whether new technologies would significantly decrease the cost of recovering oil from oil shale.




If Natural Soda Holdings or Natural Soda is unable to cost effectively exploit oil from oil shale, the value of any potential business opportunity or oil shale leases they may be able to obtain would be materially and adversely affected.




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We are obliged under a Licence Agreement with Peter Cassidy to pay for a research program at Monash University, Melbourne, Australia in connection with research to support our R, D & D lease application activities.





We have committed to spend approximately $500,000 this year and we may spend more afterwards but the nature of research is such that we may not have anything of value in the end.  Further, if anything of value does eventuate, while we have agreed with Peter Cassidy to negotiate in good faith a royalty and license agreement to utilize the technology for commercial purposes, there is no assurance that we will be able to reach an agreement.  If we do not negotiate a commercial agreement, we will not receive any benefit from our expenditures and we will not be able to exploit any commercial oil shale lease opportunities we may have in the future, if any.





The current technology for production of oil from oil shale may require a significant amount of water.




The value of Natural Soda’s water rights is partly dependent on the development of commercial production of oil from oil shale on or near its properties.  If such commercial oil shale market does not develop, the possible value of its water rights assets may be materially and adversely affected.  In addition, litigation regarding the water rights owned by Natural Soda may affect the ability of Natural Soda to fully develop all or a portion of Natural Soda’s water rights


.


Pursuant to our restructuring agreement with Sentient, Sentient had the option until October 31, 2011 to purchase an additional 5,500,000 shares of the Company’s common stock at $.36 per share to pay for AmerAlia indebtedness that was outstanding as of October 31, 2008.  On March 15, 2011 this option was assigned to GSR.  If GSR exercises this option, the Company’s shareholders will have their ownership interest diluted.





In our restructuring transaction completed in October 2008, we were not able to repay all indebtedness of AmerAlia and Natural Soda Holdings owed to third parties.  There are also potentially claims that we are unaware of at this time.  If any third party brings a claim prior to October 31, 2011 for amounts owed by the Company or Natural Soda Holdings prior to October 31, 2008, GSR may exercise its option to purchase up to 5,500,000 shares at a purchase price of $0.36 to provide the Company with the funds to pay such claim.  If GSR exercises this option, the percentage ownership of the Company held by its existing shareholders will be reduced.





GSR owns more than 90% of our shares and can take complete control of the company.





GSR currently owns nearly 95% of the issued and outstanding Common Shares.  Accordingly, GSR could unilaterally cause a “short form” merger in which Utah law allows GSR to force such a transaction without approval of the other shareholders.  In a “short form” merger, a 90%-plus corporate shareholder forces out the remaining issued and outstanding shares for cash by operation of law, resulting in the minority shareholders losing the potential future value of their Common Shares, if any.  Therefore, GSR could not only force out the minority shareholders, but it could also effectively and unilaterally set the per share cash price received by each shareholder in
such a transaction.  If this occurs, the only recourse for shareholders will be to exercise dissenters’ rights pursuant to Utah law.
 
 In addition, GSR can approve any shareholder action or block any shareholder action that it does not approve.  Further, GSR could replace our independent directors and nominate its representatives to the board of directors. Since our annual general meeting of the shareholders of the company held on February 9, 2011, the board of directors comprises nine directors of whom three are independent.  Six directors are employees, officers or directors of Sentient, GSR or their affiliates.  This control could discourage others from initiating potential merger, takeover or other change of control transactions that may otherwise be beneficial to our business or holders of our common
stock.  In addition, the control that GSR may exert over us, either directly or indirectly, could give rise to conflicts of interest issues.


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Broker-dealers may be discouraged from effecting transactions in our shares because they are considered a penny stock and are subject to the penny stock rules.
 
 We believe our stock is treated as a penny stock.  SEC Rule 15g-9, generally defines “penny stock” to be any equity security that has a market price less than US$5.00 per share, subject to exceptions.  Penny stock rules impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors, as defined by SEC rules.  The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the
penny stock market.  The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account.  The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer in writing before or with the customer’s confirmation.  In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.  These disclosure
requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to the penny stock rules.  Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities and discourage investor interest in and limit the marketability of our Common Shares.





Our shares are listed on the OTC Bulletin Board and are subject to trading restrictions imposed by brokers.





Some brokers will not allow their clients to purchase shares listed on the Bulletin Board.  This reduces the ability of shareholders to acquire more shares or to sell them on market.  In addition, market makers are not obliged to show best bid and ask prices so that shareholders may operate on the basis of inadequate information and not be able to buy or sell shares at the most favorable prices and thereby potentially lose value in their investments in our shares.





The magnitude of the GSR shareholding limits the size of the public float and the depth of the market for the buying and selling of our shares.





The number of shares of our company that are not owned by GSR or other insiders is a small proportion of the total number of shares outstanding.  Hence, our public float is small and our shares are thinly traded with prices volatile.  The trading in our stock is not an efficient market.  Even minimal trading could force up or down our stock price in quick succession.  If a large shareholder sought to sell shares through the market it could easily depress the market value of the shares.





We are currently engaged in litigation defending our water rights and our efforts to utilize our water rights could provoke further litigation.





We have water rights which represent a significant asset to us.  Our water rights are based on a complex body of law.  We are currently engaged in litigation defending our water rights and our efforts to utilize our water rights could provoke further litigation.  If we are unsuccessful in defending our water rights, we could lose the rights to significant and valuable assets.  In addition, if we lose our water rights we might have to pay a third party for the water necessary to run our operations, which would increase our expenses and could make our operations unprofitable.  Engaging in litigation is potentially an expensive undertaking with uncertain
outcomes.  It is possible that Natural Soda may in the future become subject to litigation, arbitration or other legal proceedings with other parties.  If decided against Natural Soda, these legal proceedings, or others that could be brought against us in the future, could have a material adverse effect on our financial position.




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If we cease to be a “smaller reporting company” in future financial years, we will be required to obtain an auditor’s attestation on the effectiveness of our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002.  Any adverse results from such attestation could result in a loss of investor confidence in our financial reports and have an adverse effect on the price of our Common Shares.





Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we have furnished a report by management on our internal control over financial reporting.  Such report contains, among other matters, an assessment of the effectiveness of our internal control over financial reporting, including a statement as to whether or not our internal control over financial reporting is effective.





In future years, if we cease to be a “smaller reporting company” under the Securities and Exchange Act of 1934 we will be required to have our auditor provide an attestation report.  During the evaluation and testing process by our auditor, the auditor may identify one or more material weaknesses in our internal control over financial reporting.  If so, the auditor will be unable to attest that such internal control is effective. If our auditor is unable to attest that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which could have a material adverse effect on our common share
price.





We will need to raise additional capital through the sale of our securities, resulting in dilution to the existing shareholders, and if such funding is not available, our operations would be adversely effected.





We do not have sufficient financial resources to undertake by ourselves all of our planned development and plant expansion programs. We have limited financial resources and in the past have financed our operations primarily through investment from our majority shareholder.  We will need to continue at least a partial reliance on the sale of our securities for future financing, resulting in potential dilution to existing shareholders.  If adequate financing is not available, we may not be able to commence or continue with our development programs.





The occurrence of events for which we are not insured may affect our cash flow and overall profitability.





We maintain insurance policies that mitigate against certain risks related to our operations.  This insurance is maintained in amounts that we believe are reasonable depending upon the circumstances surrounding each identified risk.  However, events may occur that cause damage in excess of our insurance policies.  In addition, we may elect not to have insurance for certain risks because of the high premiums associated with insuring those risks or for various other reasons; in other cases, insurance may not be available for certain risks. Occurrence of events for which we are not insured may affect our operational results and financial
position.





Mine closure and remediation costs for environmental liabilities may exceed the provisions we have made.





Natural resource companies are required to close their operations and rehabilitate the lands they mine in accordance with a variety of environmental laws and regulations.  Costs of the total ultimate closure and rehabilitation can be significant.  Our estimates of those costs are based principally on current legal and regulatory requirements and mine closure plans that may change materially.





Any underestimated or unanticipated rehabilitation costs could materially affect our financial position, operational results and cash flows.  Environmental liabilities are accrued when they become known, are probable and can be reasonably estimated.





The laws and regulations governing mine closure and remediation are subject to review at any time and may be amended to impose additional requirements and conditions which may cause our provisions for environmental liabilities to be underestimated and could materially affect our financial position or operational results.


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We may experience increased costs or losses resulting from the hazards and uncertainties associated with our operational activities.





Exploration, development and operational activities involve a high level of uncertainty.  These can be difficult to predict and are often affected by risks and hazards outside of our control.  These factors include, but are not limited to:




·
Environmental hazards, including discharge of pollutants or hazardous chemicals;


·
Industrial accidents, including in connection with transportation and processing activities;


·
Fire and floods;


·
Unexpected geological formations or conditions;


·
Ground and water conditions;


·
Seismic activity;


·
Other natural phenomena, such as lightning, storms, or other inclement weather conditions.





The occurrence of one or more of these events may result in the death of, or personal injury to, our personnel, the loss of equipment, damage to facilities, monetary losses, deferral or unanticipated fluctuations in production, environmental damage and potential legal liabilities, all of which may adversely affect our reputation, business, prospects, operational results and financial position.




Our ability to file consolidated tax returns of Natural Resources, Natural Soda Holdings and Natural Soda through relief provisions of the Internal Revenue code is not assured potentially resulting in Natural Resources and Natural Soda incurring tax liabilities in current and future periods.
 
 Our financial statements indicate tax liabilities in the current period and there may be additional tax liabilities in future periods.  We intend to seek relief from the Internal Revenue Service which, if granted, would allow us to file consolidated tax returns to reduce or eliminate tax provisions and payments required by filing on an individual basis.  We anticipate the IRS will make a determination on this matter within six months.  The ability to grant relief is at the discretion of the IRS and this process may not be successful resulting in a loss of the Company’s ability to offset tax losses incurred by Natural Soda Holdings against taxable income earned by Natural Resources
and Natural Soda.




ITEM 2.
PROPERTIES





Natural Resources’ only interests in property are through Natural Soda Holdings and Natural Soda.





Natural Soda is a lessee of United States Sodium Mineral Leases C-0118326, C-37474, C-0118327 and C-0119986 covering 8,223 acres and Natural Soda Holdings is a lessee of United States Sodium Lease No. C-0119985 covering 1,320 acres, all in Rio Blanco County, Colorado, USA.  These are described more fully in Item 1. - "Business", above.





Natural Soda’s plant consists of a single building with boilers, centrifuge, and other equipment capable of producing various grades of sodium bicarbonate at over 125,000 tons per year.  There are also several other buildings associated with the plant which are used for bulk storage (one building of approximately 50 feet in diameter with a storage capacity of 3,000 tons) and three small sheds (lube storage shed, fire pump house shed, and hazardous materials shed).  The plant, the bulk storage facility and one of the sheds are of metal construction and the other two sheds are of wood construction, each on concrete pads.  In management’s opinion, the plant facilities are
adequately insured.





Approximately 25 miles east of the plant, Natural Soda owns approximately 35.8 acres of real property that is used for the existing water storage reservoir.  Natural Soda also leases a 21,517 square-foot warehouse in Rifle, Colorado, from an unaffiliated landlord.


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ITEM 3.
LEGAL PROCEEDINGS





Natural Resources is not subject to any legal proceeding.





As discussed above, Natural Soda owns water rights located in the Piceance Creek, Yellow Creek and White River Basins within Colorado.  Natural Soda is involved in several cases pending in the District Court in and for Water Division No. 5 and District Court in and for Water Division No. 6, State of Colorado (collectively referred to as “Water Court”).  The proceedings in Water Court pertain to applications for water rights filed by Natural Soda and objections to water rights applications by third parties.  In addition, under Colorado law, the owner of conditional water rights must periodically file an application for determination of reasonable diligence in the
development of the conditional water rights.  The proceedings pertaining to the conditional water right must be filed within six years following the determination by the Court regarding the prior proceeding, or the water right is considered abandoned.





As of December 31, 2010, Natural Soda is the applicant in the following cases pending in the Water Court:





·
Water Division No. 5: Case No. 1998CW315,


·
Water Division No. 6:  Case Nos. 2010CW10, 2010CW11, 2010CW12, 2010CW13, 2010CW14, 2010CW32, 2010CW33 and 2010CW34.





As of December 31, 2010, Natural Soda has filed a statement of opposition in the following cases pending in Water Division No. 5; Case Numbers:





·
2003CW282 – Exxon Mobile Corporation,


·
2003CW309 – Encana Oil & Gas (USA), Inc.,


·
2003CW318 – Encana Oil & Gas (USA), Inc.,


·
2004CW110 – Shell Frontier Oil & Gas, Inc.,


·
2005CW285 – Exxon Mobile Corporation,


·
2005CW294 – Exxon Mobile Corporation,


·
2006CW263 – Exxon Mobile Corporation,


·
2006CW265 – Exxon Mobile Corporation,


·
2007CW242 – Puckett Land Company,


·
2007CW253 – XTO Energy Inc.,


·
2007CW254 – Williams Production RMT Company,


·
2008CW182 – Encana Oil and Gas (USA), Inc. and


·
2008CW199 – Exxon, 2008CW203 - Exxon.





Of the cases in which Natural Soda has filed a statement of opposition, a principal one is the objection to Shell Frontier Oil & Gas, Inc.’s application to move a water right from a tributary of the White River to a point on the White River lower down river than the off take point for Natural Soda’s White River direct pumping right. If Shell were to be successful in their application, it might adversely impact the value of our White River water rights. We participated in a trial before the Water Division No. 5 Court in December, 2010 and the Court has not issued a decision.


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PART II




ITEM 5.
MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES








Market Information.





Our common stock is publicly traded under the symbol “NTRC”.  Since August 20, 2002, we were listed on the OTC Bulletin Board until our shares were transferred to the over the counter market in late 2005.  On May 18, 2009, we regained our listing on the Bulletin Board.  We believe that our shares of common stock were traded on the over-the-counter market from approximately mid-February 2011 through mid-March 2011.  The highest, lowest and average closing prices for our common stock as provided by an online service for the past two fiscal years up to December 31, 2010 are pro­vided in the table below.  These prices reflect inter-dealer prices and do
not include allowance for retail mark-up or mark-down, commissions or other transaction costs.




Highest Price


Lowest Price


Average ReportedFor the Quarter Ended

For the Quarter ($)


For the Quarter ($)


Last Sale Price ($)March 31, 2009


0.59



0.20



0.39June 30, 2009


0.55



0.21



0.33September 30, 2009


0.50



0.30



0.40December 31, 2009


1.01



0.30



0.65March 31, 2010


0.50



0.32



0.49June 30, 2010


0.45



0.32



0.39September 30, 2010


0.50



0.11



0.38December 31, 2010


1.01



0.25



0.62


Holders.





The number of record holders of our Common Stock on December 31, 2010 was approximately 200.  This does not include shareholders holding shares in accounts with brokers.





Dividends.





The Company has not paid dividends on its Common Stock and has no plans to pay cash dividends in the future.





Repurchase of Securities.




During the six months ended December 31, 2010, neither we nor any of our affiliates repurchased any of our common shares registered under Section 12 of the Securities Exchange Act of 1934, as amended




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Securities authorized for issuance under equity compensation plans.




The following is provided with respect to compensation plans (including individual compensation arrangements) under which equity securities are authorized for issuance as of the transition period ending December 31, 2010.




Equity Compensation Plan InformationPlan Category and Description

Number of Securities to be issued upon exercise of outstanding options, warrants, and rights



(a)


Weighted-average exercise price of outstanding options, warrants, and rights



(b)


Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

(c)Equity compensation plans approved by security holders


675,000


$
0.49



34,325,000Equity compensation plans not approved by security holders


-0-



-0-



-0-Total


675,000


$
0.49



34,325,000




Recent Sales of Unregistered Securities -- Item 701 Disclosure.





Date of Issue
No. of Shares
Recipients
Consideration
Reliance on exemptions
Conversion Terms
Notes(a)
(b)
(c)
(d)
(e)
(f)June 2010
286,119,886
Sentient
82% of NSHI
See Note 1.
None
2


1.
No underwriters were involved in the transaction.  The issuance of the shares was accomplished pursuant to exemptions from registration contained in Sections 4(2) and 4(6) of the Securities Act of 1933.


2.
See Item 1 at Restructuring Transactions.





In accordance with the terms and provisions of the 2010 Directors’ Incentive Plan:





·
On July 1, 2010 we granted options to acquire 225,000 shares at $0.37 for three years to the non-executive directors of the company.





In accordance with the terms and provisions of the 2010 Stock Option Plan:





·
On January 18, 2011 we granted options to acquire 3,500,000 shares at $0.58 for five years to the executive officers of the company.


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ITEM 6.
SELECTED FINANCIAL DATA





Not applicable.


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





You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this Annual Report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth under “Risk Factors” and elsewhere in this Annual Report. See “Cautionary Note Regarding Forward-Looking Statements” above.





Our business is to identify and develop natural resource assets.  We own significant natural sodium bicarbonate resources utilised for the recovery and production of various sodium bicarbonate products and water rights.





Natural Soda owns various water rights in the Piceance Creek Basin in northwest Colorado, a part of the Colorado River drainage system.  These various rights are decreed to allow Natural Soda to draw up to a maximum of 108,812 acre feet (35.46 billion gallons) annually and to store up to 7,980 acre feet of water.





Natural Soda Holdings and Natural Soda also own BLM leases in the Piceance Creek Basin covering very large deposits of naturally occurring sodium bicarbonate called nahcolite.  Natural Soda’s business is to produce and sell natural sodium bicarbonate, commonly known as baking soda, for use in a wide variety of products and activities. Natural Soda’s immediate objectives are, firstly, to be a low cost producer of sodium bicarbonate and to leverage that low cost advantage to achieve superior profit margins; and secondly, to profitably utilize its water assets.





Deposits of oil shale lie below, above and are interspersed within the nahcolite contained within the sodium leases.  We do not have any rights to recover oil shale but Natural Soda Holdings and Natural Soda plan to apply for leases to exploit all or part of this oil shale if and when the United States government formulates procedures for that purpose.  Shell Frontier Oil & Gas Co. (“Shell”) has three research, development and demonstration leases adjacent to Natural Soda’s sodium leases.  A Shell fact sheet, “Shell Exploration & Production Technology - to secure our energy future – Mahogany Research Project” reports an estimated potential
recovery rate of up to one million barrels of oil per surface acre.  If we obtain the right to exploit all or part of this oil shale, we plan to independently determine possible recovery rates and attempt to develop an economically feasible plan to recover oil from the oil shale resource contained within the area where Natural Soda Holdings’ and Natural Soda’s sodium leases are located.





We are filing this Amended Transition Report on Form 10-KT/A to amend and restate our audited consolidated financial statements and related disclosures for the six months ended December 31, 2010 as shown below.





Sales and Revenue Performance of Natural Soda





Natural Soda’s recent sales in tonnages and gross revenues are shown in the following tables:




Fiscal

Year

Sales (tons)


% Change

on prior FY2006


88,910



+ 4.62007


101,970



+14.72008


101,614



- 0.42009


97,729



-3.82010


107,179



+9.7Fiscal

Year

Gross Revenues

($)


% Change

on prior FY2006


15,293,688



+ 8.12007


16,951,997



+ 10.82008


17,947,800



+ 5.92009


19,835,160



+ 10.52010


21,981,038



+10.8


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For the six months ending December 31, 2010 we sold 65,820 tons and earned gross revenue of $12,924,583.





Fiscal year ended June 30, 2010 compared with fiscal year ended June 30, 2009:





After the limitation on sales we experienced during fiscal year 2009, our sales during fiscal year 2010 benefited from our investments in expanding our well field, improving our production efficiencies and our greatly enhanced supply capability.  Natural Soda’s recent sales history is illustrated on a quarterly basis in the following graph.










Our sales revenues during fiscal year 2010 were $21,981,038 compared with $19,835,160 in the prior period, an increase of 10.8%, based on 107,179 tons sold compared with 97,729 tons in the prior period, an increase of 9.7%.  This represents an increase in gross revenue per ton of $2.13 or 1.0%.  Meanwhile, our cost of goods sold only increased from $13,284,929 to $13,475,798, an increase of 1.4% but actually a reduction of $10.21 per ton, a reduction of 7.5%. This reduction in cost per ton is a direct reflection of the economies of scale we can achieve in our production costs.  For example, while our production increased by 8.5% over the year, our major energy cost, gas costs were up
only 3%.   Consequently, our gross profit increased from $6,550,231 to $8,505,240, an increase of 30%.





Our general and administrative expenses increased from $2,647,057 in the prior period to $4,711,593, an increase of 78%.  This increase was due primarily to nearly $600,000 paid in investigating the oil shale potential within our sodium lease areas, nearly $500,000 paid to Sentient and its associates for management fees and further additional professional fees to investigate our water assets, additional provisions for property taxes, insurance and other general and administrative costs.





Conversely, our depreciation, amortization and accretion expense reduced from $2,565,526 in the prior period to $2,107,525, a reduction of 18% in aggregate or 25% on a per ton basis.  This reduction is a direct reflection of the investments we have made in expanding our recoverable reserves and the resulting reduced depletion rate per ton that we apply to determine this expense.





For accounting purposes, we chose to record an impairment charge on a prepaid expense item that we could not adequately confirm but fully intend to recover.


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In fiscal year 2009 we implemented a refinancing of our debt obligations and raised additional capital as discussed more fully above in Item 1.  Consequently, in that period we gained $1,874,359 on settlement of liabilities, incurred $6,997,658 in interest expense and incurred $209,449 in other financing costs.  In the current fiscal; year our only expense on a comparable basis was $184,773 for interest expense.  At the Natural Soda level, we reduced our factoring costs by $235,000 or 58% as a result of reduced reliance on factoring our receivables and the renegotiation of our factoring charges to a lesser rate





Consequently, our net loss of $5,856,440 in the prior year has been turned into a net income of $1,274,439 in the current period, a net turn-around of $7,130,879.





Six months ended December 31, 2010 compared with six months ended December 31, 2009:





The following table presents the impact of the restatement adjustments on the Company’s Consolidated Income Statements for the six months ended December 31, 2010





As Reported


Adjustment


As RestatedINCOME BEFORE INCOME TAX EXPENSE

$
1,660,337


$
-


$
1,660,337Current tax expense


-



(173,976
)


(173,976
)Deferred tax benefit


3,127,865



(2,769,365
)


358,500NET INCOME

$
4,788,202


$
(2,943,341
)

$
1,844,861




The restatement adjustments did not impact the total net cash flows from operating, financing, or investing activities in the Consolidated Statements of Cash Flows for the transitional six months ended December 31, 2010. All notes to the consolidated financial statements affected by the restatements have been labeled as restated.  Whilst management intends to seek relief under the Section 9100 provisions of the Internal Revenue Code, if this is not successful, the Company may incur tax liabilities in one subsidiary in future periods which cannot be offset by tax losses held by another subsidiary within the Natural Resources group, thereby impacting cash flows in the future.





Our sales revenues during the six months ended December 31, 2010 were $12,924,583 compared with $10,428,949 during the six months ended December 31, 2009, an increase of 23.9%, based on 65,820 tons sold compared with 49,151 tons in the prior period, an increase of 33.9%.  This represents a decrease in gross revenue per ton of $15.82 or 7.5%.  Meanwhile, our total cost of goods sold (before depreciation) only increased by 16.3% from $6,253,537 to $7,274,339 but also representing a reduction of $16.71 per ton, a reduction of 13.1%. This reduction in cost per ton is a direct reflection of the economies of scale we can achieve in our production costs.  Consequently, our gross profit
increased from $4,175,412 to $5,650,244, an increase of 35.3%.





Our general and administrative expenses decreased from $2,393,017 in the prior period to $2,305,775, a decrease of 3.6%.  Similarly, our depreciation, amortization and accretion expense reduced from $1,226,148 in the prior period to $1,032,028, a reduction of 15.8% in aggregate or 37% on a per ton basis.  This reduction is a direct reflection of the investments we have made in expanding our recoverable reserves and the resulting reduced depletion rate per ton that we apply to recognize this expense.  The resulting net income from operations was $1,735,877 for the six months ended December 31, 2010 compared with $556,247 in the six months ended December 31, 2009.





Our interest expense for the six month period ended December 31, 2010 was $76,460 compared with $109,756 for the prior period reflecting the end of our factoring facility.  Finally, as a result of our improved economic performance, we have recognized a net deferred tax benefit of $184,524 due to recognizing that our tax losses allow us to reduce our tax obligations in future years.  The resulting net income is $1,844,861 for the six months ended December 31, 2010 compared with $447,081 in the six months ended December 31, 2009.


34
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Liquidity and Capital Resources





Fiscal year ended June 30, 2010 compared with fiscal year ended June 30, 2009:





In the last two fiscal years two significant restructuring events have occurred affecting the financial condition of our company.   These events are fully discussed elsewhere in this report but, in summary, the first transaction in October 2008 resulted in the repayment of  obligations, the receipt of a significant amount of new capital and left all companies in our group nearly debt free.  At the conclusion of that transaction, AmerAlia owned 18% of Natural Soda Holdings and Natural Soda.  The second significant event was the reorganization of the ownership interests in all companies requiring the issue of 286,119,886 shares of our common stock to Sentient in exchange
for the 82% of Natural Soda Holdings it owned enabling ownership of 100% of Natural Soda Holdings and Natural Soda by AmerAlia, now known as Natural Resources.  Under generally accepted accounting principles, this “reorganization of entities having common control” required restating the prior period financial statements as though they had always been owned by the new Natural Resources.  Consequently, shareholders’ equity increased by $86.8 million in fiscal year 2009 and has since increased by a further $6 million in the fiscal year ended June 30, 2010.  The increase in equity in the latter period is primarily due to $4,510,000 we received from Sentient as a capital contribution during the year and to our net profit of $1,274,439.





Our consolidated balance sheet is nearly debt free, our total liabilities amount to approximately $6.4 million against which the book value of our assets totals approximately $47.4 million.  We believe we have sufficient working capital for the next 12 months.





During the year we invested $6,294,012 in expanding our well field and associated assets and property plant and equipment.  We reduced capital leases by $11,906, notes payable by $21,757, repurchased preferred stock for $27,500, reduced accounts and royalties payable by $479,702 and added $45,428 to our restricted funds.  In addition to the capital contribution and profits discussed above, we received $236,809 by reducing our accounts receivable, $115,375 through reducing inventories and $119,445 through increasing our accruals for expenses.


35
 Table Of Contents




Six months ended December 31, 2010





The following table presents the impact of the restatement adjustments on the Company’s Consolidated Balance Sheets as of December 31, 2010:




As Reported


Adjustment


As RestatedASSETSCURRENT ASSETSDeferred tax asset

$
1,790,592


$
(1,714,192
)

$
76,400Total Current Assets


10,927,497



(1,714,192
)


9,213,305FIXED ASSETSProperty, Plant and equipment, net


12,744,010



473,264



13,217,274Cavities and well development, net


10,141,482



(78,929
)


10,062,553Total Fixed Assets


27,052,963



394,335



27,447,298OTHER ASSETSDeferred tax asset, long term


1,465,030



(1,182,930
)


282,100Total Other Assets


13,073,844



(1,182,930
)


11,890,914TOTAL ASSETS


51,054,304



(2,502,787
)


48,551,517LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIESIncome tax payable


127,757



46,219



173,976Asset retirement obligation, current


-



207,000



207,000Total Current Liabilities


3,787,563



253,219



4,040,782LONG TERM LIABILITIESAsset retirement obligations


1,367,247



187,335



1,554,582Total Long Term Liabilities


1,379,259



187,335



1,566,594Total Liabilities


5,166,822



440,554



5,607,376STOCKHOLDERS’ EQUITYAccumulated deficit


(105,569,990
)


(2,943,341
)


(108,513,331
)Total Stockholders’ Equity


45,887,482



(2,943,341
)


42,944,141TOTAL LIABILITIES ANDSTOCKHOLDERS’ EQUITY


51,054,304



(2,502,787
)


48,551,517





The restatement adjustments did not impact the total net cash flows from operating, financing, or investing activities in the Consolidated Statements of Cash Flows for the transitional six months ended December 31, 2010. All notes to the consolidated financial statements affected by the restatements have been labeled as restated.  Whilst management intends to seek relief under the Section 9100 provisions of the Internal Revenue Code, if this is not successful, the Company may incur tax liabilities in one subsidiary in future periods which cannot be offset by tax losses held by another subsidiary within the Natural Resources group, thereby impacting cash flows in the future.





During the six months we utilized the proceeds from our operations to increase accounts receivable by $292,257, increase expense advances to related parties by $84,959, increase inventories by $37,229, increase prepaid expenses by $27,305, reduce accounts and royalties payable by $79,128 and increased restricted deposits to secure increased bonding obligations by $58,482.  We also recognized a deferred tax asset of $358,500 and increase in tax payable of $173,976.  We sourced additional funds through increased accrued expenses by $85,935, increased our obligations for reimbursement of expenses due to related parties by $256,805.  We continued our investment in our well fields by a
further $1,522,619 and in progressing our boiler upgrade and other plant and equipment by $2,023,603.  Finally, we repaid our factoring facility using $1,730,694.


36
 Table Of Contents




As a result of the restatement discussed above, our financial statements include the following adjustments:





1.
A reduction of $1,714,192 in the current deferred tax asset from $1,790,592 to $76,400 and a reduction of $1,182,930 in the long term deferred tax asset from $1,465,030 to $282,100; together representing a reduction in net income after tax of $2,897,122.  In addition, an increase in income tax payable of $46,219 from $127,757 to $173,976 resulted in a total reduction of $2,943,341 in net income after tax.


2.
An increase in the asset retirement obligation current provision of $207,000 and the long term provision of $187,333, a total increase of $394,335; and


3.
A corresponding increase in the property, plant and equipment account of $473,264 offset by an increase in accumulated depreciation of $78,929 to representing a net increase of $394,335.




As previously announced, we have embarked on a program to upgrade our boilers with a new more efficient boiler; a project we expect to complete by September 2011.  In addition, we propose, subject to satisfactory financing and confirmation of our investment decision assumptions, to install a second crystallizer line to increase our production capacity to 250,000 tons per year.





Under the October 2008 Restructuring Agreement, GSR has the right to purchase up to a total of 5,500,000 additional shares of Natural Resources common stock at $0.36 per share until October 31, 2011.  This right can only be exercised to resolve obligations of Natural Resources that existed at the first closing and have not been discharged, and only then if the holders of the unpaid obligations pursue or threaten to pursue claims against Natural Resources or Natural Resources’ affiliates.





Off-Balance Sheet Arrangements





We do not have any significant off-balance sheet arrangements for either Natural Resources, Natural Soda Holdings or Natural Soda that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Natural Soda sometimes enters into forward purchases of natural gas in order to secure supplies at fixed prices for up to 75% of anticipated requirements.


37
 Table Of Contents




ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA




NATURAL RESOURCES USA CORPORATION





CONSOLIDATED FINANCIAL STATEMENTS





December 31, 2010





38
 Table Of Contents




C O N T E N T S








Report of Independent Registered Public Accounting FirmConsolidated Balance SheetsConsolidated Statements of OperationsConsolidated Statements of Stockholders’ Equity (DeficitConsolidated Statements of Cash Flows.Notes to the Consolidated Financial Statements





39
 Table Of Contents





Report of Independent Registered Public Accounting Firm




To the Board of Directors and Shareholders


Natural Resources USA Corporation


Rifle, Colorado





We have audited the accompanying consolidated balance sheets of Natural Resources USA Corporation and Subsidiaries as of December 31, 2010, June 30, 2010, and June 30, 2009 and the related consolidated statements of operations, stockholders' equity, and cash flows for the six months ended December 31, 2010 and twelve months ended June 30, 2010 and June 30, 2009.   These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.





We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Natural Resources USA Corporation and Subsidiaries as of December 31, 2010, June 30, 2010, and June 30, 2009 and the results of their operations and their cash flows for the six months ended December 31, 2010 and twelve months ended June 30, 2010 and 2009 in conformity with U.S. generally accepted accounting principles.





As discussed in Note 24, the financial statements for the six months ended December 31, 2010 have been restated to correct an error relating to the deferred tax asset as well as the asset retirement obligation.








HJ & Associates, LLC


Salt Lake City, Utah


March 25, 2011, except for Notes 1f, 6, 15, 23 and 24 which are dated September 14, 2011




40
 Table Of Contents




NATURAL RESOURCES USA CORPORATION




Consolidated Balance Sheets





December 31,


June 30,


June 30,2010


2010


2009 (1)(As restated)ASSETSCURRENT ASSETSCash

$
4,165,028


$
6,318,377


$
4,502,204Accounts receivable, net


3,890,699



3,598,442



3,718,426Inventories


852,203



814,974



930,349Prepaid expenses


124,034



96,729



325,942Related party receivables


104,941



19,982



5,000Deferred tax asset


76,400



-



-Total Current Assets


9,213,305



10,848,504



9,481,921FIXED ASSETSProperty, plant and equipment, net


13,217,274



10,969,669



9,462,474Cavities and well development, net


10,062,553



9,164,003



6,130,745Mineral leases


4,167,471



4,167,471



4,167,471Total Fixed Assets


27,447,298



24,301,143



19,760,690OTHER ASSETSWater rights


3,150,582



3,150,582



3,150,582Patents, net


17,859



19,535



22,886Well and well development RSL


595,000



595,000



595,000Equipment held and not yet in service


2,498,611



3,197,842



3,197,842Deferred financing and acquisition costs, net


673,372



692,861



731,848Rock School lease


3,300,000



3,300,000



3,300,000Deposits and bonds


2,000



4,000



8,000Restricted funds


1,371,390



1,312,908



1,267,480Deferred tax asset, long term


282,100



-



-Total Other Assets


11,890,914



12,272,728



12,273,638TOTAL ASSETS

$
48,551,517


$
47,422,375


$
41,516,249





(1) Retrospectively adjusted for 2010 reorganization (see note 3)
  The accompanying notes are an integral part of these consolidated financial statements
  41
 Table Of Contents


NATURAL RESOURCES USA CORPORATION


Consolidated Balance Sheets (Continued)




December 31,


June 30,


June 30,2010


2010


2009 (1)(As restated)LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIESAccounts payable

$
1,453,489


$
1,568,676


$
2,091,447Royalties payable


1,170,964



1,134,905



1,089,373Accrued expenses


681,718



595,783



478,801Accrued expenses due to related parties


337,672



80,867



71,401Income tax payable


173,976



-



-Current portion of notes payable


9,869



1,735,582



1,612,741Current portion of capital lease obligations


6,094



9,256



10,983Asset retirement obligation, current


207,000



-



-Total Current Liabilities


4,040,782



5,125,069



5,354,746LONG TERM LIABILITIESNotes payable


12,012



16,993



29,784Capital lease obligations


-



892



11,071Asset retirement obligations


1,554,582



1,275,451



967,825Total Long Term Liabilities


1,566,594



1,293,336



1,008,680TOTAL LIABILITIES


5,607,376



6,418,405



6,363,426COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS’ EQUITYPreferred stock, $0.05 par value; 1,000,000 authorized; 0, 0 and 82 issued and outstanding


-



-



4Common stock, $0.01 par value; 700,000,000 shares authorized; 352,413,582, 352,413,582 and 66,293,696 issued and outstanding, respectively


3,524,136



3,524,136



662,937Additional paid in capital


147,933,336



147,838,026



146,122,513Accumulated deficit


(108,513,331
)


(110,358,192
)


(111,632,631
)Total Stockholders’ Equity


42,944,141



41,003,970



35,152,823TOTAL LIABILITIES ANDSTOCKHOLDERS’ EQUITY

$
48,551,517


$
47,422,375


$
41,516,249


(1) Retrospectively adjusted for 2010 reorganization (see note 3)
  The accompanying notes are an integral part of these consolidated financial statements




42
 Table Of Contents





NATURAL RESOURCES USA CORPORATION


Consolidated Statements of Operations




For the Six

Months Ended

December 31,

2010


For the

Year Ended

June 30,

2010


For the

Year Ended

June 30,

2009 (1)(As restated)REVENUES

$
12,924,583


$
21,981,038


$
19,835,160COST OF GOODS SOLD (EXCLUDING DEPRECIATION)


7,274,339



13,475,798



13,284,929GROSS PROFIT


5,650,244



8,505,240



6,550,231EXPENSESGeneral and administrative


2,305,775



4,711,593



2,647,057Loss on impairment


576,564



227,500



1,876,000Depreciation, amortization andaccretion expense


1,032,028



2,107,525



2,565,526Total Expenses


3,914,367



7,046,618



7,088,583INCOME (LOSS) FROM OPERATIONS


1,735,877



1,458,622



(538,352
)OTHER INCOME (EXPENSE)Interest income


920



590



2,671Gain on settlement of liabilities


-



-



1,874,359Other income


-



-



11,989Interest expense


(76,460
)


(184,773
)


(6,997,658
)Other financing costs


-



-



(209,449
)Total Other Income (Expense)


(75,540
)


(184,183
)


(5,318,088
)INCOME (LOSS) BEFORE INCOME TAX EXPENSE


1,660,337



1,274,439



(5,856,440
)Current tax expense


(173,976
)


-



-Deferred tax benefit


358,500



-



-NET INCOME (LOSS)

$
1,844,861


$
1,274,439


$
(5,856,440
)INCOME (LOSS) PER SHAREBasic

$
0.01


$
0.02


$
(0.12
)Diluted

$
0.01


$
0.02


$
(0.12
)WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDINGBasic


352,413,582



67,077,586



47,899,158Diluted


352,570,332



67,168,992



47,899,158




(1) Retrospectively adjusted for 2010 reorganization (see note 3)
  The accompanying notes are an integral part of these consolidated financial statements




43
 Table Of Contents




NATURAL RESOURCES USA CORPORATION


Consolidated Statements of Stockholders' Equity (Deficit)




AdditionalPreferred Stock


Common Stock


Paid-In


AccumulatedShares


Amount


Shares


Amount


Capital


Deficit


TotalBalance, June 30, 2008 (1)


82


$
4



17,298,507


$
172,985


$
53,920,685


$
(105,776,191
)

$
(51,682,517
)Fair value of options granted


-



-



-



-



138,285



-



138,285Shares issued to settle related party debts


-



-



18,193,947



181,939



8,964,616



-



9,146,555Related party contributions to capital on debt settlement


-



-



-



-



(361,529
)


-



(361,529
)Shares issued to settle debt obligations


-



-



3,340,086



33,401



1,727,280



-



1,760,681Share issues to related parties for cash


-



-



27,427,406



274,274



9,599,592



-



9,873,866Settlement of related party liabilities in conjunction with 2009 reorganization


-



-



-



-



72,133,922



-



72,133,922Issue of shares on settlement of options


-



-



33,750



338



(338
)


-



-Net loss


-



-



-



-



-



(5,856,440
)


(5,856,440
)Balance, June 30, 2009 (1)


82



4



66,293,696



662,937



146,122,513



(111,632,631
)


35,152,823Fair value of options granted


-



-



-



-



94,208



-



94,208Repurchase of preferred shares


(82
)


(4
)


-



-



(27,496
)


-



(27,500
)Contribution to capital


-



-



-



-



4,510,000



-



4,510,000Issue of shares in conjunction with 2010 reorganization


-



-



286,119,886



2,861,199



(2,861,199
)


-



-Net income


-



-



-



-



-



1,274,439



1,274,439Balance, June 30, 2010


-



-



352,413,582



3,524,136



147,838,026



(110,358,192
)


41,003,970Fair value of options granted


-



-



-



-



95,310



-



95,310Net income (As restated)


-



-



-



-



-



1,844,861



1,844,861Balance, (As restated)December 31, 2010


-


$
-



352,413,582


$
3,524,136


$
147,933,336


$
(108,513,331
)

$
42,944,141


(1) Retrospectively adjusted for 2010 reorganization (see note 3)
  The accompanying notes are an integral part of these consolidated financial statements
  44
 Table Of Contents




NATURAL RESOURCES USA CORPORATION


Consolidated Statements of Cash Flows




For the Six

Months Ended

December 31,

2010


For the

Year Ended

June 30,

2010


For the

Year Ended

June 30,

2009 (1)CASH FLOWS FROM OPERATING ACTIVITIES

(As restated)Net income (loss)

$
1,844,861


$
1,274,439


$
(5,856,440
)Adjustments to reconcile net income (loss) to net cash provided by operating activities:Fair value of options granted


95,310



94,208



138,285Depreciation, amortization and accretion expense


1,032,030



2,107,523



2,565,526Amortization of debt discount


-



-



209,448Deferred tax asset


(358,500
)


-



-Loss on impairment


576,564



227,500



1,876,000Gain on settlement of liabilities


-



-



(1,874,359
)Change in Operating Assets and Liabilities:Restricted funds


(58,482
)


(45,428
)


(144,637
)Accounts receivable and related party receivables


(377,216
)


236,809



(1,071,847
)Inventory


(37,229
)


115,375



(187,589
)Prepaid expenses


(27,305
)


1,713



168,556Accounts and royalties payable


(79,128
)


(479,702
)


(264,420
)Accrued expenses due to related parties


256,805



9,466



5,543,787Accrued expenses


85,935



119,445



(1,280,223
)Income tax payable


173,976



-



-Interest payable


-



-



(378,279
)Net Cash Provided By (Used In) Operating Activities


3,127,621



3,661,348



(556,192
)CASH FLOWS FROM INVESTING ACTIVITIESCavities and well development


(1,522,619
)


(4,110,282
)


(1,982,253
)Purchase of property and equipment


(2,023,603
)


(2,183,730
)


(577,102
)Net Cash Used In Investing Activities


(3,546,222
)


(6,294,012
)


(2,559,355
)CASH FLOWS FROM FINANCING ACTIVITIESBank overdraft


-



-



(54,331
)Proceeds from issuance of common stock


-



-



9,873,866Payments on capital leases


(4,054
)


(11,906
)


(46,056
)Repurchase of preferred shares


-



(27,500
)


-Capital contribution from major shareholder


-



4,510,000



-Payments on debt


(1,730,694
)


(21,757
)


(1,479,102
)Payments on related party debt


-



-



(980,000
)Proceeds from related party notes payable


-



-



260,000Net Cash Provided By (Used In) Financing Activities


(1,734,748
)


4,448,837



7,574,377NET INCREASE (DECREASE) IN CASH


(2,153,349
)


1,816,173



4,458,830CASH AT BEGINNING OF YEAR


6,318,377



4,502,204



43,374CASH AT END OF YEAR

$
4,165,028


$
6,318,377


$
4,502,204SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONIncome taxes

$
26,452


$
-


$
-Interest

$
23,543


$
184,772


$
7,686,781


(1) Retrospectively adjusted for 2010 reorganization (see note 3)
  The accompanying notes are an integral part of these consolidated financial statements





45
 Table Of Contents





NATURAL RESOURCES USA CORPORATION


Notes to the Consolidated Financial Statements


December 31, 2010, June 30, 2010 and 2009





NOTE 1 -            ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





a. General Development of the Business





Natural Resources USA Corporation (“Natural Resources” or “the Company”), formerly known as AmerAlia, Inc. (“AmerAlia”), was originally incorporated as Computer Learning Software, Inc. under the laws of the State of Utah on June 7, 1983 and renamed AmerAlia, Inc. in January 1984.  Until October 31, 2008, AmerAlia owned 100% of Natural Soda Holdings, Inc. (“Natural Soda Holdings”) and Natural Soda Holdings owned 46.5% of Natural Soda, Inc. (“Natural Soda”).  On October 31, 2008 AmerAlia completed a restructuring agreement wherein AmerAlia and Natural Soda Holdings issued new equity in exchange for cash, settlement of various debt
obligations and the acquisition of the 46.5% of Natural Soda previously owned by Sentient USA Resources Fund, LP (“Sentient”).  AmerAlia then owned 18% of the equity of Natural Soda Holdings which owned 100% of the equity of Natural Soda.  On June 30, 2010 AmerAlia completed an exchange reorganization with Sentient whereby AmerAlia acquired 100% ownership of Natural Soda Holdings in exchange for the issue of 286,119,886 shares of its Common Stock.  Consequently, this last transaction is accounted for as a reorganization of entities under common control and in accordance with Accounting Standards Codification 805-50 Business Combinations, Related Issues, it requires retrospective presentation for all periods presented in these financial statements.  All material inter-company accounts and transactions have been eliminated in the
consolidation accounts.





On September 14, 2010, a Special Meeting of the shareholders of the Company agreed to change its name to Natural Resources USA Corporation.





On March 15, 2011 as a result of the closing of an Exchange Agreement and Plan of Reorganization entered into between Sentient and Green SEA Resources Inc. (“GSR”), Sentient exchanged all its 334,074,381 shares of Natural Resources common stock and its limited right to subscribe for 5,500,000 additional shares of common stock for an issue of 20,084,954 shares of GSR common stock.  GSR, a private corporation majority owned and controlled by Sentient and its affiliates, now owns 94.8% of Natural Resources’ common stock.





b.      Accounting Method





The Company’s consolidated financial statements are prepared using the accrual method of accounting.  On December 16, 2010, the Board of Directors approved a change in the Company’s fiscal year end from a June 30 fiscal year to a December 31 fiscal year end.  This Form 10-KT is a transition report for the six month period ended December 31, 2010.





c.      Principles of Consolidation





All significant inter-company balances and transactions have been eliminated.  As a result of the reorganization on June 30, 2010 the Company consolidates activities of Natural Soda Holdings, a wholly owned subsidiary.  Natural Soda remains a wholly owned subsidiary of Natural Soda Holdings.  In addition, as a result of the 2010 reorganization transaction, the Company is retrospectively adjusting prior periods to include consolidated activity for all periods presented in these financial statements.





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 Table Of Contents





NATURAL RESOURCES USA CORPORATION


Notes to the Consolidated Financial Statements


December 31, 2010, June 30, 2010 and 2009


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





d.      Cash and Restricted Cash





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





At various times during the year, the Company maintained cash balances in excess of FDIC insurable limits. The financial institutions with which the Company deposits its funds are substantial institutions with longstanding reputations.





Natural Resources had $1,371,390, $1,312,908 and $1,267,480 in restricted cash at December 31, 2010, June 30, 2010 and 2009 respectively, comprising certificates of deposit with banks to secure bonds associated with the water monitoring wells and the restoration of the sodium leases.  These restricted balances are presented as a non-current asset.





e.      Fixed Assets





Property, plant, and equipment are stated at cost.  The costs of replacements or renewals, which improve or extend the life of existing property, are capitalized.  Maintenance and repairs are expensed as incurred.  Depreciation and amortization are provided for on the straight-line method over the following estimated useful lives.  The Company has elected to expense all purchases under $3,000 as maintenance and repairs.





Buildings and improvements
25 to 40 yearsMachinery and equipment
10 to 30 yearsWell cavities and development
Units of productionFurniture and fixtures
3 to 5 years





f.      Income Taxes





Deferred Taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of
enactment.  Net deferred tax assets consists of the following components:




December 31, 2010


June 30,

2010


June 30,

2009Deferred tax assets:

(As restated)





(As restated)NOL Carryover

$
40,708,995


$
43,544,101


$
40,954,426Accrued payroll


135,605



-



-Related party accruals


51,090



47,400



45,088Impairment/Tax ARO


432,644



-



-Deferred tax liabilities:Depreciation / depletion exploration / accretion


(2,063,646
)


(348,028
)


-Valuation allowance


(38,906,188
)


(43,243,473
)


(40,999,514
)Net deferred tax asset

$
358,500


$
-


$
-


47
 Table Of Contents
 
 NATURAL RESOURCES USA CORPORATION
 Notes to the Consolidated Financial Statements
 December 31, 2010, June 30, 2010 and 2009
 NOTE 1 -           ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





f.      Income Taxes (Continued)





The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the six months ended December 31, 2010 and the years ended June 30, 2010 and 2009 due to the following:





December 31, 2010


June 30,

2010


June 30,

2009(As restated)Book Income

$
597,707


$
497,199


$
(2,257,439
)Tax depletion (over) / under book


(62,104
)


-



-Asset retirement obligation (over) book


(29,462
)


-



-Section 179 carryover


(57,055
)


-



-Stock for expenses


37,171



36,741



358,483Penalties


-



-



32,029Meals and entertainment


9,358



4,287



626Accretion


7,443



11,637



81,685Accrued payroll


38,679



(40,241
)


-Depreciation


(160,458
)


36,532



-Impairment of equipment held


224,860



-



-Section 199 credits


(19,826
)


-



-Related party accruals


24,180



-



-Federal Taxes


33,998



-



-NOL Carryforwards used


(801,118
)


(546,155
)


(685,887
)Alternative minimum tax credit


(54,734
)


-



-Gain on debt settlement


-



-



686,665Minority interest in subsidiary


-



-



2,658,991Other


-



-



8,692Minority interest Natural Soda Holdings


-



-



(46,320
)Minority interest Natural Soda


-



-



114,341Valuation allowance


385,337



-



(951,866
)Income tax payable net of credits

$
173,976


$
-


$
-





At December 31, 2010, the Company had net operating loss carry-forwards of approximately $104,382,040 that may be offset against future taxable income from the year 2010 through 2030.





Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Pursuant to Notes 2 and 3, the Restructurings have created changes in ownership transactions which have limited the amount of useable net operating losses.




We remain subject to examination by the IRS for the tax years ended on or after June 30, 2007 and by the Colorado Department of Revenue for the tax years ended on or after June 30, 2006.  The statute is closed for years prior to the tax years ended June 30, 2007 and June 30, 2006, for the federal and Colorado income tax returns, respectively; however, we remain open to adjustment to the extent of net operating losses generated in these prior periods.




g.      Use of Estimates





The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.





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NATURAL RESOURCES USA CORPORATION


Notes to the Consolidated Financial Statements


December 31, 2010, June 30, 2010 and 2009


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





h.      Basic and Diluted Net Income (Loss) Per Share





Basic earnings per share includes no dilution and is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the periods presented.  Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity, such as stock options or warrants.  The calculation of diluted earnings per share for the year ended June 30, 2009 does not include 375,000 options, due to their anti-dilutive effect.





i.      Concentrations of Risk





Natural Soda sells its products in North America through distributors to manufacturers and users. Financial instruments consisting of trade accounts receivable potentially subject Natural Soda to concentrations of credit risk.  Generally, Natural Soda does not require security when trade credit is granted to customers.  Credit losses are provided for in Natural Soda’s financial statements and consistently have been within management’s expectations.  During the fiscal period ended December 31, 2010 Natural Soda had three customers that individually constituted more than 10% of its total
revenues.  These customers had revenues representing 22%, 22% and 11% of Natural Soda’s total revenues and receivables balances representing 28%, 24% and 12%, respectively, of Natural Soda’s total trade accounts receivable balance at December 31, 2010.  During the fiscal year ended June 30, 2010 Natural Soda had three customers that individually constituted more than 10% of its total revenues.  These customers had revenues representing 27%, 25% and 11% of Natural Soda’s total revenues and receivables balances representing 23%, 25% and 10%, respectively, of Natural Soda’s total trade accounts receivable balance at June 30, 2010.  During the fiscal year ended June 30, 2009 Natural Soda had two customers that individually constituted more than 10% of its total revenues.  These customers had revenues
representing 27% and 25% of Natural Soda’s total revenues and receivables balances representing 34% and 20%, respectively, of Natural Soda’s total trade accounts receivable balance at June 30, 2009.





j.      Accounts Receivable





Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis.  Management determines the allowance for doubtful accounts by identifying troubled accounts and by reviewing and considering individual customer receivables, customer’s financial condition, credit history, aging of accounts and current economic conditions. Accounts receivable are written off when deemed uncollectible.  Recoveries of accounts receivable previously written off are recorded when received.





An account receivable is considered to be past due if any portion of the receivable balance is outstanding for more than 90 days.  At December 31, 2010 the net accounts receivable balance of Natural Soda included $3,890,849 for trade receivables with a $150 allowance for doubtful accounts.  At June 30, 2010 the net accounts receivable balance of Natural Soda included $3,598,692 for trade receivables with a $250 allowance for doubtful.  At June 30, 2009 the net accounts receivable balance of Natural Soda included $3,726,874 for trade receivables with an $8,448 allowance for doubtful accounts.




49
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NATURAL RESOURCES USA CORPORATION


Notes to the Consolidated Financial Statements


December 31, 2010, June 30, 2010 and 2009


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





k.      Inventories





Inventories consist of sodium bicarbonate which is stated at the lower of production costs or market. Production costs include all identifiable costs of the plant, including depreciation, royalties, and rental on the sodium leases.  Inventories also include packaging materials which are stated at the lower of cost (first-in, first-out cost method) or market.





l. Environmental Costs





Environmental costs and clean up costs are accrued at the time the exposure becomes known and costs can be reasonably estimated.  The Company does not accrue liabilities for unasserted claims that are not probable of assertion.





m. Shipping and Handling Fees and Costs





The Company records all shipping and handling costs in cost of sales.





n. Mineral Properties and Patents





Mineral properties include costs associated with the development of the mining and processing facility.  Such items include the cost of leases, access road, and electric power lines.   Costs involved in registering, developing, and defending patents related to the solution mining process are capitalized and amortized on a straight-line basis over the life of the patents.





o.      New Accounting Pronouncements





During the period ended December 31, 2010 and subsequently, the FASB has issued a number of financial accounting standards, none of which did or are expected to have a material impact on the Company’s results of operations, financial position, or cash flows, with exception of:





New Accounting Pronouncements (Not yet adopted)





ASU 2010-06.  In January 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820) — Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”). ASU 2010-06 amends ASC Topic 820, “Fair Value Measurements and Disclosures”(“ASC 820”) to require additional disclosures regarding fair value measurements. Specifically, ASU 2010-06 requires entities to disclose additional information regarding (i) the reconciliation of recurring Level 3 measurements about purchases, sales, issuances and settlements on a gross
basis, (ii) the amounts of significant transfers between Level 1 and Level 2 of the fair value hierarchy and the reasons for these transfers and (iii) the reasons for any transfers in or out of Level 3. In addition to these new disclosure requirements, ASU 2010-06 also amends ASC 820 to further clarify existing guidance pertaining to the level of disaggregation at which fair value disclosures should be made and the requirements to disclose information about the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. The update is effective for interim and annual periods beginning after December 15, 2009, except for the requirement to separately disclose information about purchases, sales, issuances, and settlements in the reconciliation of recurring Level 3 measurements on a gross basis which becomes effective for fiscal years (and interim periods
within those fiscal years) beginning after December 15, 2010, and is not expected to have a material impact on the Company’s results of operations or financial condition.





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NATURAL RESOURCES USA CORPORATION


Notes to the Consolidated Financial Statements


December 31, 2010, June 30, 2010 and 2009


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





o.      New Accounting Pronouncements (continued)





The Company adopted the first portion of the updates effective January 1, 2010, with no material impact on the Company’s financial condition, results of operations or cash flows. The Company does not expect the adoption of the remainder of the update to have a material impact on the Company’s financial condition, results of operations or cash flows.





p.      Stock Options





Stock based compensation expense is recorded in accordance with Financial Account Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718, Compensation – Stock Compensation, for stock and stock options awarded in return for services rendered. The expense is measured at the grant-date fair value of the award and recognized as compensation expense on a straight-line basis over the service period, which is the vesting period. Stock-based compensation expense recognized in the Company’s Statements of Operations for the six months ended December 31, 2010 and the fiscal years ended June 30, 2010 and 2009 assume all
awards will vest, therefore no reduction has been made for estimated forfeitures.





q.      Advertising





The Company follows the policy of charging the costs of advertising to expense as incurred.  Advertising expense for the six months ended December 31, 2010, and the years ended June 30, 2010 and 2009 was $nil, $nil and $nil, respectively.





r. Revenue Recognition





The Company recognizes revenue from the sodium bicarbonate sales when persuasive evidence of a sale exists, the product has been shipped and delivered as determined by the bill of sale, collection is reasonably assumed and no further company obligation to perform exists.





Mostly, inventory is shipped to customers FOB the Company plant or Rifle warehouse; otherwise the risk of loss transfers to the customer at the time of delivery receipt.





s. Deferred Financing and Acquisition Costs





Deferred financing costs include the costs of sourcing long term debt financing for the WRNM Acquisition and its associated capital requirements in 2002.  These costs include finders’ fees, legal fees and fees paid for due diligence costs and are being amortized over a 25 year period.  The Company recorded amortized acquisition expense of $19,489, $38,968 and $38,968 for the six months ended December 31, 2010 and the years ended June 30, 2010 and 2009, respectively.





t. Impairment of Long-Lived Assets





Management reviews the net carrying value of all property and equipment and other long-lived assets on a periodic basis. The Company estimates the net realizable value of each asset group based on the estimated undiscounted future cash flows that will be generated from operations at each property.  These estimates of undiscounted future cash flows are dependent upon the estimates of sodium bicarbonate to be recovered, future production cost estimates and future sodium bicarbonate price estimates over the estimated remaining life of the property.





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NATURAL RESOURCES USA CORPORATION


Notes to the Consolidated Financial Statements


December 31, 2010, June 30, 2010 and 2009





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





t. Impairment of Long-Lived Assets (continued)





If undiscounted cash flows are less than the carrying value of a property, an impairment loss will be recognized based upon the estimated expected future cash flows from the property discounted at an interest rate commensurate with the risk involved.





Management’s estimates of sodium bicarbonate prices and other factors are subject to risks and uncertainties of change affecting the recoverability of the Company’s investment in various projects.  Although management believes it has made a reasonable estimate of these factors based on current conditions and information, it is reasonably possible that changes could occur in the near term which could adversely affect management’s estimate of net cash flows expected to be generated and the need for asset impairment write-downs.





The Company hired expert appraisers to assess the fair market value of their assets at the time the assets were acquired.  These fair market valuations are compared against the cost basis to determine if any further impairment exists.  The Company impaired $576,564 of Equipment Held and not in service for the six months ended December 31, 2010.





u. Reclassification





Certain June 30, 2010 balances have been reclassified to conform to current year presentation.





v.      Sales Tax and Value Added Taxes





In accordance with FASB ASC 605-45, formerly EITF Issue No. 06-3, How Taxes Collected From Customers and Remitted to Government Authorities Should be Presented in the Income Statement, the Company accounts for sales taxes and value added taxes imposed on its goods and services on a net basis in the consolidated statement of operations.





w.      Research and Development Cost





The Company expenses research and development costs as incurred








NOTE 2 -COMPLETED FISCAL 2009 RESTRUCTURING AGREEMENT


On September 25, 2008, the Company, Natural Soda Holdings, Natural Soda, Bill H. Gunn and Robert van Mourik, Directors and executive officers of the Company (collectively the “Natural Resources parties”) entered into a Restructuring Agreement with the Sentient Entities.  Previously, Natural Soda Holdings owned 46.5% of Natural Soda.  On October 31, 2008, the Natural Resources Parties and the Sentient Entities completed an Amendment to the Restructuring Agreement.  As a result of the amendment, the restructuring transaction was divided into two closings.  In accordance with the amended agreement the first closing occurred as of October 31,
2008.  Prior to the first closing, the Sentient





52
 Table Of Contents


NATURAL RESOURCES USA CORPORATION
 Notes to the Consolidated Financial Statements
 December 31, 2010, June 30, 2010 and 2009


NOTE 2 -








Entities transferred their various interests to Sentient USA Resources Fund, L.P. (“Sentient”).  The second closing occurred as of December 31, 2008.  In the first and second closings:





1.
Sentient exchanged all its Natural Soda Holdings debentures and all accrued interest thereon, its one share of Natural Soda Holdings common stock and its 53.5% of the common stock of Natural Soda for 82% of the issued common stock of Natural Soda Holdings;


2.
The Company exchanged its Natural Soda Holdings debentures and all accrued interest thereon and its Natural Soda Holdings preferred stock for 12.9% of the issued common stock of Natural Soda Holdings, giving the Company an aggregate ownership position in Natural Soda Holdings of 18%;


3.
Intercompany loans between the Company and Natural Soda Holdings were extinguished;


4.
Sentient’s right to indemnification relating to the repayment of the Company’s $9.9 million bank loan were terminated; and


5.
Sentient received an aggregate of 40,024,675 shares of the Company’s common stock as follows:


a.
27,427,406 shares of the Company’s common stock for a total purchase price of $9,873,866;


b.
6,619,469 shares of the Company’s common stock in satisfaction of various promissory notes issued by the Company and held by Sentient; and


c.
5,977,800 shares of the Company’s common stock in satisfaction of debts, rights and obligations acquired from the Mars Trust in August 2007.


6.
Officers and Directors acquired 5,100,858 shares of the Company’s Common Stock in satisfaction of Series A Debenture Secured Promissory Notes, unsecured notes and accrued compensation valued at $1,836,309.


7.
Other accredited investors acquired 2,433,706 shares in satisfaction of $876,134 worth of Series A Debenture Secured Promissory Notes.





Neither Sentient nor its successor, GSR, continues to hold any debt in either the Company or Natural Soda Holdings.  All Series A Debentures, Series B1 Debentures and Series C Debentures issued by Natural Soda Holdings were cancelled.  Following the first closing Natural Soda again became a wholly-owned subsidiary of Natural Soda Holdings.





On December 31, 2008 Sentient purchased an additional 12,149,628 shares of the Company’s Common Stock for $4,373,866 at the second closing.  The proceeds from the second closing were reserved for use in the following priority: (a) as a working capital reserve for the Company of $1,000,000 and (b) as a reserve solely to fund the Company’s share of an anticipated capital call by Natural Soda Holdings, the Company’s share of which was $2,880,000 and (c) additional working capital for the Company.  These obligations were subsequently extinguished in connection with the Fiscal 2010 restructuring discussed in Note 3, below.





In June 2008 a promissory note with a principal value of $1,200,000 previously due to HPD was acquired by the Sentient Entities.  Under the Restructuring Agreement discussed herein, Sentient agreed to accept interest at the rate of 6% per year on the note from June 20, 2008.  Since the Company had previously provided for interest payable to HPD and the note and the accrued interest were cancelled pursuant to the Restructuring Agreement, consequently, a gain on the forgiveness of debt of $536,640 was recorded as a contribution to capital for financial statement purposes.  For income tax purposes, the interest which was previously deducted as an expense was added back to income
thereby reducing the net operating loss carrryforward.




53
 Table Of Contents





NATURAL RESOURCES USA CORPORATION


Notes to the Consolidated Financial Statements


December 31, 2010, June 30, 2010 and 2009




NOTE 2 -








In September 2008 the Company issued 1,402,200 shares of restricted common stock to holders of Series C Debenture secured promissory notes in satisfaction and cancellation of such notes and accrued interest with a total value of $3,311,367.  One of the holders was a related party.  Consequently, the gain on cancellation of debt resulted in a contribution to capital of $878,397 from the issue of 495,820 shares of the Company’s common stock valued at $297,492.  The other holder, an accredited investor accepted 906,380 shares of common stock valued at $543,828 and the Company recorded a gain on settlement of debt of $1,591,650.  Following the second closing of the
restructuring, Sentient owned 72.4% of the Company’s common stock.  Once again, for income tax purposes the interest which had previously been deducted was added back to income thereby decreasing the net operating loss carryforward.





The changes in control of both the Company and Natural Soda Holdings have resulted in restrictions on the companies’ use of their net operating loss carryforwards.  Until October 31, 2008, the Company owned 100% of Natural Soda Holdings which, in turn owned 46.5% of Natural Soda and the financial statements of the Company presented consolidated information of Natural Soda Holdings.  After October 31, 2008, nearly all of the Company’s and Natural Soda Holdings’ debt obligations had been exchanged for equity and the Company’s ownership of Natural Soda Holdings became 18% whereupon the Company accounted for its investment in Natural Soda Holdings using the equity
method of accounting.





NOTE 3 –         COMPLETED FISCAL 2010 REORGANIZATION OF ENTITIES UNDER COMMON CONTROL





On June 30, 2010, the Company and Sentient entered into an Exchange Agreement and Plan of Reorganization (the “Exchange Agreement”) pursuant to which Natural Soda Holdings became a wholly-owned subsidiary of the Company.





Prior to entering into the Exchange Agreement, Sentient owned 820,000 shares of common stock of Natural Soda Holdings, constituting 82% of Natural Soda Holdings’ issued and outstanding common stock.  The Company owned 180,000 shares of common stock of Natural Soda Holdings, constituting 18% of Natural Soda Holdings’ issued and outstanding common stock.  Sentient also owned 47,954,495 shares of common stock of the Company, constituting approximately 72% of the Company’s issued and outstanding common stock plus a limited right to acquire up to 5,500,000 additional shares of common stock of the Company.





Pursuant to the Exchange Agreement, the Company issued 286,119,886 shares of its common stock to Sentient in exchange for the 820,000 shares of common stock of Natural Soda Holdings held by Sentient (the “Exchange”).  Following the Exchange, the Company owns 100% of the issued and outstanding common stock of Natural Soda Holdings and Sentient owns approximately 94.8% of Natural Resources’ issued and outstanding common stock.





These consolidated financial statements give effect to the reorganization of the Company, accounted for as a reorganization of entities under common control.  In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805-50 Business Combinations, Related Issues, the financial statements of Natural Resources have been retrospectively adjusted to furnish comparative information.





54
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NATURAL RESOURCES USA CORPORATION


Notes to the Consolidated Financial Statements


December 31, 2010, June 30, 2010 and 2009







NOTE 4 -INVENTORIES


Inventories consisted of the following:





December 31,

2010


June 30,

2010


June 30,

2009Raw materials and supplies

$
521,023


$
380,833


$
501,842Finished goods


331,180



434,141



428,507Total

$
852,203


$
814,974


$
930,349




NOTE 5 -           PREPAID EXPENSES





Prepaid expenses consisted of the following:





December 31,

2010


June 30,

2010


June 30,

2009Prepaid construction costs

$
-


$
-


$
227,500Other prepayments and deposits


124,034



96,729



98,442Total

$
124,034


$
96,729


$
325,942





NOTE 6 -           FIXED ASSETS





Fixed assets consist of the following amounts:




December 31,

2010


June 30,

2010


June 30,

2009(As restated)Property plant and equipment

$
18,207,250


$
15,503,867


$
13,328,537Cavities and well development


16,870,100



15,454,771



11,066,701Furniture and fixtures


187,747



170,526



162,126Mineral leases


4,167,471



4,167,471



4,167,471Subtotal


39,432,568



35,296,635



28,724,835Less, accumulated depreciation and amortization


(11,985,270
)


(10,995,492
)


(8,964,145
)Total

$
27,447,298


$
24,301,143


$
19,760,690




Depreciation and amortization expense for the six months ended December 31, 2010 and the years ended June 30, 2010 and 2009 was $1,012,942, $2,031,158 and $2,491,197,respectively.





55
 Table Of Contents





NATURAL RESOURCES USA CORPORATION


Notes to the Consolidated Financial Statements


December 31, 2010, June 30, 2010 and 2009





NOTE 7 -           PATENTS





Patents consisted of the following:





December 31,

2010


June 30,

2010


June 30,

2009Patents acquired from IMC at fair value

$
50,000


$
50,000


$
50,000Less, accumulated amortization


(32,141
)


(30,465
)


(27,114
)Net patents

$
17,859


$
19,535


$
22,886





The patents are being amortized on a straight line basis over a period of the remaining life of the patents up to 20 years.  Amortization expense for the six months ended December 31, 2010 and the years ended June 30, 2010 and 2009 was $1,676, $3,351 and $3,352, respectively.





NOTE 8 -           ROCK SCHOOL LEASE AND WELL COSTS





In December 1992, the Company acquired from an unrelated party, E. E. Kinder Co. (Kinder), BLM Sodium Lease C-0119985 known as the Rock School Lease, covering 1,320 acres, in Rio Blanco County, Colorado, USA.  The Company acquired the Rock School Lease for consideration comprising (i) a cash payment of $600,000; (ii) the issuance of 50,000 shares of common stock valued at $3.00 per share or $150,000; 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 $100,000 (which was
changed to $75,000 on January 1, 1996) be paid monthly in arrears.  The Company agreed to pay Kinder an additional consulting fee of $25,000 annually commencing January 1, 1996.





Kinder assigned all of its rights, title and interest in the federal lease to the Company which then assigned them to Natural Soda Holdings.  Kinder also agreed to provide all documentation, files, and records in its possession pertaining to the exploration of and development plans for 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 Natural Soda Holdings an option to acquire its royalty interests.  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, 2001 for a period of ten
years and is renewable under the terms and conditions prescribed by the Secretary of the Interior.  The lease is currently undeveloped.  There is a risk that the Department of Interior will not renew the lease.





During the years ended June 30, 1993 through June 30, 2003, Natural Soda Holdings capitalized lease acquisition, exploration and development costs of $3,066,917.  Since then, no further expenditures have been capitalized.  Natural Soda Holdings has also installed five water monitoring wells and has collected base line data required by the Division of Minerals and Geology.  The last data was collected in February 2001, completing the regulatory requirements necessary to begin solution-mining activities.  Natural Soda Holdings has recorded the value of the Rock School at $3,300,000.  The value of the monitoring wells is $595,000.




56
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NATURAL RESOURCES USA CORPORATION
 Notes to the Consolidated Financial Statements
 December 31, 2010, June 30, 2010 and 2009


NOTE 9 -           ENGINEERING DRAWINGS AND EQUIPMENT HELD





The Company entered into a Design/Build agreement on May 14, 1999 with a Delaware corporation doing business as U.S. Filter Corporation and HPD Products (US Filter) to design, manage and construct a sodium bicarbonate solution mining and production plant for an amount not to exceed $33,200,000.





The agreement was not completed although engineering drawings were prepared and some equipment constructed.  As of June 30, 2004 the Company had the drawings valued at $2,800,000 and the equipment valued at $4,700,000.  The Company performed an impairment analysis on these assets and determined an impairment charge on the equipment in fiscal year 2005 of $458,087.  The Company also placed $80,093 of the equipment in service during the year which resulted in a $4,161,820 value beingrecorded on the books as of June 30, 2005.  During fiscal year 2006 NSI placed $44,697 of the equipment in service
and completed an impairment analysis which resulted in an impairment of $924,000 on the engineering drawings and $919,281 on the equipment, leaving a $1,876,000 and a $3,197,842 account balance being recorded on the books as of June 30, 2006.  During fiscal years 2007 and 2008 no equipment was placed in service and no impairment recorded on these assets.  Therefore, no changes were made to the account balances as at June 30, 2008.





During fiscal year ended June 30, 2009 no equipment was placed in service and no impairment recorded on the equipment but the remaining balance of the engineering drawings was impaired resulting in a nil account balance at year end and $1,876,000 of impairment expense being recognized.  During the year ended June 30, 2010 and the six months ended December 31, 2010 further impairment charges of $227,500 and $576,564 were recorded, respectively.  The equipment is being held in storage until it is brought into service.





NOTE 10 -         ROYALTIES PAYABLE





Royalties payable comprise the amount of minimum guaranteed royalties payable due to Kinder (Note 8) and the monthly royalties due to the BLM.  At December 31, 2010, June 30, 2010 and 2009, the Company owed $1,170,964, $1,134,905 and $1,089,373, respectively.  Royalty expense for the six months ended December 31, 2010 and the years ended June 30, 2010 and 2009 was $200,560, $447,512 and $397,549, respectively.





NOTE 11 -         ACCRUED EXPENSES





Accrued expenses comprise the following:





December 31,

2010


June 30,

2010


June 30,

2009Salaries and wages

$
265,966


$
363,883


$
319,865Freight


17,093



31,179



18,774Property tax


136,706



99,597



73,587Employment taxes


-



-



44,211Other


261,953



101,124



22,364Total

$
681,718


$
595,783


$
478,801





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NATURAL RESOURCES USA CORPORATION
 Notes to the Consolidated Financial Statements
 December 31, 2010, June 30, 2010 and 2009




NOTE 12 -         DUE TO RELATED PARTIES





Accrued liabilities due to related parties comprise the following:




December 31,

2010


June 30,

2010


June 30,

2009Accrued officer and director compensation,  expenses and advances (1)

$
16,303


$
11,867


$
71,401Accrued expenses due to Sentient


321,369



69,000



-Total

$
337,672


$
80,867


$
71,401  (1)
Accrued directors fees and officer and director compensation also includes interest expense totaling $0 for the six months ended December 31, 2010, and $0 and $67,378 for the years ended June 30, 2010 and 2009, respectively.











NOTE 13 -         NOTES PAYABLE




The Wells Fargo factoring facility interest rate is Prime plus 4% which was 7.25% as of December 31, 2010, June 30, 2010 and 2009.  The Company has pledged all Accounts Receivable as collateral.  The agreement with Wells Fargo currently expires on June 24, 2012.





Notes payable comprise the following:




December 31,

2010


June 30,

2010


June 30,

2009Wells Fargo factoring facility with fees payable according to time taken to collect each receivable

$
-


$
1,723,829


$
1,592,021Motor vehicle loans at 0.9% p.a. interest due September 2010 and February 2013 secured by motor vehicles


21,881



28,746



50,504Total notes payable


21,881



1,752,575



1,642,525Less current portion


(9,869
)


(1,735,582
)


(1,612,741
)Total long-term debt

$
12,012


$
16,993


$
29,784




Future maturities of notes payable are as follows:





Year EndingDecember 31, 20102011

$
9,8692012


10,2602013


1,7522014


-2015


-Total

$
21,881





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NATURAL RESOURCES USA CORPORATION


Notes to the Consolidated Financial Statements


December 31, 2010, June 30, 2010 and 2009


NOTE 14 -        CAPITAL LEASE OBLIGATIONS




December 31,

2010


June 30,

2010


June 30,

2009Total minimum lease payments

$
6,268


$
11,648


$
25,904Less interest and taxes


(174
)


(1,500
)


(3,850
)Present value of net minimum lease payments


6,094



10,148



22,054Less current portion


(6,094
)


(9,256
)


(10,983
)Long-term portion of capital lease obligations

$
-


$
892


$
11,071





As of December 31, 2010 $422,002 of Capital Lease assets was included in Property, Plant and Equipment.  Depreciation expense for the six months ended December 31, 2010 and each of the years ending June 30, 2010 and 2009 was $4,707, $12,044 and $18,042, respectively.





NOTE 15 -         ASSET RETIREMENT OBLIGATION





The asset retirement obligation (ARO) represents the estimated current fair value of the costs to plug the wells, remove buildings and return the site to its natural condition.  Natural Soda recorded the fair value of the ARO at the date of the purchase of the assets and liabilities of White River and is accreting the balance at the current inflation rate of 3%.





December 31, 2010


June 30,

2010


June 30,

2009(As restated)Beginning balance

$
1,275,451


$
967,825


$
1,036,640Liability incurred


571,053



277,788



66,088Liability settled


(104,008
)


-



(162,912
)Accretion expense


19,086



29,838



28,009Ending balance

$
1,761,582


$
1,275,451


$
967,825





NOTE 16 -         OPERATING LEASES





Natural Soda has signed six leases for a total of 33 railway hopper cars.  Three of these leases terminate in September 2011, one will terminate in November 2011, one terminates in February 2012 and the other terminates in March 2015.  These leases require monthly payments of $300 to $540 per car.  Natural Soda has signed a lease for a 29,988 square foot warehouse in Rifle, Colorado.  The lease terminated May 2010 and is currently operating on a month to month basis.  This lease requires monthly payments of $11,188 increasing by 3% in January of each year.





The following is a schedule of future minimum lease payments required to be paid by Natural Soda under the non-cancellable operating lease agreements at December 31, 2010:





Year ended December 31

Amount2011

$
120,8852012


17,2202013


14,2202014


14,2202015


3,555Total

$
170,100
 
 59
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 NATURAL RESOURCES USA CORPORATION


Notes to the Consolidated Financial Statements


December 31, 2010, June 30, 2010 and 2009.


NOTE 16 -         OPERATING LEASES (Continued)





The rental expense component recognized by the Company related to the above leases was $151,634, $306,324 and $282,029 for the six month ended December 31, 2010 and the years ended June 30, 2010 and 2009, respectively.





NOTE 17 -         OUTSTANDING STOCK OPTIONS AND PURCHASE WARRANTS





As a result of applying ASC 718 to stock options granted to board members, the Company recorded expenses of $95,310, $94,208 and $138,285 for the six months ended December 31, 2010 and the years ended June 30, 2010 and 2009, respectively.These expenses are included in the selling, general and administrative amount in the statement of operations.





Under ASC 718, the Company estimated the fair value of each stock award at the grant date by using the Black-Scholes option pricing model with the following weighted average assumptions used for each of the grants in the six month ended December 31, 2010; dividend yield of zero percent; expected volatility of 223%; risk-free interest rates of 1.5% and expected lives of 3.0 years.





A summary of the status of the Company’s stock options and warrants as of June 30, 2008 and changes during the each of the periods ended June 30, 2009 and 2010 and December 31, 2010 is presented below:






Options,

Warrants

and SAR’s


Weighted

Average

Execise

PriceOutstanding, June 30, 2008


3,615,000


$
1.01Granted


187,500


$
0.88Expired/Cancelled


(3,240,000
)

$
1.08Exercised


(187,500
)

$
0.42Outstanding, June 30, 2009


375,000


$
0.64Granted


262,500


$
0.31Expired/Cancelled


(187,500
)

$
0.40Exercised


-


$
0.00Outstanding, June 30, 2010


450,000


$
0.55Granted


225,000


$
0.37Expired/Cancelled


-


$
0.00Exercised


-


$
0.00Outstanding, December 31, 2010


675,000


$
0.49Exercisable, December 31, 2010


450,000


$
0.55




The following summarizes the exercise price per share and expiration date of the Company's outstanding options and warrants to purchase common stock at December 31, 2010:





Expiration Date

Price


NumberJune 30, 2011

$
0.88



187,500June 30, 2012

$
0.29



187,500June 21, 2013

$
0.37



75,000June 30, 2013

$
0.37



225,000675,000





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NATURAL RESOURCES USA CORPORATION
 Notes to the Consolidated Financial Statements
 December 31, 2010, June 30, 2010 and 2009


NOTE 17 -         OUTSTANDING STOCK OPTIONS AND PURCHASE WARRANTS (Continued)





During the year ended June 30, 2009, options to purchase 187,500 shares were granted and 33,750 shares were issued to non-executive directors pursuant to the net exercise provisions of their option agreements over 187,500 shares.





In June 2010, the Shareholders approved the 2010 Directors’ Incentive Plan whereby each director (who is not an employee or officer) is granted an option to purchase 75,000 shares at a current market price when a person joins the Board of Directors.  In addition, options to purchase 37,500 shares are granted to each such director sitting at July 1 of each year.  The exercise price for these options is the average of the selling prices on all trading days during the thirty day period immediately preceding the date of determination (weighted based on the volume of trading of such stock on each trading day during the month of June preceding each grant date, and the options have a
three-year term.  All options under this plan vest and are exercisable six months after the date of grant.





On July 1, 2010 the Company granted options to Non-executive Directors to acquire 225,000 shares at $0.37 per share until June 30, 2013 in accordance with the 2010 Directors’ Incentive Plan.  The options vest on January 2, 2011.  The weighted average grant-date fair value of these options was $0.33 per option and $74,590 in total.





NOTE 18 –        RELATED PARTY TRANSACTIONS





During the year ended June 30, 2010 Sentient contributed $4,510,000 of capital to the Company to be used to fund the expansion of Natural Soda’s nahcolite resources, explore further utilization of Natural Soda’s water rights and potential oil shale and to reimburse Sentient for payment of certain expenses, to pay Sentient for providing consulting services to Natural Soda Holdings and for additional working capital.





Natural Soda Holdings paid Sentient $790,846 for reimbursement of certain expenses and for providing management consultancy services related to NSHI’s business development activities in December 2009.  On June 30, 2010, Natural Soda Holdings paid $350,010 to Sentient to reimburse expenses paid in relation to oil shale research and investigations.  Natural Soda Holdings also made provision to pay Sentient $39,000 for reimbursement of other expenses.  In addition, Natural Soda Holdings made provision to pay Stephen Dunn, a Sentient associate, $19,500 for Consulting services.  On December 31, 2010 Natural Soda Holdings made a provision to reimburse Sentient $321,369
for expenses incurred on its behalf.





Following the completion of the restructuring agreement on December 31, 2008, Gunn Development Pty Ltd, a company in which Bill H. Gunn, Chief Executive Officer of the Company is a long-time 66% shareholder, provided independent consulting, aerial and other commercial services to The Sentient Group (“SGL”).  Gunn Development Pty Ltd received $200,000 in fiscal year 2009 and $200,000 in fiscal year 2010 from SGL.  Similarly, Robert van Mourik, Executive Vice President and Chief Financial Officer of the Company, has also provided independent consulting services to SGL in Australia.  He received approximately $28,000 in fiscal year 2009 and $28,000 in fiscal year
2010.  To the Company’s knowledge, the services provided to SGL were unrelated to the Company, Natural Soda Holdings or Natural Soda and represented the market value for such services.  To the Company’s knowledge, neither Gunn Development Pty Ltd nor Robert van Mourik has any on-going obligation to provide services to SGL.





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NATURAL RESOURCES USA CORPORATION
 Notes to the Consolidated Financial Statements
 December 31, 2010, June 30, 2010 and 2009


NOTE 18 –        RELATED PARTY TRANSACTIONS (Continued)





License Agreement





On June 30, 2010, Natural Soda Holdings and Natural Soda entered into a License Agreement with Peter Cassidy, an officer and director of Sentient (the “License Agreement”), pursuant to which Mr. Cassidy licensed patented technology relating to oil shale processing (the “Licensed Technology”) to Natural Soda Holdings and Natural Soda for the lump sum of $100, solely for research and development purposes.  The License Agreement specifically prohibits the use of the Licensed Technology by Natural Soda Holdings or Natural Soda for any income generating activities or any activities intended to produce commercial quantities of oil shale products (the “Prohibited
Activities”).  If at any time Natural Soda Holdings or Natural Soda desire to engage in the Prohibited Activities, Mr. Cassidy agreed to negotiate in good faith in respect of a royalty and license agreement of the Licensed Technology to enable Natural Soda Holdings and Natural Soda to engage in the Prohibited Activities.  If Mr. Cassidy determines to license the Licensed Technology to an independent third party, Mr. Cassidy agreed to provide Natural Soda Holdings and Natural Soda with a right of first offer to license the License Technology.





During the term of the License Agreement, Natural Soda Holdings and Natural Soda have agreed to pay for a research program related to the Licensed Technology.





The foregoing description of the License Agreement is qualified in its entirety by the full text of the License Agreement, a copy of which is filed as Exhibit 10.57 to the Company’s Current Report on Form 8-K dated June 30, 2010.





Reimbursement Agreement





On June 30, 2010, Natural Soda Holdings entered into a Cost Reimbursement Agreement (the “Reimbursement Agreement”) with The Sentient Group (“TSG”), an affiliate of Sentient.  Pursuant to the Reimbursement Agreement, Natural Soda Holdings agreed to reimburse TSG and Sentient for services provided by TSG and Sentient to Natural Soda Holdings and Natural Soda and for the cost of goods and services provided by third parties to or for the benefit of Natural Soda Holdings and Natural Soda but billed to TSG or Sentient.





The foregoing description of the Reimbursement Agreement is qualified in its entirety by the full text of the Reimbursement Agreement, a copy of which is filed as Exhibit 10.58 to the Company’s Current Report on Form 8-K dated June 30, 2010.





Consulting Agreement





On November 21, 2009, Natural Soda Holdings entered into a Consulting Agreement (the “Consulting Agreement”) with Toveloa Pty Limited (“Toveloa”), an Australian company controlled by Alan You Lee, an affiliate of Sentient, pursuant to which Mr. Lee agreed to provide certain consulting services to Natural Soda Holdings.  During the six months ended December 31, 2010 and the years ended June 30, 2010 and 2009, Toveloa earned $55,000, $110,000 and $60,217 in fees in accordance with the consulting agreement.





At a meeting of its board of directors on June 28, 2010, the Board of Directors and shareholders of Natural Soda Holdings ratified and approved the License Agreement, the Reimbursement Agreement and the Consulting Agreement.


62
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 NATURAL RESOURCES USA CORPORATION
 Notes to the Consolidated Financial Statements
 December 31, 2010, June 30, 2010 and 2009
  NOTE 18 –        RELATED PARTY TRANSACTIONS (Continued)





The Consulting Agreement was terminated by mutual agreement between Toveloa and Natural Soda Holdings on March 21, 2011, effective December 31, 2010.





Related Party Receivables





The Company provides executive officers and some employees with company credit cards or advances only for the purpose of paying company expenses incurred while travelling.  These charges are recorded as advances until claims for expenses are approved.  The balance of these amounts was $104,941 at December 31, 2010, $19,982 at June 30, 2010 and $5,000 at June 30, 2009.





NOTE 19 -         COMMITMENTS AND CONTINGENT LIABILITIES





The Company is a party to certain claims and lawsuits arising from its business activities.





On December 10, 1992, AmerAlia and Natural Soda Holdings acquired the Rock School Lease from Kinder (See Note 8); the acquisition terms were amended by Kinder and AmerAlia 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 $75,000 in arrears;


2. Starting January 1, 1996, the establishment of a consulting arrangement between Kinder and the Company providing for an annual consulting fee of $25,000 payable monthly in arrears.





NOTE 20 -         PREFERRED STOCK





There were 82 shares of Series E preferred stock outstanding at June 30, 2009 which carried a 10% dividend payable quarterly when declared by the directors of the Company. Each share of the preferred stock was convertible into 1,000 shares of common stock until October 31, 2000.  Since October 31, 2000 the 82 shares had not been convertible into common stock and had no voting rights.  During the year ended June 30, 2010 the Company repurchased the preferred shares for a total of $27,500.





NOTE 21 -         OFFICER COMPENSATION





Bill H. Gunn is Chairman and CEO of the Company, Bradley F. Bunnett is President and COO (since June 21, 2010) and Robert van Mourik is Chief Financial Officer, Secretary and Treasurer of the Company.  On June 21, 2010 Mr. Gunn ceased to be President and Mr. van Mourik ceased to be Executive Vice President upon the appointment of Mr. Bunnett as President and COO.


63
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 NATURAL RESOURCES USA CORPORATION
 Notes to the Consolidated Financial Statements
 December 31, 2010, June 30, 2010 and 2009


NOTE 21 - OFFICER COMPENSATION (Continued)





December 31, 2010


June 30, 2010


June 30, 2009Compensation paidBill Gunn *

$
107,000


$
214,000


$
214,000Bradley F Bunnett **


205,350



-



-Robert van Mourik *


82,000



164,000



164,000Compensation arrears paidBill Gunn


-



-



65,434Robert van Mourik


-



-



510,039Accrued but unpaid compensation, balanceBill Gunn


-



-



48,769Robert van Mourik


15,340



11,867



1,132Advances received from the Company(see Note 18)Bill Gunn


94,054



14,982



-* These amounts also included $14,000 director’s fees due annually.** $205,350 comprises $80,000 base compensation and $125,350 commissions
 
 NOTE 22 -         INCOME TAXES




ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-like1y-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.





The Company includes interest and penalties arising from the underpayment of income taxes in the consolidated statements of operations in the provision for income taxes.  As of December 31, 2010, June 30, 2010 and 2009, the Company had no accrued interest or penalties related to uncertain tax positions.





Notes 2 and 3 discuss the restructuring of the company and the change in Net Operating Loss amounts.





The Company files income tax returns in the U.S. federal jurisdiction and in the state of Colorado. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2005.


64
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 NATURAL RESOURCES USA CORPORATION
 Notes to the Consolidated Financial Statements
 December 31, 2010, June 30, 2010 and 2009


NOTE 23 –        TRANSITION PERIOD COMPARATIVE DATA (UNAUDITED)





The information furnished in the interim condensed financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements.





Consolidated Statements of Operations




For the Six

Months Ended

December 31,

2010


For the Six

Months Ended

December 31,

2009 (1)(As restated)


(unaudited)REVENUES

$
12,924,583


$
10,428,949COST OF GOODS SOLD (EXCLUDING DEPRECIATION)


7,274,339



6,253,537GROSS PROFIT


5,650,244



4,175,412EXPENSESGeneral and administrative


2,305,775



2,393,017Loss on impairment


576,564



-Depreciation, amortization and accretion expense


1,032,028



1,226,148Total Expenses


3,914,367



3,619,165INCOME FROM OPERATIONS


1,735,877



556,247OTHER INCOME (EXPENSE)Interest income


920



590Interest expense


(76,460
)


(109,756
)Total Other Income (Expense)


(75,540
)


(109,166
)INCOME BEFORE INCOME TAX EXPENSE


1,660,337



447,081Current tax expense


(173,976
)


-Deferred tax benefit


358,500



-NET INCOME

$
1,844,861


$
447,081INCOME PER SHAREBasic

$
0.01


$
0.01Diluted

$
0.01


$
0.01WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDINGBasic


352,413,582



66,293,696Diluted


352,570,332



66,387,446
 
 (1) Retrospectively adjusted for 2010 reorganization (see note 3)
  65
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NATURAL RESOURCES USA CORPORATION
 Notes to the Consolidated Financial Statements
 December 31, 2010, June 30, 2010 and 2009




NOTE 23 –      TRANSITION PERIOD COMPARATIVE DATA (UNAUDITED) (CONTINUED)
 Consolidated Statements of Cash Flows


For the Six

Months Ended

December 31,

2010


For the Six

Months Ended

December 31,

2009 (1)(As restated)


(unaudited)CASH FLOWS FROM OPERATING ACTIVITIESNet income

$
1,844,861


$
447,081Adjustments to reconcile net income (loss) to net cash provided by operating activities:Fair value of options granted


95,310



90,064Depreciation, amortization and accretion expense


1,032,030



1,240,648Deferred tax asset


(358,500
)


-Loss on impairment


576,564



-Change in Operating Assets and Liabilities:Restricted funds


(58,482
)


-Accounts receivable and related party receivables


(377,216
)


82,047Inventory


(37,229
)


(209,503
)Prepaid expenses


(27,305
)


(17,925
)Accounts and royalties payable


(79,128
)


611,263Accrued expenses due to related parties


256,805



(44,694
)Accrued expenses


85,935



(42,270
)Income taxes payable


173,976



-Net Cash Provided By Operating Activities


3,127,621



2,156,711CASH FLOWS FROM INVESTING ACTIVITIESCavities and well development


(1,522,619
)


(4,065,848
)Purchase of property and equipment


(2,023,603
)


(1,690,322
)Net Cash Used In Investing Activities


(3,546,222
)


(5,756,170
)CASH FLOWS FROM FINANCING ACTIVITIESPayments on capital leases


(4,054
)


(7,117
)Proceeds from notes payable


-



702,709Capital contribution from major shareholder


-



4,510,000Payments on debt


(1,730,694
)


(7,903
)Net Cash Provided By (Used In) Financing Activities


(1,734,748
)


5,197,689NET INCREASE (DECREASE) IN CASH


(2,153,349
)


1,598,230CASH AT BEGINNING OF YEAR


6,318,377



4,502,204CASH AT END OF YEAR

$
4,165,028


$
6,100,434SUPPLEMENTAL DISCLOSURE OF CASHFLOW INFORMATIONIncome taxes

$
26,452


$
-Interest

$
23,543


$
109,756


(1) Retrospectively adjusted for 2010 reorganization (see note 3)




66
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NATURAL RESOURCES USA CORPORATION


Notes to the Consolidated Financial Statements


December 31, 2010, June 30, 2010 and 2009





NOTE 24 -         RESTATEMENT





The financial statements as of and for the six months ended December 31, 2010 (the transition period)  have  been restated due to the following errors:





(a)
as a result of the need to file federal income tax returns on a separate company basis for Natural Resources, its wholly-owned subsidiary, Natural Soda Holdings, and its wholly-owned subsidiary, Natural Soda, rather than on a consolidated basis,the Company has determined that it previously understated the current and deferred tax provision by $2,943,341and


(b)
as a result of its practice to offset the anticipated salvage value of the buildings and plant against the estimated cost of asset retirement, the amount recorded for its asset retirement obligation was understated by $394,335.





The restated consolidated financial statements as of and for the six months ended December 31, 2010 reflect the following changes:





Consolidated Balance Sheet




December 31, 2010As Reported


Adjustment


As RestatedASSETSCURRENT ASSETSDeferred tax asset

$
1,790,592


$
(1,714,192
)

$
76,400Total Current Assets


10,927,497



(1,714,192
)


9,213,305FIXED ASSETSProperty, Plant and equipment, net


12,744,010



473,264



13,217,274Cavities and well development, net


10,141,482



(78,929
)


10,062,553Total Fixed Assets


27,052,963



394,335



27,447,298OTHER ASSETSDeferred tax asset, long term


1,465,030



(1,182,930
)


282,100Total Other Assets


13,073,844



(1,182,930
)


11,890,914TOTAL ASSETS


51,054,304



(2,502,787
)


48,551,517LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIESIncome tax payable


127,757



46,219



173,976Asset retirement obligation, current


-



207,000



207,000Total Current Liabilities


3,787,563



253,219



4,040,782LONG TERM LIABILITIESAsset retirement obligations


1,367,247



187,335



1,554,582Total Long Term Liabilities


1,379,259



187,335



1,566,594Total Liabilities


5,166,822



440,554



5,607,376STOCKHOLDERS’ EQUITYAccumulated deficit


(105,569,990
)


(2,943,341
)


(108,513,331
)Total Stockholders’ Equity


45,887,482



(2,943,341
)


42,944,141TOTAL LIABILITIES ANDSTOCKHOLDERS’ EQUITY


51,054,304



(2,502,787
)


48,551,517




67
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NATURAL RESOURCES USA CORPORATION
 Notes to the Consolidated Financial Statements
 December 31, 2010, June 30, 2010 and 2009





NOTE 24 –        FINANCIAL STATEMENT RESTATEMENT (CONTINUED)




Consolidated Statement of Operations


Six Months Ended December 31, 2010


As Reported


Adjustment


As RestatedINCOME BEFORE INCOME TAX EXPENSE

$
1,660,337


$
-


$
1,660,337Current tax expense


-



(173,976
)


(173,976
)Deferred tax benefit


3,127,865



(2,769,365
)


358,500NET INCOME

$
4,788,202


$
(2,943,341
)

$
1,844,861INCOME PER SHAREBasic

$
0.01


$
-


$
0.01Diluted

$
0.01


$
-


$
0.01




The footnotes included elsewhere in these financial statements have been revised for the impacts of the corrections for these aforementioned errors as needed.





NOTE 25 –        SUBSEQUENT EVENTS





On January 18, 2011 options to subscribe for 875,000 shares of common stock at $0.58 per share were granted to each of Bill H. Gunn, Robert van Mourik, Bradley F. Bunnett and Robert Warneke.  One third of the options vest on each of the first, second and third anniversaries of the date of grant and expire on January 18, 2016.





On March 15, 2011, Sentient transferred all of its shares of common stock of Natural Resources (equal to 334,074,381 shares or 94.8% of the outstanding shares of common stock of the Company) and its limited right to subscribe for an additional 5,500,000 shares (collectively, the “Securities”) to Green SEA Resources, Inc., a Canadian private company (“GSR”), in exchange for shares of common stock of GSR.  According to its Schedule 13D/A report filed with the Securities and Exchange Commission on March 17, 2011, Sentient is the majority and controlling shareholder of GSR and, consequently, will remain an indirect beneficial owner of the Securities.  The Company
expects that the Board of Directors of GSR will hold voting and investment control over the Securities, and, therefore, is now the beneficial owner of the Securities.  Since this exchange resulted in a change in the direct beneficial ownership of greater than 50% of the Company’s issued and outstanding common stock, this transaction may be deemed to be a change of control.





The Consulting Agreement between Toveloa and Natural Soda Holdings was terminated by mutual agreement on March 21, 2011, effective December 31, 2010.





The Company has evaluated subsequent events pursuant to ASC Topic 855 and no other events require disclosure.


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ITEM 9.
CHANGES IN AND DISAGREEMENTS ON ACCOUNTINGAND FINANCIAL DISCLOSURE





None.




ITEM 9A.
CONTROLS AND PROCEDURES





Restatement of Previously Issued Financial Statements





We previously announced our intention to restate the previously issued financial information for the six months ended December 31, 2010 as a result of our need (i) to file tax returns individually for Natural Resources, its wholly-owned subsidiary, Natural Soda Holdings, and Natural Soda Holdings’ wholly-owned subsidiary, Natural Soda, as elections to consolidate had not been made as required, rather than on a consolidated basis as was done in the past, and (ii) to record an increase to our asset retirement obligation of $394 thousand with a corresponding increase in fixed assets.





As a result of our need to file tax returns individually for Natural Resources, Natural Soda Holdings and Natural Soda rather than on a consolidated basis, losses incurred at one entity are not allowed to be offset against profits incurred at another, which is how we accounted for these previously.  Consequently, as a result of filing tax returns separately, Natural Resources and Natural Soda have an income tax liability.  Management under the direction of the Audit Committee have determined the amount of tax liability that would arise due to the inability of the Company to offset tax losses incurred in one entity against profits earned by another.





As a result, we have identified material weaknesses in our internal control over financial reporting related to the determination of tax balances and the preparation of tax returns, as discussed more fully below. The control deficiencies failed to prevent or detect an accounting error occurring within the financial statements and the errors identified in the tax returns filed by the Company, which led to the restatement described above. The control deficiencies represent material weaknesses in our internal control over financial reporting and require corrective and remedial actions.




Disclosure Controls and Procedures




Our senior management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15 and 15d-15 under the Securities Exchange Act of 1934 (the “Exchange Act”)) designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.





Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  Our Chief Executive Officer and Chief Financial Officer re-evaluated our internal controls and concluded that our disclosure controls and procedures were not effective as of December 31, 2010 as a result
of the material weaknesses in our internal control over financial reporting as discussed below.




In our Transition Report on Form 10-KT for the six months ended December 31, 2010, filed on March 25, 2011, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of December 31, 2010.  In connection with our decision to restate our financial statements, as more fully described in Note 2 to the financial statements of this Form 10-KT/A, our management, including our Chief Executive Officer and Chief Financial Officer, re-evaluated our internal controls and concluded that our disclosure controls and procedures were not effective as of December 31, 2010 as a result of the material weaknesses
in our internal control over financial reporting as discussed below.
 
 Notwithstanding the material weaknesses described below, we concluded that the consolidated financial statements included in this Form 10-KT/A fairly present, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in accordance with Generally Accepted Accounting Principles.


Management’s Report on Internal Control Over Financial Reporting (Restated)





Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process designed by, or under the supervision of, our CEO and CFO, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:


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(i)
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;





(ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and





(iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.





Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.




Management of the Company has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010. In making its assessment of internal control over financial reporting, management used the criteria described in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).





A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. As of December 31, 2010, the Company did not maintain effective controls over the preparation of its tax returns and determination of its tax provisions for accounting purposes.





Specifically:





•
We did not maintain an effective control environment that recognized the differences between financial accounting and taxation accounting and ensured access to personnel with appropriate experience to properly prepare taxation returns.





•
We did not maintain sufficient controls  to ensure our tax returns were filed accurately and on a consistent basis.




These control deficiencies led to errors and irregularities in our tax filings that in turn resulted in errors in the preparation of our financial statements.




These control deficiencies resulted in material errors and the restatement of our financial statements for the six months ended December 31, 2010, particularly with respect to the determination of amounts of tax expense, deferred tax assets, income tax liability and net income. Additionally, these control deficiencies could result in further misstatements of these accounts that would result in a material misstatement of our financial statements that would not be prevented or detected on a timely basis. Accordingly, our management has determined that these control deficiencies constitute material weaknesses.
 
 In Management’s Report on Internal Control Over Financial Reporting included in our original Annual Report on Form 10-KT for the six months ended December 31, 2010, our management, including our CEO and CFO, concluded that we maintained effective internal control over financial reporting as of December 31, 2010. In connection with the restatement of our financial statements, as more fully described in Note 2 to the financial statements of this Form 10-KT/A, management has subsequently concluded that the material weaknesses described above existed as of December 31, 2010. As a result, we have concluded that we did not maintain effective internal control over financial
reporting as of December 31, 2010, based on the criteria in Internal Control – Integrated Framework issued by the COSO. Accordingly, management has restated its report in internal control over financial reporting.




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Changes in Internal Control Over Financial Reporting





There were no changes during the period ended December 31, 2010.


Management’s Plan for Remediation




Beginning in August 2011, our management began to determine new policies and procedures and internal controls to address the above-described material weaknesses and enhance our system of internal control over financial reporting and the preparation of tax returns. Management believes the remediation measures described below will remediate the identified control deficiencies and strengthen our internal control over financial reporting. Management may determine that additional measures must be taken to address control deficiencies or that we need to modify or otherwise adjust the remediation measures described below.
 
 The remediation efforts outlined below are intended both to address the identified material weaknesses and to enhance our overall financial control environment.
 
 Our plan is to create an effective control environment around the preparation of the tax returns and the computation of tax provisions, tax expense, deferred tax assets, income tax liability and net income to ensure the accuracy of our financial reporting:


•
We will appoint tax advisors who have expertise in US mining tax regulations.





•
We will introduce new internal control procedures to review tax returns filed by the Company to ensure tax returns are complete and accurate.





•
In addition, due to the missed filings referred to above, we intend to seek relief from the Internal Revenue Service which, if granted, would allow us to re-consolidate the above mentioned tax returns.





•
We will improve the quality and quantity of the tax training provided to our CFO and accounting staff.





The Audit Committee has directed management to develop a detailed plan and timetable for the implementation of the foregoing remediation efforts and will monitor the implementation.  In addition, under the direction of the Audit Committee, management will continue to review and make necessary changes to the overall design of the Company’s internal control environment, as well as to policies and procedures to improve the overall effectiveness of internal control over financial reporting.





Management believes the foregoing efforts will effectively remediate these material weaknesses.  As the Company continues to evaluate and work to improve its internal control over financial reporting, management may determine to take additional measures to address control deficiencies or determine to modify the remediation plan described above.




ITEM 9B.
OTHER INFORMATION





None.


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PART III








ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE




(a)
Identification of Directors and Executive Officers




The following table sets forth certain information with respect to our current directors and executive officers.  Directors hold office until the next Annual Meeting of Shareholders and a successor is elected and qualified, or until their death, resignation or removal.  Executive officers are elected at annual meetings of the Board and hold office for one year or until a successor has been duly elected and qualified or until death, resignation or removal. The ages of the directors, executive officers, and significant employees are shown as of March 24, 2011.




Name
Current Office
Principal Occupation
Director/Officer/

Since
AgeBill H. Gunn
CEO and Chairman of the Board
President and CEO of Natural Resources
February 1984
68Robert C.J. van Mourik
Chief Financial Officer,Secretary and Treasurer
CFO of Natural Resources
January 1989
58Neil E. Summerson(1)
Director
Company Director
September 1990
64Geoffrey C. Murphy(1)
Director
Principal, Valor Leadership Partners, LLC.
June 1999
69J. Jeffrey Geldermann(1)
Director
President of Credentials, Inc.
June 2004
60Alan De’ath(2)
Director
President and CEO of Ivernia, Inc.
June 2010
57Paul-Henri Couture(2)
Director
President – Sentient Asset Management Canada Ltd
June 2010
55Leigh Hall(2)
Director
Company Director
February 2011
70Wayne Richardson(2)
Director
Managing Director and CEO of Renewed Metal Technologies and Orbitas Pty Ltd
February 2011
55Alan You Lee(2)
Director
Sentient Consultant and VP, Finance and CFO of GSR
February 2011
52Bradley Bunnett
President and Chief Operating Officer
President and COO of Natural Resources
June 2010
45Robert Warneke(3)
Executive Director of Manufacturing of Natural Soda
Executive Director of Manufacturing of Natural Soda
August 2007
54


(1)
Indicates that the director may be considered “independent” in accordance with Section 803A of the NYSE Amex Equities Company Guide even though this guide is not applicable to the Company.


(2)
Indicates that Sentient recommended the director for nomination to the Board of Directors.


(3)
Mr. Warneke is an executive officer of Natural Soda, a wholly-owned subsidiary of Natural Soda Holdings, which is itself a wholly owned subsidiary of the Company.





The following is a description of the business background of the directors and executive officers of Natural Resources.




Bill H. Gunn





Mr. Gunn graduated with a degree in Commerce from the University of Queensland, Australia 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 Certified Practising Accountants and has successfully completed and passed the examinations for admittance as a Certified Public Accountant (CPA) in the USA.


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Mr. Gunn has been a self-employed investor, CPA, and a director of several Australian Stock Exchange listed public companies, as well as a number of majority owned private corporations.   Since February 1984 he has been Chairman and Chief Executive Officer of Natural Resources and was also president from 1984 to 2010.





Mr. Gunn is also a director of GSR, a majority-owned subsidiary of Sentient and its affiliates.  Since March 15, 2011 GSR owns 94.8% of Natural Resources.





Robert C.J. van Mourik





Mr. van Mourik served as Executive Vice President, Chief Financial Officer, Treasurer and Secretary of Natural Resources since 1989 and was elected a Director in September 1990.  In June 2010 he relinquished the role of Executive Vice President and retired as a director at the annual meeting of shareholders.  He graduated in 1974 with a Bachelor of Applied Science (Applied Chemistry) from the Victoria Institute of Colleges, Australia and in 1981 with a Master’s Degree in Business Administration from the University of Newcastle, Australia.  He is a Fellow of the Australian Institute of Company Directors.





Neil E. Summerson




Mr. Summerson is a director of several Australian listed and unlisted public companies and closely held private companies.  He is Chairman of Bank of Queensland Ltd, Chairman of Idec Group of companies, Chairman of Australian Property Growth Limited, Chairman of St Andrews Insurance Limited and a Director of Leyshon Group of companies, Pioneer Permanent Building Society Limited, Home Building Society Limited and Australian Made Campaign Limited.   He was formerly the Managing Partner of Ernst & Young in Queensland.  He is a Fellow of the Institute of Chartered Accountants, a Fellow of the Australian Institute of Management and a Fellow of the Australian Institute of Company
Directors.




Geoffrey C. Murphy





In 2009 Mr. Murphy became a principal of Valor Leadership Partners, LLC, a consulting firm.  Previously, he was employed as the Senior Vice President of Citrico Holdings, Inc., a company engaged in the manufacture of lemon-based products from September 1, 2001 until September 30, 2004.





J. Jeffrey Geldermann





Mr. Geldermann is and has been since 1997, President of Credentials, Inc., a company offering computer based electronic academic qualifications verification services used by colleges and universities.





Alan M. De’ath





Mr De’ath was appointed President, Chief Executive Officer and a director of Ivernia, Inc., a TSX listed public company, in 2003 after joining the company in 2000.  He has 30 years of experience in senior management positions in the mining industry including a 20-year career with Rio Tinto in Europe and southern Africa including positions as Commercial Director on the board of RioMinas Lda in Portugal managing Rio Tinto’s Neves Corvo joint venture with the Portuguese government and as Finance Director on the board of Rossing Uranium Ltd in Namibia.  Immediately prior to joining Ivernia he was CFO with TVX Gold in Toronto for two years.  Mr. De’ath is also an officer
and director of GSR.  GSR owns a significant interest in Ivernia.





Paul-Henri Couture





Mr. Couture joined Sentient in 2009 as President of Sentient Asset Management Canada. He has over 30 years of experience as a financial management and investment professional.  From 1983 to 2009, he served as Senior Vice-President at the Caisse de dépôt et placement du Québec.  He graduated with a Bachelor’s degree in business administration from HEC Montreal in 1976 and is a Certified Financial Analyst.


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Leigh Hall




Mr. Hall held a number of senior positions at AMP Limited, an Australian public company, before retiring in 1999 as Deputy Managing Director of AMP Asset Management Australia Limited.  Mr. Hall is a Member of the Order of Australia, a Fellow of the Institute of Chartered Accountants in Australia and a Fellow of the Australian Institute of Company Directors.  He has been a director of a number of Australian-based public companies and presently is a director of Superannuation Funds Management Corporation of South Australia. Mr. Hall has served in various capacities on several industry and government associations and groups, including president of the Securities Institute of Australia, Chairman of
the Australian Investment Managers Association and a member of the Australian Law Reform Commission and the Financial Reporting Council.  Mr. Hall is also a director of GSR.




Wayne Richardson




Mr. Richardson has been Managing Director and CEO of Renewed Metal Technologies and Orbitas Pty Ltd since 2007, and has been Chairman of Southern Oil Pty Ltd in Australia since 2009. Prior to that he served as General Manager, Sales of Century Yuasa in Brisbane for four years, and before that he founded and managed Club Assist International, an automobile battery retailer, between 1996 and 2001. Mr. Richardson is also President of the Australian Battery Recycling Initiative and an industry advisor for the Green Lead Project in Australia, and was Director of the Australian Battery Industry Association for four years.  Mr. Richardson is also an officer of GSR.




Alan You Lee




Mr. You Lee has over 25 years’ experience gained in senior finance positions across a diversified range of industries.  Through his company, Toveloa Pty Limited, an Australian company, Mr. You Lee has served a consultant to Sentient since December 2008.  Prior to joining Sentient in 2008, he was at Macquarie Bank where he fulfilled several senior finance roles including as CFO of Macquarie Direct Investment, the private equity investment funds division.  Before that he was General Manager, Finance and Operations at Fuji International Finance Australia, the Australian subsidiary of the Fuji Bank, which specialized in project and corporate finance. Alan is a Chartered Accountant
and holds a Bachelor of Commerce (Honours) degree from Rhodes University.  Mr. You Lee is also an officer of GSR.





Bradley Bunnett





Mr. Bunnett is President and Chief Operating Officer of Natural Resources and was appointed to those roles in June 2010.  In addition, he is President of Natural Soda Holdings and Natural Soda.  Previously, he was Vice President of Sales & Marketing for Energy Supplements International in Fullerton, California from July 2002 until he joined Natural Soda in April 2004 as Executive Director, Marketing.





Robert (“Bob”) Warneke





Mr. Warneke joined Natural Soda in August 2007.  He has 29 years of manufacturing experience in industrial, chemical and mineral industries.  He was employed by FMC Corporation for 14 years until 1993 progressing in engineering and management.  In 1993 he joined North American Chemical Company and its successor companies as the plant manager of a new sodium bicarbonate plant in Rifle which is now the NSI plant.  Bob transferred from IMC Chemical Company in 2000 to become plant manager of their soda ash facility in California until his return to Colorado in early 2007.





(b)
Identification of Significant Employees





None.





(c)
Family Relationships





There are no family relationships among the Company’s directors of officers.  No arrangement exists between any of the above directors and officers pursuant to which any one of those persons was elected to such office or position.


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Alan De’ath and Paul Henri-Couture were recommended by Sentient to our Board of Directors and were appointed to the board on June 29, 2010 and subsequently elected by the shareholders on February 9, 2011.  Leigh Hall, Wayne Richardson and Alan You Lee were recommended by Sentient to our Board of Directors as potential candidates for nomination to our Board of Directors and were elected to the board on February 9, 2011 by the shareholders.




(d)
Involvement in Certain Legal Proceedings:





During the past ten years, no director or executive officer of Natural Resources has:





(d)(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;





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





(d)(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, barring, suspending or otherwise limiting his involvement in any type of business, securities or bankingactivities;





(d)(4)           Been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission, or by the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.




(e)
Audit Committee Financial Expert




The Board has determined that Neil E. Summerson and Geoffrey C. Murphy are both qualified to be and are “financial experts”as defined under Item 407(d)(5)(ii) and (iii) of Regulation S-K.




Director Qualification and Background





The Company does not have a separate Nominating Committee and does not have a formal policy with respect to evaluation of nominees.  However, it has been the Company’s practice to seek to compose a Board which brings a full complement of skills and attributes and experience to the Company and in this respect the Company looks for a diverse range of attributes and qualifications among its Board candidates. These include: financial acumen, previous public company governance experience, experience in the natural soda mining industry or related mining industries, sound business experience, government relations experience, investor relations experience, and sales and marketing experience. Each candidate
is not expected to have each of these elements but rather the Board seeks to nominate a group which, in the aggregate, is comprised of individuals who contribute the full range of such experience and qualifications, which the current nominees for director provide.





Nominees who are recommended to the Board by the Company’s shareholders are evaluated to confirm that they are qualified to serve on the board of directors of a publicly-traded company.  Alan De’ath, Paul Henri-Couture, Leigh Hall, Wayne Richardson and Alan You Lee were recommended by Sentient to our Board of Directors as potential candidates for nomination to our Board of Directors.




Additionally, each nominee is expected to display a commitment to good governance and the protection of shareholders’ interests, demonstrated leadership skills, and effective communication skills. Nominees who have previously served as directors are also evaluated on the basis of their attendance record and their dedication to fulfilment of their responsibilities as directors of the Company.


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The Board also evaluates each candidate in respect of whether their personal and professional schedules allow them to dedicate sufficient time to governance of the Company.  The Board has concluded that each nominee has been, and will be, consistent and conscientious in devoting time and energy to the affairs of the Company.





The Board does not currently have a formal policy with regard to the consideration of diversity in identifying director nominees.





Code of Ethics





The Company has adopted a code of ethics that applies to our principal executive, financial and accounting officers.





Section 16(a) Beneficial Ownership Reporting Compliance.





Section 16(a) of the Exchange Act requires Natural Resources’ directors and officers and persons who own more than 10% of the Company’s equity securities to file reports of ownership and changes in ownership with the SEC.  Directors, officers, and greater-than-10% shareholders are required by SEC regulations 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 July 1, 2009 through December 31, 2010, all filing requirements applicable to officers, directors, and greater-than-10% shareholders have been met in accordance with the requirements of Section 16(a), other than the following reports:





Name
Number of
Transactions Not
Known Failures toLate Reports
Timely Reported
File a Required FormAlan De’ath
Three
Two
NonePaul-Henri Couture
One
None
NoneMichel Marier
One
None
NoneBradley Bunnett
One
Two
NoneRobert Warneke
One
None
None


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ITEM 11.
EXECUTIVE COMPENSATION





Summary Compensation Table





The following table sets forth information regarding compensation paid to our executive officers during the two most recent fiscal years ended June 30, 2010.  Mr. Gunn, and Mr. van Mourik were the only executive officers receiving or accruing compensation exceeding $100,000 during our fiscal year ended June 30, 2010, as shown below.  None of our executive officers are subject to employment agreements.  The compensation of our executive officers is determined by the Compensation Committee of the Board.  Mr. Gunn also received a salary of $100,000 per year from Natural Soda that is paid directly by Natural Soda.  As a consequence of the exchange reorganization
completed on June 30, 2010 whereby Natural Soda is now a wholly owned subsidiary of Natural Resources, Mr. Gunn is paid one combined salary.





Name and Principal Position

(a)
Year







(b)
Salary

(1)

$



(c)

Bonus

$





(d)

Stock Awards

$



(e)

Option

Awards

$



(f)

Non-equity

incentive plan

compensation

$

(g)

Non-qualified deferred compensation earnings

$

(h)

All other compensation

$

(i)

Total

$



(j)Bill H. Gunn President
2010
114,000


-0-

-0-


-0-

-0-


-0-

-0-


114,000& Chief ExecutiveOfficer
2009
114,000


-0-

-0-


-0-

-0-


-0-

-0-


114,000Robert van Mourik
2010
164,000


-0-

-0-


-0-

-0-


-0-

-0-


164,000Chief FinancialOfficer
2009
164,000


-0-

-0-


-0-

-0-


-0-

-0-


164,000





(1)
At June 30, 2010 accrued unpaid compensation, interest, expenses and advances to the Company of $Nil and $11,867 were due to Bill H. Gunn and Robert van Mourik respectively (at June 30, 2009: $48,769 and $1,132, respectively).  These amounts also include $14,000 director’s fees due annually.  In addition, prior to the exchange reorganization, Bill H. Gunn was paid a separate salary of $100,000 by Natural Soda.





Subsequently, for the six months ended December 31, 2010 the following compensation was paid:





Name and Principal Position

(a)
(b)
Salary

$





(c)

Bonus

$





(d)

Stock Awards

$



(e)

Option

Awards

$



(f)

Non-equity

incentive plan

compensation

$

(g)

Non-qualified deferred compensation earnings

$

(h)

All other compensation

$

(i)

Total

$



(j)Bill H. GunnPresident &Chief ExecutiveOfficer

107,000


-0-

-0-


-0-

-0-


-0-

-0-


107,000Bradley F. Bunnett President & COO

80,000


-0-

-0-


-0-

125,350


-0-

-0-


205,530Robert van MourikChief FinancialOfficer

82,000


-0-

-0-


-0-

-0-


-0-

-0-


82,000





Natural Resources does not have a group medical insurance plan for its executive officers although Mr. Gunn and Mr Bunnett participate in a comprehensive group medical insurance plan that Natural Soda provides for its employees.  While the Company has no retirement plans, Natural Soda contributes matching contributions to a 401(k) plan for Mr. Gunn, Mr. Bunnett and Mr. Warneke.


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We have no plans for the payment or accrual for payment of any amounts to any executive officer in connection with such officer’s resignation, retirement, or other termination, or change of control or change in the executive officer's responsibilities.  We have no long term incentive compensation plans, defined benefit plans, or actuarial plans.  There are no plans to pay bonuses or deferred compensation to employees of Natural Resources.





2010 Stock Option Plan





In June 2010, the Board adopted a stock option plan for its officers, employees, and consultants.  The Board (through its compensation committee) can issue options under this plan to acquire up to 25,000,000 shares to officers, employees and consultants.  The Plan is intended to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to our success by offering them an opportunity to participate in our future performance through awards of stock options.  In each case, the Board (through its compensation committee) will determine the price at which options may be issued, the term of the options, and the number of
options to be issued.  In no case may the exercise price be less than the market value of the underlying shares at the time of grant. Our shareholders approved this Plan at the annual meeting of shareholders held in June 2010.  No officer exercised stock options during the transition period ended December 31, 2010.  There are no outstanding stock options at December 31, 2010 held by any officer.




DIRECTOR COMPENSATION





Our directors are authorized to receive $14,000 cash compensation per year for their services as directors.  In addition, the Chairman of the Audit Committee receives $6,000 per year and other Audit Committee members $4,000 per year; the Chairman of the Compensation Committee receives an additional $2,000 per year.  These arrangements were approved September 10, 2002 as of July 1, 2002.  We also reimburse directors for expenses incurred on behalf of the Company.  The option awards data represents the dollar amount recognized for financial statement reporting purposes for the fair value of stock options granted to each of the named directors in accordance with ASC
718.The following table shows the compensation paid to directors for the year ended June 30, 2010:





Name

(a)
Year

Fees earned or paid in cash

$

(b)


Stock Awards

$

(c)


Option

Awards

$

(d)


Non-equity

incentive plan

compensation

$

(e)


Non-qualified deferred compensation earnings

$

(f)


All other compensation

$

(g)


Total

$

(h)Neil E.Summerson
2010


20,000



-0-



18,013



-0-



-0-



-0-



38,013Geoffrey C. Murphy
2010


20,000



-0-



18,013



-0-



-0-



-0-



38,013J. Jeffrey Geldermann
2010


14,000



-0-



18,013



-0-



-0-



-0-



32,013James V.Riley
2010


18,000



-0-



18,013



-0-



-0-



-0-



36,013Robert C. Woolard
2010


14,000



-0-



18,013



-0-



-0-



-0-



32,013Alan M.De’ath
2010


-0-



-0-



4,143



-0-



-0-



-0-



4,143


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The following table shows the compensation paid to directors for the six months ended December 31, 2010:




Name

(a)
Year

Fees earned or paid in cash

$

(b)


Stock Awards

$

(c)


Option

Awards

$

(d)


Non-equity

incentive plan

compensation

$

(e)


Non-qualified

deferred

compensation

earnings

$

(f)


All other

compensation

$

(g)


Total

$

(h)Neil E.Summerson
2010


10,000



-0-



12,432



-0-



-0-



-0-



22,432Geoffrey C. Murphy
2010


10,000



-0-



12,432



-0-



-0-



-0-



22,432James V. Riley
2010


9,000



-0-



12,432



-0-



-0-



-0-



21,432J. Jeffrey Geldermann
2010


7,000



-0-



12,432



-0-



-0-



-0-



19,432Robert C. Woolard
2010


7,000



-0-



12,432



-0-



-0-



-0-



19,432Alan M.De’ath
2010


7,000



-0-



33,150



-0-



-0-



-0-



40,150Paul-Henri Couture
2010


7,000
*


-0-



-0-



-0-



-0-



-0-



7,000
*Michel Marier
2010


7,000
*


-0-



-0-



-0-



-0-



-0-



7,000
*
 * Paid to Sentient Asset Management Ltd


2010 Directors’ Incentive Plan





In June 2010, the Board of Directors adopted a plan by which each director (who is not an employee or officer) is granted:







·
an option to purchase 75,000 shares at a current market price upon joining the Board of Directors; and


·
an option to purchase 37,500 shares on July 1 of each year he remains a director





The options have a three-year term and are exercisable six months after the date of grant.





The following table summarizes information with respect to each non-executive director’s outstanding stock options at December 31, 2010.




Option AwardsName

(a)

Number of securities underlying unexercised options

# Exercisable

(b)


Number of securities underlying unexercised options

# Unexercisable

(c)


Option exercise price

$

(e)

Option expiration date

(f)Neil E. Summerson


37,500



-



0.88

6/30/1137,500



-



0.29

6/30/1237,500



-



0.37

6/30/13Geoffrey C. Murphy


37,500



-



0.88

6/30/1137,500



-



0.29

6/30/1237,500



-



0.37

6/30/13James V. Riley


37,500



-



0.88

6/30/1137,500



-



0.29

6/30/1237,500



-



0.37

6/30/13Robert C. Woolard


37,500



-



0.88

6/30/1137,500



-



0.29

6/30/1237,500



-



0.37

6/30/13J. Jeffrey Geldermann


37,500



-



0.88

6/30/1137,500



-



0.29

6/30/1237,500



-



0.37

6/30/13Alan M. De’ath


75,000



-



0.37

6/22/1337,500



-



0.37

6/30/13


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On July 1, 2009, we granted options to acquire 37,500 shares of Common Stock at $0.29 per share exercisable until June 30, 2012 to each of the following non-executive directors:





·
Geoffrey C. Murphy;


·
Neil E. Summerson;


·
James V Riley;


·
Robert C. Woolard; and


·
J. Jeffrey Geldermann.





On June 21, 2010, we granted options to acquire 75,000 shares at $0.37 per share exercisable until June 21, 2013 to Alan De’ath on his appointment to the board.  These options vest on December 21, 2010.





On July 1, 2010, we granted options to acquire 37,500 shares of Common Stock at $0.37 per share exercisable until June 30, 2013 to each of the following non-executive directors:





·
Geoffrey C. Murphy;


·
Neil E. Summerson;


·
James V Riley;


·
Robert C. Woolard;


·
J. Jeffrey Geldermann; and





·
Alan De’ath.


These options vested on January 3, 2011.





On December 16, 2010, the Board determined to grant options to purchase 875,000 shares of Company common stock at $0.58 per share to each of Bill Gunn, Brad Bunnett, Robert van Mourik and Bob Warneke (the “Executive Options”) pursuant to the Company’s 2010 Stock Option Plan.  The exercise price of the Executive Options was to be determined on a 30-day volume weighted trading average price beginning on the day following the Board action.  Consequently, the options were granted on January 18, 2011.  They vest annually over a three period and become fully exercisable on a change of control of the Company.  They terminate on January 18, 2016.




OTHER ARRANGEMENTS





Except as described herein, no officer or director of Natural Resources 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 Natural Resources except that for the transition period ended December 31, 2010 alone an amount of $15,340 for expenses reimbursement owed to Robert van Mourik was accrued.





Employment Contracts and Termination of Employment and Change-in-Control Arrangements.





Natural Resources has no compensation plan or arrangement with 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.


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ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTAND RELATED STOCKHOLDER MATTERS




At March 24, 2011, we had one class of outstanding voting securities, our Common Shares, with 352,413,582 shares issued and outstanding.  The following table sets forth information as of March 24, 2011 on the ownership of Common Shares for all directors, individually, all executive officers, all executive officers and directors as a group, and all beneficial owners of more than five percent of our Common Shares.  The following shareholders have sole voting and investment power with respect to the Common Shares unless indicated otherwise.





Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. Shares of Common Stock subject to options and warrants exercisable within 60 days of March 24, 2011 are deemed outstanding for computing the percentage of the person or entity holding such securities but are not outstanding for computing the percentage of any other person or entity.





Name & Address

of Beneficial Owner
Amount & Nature

Of Beneficial Ownership

Percent of

Common Shares*J. Jeffrey Geldermann
1,210,500
(1)
**Bill H. Gunn
1,064,445
(2)
**Geoffrey C. Murphy
776,993
(3)
**Robert van Mourik
545,385
(4)
**Neil E. Summerson
516,417
(5)
**Alan De’ath
112,500
(6)
**Bradley F. Bunnett
16,200

**Robert Warneke
0

**Paul-Henri Couture
0

**Leigh Hall
0

**Wayne Richardson
0

**Alan You Lee
0

**Officers, Directors and Director Nominees as a Group (15 persons)
4,242,440
(7)
1.2%Green SEA Resources Inc.
339,574,381
(8)
96.0%130 Adelaide St West, Suite 3303

Toronto, Ontario, Canada M5H 3P5
  *
Percent of Common Shares is calculated individually (or as a group) assuming an individual (or all members of a group) exercises its options or any other rights it might have to take up additional Common Shares.  The calculations assume that other holders of equity interests do not exercise their rights unless they are part of the same group.  The calculation is based on a total of 352,413,582 Common Shares plus the number of applicable options or rights in each case.**
Indicates less than 1%.


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(1)
Includes options to acquire 37,500 Common Shares at $0.88 until June 30, 2011, options to acquire 37,500 Common Shares at $0.29 until June 30, 2012 and options to acquire 37,500 Common Shares at $0.37 until June 30, 2013.
 (2)
Includes 131,960 Common Shares owned by Gunn Development Pty. Ltd. (of which Mr. Gunn is a controlling shareholder).
 (3)
Includes options to acquire 37,500 Common Shares at $0.88 until June 30, 2011, options to acquire 37,500 Common Shares at $0.29 until June 30, 2012 and options to acquire 37,500 Common Shares at $0.37 until June 30, 2013.
 (4)
Includes 240,760 Common Shares owned by Ahciejay Pty. Ltd. as trustee for The R.C.J. Trust, and 304,125 Common Shares held in trust for the R.C.J. Superannuation Fund, as to both of which Mr. van Mourik and his family are beneficiaries.
 (5)
Includes 400,167 Common Shares held by held by Glendower Investments Pty Ltd as trustee for a trust of which Mr. Summerson and his family are beneficiaries; 3,750 Common Shares held by held by Glendower Properties Pty Ltd as trustee for a trust of which Mr. Summerson and his family are beneficiaries; and options held directly to acquire 37,500 Common Shares at $0.88 until June 30, 2011, options to acquire 37,500 Common Shares at $0.29 until June 30, 2012 and options to acquire 37,500 Common Shares at $0.37 until June 30, 2013.
 (6)
Includes options to acquire 75,000 shares at $0.37 per share until June 21, 2013 and options to acquire 37,500 shares at $0.37 per share until June 30, 2013.
 (7)
Includes beneficial ownership of Messrs. Geldermann, Gunn, Murphy, van Mourik, Summerson, Bunnett and De’ath as described in notes 1, 2, 3, 4, 5 and 6 above.
 (8)
Includes the right to purchase 5,500,000 Common Shares for $0.36 each until October 31, 2011 subject to certain conditions.




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




Change in Control




We are not aware of any arrangement that might result in a change in control in the future.




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ITEM 13.           CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS





Transactions with Management and Others





The following sets out information regarding transactions between officers, directors and significant shareholders of Natural Resources during the most recent fiscal year and the subsequent transition period ending December 31, 2010.





During the year ended June 30, 2010, Sentient contributed $4,510,000 of capital to the Company to fund the expansion of Natural Soda’s nahcolite resources, to explore further utilization of Natural Soda’s water rights and potential oil shale and to reimburse Sentient for payment of certain expenses, to pay Sentient for providing consulting services to Natural Soda Holdings and for additional working capital.





Natural Soda Holdings paid Sentient $790,846 for reimbursement of certain expenses and for providing management consultancy services related to Natural Soda Holdings’ business development activities in December 2009.  On June 30, 2010, Natural Soda Holdings paid $350,010 to Sentient to reimburse expenses paid in relation to oil shale research and investigations.  Natural Soda Holdings also made provision to pay Sentient $39,000 for reimbursement of other expenses.  In addition, Natural Soda Holdings made provision of $19,500 to pay Stephen Dunn, a Sentient associate, for consulting services.  In December 2010 it made a further provision of $321,369 to reimburse
Sentient for additional expenses.





The Company provides executive officers and some employees with company credit cards or advances for the purpose of paying company expenses incurred while travelling.  These charges are recorded as advances until claims for expenses are approved.  The balance due from related parties was $104,941 at December 31, 2010, $19,982 at June 30, 2010 and $5,000 at June 30, 2009.





Following the completion of the restructuring agreement on December 31, 2008, Gunn Development Pty Ltd, a company in which Bill H. Gunn, Chief Executive Officer of the Company is a long-time 66% shareholder, provided independent consulting, aerial and other commercial services to The Sentient Group (“SGL”).  Gunn Development Pty Ltd received $200,000 in fiscal year 2010 from SGL.  Similarly, Robert van Mourik, Chief Financial Officer of the Company, has also provided independent consulting services to SGL in Australia.  He received approximately $28,000 in fiscal year 2010.  To the Company’s knowledge, the services provided to SGL were unrelated to the
Company, Natural Soda Holdings or Natural Soda and represented the market value for such services.  To the Company’s knowledge, neither Gunn Development Pty Ltd nor Robert van Mourik has any on-going obligation to provide services to SGL.




License Agreement





On June 30, 2010, Natural Soda Holdings and Natural Soda entered into a License Agreement with Peter Cassidy, an officer and director of SGL (the “License Agreement”), pursuant to which Mr. Cassidy licensed patented technology relating to oil shale processing (the “Licensed Technology”) to Natural Soda Holdings and Natural Soda for the lump sum of $100, solely for research and development purposes.  The License Agreement specifically prohibits the use of the Licensed Technology by Natural Soda Holdings or Natural Soda for any income generating activities or any activities intended to produce commercial quantities of oil shale products (the “Prohibited
Activities”).  If at any time Natural Soda Holdings or Natural Soda desire to engage in the Prohibited Activities, Mr. Cassidy agreed to negotiate in good faith in respect of a royalty and license agreement of the Licensed Technology to enable Natural Soda Holdings and Natural Soda to engage in the Prohibited Activities.  If Mr. Cassidy determines to license the Licensed Technology to an independent third party, Mr. Cassidy agreed to provide Natural Soda Holdings and Natural Soda with a right of first offer to license the License Technology.  Natural Soda Holdings paid $350,010 during the year ended June 30, 2010 and $83,904 during the transition period ended December 31, 2010 to SGL to reimburse it for expenses paid in association with developing this oil shale technology.





During the term of the License Agreement, Natural Soda Holdings and Natural Soda have agreed to pay for a research program related to the Licensed Technology.


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Reimbursement Agreement





On June 30, 2010, Natural Soda Holdings entered into a Cost Reimbursement Agreement (the “Reimbursement Agreement”) with SGL.  Pursuant to the Reimbursement Agreement, Natural Soda Holdings agreed to reimburse SGL for services provided by SGL to Natural Soda Holdings and Natural Soda and for the cost of goods and services provided by third parties to or for the benefit of Natural Soda Holdings and Natural Soda but billed to SGL, as discussed below at “Corporate Loans – Loans to Natural Resources”.





Consulting Agreement





On November 1, 2009, Natural Soda Holdings entered into a Consulting Agreement (the “Consulting Agreement”) with Toveloa Pty Limited, an Australian company controlled by Alan You Lee, an affiliate of SGL and Sentient, pursuant to which Mr. Lee agreed to provide certain consulting services to Natural Soda Holdings for $110,000 per year.  During the six months ended December 31, 2010 and the years ended June 30, 2010 and 2009, Toveloa earned $55,000, $110,000 and $60,217 in fees in accordance with the consulting agreement.





At a meeting of its board of directors on June 28, 2010, the board of directors and shareholders of Natural Soda Holdings ratified and approved the License Agreement, the Reimbursement Agreement and the Consulting Agreement.





The Consulting Agreement was terminated by mutual agreement on March 21, 2011, effective December 31, 2010.





Rights to the name “AmerAlia”





On July 29, 2010 the Board agreed that upon completion of the registration of the name change with the Secretary of State of the State of Utah, the Company assign all rights of the Company to the name “AmerAlia, Inc.” and to the domain name “ameralia.com” to Robert van Mourik and Bill Gunn for nominal consideration.  This change of name was approved by the shareholders on September 14, 2010 and the Company promptly amended its articles of incorporation to change the corporate name.  The Company has completed this assignment.





Corporate Loans – Loans to Natural Resources





Over several years, officers and directors advanced loans to Natural Resources as detailed in the Notes to the Financial Statements. These comprised advances to us, as well as accrued but unpaid compensation, directors’ fees and interest. Obligations owed to related parties at December 31, 2010 comprised $321,369 due to Sentient for reimbursement of expenses and $16,303 for reimbursement of expenses paid by management.





Customer Relationship





Bunnett & Company is Natural Soda’s largest customer representing 22% of NSI’s sales by revenue in FY2010.  The principal of Bunnett & Company is Mr. Bill Bunnett, Brad Bunnett’s father.





No Other Relationships





No nominee or director of Natural Resources 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.





List All Parents of the Company





Under Rule 405 of Regulation C, the term “parent” when used with respect to Natural Resources means an affiliate controlling the Company directly or indirectly through one or more intermediaries.  One entity that has the ability to control the Company (other than its Board and shareholders generally) is GSR through its beneficial ownership of 94.8% of our Common Shares.


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Transactions with Promoters





Not applicable.




EQUITY COMPENSATION PLANS




The following is provided with respect to compensation plans (including individual compensation arrangements) under which equity securities are authorized for issuance as of the six months ending December 31, 2010.





Equity Compensation Plan InformationPlan Category and

Description

Number of Securities to be issued upon exercise of outstanding options, warrants, and rights


Weighted-average exercise price of outstanding options, warrants, and rights


Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(a)


(b)


(c)Equity compensation plans approved by security holders


675,000


$
0.49



34,325,000Equity compensation plans not approved by security holders


-0-



-0-



-0-Total


675,000


$
0.49



34,325,000




ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES




HJ & Associates, LLC was the independent registered public accounting firm for Natural Resources during the fiscal year ended June 30, 2010.




Our financial statements have been audited by HJ & Associates, LLC, independent registered public accounting firm, for the six months ended December 31, 2010 and for the years ended June 30, 2010, 2009, 2008, 2007 and 2006.




For the six months ended December 31, 2010 and for the fiscal years ended June 30, 2010 and 2009, HJ & Associates has billed the Company the following amounts for services provided.




Six Months


Year ended June 30,Ended Dec. 31, 2010


2010


2009Audit fees

$
79,000


$
121,600


$
131,800Audit related fees


-



-



-Tax fees


19,445



9,400



21,150All other fees


-



-



-$
98,445


$
131,000


$
152,950


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Audit Fees




Consists of fees billed for professional services rendered for the audit of our financial statements, review of interim consolidated financial statements included in quarterly reports and services that are normally provided by the principal accountants in connection with statutory and regulatory filings or engagements.




Audit Related Fees




Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees”.




Tax Fees




Consists of fees billed for professional services for tax compliance, tax advice and tax planning.  These services include preparation of federal and state income tax returns.




All Other Fees




Consists of fees for product and services other than the services reported above.




Policy on Pre-Approval by Audit Committee of Services Performed by Independent Auditors




The Board has adopted an Audit Committee Charter which is reviewed annually and amended if considered necessary.  It was last amended February 9, 2011.  The Audit Committee’s responsibilities include responsibility to:





·
Pre-approve all audit services that the auditor may provide to Natural Resources or any subsidiary (including, without limitation, providing comfort letters in connection with securities underwritings or statutory audits) as required by §10A(i)(1)(A) of the Exchange Act (as amended by the Sarbanes-Oxley Act of 2002); and


·
Pre-approve all non-audit services (other than certain de minimis services described in §10A(i)(1)(B) of the Exchange Act (as amended by the Sarbanes-Oxley Act of 2002)) that the auditors propose to provide to Natural Resources or any of its subsidiaries.





The independent auditors are engaged by the Audit Committee subject to the auditors providing an estimate of their fees for their services.  The Audit Committee subjects all audit related services to this pre-approval policy.


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PART IV





ITEM 15.              EXHIBITS AND FINANCIAL STATEMENT SCHEDULES





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





3.3(ff)
Amended and Restated Articles of Incorporation, filed June 30, 2010


3.4(gg)
Amendment to the Amended and Restated Articles of Incorporation, filed September 14, 2010


3.5
Amended and Restated Bylaws


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


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


10.10 (f)
U.S. Government Sodium Lease


10.11 (g)
Design/Build Contract with U.S. Filter Corp.


10.12 (b)
Amended and Restated Guaranty Agreement with the Jacqueline Badger Mars Trust


10.13 (d)
Second Amended and Restated Guaranty Agreement with the Jacqueline Badger Mars Trust


10.14 (c)
AmerAlia, Inc. 2001 Directors’ Incentive Plan


10.15 (c)
AmerAlia, Inc. 2001 Stock Option Plan


10.16 (h)
Third Amended and Restated Guaranty Agreement with the Jacqueline Badger Mars Trust


10.17 (i)
Fourth Amended and Restated Guaranty Agreement with the Jacqueline Badger Mars Trust


10.18 (i)
Guaranty Agreement – Messrs Woolard and O’Kieffe.


10.19 (j)
Asset Purchase Agreement between AmerAlia, Inc., Natural Soda, Inc., White River Nahcolite Minerals, LLC., and IMC Global, Inc. dated January 9, 2003.


10.19 (j)
Amendment dated February 10, 2003 to the Asset Purchase Agreement.


10.20 (j)
Closing Agreement dated February 20, 2003, between AmerAlia, Inc., Natural Soda Holdings, Inc., Sentient Global Resources Fund I, LP and Sentient Global Resources Trust No. 1; Promissory note from Natural Soda Holdings, Inc. to Sentient Global Resource Fund I, LP and Sentient Global Resource Trust No. 1; and Pledge Agreement from Natural Soda Holdings, Inc. to Sentient Global Resources Fund I, LP and Sentient Global Resources Trust No. 1.


10.21 (k)
Extension Agreement dated March 24, 2003 between AmerAlia, Inc., Natural Soda Holdings, Inc., Sentient Global Resource Fund I, LP and Sentient Global Resource Trust No. 1.


10.22 (l)
Second Extension Agreement dated April 22, 2003 between AmerAlia, Inc., Natural Soda Holdings, Inc., Sentient Global Resource Fund I, LP and Sentient Global Resource Trust No. 1.


10.23 (m)
Third Extension Agreement dated May 31, 2003 between AmerAlia, Inc., Natural Soda Holdings, Inc., Sentient Global Resource Fund I, LP and Sentient Global Resource Trust No. 1.


10.24 (n)
Fourth Extension Agreement dated June 30, 2003 between AmerAlia, Inc., Natural Soda Holdings, Inc., Sentient Global Resource Fund I, LP and Sentient Global Resource Trust No. 1.


10.25 (o)
Fifth Extension Agreement dated July 31, 2003 between AmerAlia, Inc., Natural Soda Holdings, Inc., Sentient Global Resource Fund I, LP and Sentient Global Resource Trust No. 1.


10.27 (p)
Sixth Extension Agreement dated August 31, 2003 between AmerAlia, Inc., Natural Soda Holdings, Inc., Sentient Global Resource Fund I, LP and Sentient Global Resource Trust No. 1.


10.28 (q)
Seventh Extension Agreement dated September 30, 2003 between AmerAlia, Inc., Natural Soda Holdings, Inc., Sentient Global Resource Fund I, LP and Sentient Global Resource Trust No. 1.


10.29 (r)
Eighth Extension Agreement dated October 31, 2003 between AmerAlia, Inc., Natural Soda Holdings, Inc., Sentient Global Resource Fund I, LP and Sentient Global Resource Trust No. 1.


10.30 (s)
Ninth Extension Agreement dated November 30, 2003 between AmerAlia, Inc., Natural Soda Holdings, Inc., Sentient Global Resource Fund I, LP and Sentient Global Resource Trust No. 1.


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10.33 (t)
Debenture Purchase Agreement executed March 19, 2004 by and among Natural Soda Holdings, Inc., Natural Soda, Inc., AmerAlia, Inc. and Sentient Executive GP I, Limited, acting on behalf of the General Partner of Sentient Global Resources Fund I, L.P. and Sentient (Aust) Pty Limited, Acting on behalf of Sentient Global Resources Trust No. 1.


10.34 (t)
Securityholder Agreement dated March 19, 2004 among AmerAlia, Inc., Natural Soda, Inc., Sentient Executive GP I, Limited, acting on behalf of the General Partner of Sentient Global Resources Fund I, L.P. and Sentient (Aust.) Pty Limited, Acting on behalf of Sentient Global Resources Trust No. 1 and Natural Soda Holdings, Inc.


10.35 (t)
Management & Cost Reimbursement Agreement dated March 19, 2004 among AmerAlia, Inc., Sentient Executive GP I, Limited, acting on behalf of the General Partner of Sentient Global Resources Fund I, L.P. and Sentient (Aust.) Pty Limited, Acting on behalf of Sentient Global Resources Trust No. 1, Natural Soda Holdings, Inc. and Natural Soda, Inc.


10.36 (t)
Form of Secured Series A 10% Debenture Due September 30, 2005.


10.37 (t)
Form of Secured Subordinated Series B1 Debenture Due February 19, 2008.


10.38 (t)
Form of Secured Subordinated Series B2 Convertible Debenture Due February 19, 2008.


10.39 (t)
Form of Unsecured Subordinated Series C Debenture Due February 19, 2008


10.40 (t)
Addendum to the Third and Fourth Amended and Restated Guaranty Agreements entered into March 19, 2004 by and between AmerAlia, Inc. and Jacqueline B. Mars, as Trustee of the Jacqueline B. Mars Trust dated February 5, 1975, as amended.


10.42 (v)
Form of Secured Promissory Note Due 6-30-06.


10.43 (v)
Memorandum of Understanding AmerAlia, Inc. and Series C Security Holders.


10.44 (v)
Account Purchase Agreement with Wells Fargo Bank NA.


10.45 (v)
Amendment to Account Purchase Agreement with Wells Fargo Bank NA.


10.46 (w)
Water Purchase Contract with Shell Frontier Oil & Gas, Inc.


10.47 (x)
Promissory Note for $350,000 issued to Sentient USA Resources Fund II, LP.


10.49 (y)
Debenture Purchase Agreement executed May 27, 2008, to be effective as of October 31, 2007, by and among Natural Soda Holdings, Inc., Natural Soda, Inc., AmerAlia, Inc. and Sentient USA Resources Fund, LP.


10.50 (y)
Interest Purchase Agreement executed May 27, 2008, to be effective as of March 31, 2008, by and among Natural Soda Holdings, Inc., Natural Soda, Inc., AmerAlia, Inc., Sentient USA Resources Fund. LP and Sentient Global Resources Fund III LP.


10.51 (z)
Promissory note for $300,000 issued to Sentient Global Resources Fund III, L.P.


10.52 (aa)
Restructuring Agreement between AmerAlia Parties and Sentient Entities dated September 25, 2008.


10.53 (bb)
Form of Letter Offer of Shares.


10.54 (cc)
Amendment to Restructuring Agreement between AmerAlia Parties and Sentient Entities dated October 31, 2008


10.55 (cc)
Shareholders Agreement between Natural Soda Holdings, Inc., AmerAlia, Inc. and Sentient USA Resources Fund L.P.


10.56 (dd)
Contribution Agreement made and entered into July 15, 2009, by and between Natural Soda Holdings, Inc., Sentient USA Resources Fund, LP, and AmerAlia, Inc.


10.57.1(ee)
Contribution Agreement made and entered into December 17, 2009, by and between Natural Soda Holdings, Inc., Sentient USA Resources Fund, LP, and AmerAlia, Inc.


10.57.2(ff)
Exchange Agreement and Plan of Reorganization, dated June 30, 2010


10.58 (ff)
License Agreement, dated June 30, 2010, including Amendment Number 1 to License Agreement.


10.59 (ff)
Reimbursement Agreement, dated June 29, 2010


10.60 (ff)
Consulting Agreement, dated November 1, 2009


10.61 (hh)
Termination Toveloa Consulting Agreement, dated March 21, 2011


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21.1
Subsidiaries of the Registrant:  Natural Soda Holdings, Inc., a Colorado corporation and its wholly owned subsidiary, Natural Soda, Inc., a Colorado corporation.


31.1
Certification of Chief Executive Officer filed pursuant to Rule 13a-14(a) of the Exchange Act


31.2
Certification of Chief Financial Officer filed pursuant to Rule 13a-14(a) of the Exchange Act


32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.


32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.


(a)
Incorporated by reference from Natural Resources’ Form 10 General Registration Statement filed with the Commission on March 5, 1987.


(b)
Incorporated by reference from Natural Resources’ annual report on Form 10-K for the year ended June 30, 2000.


(c)
Incorporated by reference from Natural Resources’ Form 10-K for its year ended June 30, 2001.


(d)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of December 1, 2000.


(f)
Incorporated by reference from Natural Resources’ Form 10-K for its year ended June 30, 1995.


(g)
Incorporated by reference from Natural Resources’ Form 10-K for its year ended June 30, 1999.


(h)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of December 17, 2001.


(i)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of March 29, 2002.


(j)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of February 20, 2003.


(k)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of March 24, 2003.


(l)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of April 22, 2003.


(m)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of May 31, 2003.


(n)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of June 30, 2003.


(o)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of July 31, 2003.


(p)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of August 31, 2003.


(q)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of September 30, 2003.


(r)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of October 31, 2003.


(s)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of November 30, 2003.


(t)
Incorporated by reference from Natural Resources’ Form 10-QSB for its quarter ended December 31, 2003.


(v)
Incorporated by reference from Natural Resources’ Form 10-KSB for its year ended June 30, 2005.


(w)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of January 29, 2007.


(x)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of August 22, 2007.


(y)
Incorporated by reference from Natural Resources’ Form 10-KSB for its year ended June 30, 2006.


(z)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of June 24, 2008.


(aa)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of September 25, 2008.


(bb)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of October 13, 2008.


(cc)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of October 31, 2008.


(dd)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of July 15, 2009.


(ee)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of December 17, 2009.


(ff)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of June 30, 2010.


(gg)
Incorporated by reference from Natural Resources’ Form 8-K reporting an event of September 14, 2010


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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.





NATURAL RESOURCES USA CORPORATION.By:
/s/ Bill H. Gunn
Date: September 14, 2011Bill H. Gunn, CEO




KNOW ALL PEOPLE BY THESE PRESENTS, that each of the persons whose signature appears below hereby constitutes and appoints Bill H. Gunn and Robert van Mourik, each acting individually, as his attorney-in-fact, each with the full power of substitution, for him in any and all capacities, to sign any and all amendments to this Transition Return on Form 10-KT, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform each and every act and things requisite and necessary to be done in and about the premises as fully as to all intents and purposes
as he might or could do in person, hereby ratifying and confirming our signatures as they may be signed by our said attorney-in-fact and any and all amendments to this Transition Report on Form 10-KT.


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





/s/ Bill H. Gunn

Chairman, CEO and Director

Date: September 14, 2011Bill H. Gunn

(Principal Executive Officer)/s/ Robert van Mourik

Chief Financial Officer, Secretary and Treasurer

Date: September 14, 2011Robert C. J. van Mourik

(Principal Financial and Accounting Officer)/s/ Neil E. Summerson

Director

Date: September 14, 2011Neil E. Summerson/s/Geoffrey C. Murphy

Director

Date: September 14, 2011Geoffrey C. Murphy/s/ J. Jeffrey Geldermann

Director

Date: September 14, 2011J. Jeffrey Geldermann/s/Alan M. De’ath

Director

Date: September 14, 2011Alan M. De’ath/s/Paul-Henri Couture

Director

Date: September 14, 2011Paul-Henri Couture/s/Leigh Hall

Director

Date: September 14, 2011Leigh Hall/s/Wayne Richardson

Director

Date: September 14, 2011Wayne Richardson/s/Alan You Lee

Director

Date: September 14, 2011Alan You Lee




91