----

**SECURITIES                          AND EXCHANGE COMMISSION**

**WASHINGTON,                          D.C. 20549**

**FORM                          10-KSB**

| [X                                    ] | ANNUAL                                    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                                    SECURITIES EXCHANGE ACT OF                                    1934 For the Fiscal Year Ended June 30,                                    2005 |
|-----------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| [                                    ] | TRANSITION                                    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                                    SECURITIES EXCHANGE ACT OF                                    1934 |
|----------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**AMERALIA,                          INC.**

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

| Company's                                    telephone number, including area code:                                                                                        | (720)                                    876-2373 |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------|
| Securities                                    registered pursuant to Section 12(b) of the Act:                                                                             | None.                                             |
| Securities                                    to be registered pursuant to Section 12(g) of                                    the                                    Act: |

| Check                                    whether the issuer is not required to file reports                                    pursuant to Section 13                                    or 15(d) of the Exchange                                    Act.                                                                                                            [ ] Check                                    whether the issuer (1) filed all reports required                                    to be filed by Section                                    13 or 15(d) of the Exchange Act during the past                                    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                                    / / No / X / |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Indicate                                    by check mark whether the registrant is a Shell                                    Company (as defined in                                    Rule 12b-2 of the Exchange                                    Act)                                                                              Yes                                    / / No /X/Check                                    if disclosure of delinquent filers in response                                    to Item 405 of Regulation                                    S-B is not contained in this form, and no disclosure                                    will be contained, to                                    the best of registrant’s knowledge, in definitive proxy or information                                    statements incorporated by reference in Part                                    III of this Form 10-KSB or                                    any amendment to this Form                                    10-KSB.                                                                                                                                                                                                                                               [ ] |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Revenues                                    for the fiscal year ending June 30, 2005: | $14,141,500 |
|---------------------------------------------------------------------------------------|-------------|

| Aggregate                                    market value of the voting stock held by non-affiliates                                    of AmerAlia as of                                    December 26, 2006 was approximately $3,497,500. The estimate                                    is based                                    on the last sale price per share and 6,995,047                                    shares held by                                    non-affiliates.Shares                                    of common stock, $.01 par value, outstanding                                    as of December 26,                                    2006:                                                17,239,437 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**Forward                          Looking Statements pursuant to 1933 & 1934 Securities Acts**

|   | · | our                                    historical lack of profitable                                    operations; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------|

|   | · | a                                    need for highly profitable operations to service                                    the interest costs of our                                    outstanding debt; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                                    risks that the refinancing necessary to reduce                                    our cost of funding and to                                    finance our operations, the operations of our                                    subsidiaries and expansion                                    of production capacity will not be available                                    on reasonable terms, if at                                    all; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                                    risks of undertaking exploration, development                                    and mining of mineral                                    properties; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                                    risks associated with the manufacture and marketing                                    of chemical products;                                    and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                                    risk of default on the debentures held by the                                    Sentient Entities, the                                    promissory notes issued to our various investors                                    and the Bank of America                                    and its associated guaranty agreement obligations                                    to the Mars Trust. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**TABLE                          OF CONTENTS**

| **Item** |                                                                                                                                                                                                                                    | **Page** |
|----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|     |                                                                                                                                                                                                                                    |     |
|     | **PART                                    1**                                                                                                                                                                                           |     |
| 1.       | Description                                    of Business                                                                                                                                                                              |  1  |
|     |                                        Our BLM Sodium Leases & Oil Shale Lease Possibilities                                                                                                                         |  2  |
|     |                                        Our Sodium Bicarbonate Business                                                                                                                                                   |  5  |
|     |                                        Our Water Rights                                                                                                                                                                  |  8  |
|     |                                        Our Financing Arrangements                                                                                                                                                        |  11 |
|     |                                        Our Recapitalization Plan                                                                                                                                                         |  15 |
|     |     Risk                                  Factors                                                                                                                                                                   |  18 |
| 2.       | Description                                    of Property                                                                                                                                                                              |  20 |
| 3.       | Legal                                    Proceedings                                                                                                                                                                                    |  21 |
| 4.       | Submission                                    of Matters to a Vote of Security holders                                                                                                                                                  |  21 |
|     |                                                                                                                                                                                                                                    |     |
|     | **PART                                    11**                                                                                                                                                                                          |     |
|     |                                                                                                                                                                                                                                    |     |
| 5        | Market                                    for Company’s Common Equity, Related Stockholder Matters                                    and Small                                    Business Issuer Purchases of Equity Securities |  21 |
| 6.       | Management’s                                    Discussion and Analysis or Plan of Operation                                                                                                                                      | 23       |
| 7.       | Financial                                    Statements                                                                                                                                                                                 | 26       |
| 8A.      | Changes                                    in and Disagreements with Accountants on Accounting                                    and Financial                                    Disclosure                                           | 26       |
| 8B.      | Other                                    Information                                                                                                                                                                                    | 26       |
|     |                                                                                                                                                                                                                                    |     |
|     | **PART                                    111**                                                                                                                                                                                         |     |
|     |                                                                                                                                                                                                                                    |     |
| 9.       | Directors,                                    Executive Officers, Promoters and Control Persons;                                    Compliance with Section                                    16(a) of the Exchange Act                |  27 |
| 10.      | Executive                                    Compensation                                                                                                                                                                               | 30       |
| 11.      | Security                                    Ownership of Certain Beneficial Owners and Management                                    and Related                                    Stockholder Matters                                 |  34 |
| 12.      | Certain                                    Relationships and Related Party Transactions                                                                                                                                                 | 36       |
| 13.      | Exhibits                                                                                                                                                                                                                                | 41       |
| 14.      | Principal                                    Accountant Fees and Services                                                                                                                                                               | 43       |
|     |                                                                                                                                                                                                                                    |     |
|     | **SIGNATURES**                                                                                                                                                                                                                          |     |
|     | Consolidated                                    Financial Statements                                                                                                                                                                    | 44       |
|     |

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**PART                          I**

**ITEM                          1.**
**DESCRIPTION                          OF BUSINESS**

**(a)**
**Business                          Development**

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

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**(b)**
**Business                          of Issuer**

**GENERAL                          DISCUSSION**

|   | (a) | create                                    shareholder value through the sale of a diverse                                    range of natural products                                    derived from the recovery of our natural sodium                                    resources, |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | use                                    our water rights and |
|--------|-----|-------------------------------------------------------------|

|   | (c) | secure                                    title to a part or all of the oil shale resources                                    that underlie our                                    nahcolite leases. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**1.**
**OUR                          BLM SODIUM LEASES & OIL SHALE LEASE POSSIBILITIES**

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

|   |
|--------|
|   |

|                                                                                                                                                                                                        |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Figure                                    2: AmerAlia’s Sodium Leases are located****about                                    54 miles northwest of Rifle,                                    Colorado** |

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

|                                                                                                                                 |
|-------------------------------------------------------------------------------------------------------------------------------------------|
| **Figure                                    3: A general illustration of the solution mining                                    process** |

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**Oil                          Shale Lease Possibilities**

**2.**
**NATURAL                          SODA - OUR SODIUM BICARBONATE BUSINESS**

**Description                          of the WRNM Acquisition**

**Description                          of the Assets**

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**3.**
**OUR                          WATER RIGHTS**

**General**

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

|                                                         |
|------------------------------------------------------------------------|
| **Figure                                    4: Colorado River System** |

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**Identification                          of Water Rights**

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

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**OUR                          FINANCING ARRANGEMENTS**

**Description                          of the Short-Term Financing**

**Long-Term                          Financing Agreements**

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

|   | · | AmerAlia                                    received $3,500,000 in NSHI Series A Secured                                    10% Debentures utilizing                                    funds it raised from accredited investors (see“AmerAlia Funding”,                                    below); |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                                    Sentient Entities invested an additional $2,000,000                                    in NSHI Secured Series                                    A 10% Debentures. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $3,000,000                                    in Secured Series A 10% Debentures; |
|--------|--------|-----------------------------------------------------------------------------------|

|   | · | $11,300,000                                    in Secured Subordinated Series B1                                    Debentures; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

|   | · | $9,700,000                                    in Secured Subordinated Series B2 Convertible                                    Debentures. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $275,000                                    of Secured Series A 10% Debentures; |
|--------|--------|---------------------------------------------------------------------------------|

|   | · | $12,000,000                                    of Unsecured Subordinated Series C                                    Debentures; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------|

|   | · | 4,949                                    shares of Series A Preferred Stock having a liquidation                                    value of                                    $4,949,000; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an                                    additional issue of common stock bringing the                                    total common stock held by                                    AmerAlia to 51,000 shares, being all the common                                    stock                                    issued. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

** **

| **Period**                                                          | **Interest                                    Rate per Annum** |
|---------------------------------------------------------------------|----------------------------------------------------------------|
| March                                    19, 2004 - June 30, 2004   | 1.5%                                                           |
| July                                    1, 2004 - June 30, 2005     | 4.5%                                                           |
| July                                    1, 2005 - June 30, 2006     | 7.5%                                                           |
| July                                    1, 2006 - June 30, 2007     | 10.5%                                                          |
| July                                    1, 2007 - February 19, 2008 | 13.5%                                                          |

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**OUR                          RECAPITALIZATION PLAN**

**Standstill                          Agreement with Sentient**

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**Proposed                          Transaction with Sentient**

**Memorandum                          of Understanding - the Jacqueline Badger Mars Trust, Robert                          Woolard and Charles                          D. O’Kieffe**

|   | · | NSHI                                    will be the only holder of shares of NSI common                                    stock that are not owned                                    by Sentient. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | NSHI                                    and Sentient will enter into a shareholder agreement                                    to govern their                                    various rights and                                    responsibilities. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | NSI                                    will replace BLM and other bonds that are currently                                    guaranteed by the Mars                                    Trust as a pre-condition of the                                    recapitalisation. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | All                                    inter-company loan accounts between NSHI and                                    NSI and between NSHI and                                    AmerAlia will be extinguished. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | AmerAlia                                    will convert its NSHI preferred stock for NSHI                                    common                                    stock. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | AmerAlia                                    shall convert its NSHI Series A Debenture and                                    accrued interest into NSHI                                    common stock and raise funds to repay or else                                    renegotiate its Series A                                    notes. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | AmerAlia,                                    the Mars Trust, Woolard & O’Kieffe will enter into a shareholders                                    agreement that shall govern the conduct of the                                    parties and the management                                    of NSHI concerning, amongst other                                    things: |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | The                                    appointment of a NSHI Board of Directors representative                                    of the relative                                    ownership of the company held by each                                    shareholder. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | The                                    distribution of cash received from NSI whether                                    by dividends or from funds                                    of any other nature representing profits paid                                    by NSI to                                    NSHI. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | The                                    circumstances under which shareholders may contribute                                    additional capital                                    to NSHI to support NSHI’s share of any additional capital investment                                    in                                    NSI. |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | NSHI                                    shares must be convertible into NSI shares upon                                    the occurrence of specific                                    triggering events. These events are the bankruptcy                                    of AmerAlia or the                                    failure of NSI to remit cash to its shareholders                                    according to criteria                                    still to be determined. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | AmerAlia’s                                    first right of refusal to acquire NSHI shares                                    offered for sale by other                                    shareholders. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | NSI                                    shall enter into a formal management or professional                                    services agreement                                    with AmerAlia that is independent of                                    NSHI. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                                    apportionment of shareholdings of NSHI will be                                    based on an accurate                                    determination of liabilities on September 30,                                    2006 and an agreed total                                    capitalisation of $51 million for NSHI. The resulting                                    conversion of these                                    obligations and preferred stock is estimated                                    to                                    be: |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

|                                                                |                                                     |                                                                       |
|---------------------------------------------------------------------|----------------------------------------------------------|----------------------------------------------------------------------------|
|                                                                | Pro                                    formaobligation   | Outcome                                    upon conversion to common stock |
|                                                                | at                                    Sept. 30 ‘06 | #                                    Shares                                | % |
| Mars                                    Trust                       | $                                    11,953,256          | 24,555                                                                     | 23.4 |
| O’Kieffe                                                      | 1,770,851                                                | 3,638                                                                      | 3.5 |
| Woolard                                                             | 968,539                                                  | 1,990                                                                      | 1.9 |
| Sub-total                                    - Series C Obligations | $                                    14,692,646          | 30,182                                                                     | 28.8 |
|                                                                |                                                     |                                                                       |   |
| Series                                    A Debentures*             | 4,375,000                                                | 8,987                                                                      | 8.6 |
| Series                                    A Interest*               | 750,625                                                  | 1,542                                                                      | 1.5 |
| AmerAlia                                    - preferred stock       | 6,355,000                                                | 13,055                                                                     | 12.5 |
| AmerAlia                                    current shareholding    | 24,826,729                                               | 51,000                                                                     | 48.7 |
| Sub-total                                    - AmerAlia             | 36,307,354                                               | 74,584                                                                     | 71.2 |
| TOTAL                                                               | $51,000,000                                              | 104,766                                                                    | 100.0 |

**Holders                          of AmerAlia’s Series A Notes**

**Unsecured                          Creditors**

**Discussion**

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**EMPLOYEES**

**RISK                          FACTORS**

*NSHI                          and its operations are highly leveraged which increases                          the risk of default and                          the loss of collateral to our lenders*

*Apart                          from our obligation to pay interest to the Sentient Entities,                          our ability to                          service our additional debt obligations is entirely dependent                          on interest and                          dividend payments we receive from NSHI, or else from new                          debt or equity                          offerings*

*AmerAlia                          has large accumulated losses, we expect future losses and                          we may not achieve or                          maintain profitability.*

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

*AmerAlia                          relies on key employees in NSI to manage its operations                          and may have difficulty                          replacing them if they were to leave our employ.*

*AmerAlia’s                          pricing of its products is determined in a competitive                          environment in which we                          are not generally able to lead prices. *

| · | *The                                    loss of any of our principal customers could                                    significantly lower our sales                                    and profitability.* |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*NSI                          may not be able to continue to recover sodium bicarbonate                          economically or at all                          from the sodium leases and if so, we cannot service our                          debt                          obligations.*

| · | *Increasing                                    gas, power and fuel costs could erode our profit                                    margins and harm                                    operating results.* |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*NSI’s                          operations are subject to a significant amount of regulatory                          scrutiny and                          regulation from federal and state authorities.*

** **

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

*NSI’s                          water rights may be threatened by potential competitors                          for                          water.*

*The                          long-term financing agreements allow the conversion and                          exchange of the Sentient                          debentures for AmerAlia stock that may result in the issuance                          of a significant                          number of shares which would dilute the ownership of the                          current AmerAlia                          shareholders. *

*Hudson                          may take action against AmerAlia or its subsidiaries to                          recover the moneys owed                          to him under his judgement.*

*Under                          the Securityholder Agreement, AmerAlia has granted Sentient                          the right to force                          the sale of its economic interests in NSHI and its business                          operations on the                          same terms and conditions agreed to by Sentient for its                          interests.*

**ITEM                          2.**
**DESCRIPTION                          OF PROPERTY**

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**ITEM                          3.**
**LEGAL                          PROCEEDINGS**

*AmerAlia,                          Inc. v. Marvin H. Hudson*

**ITEM                          4.**
**SUBMISSION                          OF MATTERS TO A VOTE OF SECURITY HOLDERS**

**PART                          II**

**ITEM                          5.**
**MARKET                          FOR COMPANY'S COMMON EQUITY, RELATED STOCKHOLDER **MATTERS                          AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY                          SECURITIES****

**(a)**
**Market                          Information.**

|                                                     |
|----------------------------------------------------------|
|                                                     | Highest                                    Price | Lowest                                    Price |
| For                                    the Quarter Ended | For                                    the Quarter ($) | For                                    the Quarter ($) |
| September                                    30, 2004    | 0.85 | 0.46 |
| December                                    31, 2004     | 0.95 | 0.95 |
| March                                    31, 2005        | 0.95 | 0.95 |
| June                                    30, 2005         | 0.65 | 0.65 |
| September                                    30, 2005    | 1.05 | 0.38 |
| December                                    31, 2005     | 1.25 | 0.25 |
| March                                    31, 2006        | 1.02 | 0.20 |
| June                                    30, 2006         | 0.90 | 0.30 |
| September                                    30, 2006    | 0.50 | 0.20 |
| December                                    31, 2006     | 0.55 | 0.35 |

**(a)**
**Holders.                          **

| **(c)** | **Dividends.** |
|---------|----------------|

**(d)**
**Securities                          authorized for issuance under equity compensation plans.**

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

| **Equity                                    Compensation Plan Information** (1)                                                 |
|--------------------------------------------------------------------------------------------------------------------------------------|
| Plan                                    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                                            |   952,500 |   $0.65 |   460,000 |
| Equity                                    compensation plans not approved by security holders                                    (2) |   635,000 |   $1.66 |   -0- |
| Total                                                                                                                                | 1,587,500 | $1.05 | 460,000 |

|   | (1) | This                                    does not include options held by management and                                    directors that were not                                    granted as compensation. In each case, the disclosure                                    refers to options or                                    warrants unless otherwise specifically                                    stated. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | This                                    compensation comprises 430,000 options granted                                    by the Board of Directors                                    to investors, officers, past and some present                                    directors prior to the                                    adoption of shareholder approved Directors Incentive                                    Plan and Employee                                    Stock Option Plan in 2001 to subscribe for shares                                    at $1.50 per share until                                    June 28, 2006; and 200,000 options granted in                                    April 2004 to some present                                    directors as discussed below at Item 10 at “Compensation of Directors”                                    under “Other Grants of Options”. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**(e)**
**Recent                          Sales of Unregistered Securities -- Item 701 Disclosure.**

|                                                 |
|------------------------------------------------------|
| **Date                                    of Issue** | **No.                                    of shares** | **Recipients** | **Consideration** | **Reliance                                    on exemptions** | **Conversion                                    terms** | **Notes** |
| **(a)**                                              | **(a)** | **(b)** | **(c)** | **(d)** | **(e)** |   |
| Sept.                                    2004        | 26,470 | An                                    accredited investor | Exercise                                    of options | See                                    Note 1 | None |   |
| Oct                                    2004          | 15,833 | Director                                    of AmerAlia | Exercise                                    of options | See                                    Note 1 | None |   |
| Oct                                    2004          | Nil | An                                    accredited investor | $100,000                                    promissory note issued for cash | See                                    Note 1 | None |   |
| April                                    2005        | Nil | Directors                                    of AmerAlia or their affiliates | $500,000                                    promissory notes issued for cash and satisfaction                                    of unpaid                                    obligations | See                                    Note 1 | None | 2 |
| June                                    2005         | 75,000 | Directors                                    of AmerAlia | Exercise                                    of options | See                                    Note 1 | None |   |
| Sept                                    2005         | 8,333 | Creditor | Part                                    debt settlement | See                                    Note 1 | None |   |
| Dec                                    2005          | 60,000 | Creditor | Part                                    debt settlement | See                                    Note 1 | None |   |
| Dec                                    2005          | 137,500 | Directors                                    of AmerAlia | Exercise                                    of options | See                                    Note 1 | None |   |
| June                                    2006         | 50,000 | Directors                                    of AmerAlia | Exercise                                    of options | See                                    Note 1 | None |   |

**Notes:**

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

|   | 2. | See                                    Item 1(b) at “AmerAlia Funding”. |
|--------|----|-------------------------------------------------------------------------------------|

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**ITEM                          6.**
**MANAGEMENT’S                          DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**

**(b)**
**Management’s                          Discussion and Analysis of Financial Condition and Results                          of                          Operations**

|   |
|--------|
| **FY** | **Sales                                    (tons)** | **%                                    Change** |
| 2004   | 84,103 |   |
| 2005   | 85,038 | +1.1 |
| 2006   | 88,910 | +4.6 |

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**Liquidity                          and Capital Resources**

**(c)**
**Off-Balance                          Sheet Arrangements**

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**ITEM                          7.**
**FINANCIAL                          STATEMENTS**

**ITEM                          8.**
**CHANGES                          IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND                          FINANCIAL                          DISCLOSURE**

**ITEM                          8A.**
**CONTROLS                          AND PROCEDURES**

**ITEM                          8B.**
**OTHER                          INFORMATION**

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**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**PART                          III**

**ITEM                          9.**
**DIRECTORS,                          EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE                          WITH SECTION 16(a)                          OF THE EXCHANGE ACT**

**(a)**
**Identification                          of Directors and Executive Officers.**

| Name                                    & Age                                                               | Position                                                                                    | First                                    Elected |
|-----------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|--------------------------------------------------|
|                                                                                                            |                                                                                        | Or                                    Appointed  |
|  Bill                                    H. Gunn (64)                                                      |  Chairman                                    of the Board,                             |  02/84                                      |
|                                                                                                            | President                                    & CEO of AmerAlia, Inc.                    | 09/90                                            |
| Robert                                    C.J. van Mourik (53)                                                  | Director,                                                                                   | 01/89                                            |
|                                                                                                            | Executive                                    Vice President & Chief Financial Officer,  |                                             |
|                                                                                                            | Secretary                                    & Treasurer of AmerAlia, Inc.              |                                             |
| Neil                                    E. Summerson (58)                                                       | Director,                                    Professional Company Director (1)              | 09/90                                            |
| Geoffrey                                    C. Murphy (65)                                                      | Director,                                    Retired (1,2)                                  | 06/99                                            |
| James                                    V. Riley (69)                                                          | Director,                                    Chairman of Clear Channel Airports, Inc. (1,2) | 10/01                                            |
| Robert                                    C. Woolard (70)                                                       | Director,                                    Chairman of Wool-RACKS Holdings, Inc (2)       | 05/04                                            |
| J.                                    Jeffrey Geldermann (56)                                                   | Director,                                    President, Credentials, Inc.(2)                | 06/04                                            |
| (1)                                    Members of the Audit Committee.                                          |
| (2)                                    Members of the Compensation                                    Committee |

----

**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

----

**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**(b)**
**Identification                          of Significant Employees.**

**(c)**
**Family                          Relationships.**

**(d)**
**Involvement                          in Certain Legal Proceedings:**

**(d)(1)**

**(d)(2)**

**(d)(3)**

**(d)(4)**

**(e)**
**Audit                          Committee Financial Expert.**

----

**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**(f)**
**Identification                          of the Audit Committee.**

**(g)**
**Compensation                          Committee.**

**Section                          16(a) Beneficial Ownership Reporting Compliance.**

**ITEM                          10.**
**EXECUTIVE                          COMPENSATION**

**(a)**
**General.**

**(b)**
**Summary                          Compensation Table.**

*.*

**AmerAlia                              Annual Report on Form 10-KSB for year ended June 30,                              2005**

----

**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

|  Name&Position                                                                                                                                                                                                   |   Year                                     | Annual                                    Compensation (a) | Long                                    Term Compensation |  All                                    OtherCompensation                                                                                         |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------|------------------------------------------------------------|-----------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|  Salary                                                                                                                                                                                                              |  Bonus                                          |  Other                                                | Awards                                                    | Payout                                                                                                                                                 |
| RestrictedAwards                                                                                                                                                                                                          | Options&                                    SARs | LTIPPayout                                                 |
|  Bill                                    H. Gunn,President                                    &Chief                                    ExecutiveOfficer                                                         |   200520042003                             |   $200,000$200,000$200,000                       |   -0--0--0-                                     |   $14,000                                    (b)$14,000                                    (b)$14,000                                    (b) |   -0-320,000                                    (c)-0- |   -0--0--0- |   -0--0--0- |   -0--0--0- |
|  Robert                                    van                                    Mourik,Chief                                    FinancialOfficer                                    & Executive Vice President |   200520042003                             |   $150,000$150,000$150,000                       |   -0--0--0-                                     |   $14,000                                    (b)$14,000                                    (b)$14,000                                    (b) |   -0-320,000                                    (c)-0- |   -0--0--0- |   -0--0--0- |   -0--0--0- |

|   | Notes: | (a) | At                                    June 30, 2005 accrued unpaid compensation, expenses                                    and advances to the                                    company of $350,710 and $361,441 were due to                                    Bill H. Gunn and Robert van                                    Mourik (At June 30, 2004: $290,911 and $323,854                                    respectively). |
|--------|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | See                                    Options/SAR Granted During Year Ended June 30,                                    2004, below**.**  |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------|

**(c)**
**Options/SAR                          Granted During Year Ended June 30, 2005**

**(d)**
**Aggregated                          Option/SAR Exercises and Fiscal Year-End Option/SAR Value                          Table.**

|   Name                                           |  Shares                                    acquiredon                                    exercise |  Value                                    realized |  #                                    of unexercised options at FY end (exercisable/unexercisable) |  Value                                    of in-the-money options at FY end (exercisable/unexercisable) |
|------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|---------------------------------------------------------|---------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------|
|  Bill                                    H. Gunn      |  -0-                                                                                              |  -0-                                               |  610,000/-0-                                                                                       |  -0-/-0-                                                                                                |
|  Robert                                    van Mourik |  -0-                                                                                              |  -0-                                               |  495,000/-0-                                                                                       |  -0-/-0-                                                                                                |

----

**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

|   Name                                      |  Shares                                    acquired on                                    exercise |  Value                                    realized |  #                                    of unexercised SAR’s at FY end (exercisable/unexercisable) |  Value                                    of in-the-money SAR’s at FY end (exercisable/unexercisable) |
|-------------------------------------------------------|---------------------------------------------------------------------------------------------------------|---------------------------------------------------------|-------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------|
|  Bill                                    H. Gunn |  -0-                                                                                               |  -0-                                               |  70,000/-0-                                                                                            |  -0-/-0-                                                                                                    |

**(e)**
**Long                          Term Incentive Plan -- Awards in Last Fiscal Year**

**(f)**
**Compensation                          of Directors**

**(f)(1)**
**Standard                          Arrangements.**

**(f)(2)**
**Other                          Arrangements.**

|                                                         | June                                    30                                                          |  June                                    30                                          |
|--------------------------------------------------------------|-----------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------|
|                                                         | 2005                                                                                                |  2004                                                                                |
| Robert                                    van Mourik         |  $                                       43,608                                 | $                                         48,019                 |
|  Bill                                  H. Gunn          |                                          41,096                            |                                           38,738            |
|  Geoffrey                                  C. Murphy    |                                            8,436                 |                                             8,757 |
|  Neil                                  E. Summerson     |                                             3,832           |                                             8,754 |
|  James                                  V. Riley        |                                            2,358                 |                                             3,308 |
|  Robert                                  C. Woolard     |                                               846 |  -                                                                                   |
|  J.                                  Jeffrey Geldermann |                                               638 |  -                                                                                   |
|                                                         |  $ 100,814                                                                                |  $                                      107,576                            |
|                                                         |                                                                                                |                                                                                      |

----

**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

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

|   | · |   | An                                    option to purchase 37,500 shares at current market                                    price if a                                    non-executive director on July 1 of each year. |
|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **(g)** | **Employment                                    Contracts and Termination of Employment and Change-in-Control                                    Arrangements.** |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**(h)**
**Report                          on Repricing of Options/SARs.**

----

**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**ITEM                          11.**
**SECURITY                          OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND **
**MANAGEMENT                          AND RELATED STOCKHOLDER MATTERS**

**(a)                          and (b)**
**Security                          Ownership of Certain Beneficial Owners and Management**

|                                                                                   |
|----------------------------------------------------------------------------------------|
| Name                                    & Address                                  | Amount                                    & Nature | Percent                                    of |
| of                                    Beneficial Owner                                 | of                                    Beneficial Ownership | Common                                    Stock |
|                                                                                   |   |   |
| Bill                                    H. Gunn                                        | 1,678,060                                    (1) | 9.0% |
| Robert                                    van Mourik                                   | 1,671,384                                    (2) | 9.0% |
| Robert                                    C. Woolard                                   | 1,443,293                                    (3) | 8.1% |
| James                                    V. Riley                                      | 863,233                                    (4) | 4.9% |
| Neil                                    E. Summerson                                   | 362,500                                    (5) | 2.1% |
| Geoffrey                                    C. Murphy                                  | 295,000                                    (6) | 1.7% |
| J.                                    Jeffrey Geldermann                               | 313,600                                    (7) | 1.8% |
| **Officers                                    & Directors as a Group (7 persons)** | **6,627,070                                    (8)** | **30.75%** |
| Jacqueline                                    Badger Mars, as trustee                  | 7,929,820                                    (9) | 46.0% |
| 6885                                    Elm St, McLean VA 22101                        |
| Karen                                    O. Woolard                                    | 1,443,293                                    (10) | 8.1% |
| 219                                    Eagle Pointe Drive, Branson, MO  65616     |
| Charles                                    D. O’Kieffe                           | 1,113,293                                    (11) | 6.2% |
| 523                                    Washington Ave, Wilmette, IL 60091              |
| Sentient                                    Global Resource Fund I, LP and             |
| Sentient                                    Global Resource Trust No. 1                |
| (the                                    "Sentient Entities")                           | 33,541,176                                    (12) | 69.2% |
| George                                    Town, Grand Cayman, Cayman Islands           |

|   |  (1) |  *Mr.                                    Gunn:*                                    Includes 96,125 shares of Common Stock owned                                    by Gunn Development Pty. Ltd.                                    (of which Mr. Gunn is a controlling shareholder);                                    options to acquire                                    24,000 shares at $1.00 until March 19, 2008 held                                    by Gunn Development Pty                                    Ltd; and options held directly to acquire 270,000                                    shares at $0.71 per                                    share until April 18, 2009, options to acquire                                    50,000 shares at $3.00                                    until April 18, 2009 and options to acquire 1,000,000                                    shares at $0.45 per                                    share until December 31, 2009. |
|--------|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | *Mr.                                    van Mourik:*                                    Includes 240,759 shares of Common Stock owned                                    by Ahciejay Pty. Ltd. as                                    trustee for The R.C.J. Trust, and 54,125 shares                                    of Common Stock owned by                                    the R.C.J. Superannuation Fund, as to both of                                    which Mr. van Mourik and his                                    family are beneficiaries. Includes options held                                    by Ahciejay Pty Ltd to                                    acquire 56,000 shares at $1.00 until March 19,                                    2008. Also, options held                                    directly to acquire 270,000 shares at $0.71 per                                    share until April 18,                                    2009, options to acquire 50,000 shares at $3.00                                    until April 18, 2009 and                                    options to acquire 1,000,000 shares at $0.45                                    per share until December 31,                                    2009. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | *Mr.                                    Woolard*:                                    Includes 166,875 shares held by the Robert C                                    Woolard Trust, 22,000 shares                                    held in Mr. Woolard's IRA account, options to                                    acquire 75,000 shares at                                    $0.66 until May 18, 2007, options to acquire                                    37,500 shares at $0.53 until                                    June 30, 2007, options to acquire 37,500 shares                                    at $0.54 until June 30,                                    2008 and options to acquire 37,500 shares at                                    $0.42 until June 30, 2009.                                    Also includes the following shares in which Mr.                                    Woolard disclaims any                                    beneficial interest: 392,295 shares and options                                    to acquire 400,000 shares                                    at $1.00 until March 19, 2009 held by Karen O                                    Woolard, his spouse; 22,000                                    shares held in an IRA account for Karen O Woolard                                    and 252,623 shares held                                    by the Karen O Woolard Trust. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

|   | (4) | *Mr.                                    Riley:*                                    Includes 328,233 shares of Common Stock held                                    by the James V. Riley                                    Revocable Trust, options held directly to acquire                                    37,500 shares of Common                                    Stock at $0.53 per share exercisable through                                    June 30, 2007, options to                                    acquire 37,500 shares at $0.54 until June 30,                                    2008, options to acquire                                    37,500 shares of Common Stock at $0.42 per share                                    exercisable through June                                    30, 2009, and options to acquire 25,000 shares                                    at $3.00 until April 18,                                    2009. In addition, options are held by the Trust                                    to acquire 200,000 shares                                    of common stock at $1.00 per share until March                                    19, 2009. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | *Mr.                                    Summerson:*                                    Includes 150,000 shares held by Glendower Investments                                    Pty Ltd as trustee                                    for a trust of which Mr. Summerson and his family                                    are beneficiaries; and                                    options held directly to acquire 37,500 shares                                    of Common Stock at $0.53                                    per share exercisable through June 30, 2007,                                    options to acquire 37,500                                    shares at $0.54 until June 30, 2008, options                                    to acquire 37,500 shares at                                    $0.42 expiring June 30, 2009, and options to                                    acquire 25,000 shares at                                    $3.00 until April 18, 2009. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | *Mr.                                    Murphy*:                                    Includes options held directly to acquire 37,500                                    shares of Common Stock at                                    $0.53 per share exercisable through June 30,                                    2007, options to acquire                                    37,500 shares at $0.54 until June 30, 2008, options                                    to acquire 37,500                                    shares at $0.42 expiring June 30, 2009, and options                                    to acquire 25,000                                    shares at $3.00 until April 18, 2009. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (7) | *Mr.                                    Geldermann:*Includes                                    options to acquire 120,000 shares of common stock                                    at $1.00 per share until                                    March 19, 2009, options to acquire 37,500 shares                                    of Common Stock at $0.53                                    per share exercisable through June 30, 2007,                                    options to acquire 37,500                                    shares at $0.54 until June 30, 2008 and options                                    to acquire 37,500 shares                                    at $0.42 expiring June 30, 2009. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | *All                                    officers and directors:*                                    Includes beneficial ownership of Messrs. Gunn,                                    van Mourik, Woolard,                                    Riley,                                    Summerson, Murphy                                    and Geldermann, as described in notes 1, 2, 3,                                    4, 5, 6 and 7,                                    above. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (9) | *Mars                                    Trust*:                                    Includes 7,929,820 shares of Common Stock held                                    as trustee for the                                    Jacqueline Badger Mars Trust dated Feb 5, 1975                                    as amended.  |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (10) | *Mrs.                                    Woolard:* Mrs.                                    Woolard is Mr. Woolard's spouse and these shares                                    include 252,623 shares                                    held by the Karen O Woolard Trust, 22,000 shares                                    held in Mrs. Woolard's                                    IRA account and options to acquire 400,000 shares                                    at $1.00 until March 19,                                    2009 held directly. Also includes the following                                    shares in which Mrs.                                    Woolard disclaims any beneficial interest: 166,875                                    shares held by the                                    Robert C Woolard Trust, 22,000 shares held in                                    an IRA account for Robert C                                    Woolard, options to acquire 75,000 shares at                                    $0.66 until May 18, 2007,                                    options to acquire 37,500 shares at $0.53 until                                    June 30, 2007, options to                                    acquire 37,500 shares at $0.54 until June 30,                                    2008 and options to acquire                                    37,500 shares at $0.42 until June 30, 2009 held                                    by Robert C.                                    Woolard. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (11) | *Mr.**O’Kieffe:*Includes                                    options to acquire 440,000 shares at $1.00 until                                    March 19, 2009. Also                                    includes 121,295 shares held in a trust for the                                    benefit of Mrs. Cornelia                                    O’Kieffe in which Mr. O’Kieffe disclaims any beneficial interest. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (12) | *The                                    Sentient Entities:*** **Neither                                    the Trust nor the Fund owns any AmerAlia shares;                                    they only have the right                                    to acquire such shares upon exercise of an exchange                                    right or upon exercise                                    of warrants. These rights were acquired March                                    19, 2004. The following list                                    indicates the number of shares that the Trust                                    and the Fund could acquire                                    upon the exercise of these rights. This information                                    is based on the                                    Sentient Entities’ Schedule 13D filing with the Securities and Exchange                                    Commission dated September 2, 2004. The Sentient                                    Entities right to convert                                    into AmerAlia shares may result in the issue                                    of a much greater number of                                    shares and percentage of the company as a result                                    of accruing entitlements                                    to interest and contingent                                    interest: |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

|                                                                     |
|--------------------------------------------------------------------------|
| Name                                                                     | Number                                    of | Number                                    of | Total | Percent                                    of |
| Exchange                                    Shares                       | Warrant                                    Shares | Shares | Common                                    Stock |
| Sentient                                    Global Resources Fund I, L.P | 27,009,607 | 491,957 | 27,501,564 | 56.70% |
| Sentient                                    Global Resources Trust No. 1 | 5,931,568 | 108,043 | 6,039,611 | 12.45% |
|                                                                     | 32,941,176 | 600,000 | 33,541,176 | 69.15% |

**(c)**
**Changes                          in Control.**

**ITEM                          12.**
**CERTAIN                          RELATIONSHIPS AND RELATED PARTY TRANSACTIONS**

**(a)                          and (b)**
**Transactions                          with Management and Others.**

**Corporate                          Loans - Loans to AmerAlia: **

----

**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

|   Director                                                                                                                                                                     | June                                      30                                                        |  June                                      30                                                |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                | 2005                                                                                                |  2004                                                                                        |
| Robert                                      van Mourik                                                                                                                              |  $                                         361,441                              | $     323,857                                                            |
| Bill                                    H. Gunn                                                                                                                                     |                                            350,710                         |        290,911                                                 |
| Geoffrey                                    C. Murphy                                                                                                                               |                                              88,693              |          60,256                                      |
| Neil E. Summerson                                                                                                                                                                   |      26,594                                                                |                                              23,386            |
| Jacinth                                    Pty Ltd. an affiliate of Robert A. Cameron (retired                                    June 25,                                    2004) |                                                 - |                                              14,071            |
| James                                    V. Riley                                                                                                                                   |                                               12,041        |                                              12,308            |
| Robert                                    C. Woolard                                                                                                                                |         16,516                                              |                                                1,650 |
| J.                                    Jeffrey Geldermann                                                                                                                            |         14,638                                              |                                                -     |
|                                                                                                                                                                                |  $ 870,633                                                                                |  $                                        726,429                                  |
|                                                                                                                                                                                |                                                                                                |                                                                                              |

|                                                                                  |                                           |
|---------------------------------------------------------------------------------------|------------------------------------------------|
|                                                                                  | June                                    30,    |
|                                                                                  | 2005                                           | 2004 |
| **Series                                    A Debenture Secured Promissory Notes:**   |                                           |   |
| James                                    V. Riley Trust, an affiliate of Mr. Riley    | $                                    300,000   | $                                    300,000 |
| J.                                    Jeffrey Geldermann                              | 200,000                                        | 200,000 |
|                                                                                  | $                                    1,000,000 | $                                    500,000 |
| **Additional                                    NSHI Secured Promissory Notes**       |                                           |   |
| James                                    V. Riley Trust, an affiliate of Mr. Riley    | $                                    200,000   | - |
| J.                                    Jeffrey Geldermann                              | 100,000                                        | - |
| Ahciejay                                    Pty Ltd, an affiliate of Mr. van Mourik   | 140,000                                        | - |
| Gunn                                    Development Pty Ltd, an affiliate of Mr. Gunn | 60,000                                         | - |
|                                                                                  | $                                    500,000   | - |
| **Total                                    Interest accrued**                         |                                           |   |
| James                                    V. Riley Trust, an affiliate of Mr. Riley    | $                                    25,000    | - |
| J.                                    Jeffrey Geldermann                              | 12,719                                         | - |
| Ahciejay                                    Pty Ltd, an affiliate of Mr. van Mourik   | 3,807                                          | - |
| Gunn                                    Development Pty Ltd, an affiliate of Mr. Gunn | 1,631                                          | - |
|                                                                                  | $                                    43,157    |   |
| **Additional                                    warrants granted**                    |                                           |   |
| James                                    V. Riley Trust, an affiliate of Mr. Riley    | 80,000                                         | - |
| J.                                    Jeffrey Geldermann                              | 40,000                                         | - |
| Ahciejay                                    Pty Ltd, an affiliate of Mr. van Mourik   | 56,000                                         | - |
| Gunn                                    Development Pty Ltd, an affiliate of Mr. Gunn | 24,000                                         | - |
|                                                                                  | 200,000                                        | - |

----

**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**Loans                          from Robert C. Woolard and Karen O Woolard:**

**Letters                          of Forbearance:**

**Issue                          of Shares in lieu of Unpaid Compensation:**

|  Director                                                                   |  No.                                    of        |  Unpaid                                                                                    |
|----------------------------------------------------------------------------------|--------------------------------------------------------|-------------------------------------------------------------------------------------------------|
|                                                                             | Shares                                                 |  Compensation                                                                              |
|  Robert                                  van Mourik                         |                                    150,000        |                                    $                                      75,000 |
|  Bill                                  H. Gunn                              |  150,000                                          |    75,000                                                                        |
|  Geoffrey                                  C. Murphy                        |                                       80,000 |    40,000                                                                        |
|  Neil                                  E. Summerson                         |  150,000                                          |     75,000                                                                  |
|  Robert                                  A. Cameron (retired June 25, 2004) |  140,200                                          |                                         70,100                              |
|  James                                  V. Riley                            |                                       74,900 |     37,450                                                                  |
|  Total:                                                                     |  745,100                                          |  $ 372,550                                                                            |

**Satisfaction                          of Bonding Requirements: **

| BLM                                    Mineral Lease Bonds - NSI leases                                                                                                                                                                                                                                                                                 | $                                    542,000 |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------|
|                                                                                     - Rock School lease | 35,000                                       |
| Letter                                    of credit re: EPA underground injection control                                    permit                                                                                                                                                                                                                     | 231,730                                      |
| Letter                                    of credit re: DMG mining permit                                                                                                                                                                                                                                                                               | 150,750                                      |
|                                                                                                                                                                                                                                                                                                                                                    | $                                    959,480 |

----

**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

|   | ·  | reimburse the Mars Trust for                                  its expenses in obtaining                                  these bonds (which totalled approximately $24,000); |
|--------|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | · | pay                                    the Mars Trust a fee of $75,000 per year to maintain                                    the bonds;                                    and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | remove                                    the Mars Trust from liability for the bonds within                                    two                                    years. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Continuing                          Guarantee of Bank of America Indebtedness: **

|   | · | AmerAlia                                    shall pledge Series C Debentures to the Mars                                    Trust in the current amount                                    of the loan ($9,921,583); |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                                    Trust shall receive the interest and any contingent                                    interest or principal                                    on the Series C Debenture and use any amounts                                    received to pay any                                    outstanding interest or principal under the Bank                                    of America loan and to                                    reduce amounts owed by AmerAlia to the Trust; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | If                                    the amount of interest paid by the Trust to the                                    Bank of America exceeds                                    the amount of interest received by the Trust                                    from the pledged Series C                                    Debentures, the Trust agrees, upon AmerAlia’s written notice, to pay (i)                                    65% of the total amount of interest due on the                                    Bank of America loan during                                    calendar year 2004, and; (ii) 50% of the total                                    amount of interest due on                                    the Bank of America loan during calendar year                                    2005. Such interest paid by                                    the Trust using its own funds will become an                                    AmerAlia obligation evidenced                                    by a promissory note; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | To                                    the extent that the Series C Debenture interest                                    exceeds the Bank of                                    America interest payments, the Trust will allow                                    AmerAlia to reduce the                                    outstanding interest and principal due under                                    the promissory note issued to                                    the Trust at the financial closing. After all                                    the outstanding interest and                                    principal due under any additional promissory                                    notes and the promissory                                    note issued at the financial closing has been                                    paid, any excess Series C                                    interest may be kept by the Trust as consideration                                    for providing the                                    guaranty; and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                                    Mars Trust released its existing security interest                                    in NSHI and AmerAlia                                    upon the financial closing. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**Repayment                          of NSHI Indebtedness to the Mars Trust:**

**Sentient                          Entities:**

**No                          Other Relationships: **

**(c)**
**List                          All Parents of the Company**

**(d)**
**Transactions                          with Promoters:**

----

**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**ITEM                          13.**
**EXHIBITS,                          FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K**

**(a)**
**Exhibits.**

|   | (1) | The                                    financial statements included as a part of this                                    report are as described on                                    page F-2. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | No                                    financial statement schedules are included in                                    this                                    report. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | The                                    exhibits required by Item 601 of Regulation S-B                                    are as follows. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------|

| 3.1 *(b)* | Restated Articles of Incorporation |
|-----------|------------------------------------|
| 3.2                                    *(a)* | Bylaws                                    of AmerAlia, Inc. |
|----------------------------------------------|-------------------------------------------------------------|
| 10.6 *(e)* | Form of Distributor agreements                                  for marketing of sodium                                  bicarbonate. |
|------------|---------------------------------------------------------------------------------------------------------------------------------------|
| 10.7 *(e)* | General                                  Services Agreement with Raytheon Engineers & Constructors,                                  Inc. |
|------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

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

| 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. |
|----------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**AmerAlia,                                Inc. Annual Report on Form 10-KSB for the year ended                                June 30,                                2005**

| 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. |
|----------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.31 | No                                    exhibit. |
|-------|------------------------------------------------|

| 10.32 | No                                    exhibit. |
|-------|------------------------------------------------|

| 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. |
|----------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.41(u) | Consent                                    of Business Appraisal Associates, Inc. |   |
|----------|-----------------------------------------------------------------------------------|--------|

----

**AmerAlia,                                Inc. Annual Report on Form 10-KSB for the year ended                                June 30,                                2005**

| 31.1 | Certification                                    of Chief Executive Officer pursuant to 15 U.S.C.                                    Section 10A, as adopted                                    pursuant to Section 302 of the Sarbanes Oxley                                    Act of 2002 (filed                                    herewith). |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31.2 | Certification                                    of Chief Financial Officer pursuant to 15 U.S.C.                                    Section 10A, as adopted                                    pursuant to Section 302 of the Sarbanes Oxley                                    Act of 2002 (filed                                    herewith). |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.1 | Certification                                    of Chief Executive Officer and Chief Financial                                    Officer pursuant to 18                                    U.S.C. Section 10A, as adopted pursuant to Section                                    906 of the Sarbanes                                    Oxley Act of 2002 (filed herewith). |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(a)* | *Incorporated                                    by reference from AmerAlia's Form 10 General                                    Registration Statement filed                                    with the Commission on March 5,                                    1987.* |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| *(c)* | *Incorporated                                    by reference from AmerAlia’s Form 10-K for its year ended June 30,                                    2001.* |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(d)* | *Incorporated                                    by reference from AmerAlia’s Form 8-K reporting an event of December 1,                                    2000.* |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(e)* | *Incorporated                                    by reference from AmerAlia's Form 10-K for its                                    year ended June 30,                                    1993.* |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(f)* | *Incorporated                                    by reference from AmerAlia's Form 10-K for its                                    year ended June 30,                                    1995.* |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(g)* | *Incorporated                                    by reference from AmerAlia’s Form 10-K for its year ended June 30,                                    1999.* |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(h)* | *Incorporated                                    by reference from AmerAlia’s Form 8-K reporting an event of December 17,                                    2001.* |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(i)* | *Incorporated                                    by reference from AmerAlia’s Form 8-K reporting an event of March 29,                                    2002.* |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(j)* | *Incorporated                                    by reference from AmerAlia’s Form 8-K reporting an event of February 20,                                    2003* |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(k)* | *Incorporated                                    by reference from AmerAlia’s Form 8-K reporting an event of March 24,                                    2003.* |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(l)* | *Incorporated                                    by reference from AmerAlia’s Form 8-K reporting an event of April 22,                                    2003* |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(m)* | *Incorporated                                    by reference from AmerAlia’s Form 8-K reporting an event of May 31,                                    2003* |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(n)* | *Incorporated                                    by reference from AmerAlia’s Form 8-K reporting an event of June 30,                                    2003* |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(o)* | *Incorporated                                    by reference from AmerAlia’s Form 8-K reporting an event of July 31,                                    2003* |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(p)* | *Incorporated                                    by reference from AmerAlia’s Form 8-K reporting an event of August 31,                                    2003* |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(q)* | *Incorporated                                    by reference from AmerAlia’s Form 8-K reporting an event of September 30,                                    2003* |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(r)* | *Incorporated                                    by reference from AmerAlia’s Form 8-K reporting an event of October 31,                                    2003* |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(s)* | *Incorporated                                    by reference from AmerAlia’s Form 8-K reporting an event of November 30,                                    2003* |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(t)* | *Incorporated                                    by reference from AmerAlia’s Form 10-QSB for its quarter ended December                                    31, 2003.* |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(u)* | *Incorporated                                    by reference from AmerAlia’s Form 10-QSB for its quarter ended March 31,                                    2004* |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**(b)**
**Reports                          on Form 8-K**

**ITEM                          14.**
**PRINCIPAL                          ACCOUNTANT FEES AND SERVICES**

|                                                                    | Year                                    ended June 30,                                                                                |
|-------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|
|                                                                    | 2005                                                                                                                                  | 2004 |
|                                                                    |                                                                                                                                  |   |
| Audit                                    related fees    | $      84,045                                              | $                                       84,000   |
| Tax                                                                     |                                       10,014                                                                                |         1,800   |

|   | · | Pre-approve                                    all audit services that the auditor may provide                                    to AmerAlia or any                                    subsidiary (including, without limitation, providing                                    comfort letters in                                    connection with securities underwritings or statutory                                    audits) as required                                    by Sec.10A(i)(1)(A) of the Securities Exchange                                    Act of 1934 (as amended by                                    the Sarbanes-Oxley Act of 2002). |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Pre-approve                                    all non-audit services (other than certain *de                                    minimis*                                    services described in Sec.10A(i)(1)(B) of the                                    Securities Exchange Act of                                    1934 (as amended by the Sarbanes-Oxley Act of                                    2002) that the auditors                                    propose to provide to AmerAlia or any of its                                    subsidiaries. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**AmerAlia,                              Inc. Annual Report on Form 10-KSB for the year ended                              June 30,                              2005**

**SIGNATURES**

| /s/                                        Bill H. GunnBill                                        H. Gunn               | Principal                                        ExecutiveOfficer                                        and Director                                                                                                                       | Date:                                        January 18, 2007      |
|------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------|
| /s/                                        Robert van MourikRobert                                        C. J. van Mourik         | Secretary,                                        TreasurerPrincipal                                        Financialand                                        Accounting Officerand                                        Director  | Date:                                        January 18, 2007      |
| /s/                                        Neil E. SummersonNeil                                        E. Summerson          | Director                                                                                                                                                                                                                                    | Date: January                                        18, 2007 |
| /s/                                        Geoffrey C. MurphyGeoffrey                                        C. Murphy        | Director                                                                                                                                                                                                                                    | Date: January                                        18, 2007 |
| /s/                                        James V. RileyJames                                        V. Riley                | Director                                                                                                                                                                                                                                    | Date: January                                        18, 2007 |
| /s/                                        Robert C. WoolardRobert                                        C. Woolard          | Director                                                                                                                                                                                                                                    | Date: January                                        18, 2007 |
| /s/                                        J. Jeffrey GeldermannJ.                                        Jeffrey Geldermann  | Director                                                                                                                                                                                                                                    | Date: January                                        18, 2007 |

----

**AMERALIA,            INC. AND SUBSIDIARIES**

**CONSOLIDATED            FINANCIAL STATEMENTS**

**June            30, 2005**

----

| Report                      of Independent Registered Public Accounting Firm . . . . .                      . . . . . . . .                      . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                              | 3      |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                  |   |
| Consolidated                      Balance Sheet . . . . . . . . . . . . . . . . . . . . . . .                      . . . . . . .                      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      . . . .                      . | 4      |
|                                                                                                                                                                                                                                                                  |   |
| Consolidated                      Statements of Operations. . . . . . . . . . . . . . . . . .                      . . . . . . .                      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      . .                            | 6      |
|                                                                                                                                                                                                                                                                  |   |
| Consolidated                      Statements of Stockholders’ Equity (Deficit). . . . . . . . . . . . . . .                      . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                          | 7      |
|                                                                                                                                                                                                                                                                  |   |
| Consolidated                      Statements of Cash Flows. . . . . . . . . . . . . . . . . .                      . . . . . . .                      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      .                      .       | 8      |
|                                                                                                                                                                                                                                                                  |   |
| Notes                      to the Consolidated Financial Statements. . . . . . . . . .                      . . . . . . .                      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      . . .                      .          | 10     |

----

----

**AMERALIA,            INC. AND SUBSIDIARIES**

|                                                                   | June                      30, |
|------------------------------------------------------------------------|-------------------------------|
|                                                                   | 2005                          |
| CURRENT                      ASSETS                                    |                          |   |
|                                                                   |                          |   |
| Cash                                                                   | $                             | 1,203 |
| Restricted                      cash (Note 1)                          |                          | 507,312 |
| Accounts                      receivable, net (Note 1)                 |                          | 2,351,042 |
| Inventories                      (Note 2)                              |                          | 756,728 |
| Prepaid                      expenses (Note 3)                         |                          | 470,615 |
|                                                                   |                          |   |
| Total                      Current Assets                              |                          | 4,086,900 |
|                                                                   |                          |   |
| FIXED                      ASSETS                                      |                          |   |
|                                                                   |                          |   |
| Property                      plant and equipment, net (Notes 1 and 4) |                          | 14,800,808 |
| Cavities                      and well development, net (Note 4)       |                          | 1,792,817 |
| Mineral                      leases (Note 4)                           |                          | 4,167,471 |
|                                                                   |                          |   |
| Total                      Fixed Assets                                |                          | 20,761,096 |
|                                                                   |                          |   |
| OTHER                      ASSETS                                      |                          |   |
|                                                                   |                          |   |
| Water                      rights (Note 8)                             |                          | 3,150,582 |
| Patents                      (Note 5)                                  |                          | 43,832 |
| Well                      and well development RSL (Note 6)            |                          | 595,000 |
| Engineering                      drawings (Note 7)                     |                          | 2,800,000 |
| Deferred                      financing and acquisition costs (Note 1) |                          | 1,187,933 |
| Rock                      School Lease and reserves (Note 6)           |                          | 3,300,000 |
| Deposits                      and bonds                                |                          | 24,000 |
|                                                                   |                          |   |
| Total                      Other Assets                                |                          | 11,101,347 |
|                                                                   |                          |   |
| TOTAL                      ASSETS                                      | $                             | 35,949,343 |

----

**AMERALIA,            INC. AND SUBSIDIARIES**

|                                                                         | June                      30 |
|------------------------------------------------------------------------------|------------------------------|
|                                                                         | 2005                         |
| CURRENT                      LIABILITIES                                     |                         |   |
|                                                                         |                         |   |
| Accounts                      payable                                        | $                            | 1,477,547 |
| Royalties                      payable (Note 9)                              |                         | 760,710 |
| Accrued                      expenses (Note 10)                              |                         | 995,409 |
| Due                      to related parties (Note 11)                        |                         | 1,956,999 |
| Current                      portion of notes payable (Note 12)              |                         | 20,493,583 |
| Current                      portion of capital lease obligations (Note 13)  |                         | 68,905 |
| Interest                      payable                                        |                         | 1,750,844 |
|                                                                         |                         |   |
| Total                      Current Liabilities                               |                         | 27,503,997 |
|                                                                         |                         |   |
| LONG                      TERM LIABILITIES                                   |                         |   |
|                                                                         |                         |   |
| Notes                      payable (Note 12)                                 |                         | 23,317,692 |
| Capital                      lease obligations (Note 13)                     |                         | 141,401 |
| Asset                      retirement obligations (Note 14)                  |                         | 530,830 |
|                                                                         |                         |   |
| Total                      Long Term Liabilities                             |                         | 23,989,923 |
|                                                                         |                         |   |
| TOTAL                      LIABILITIES                                       |                         | 51,493,920 |
|                                                                         |                         |   |
| COMMITMENTS                      AND CONTINGENCIES (Note 17)                 |                         |   |
|                                                                         |                         |   |
| STOCKHOLDERS'                      EQUITY (DEFICIT)                          |                         |   |
|                                                                         |                         |   |
| Preferred                      stock, $0.05 par value; 1,000,000 authorized; |                         |   |
| 82                      issued and outstanding                               |                         | 4 |
| Common                      stock, $0.01 par value; 100,000,000 shares       |                         |   |
| authorized;                      16,983,604 issued and outstanding           |                         | 169,836 |
| Additional                      paid-in capital                              |                         | 27,434,275 |
| Accumulated                      deficit                                     |                         | (43,148,692) |
|                                                                         |                         |   |
| Total                      Stockholders' Equity (Deficit)                    |                         | (15,544,577) |
|                                                                         |                         |   |
| TOTAL                      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)    | $                            | 35,949,343 |

----

**AMERALIA,            INC. AND SUBSIDIARIES**

|                                                                  | For                      the Years Ended June 30, |
|-----------------------------------------------------------------------|---------------------------------------------------|
|                                                                  | 2005                                              | 2004 |
|                                                                  |                                              |   |   |   |
| REVENUES                                                              | $                                                 | 14,141,500 | $ | 12,609,041 |
|                                                                  |                                              |   |   |   |
| COST                      OF GOODS SOLD                               |                                              | 15,022,730 |   | 13,924,329 |
|                                                                  |                                              |   |   |   |
| GROSS                      PROFIT (DEFICIT)                           |                                              | (881,230) |   | (1,315,288) |
|                                                                  |                                              |   |   |   |
| EXPENSES                                                              |                                              |   |   |   |
|                                                                  |                                              |   |   |   |
| General                      and administrative                       |                                              | 1,234,744 |   | 1,439,077 |
| Depreciation,                      amortization and accretion expense |                                              | 8,027 |   | 7,775 |
|                                                                  |                                              |   |   |   |
| Total                      Expenses                                   |                                              | 1,242,771 |   | 1,446,852 |
|                                                                  |                                              |   |   |   |
| LOSS                      FROM OPERATIONS                             |                                              | (2,124,001) |   | (2,762,140) |
|                                                                  |                                              |   |   |   |
| OTHER                      INCOME (EXPENSE)                           |                                              |   |   |   |
|                                                                  |                                              |   |   |   |
| Interest                      income                                  |                                              | 7,222 |   | 5,803 |
| Gain                      on settlement of debt                       |                                              | 4,406 |   | 55,856 |
| Other                      income                                     |                                              | 9,208 |   | 51,000 |
| Interest                      expense                                 |                                              | (2,701,165) |   | (2,655,045) |
| Other                      financing costs                            |                                              | (1,845,702) |   | (2,001,959) |
|                                                                  |                                              |   |   |   |
| Total                      Other Income (Expense)                     |                                              | (4,526,031) |   | (4,544,345) |
|                                                                  |                                              |   |   |   |
| LOSS                      BEFORE INCOME TAX EXPENSE                   |                                              | (6,650,032) |   | (7,306,485) |
|                                                                  |                                              |   |   |   |
| Income                      tax expense                               |                                              | - |   | - |
|                                                                  |                                              |   |   |   |
| NET                      LOSS                                         | $                                                 | (6,650,032) | $ | (7,306,485) |
|                                                                  |                                              |   |   |   |
| BASIC                      LOSS PER SHARE                             | $                                                 | (0.39) | $ | (0.47) |
|                                                                  |                                              |   |   |   |
| WEIGHTED                      AVERAGE NUMBER OF SHARES OUTSTANDING    |                                              | 16,898,237 |   | 15,474,745 |

----

**AMERALIA,            INC. AND SUBSIDIARIES**

|                                               |                                 |                              |       |                           | Additional                        |                                |
|----------------------------------------------------|--------------------------------------|-----------------------------------|------------|--------------------------------|-----------------------------------|-------------------------------------|
|                                               | Preferred                      Stock | Common                      Stock | Paid-In    | Accumulated                    |
|                                               | Shares                               | Amount                            | Shares     | Amount                         | Capital                           | Deficit                             |
|                                               |                                 |                              |       |                           |                              |                                |
| Balance,                      June 30, 2003        | 82                                   |  $                      4    | 14,944,632 | $                      149,446 | $                      23,146,924 | $                      (29,192,175) |
|                                               |                                 |                              |       |                           |                              |                                |
| Contributed                      capital (Note 12) | -                                    | -                                 | -          | -                              | 1,719,450                         | -                                   |
|                                               |                                 |                              |       |                           |                              |                                |
| Shares                      issued for conversion  |                                 |                              |       |                           |                              |                                |
| of                      note payable               | -                                    | -                                 | 20,000     | 200                            | 9,800                             | -                                   |
|                                               |                                 |                              |       |                           |                              |                                |
| Shares                      issued for conversion  |                                 |                              |       |                           |                              |                                |
| of                      guaranty fee payable       | -                                    | -                                 | 242,590    | 2,426                          | 240,164                           | -                                   |
|                                               |                                 |                              |       |                           |                              |                                |
| Shares                      issued for finders     |                                 |                              |       |                           |                              |                                |
| fee                      payable                   | -                                    | -                                 | 210,000    | 2,100                          | 102,900                           | -                                   |
|                                               |                                 |                              |       |                           |                              |                                |
| Shares                      issued for finders     |                                 |                              |       |                           |                              |                                |
| fee                      payable                   | -                                    | -                                 | 503,979    | 5,040                          | 369,960                           | -                                   |
|                                               |                                 |                              |       |                           |                              |                                |
| Shares                      issued for conversion  |                                 |                              |       |                           |                              |                                |
| of                      unpaid compensation        | -                                    | -                                 | 745,100    | 7,451                          | 365,099                           | -                                   |
|                                               |                                 |                              |       |                           |                              |                                |
| Options                      granted               | -                                    | -                                 | -          | -                              | 80,894                            | -                                   |
|                                               |                                 |                              |       |                           |                              |                                |
| Warrants                      granted              | -                                    | -                                 | -          | -                              | 1,053,930                         | -                                   |
|                                               |                                 |                              |       |                           |                              |                                |
| Shares                      issued for cash        | -                                    | -                                 | 200,000    | 2,000                          | 98,000                            | -                                   |
|                                               |                                 |                              |       |                           |                              |                                |
| Net                      loss for the year ended   |                                 |                              |       |                           |                              |                                |
| June                      30, 2004                 | -                                    | -                                 | -          | -                              | -                                 | (7,306,485)                         |
|                                               |                                 |                              |       |                           |                              |                                |
| Balance,                      June 30, 2004        | 82                                   |  4                           | 16,866,301 |  168,663                  |  27,187,121                  |  (36,498,660)                  |
|                                               |                                 |                              |       |                           |                              |                                |
| Options                      granted               | -                                    | -                                 | -          | -                              | 87,903                            | -                                   |
|                                               |                                 |                              |       |                           |                              |                                |
| Warrants                      granted              | -                                    | -                                 | -          | -                              | 82,424                            | -                                   |
|                                               |                                 |                              |       |                           |                              |                                |
| Options                      exercised             | -                                    | -                                 | 117,303    | 1,173                          | 76,827                            | -                                   |
|                                               |                                 |                              |       |                           |                              |                                |
| Net                      loss for the year ended   |                                 |                              |       |                           |                              |                                |
| June                      30, 2005                 | -                                    | -                                 | -          | -                              | -                                 | (6,650,032)                         |
|                                               |                                 |                              |       |                           |                              |                                |
| Balance,                      June 30, 2005        | 82                                   | $                      4          | 16,983,604 | $                      169,836 | $                      27,434,275 | $                      (43,148,692) |

----

**AMERALIA,            INC. AND SUBSIDIARIES**

|                                                                               | For                      the Years Ended June 30, |
|------------------------------------------------------------------------------------|---------------------------------------------------|
|                                                                               | 2005                                              | 2004 |
|                                                                               |                                              |   |   |   |
| CASH                      FLOWS FROM OPERATING ACTIVITIES                          |                                              |   |   |   |
|                                                                               |                                              |   |   |   |
| Net                      loss                                                      | $                                                 | (6,650,032) | $ | (7,306,485) |
| Adjustments                      to reconcile net loss to net cash                 |                                              |   |   |   |
| used                      by operating activities:                                 |                                              |   |   |   |
| Options                      granted                                               |                                              | 124,653 |   | 80,894 |
| Depreciation                      and amortization                                 |                                              | 1,689,319 |   | 1,086,537 |
| Amortization                      of acquisition and financing costs               |                                              | 1,884,680 |   | 2,049,671 |
| Interest                      expense contributed to capital                       |                                              | - |   | 1,719,450 |
| Change                      in Operating Assets and Liabilities:                   |                                              |   |   |   |
| (Increase)                      decrease in restricted cash                        |                                              | 1,819,511 |   | (823,749) |
| (Increase)                      in accounts and interest receivable                |                                              | (529,565) |   | (70,934) |
| (Increase)                      decrease in inventory                              |                                              | 59,079 |   | (260,524) |
| (Increase)                      decrease in prepaid expenses                       |                                              | 225,790 |   | (23,094) |
| Decrease                      in deposits and bonds                                |                                              | 4,000 |   | 65,942 |
| Increase                      (decrease) in accounts payable and royalties payable |                                              | 393,314 |   | (2,190,152) |
| Increase                      in due to related parties                            |                                              | 701,225 |   | 136,318 |
| Increase                      in accrued expenses                                  |                                              | 52,030 |   | 668,913 |
| Increase                      in interest payable                                  |                                              | 1,321,189 |   | 233,629 |
| Increase                      (decrease) in asset retirement obligation            |                                              | (532,746) |   | 1,906 |
|                                                                               |                                              |   |   |   |
| Net                      Cash Used in Operating Activities                         |                                              | 562,447 |   | (4,631,678) |
|                                                                               |                                              |   |   |   |
| CASH                      FLOWS FROM INVESTING ACTIVITIES                          |                                              |   |   |   |
|                                                                               |                                              |   |   |   |
| Cavities                      and well development                                 |                                              | (498,489) |   | (246,293) |
| Purchase                      of property and equipment                            |                                              | (608,592) |   | (117,331) |
|                                                                               |                                              |   |   |   |
| Net                      Cash Used in Investing Activities                         | $                                                 | (1,107,081) | $ | (363,624) |

----

**AMERALIA,            INC. AND SUBSIDIARIES**

|                                                                                | For                      the Years Ended June 30, |
|-------------------------------------------------------------------------------------|---------------------------------------------------|
|                                                                                | 2005                                              | 2004 |
|                                                                                |                                              |   |   |   |
|                                                                                |                                              |   |   |   |
| CASH                      FLOWS FROM FINANCING ACTIVITIES                           |                                              |   |   |   |
|                                                                                |                                              |   |   |   |
| Payments                      on capital leases                                     | $                                                 | (57,343) | $ | (57,153) |
| Cash                      received from notes payable                               |                                              | 600,000 |   | 5,985,692 |
| Acquisition                      and financing costs paid                           |                                              | - |   | (1,033,020) |
| Common                      stock issued for cash                                   |                                              | - |   | 100,000 |
|                                                                                |                                              |   |   |   |
| Net                      Cash Provided by Financing Activities                      |                                              | 542,657 |   | 4,995,519 |
|                                                                                |                                              |   |   |   |
| NET                      INCREASE (DECREASE) IN CASH                                |                                              | (1,977) |   | 217 |
|                                                                                |                                              |   |   |   |
| CASH                      AT BEGINNING OF YEAR                                      |                                              | 3,180 |   | 2,963 |
|                                                                                |                                              |   |   |   |
| CASH                      AT END OF YEAR                                            | $                                                 | 1,203 | $ | 3,180 |
|                                                                                |                                              |   |   |   |
| SUPPLEMENTAL                      DISCLOSURE OF CASH                                |                                              |   |   |   |
| FLOW                      INFORMATION                                               |                                              |   |   |   |
|                                                                                |                                              |   |   |   |
| Income                      taxes                                                   | $                                                 | - | $ | - |
| Interest                                                                            | $                                                 | 820,407 | $ | 484,667 |
|                                                                                |                                              |   |   |   |
| NON-CASH                      FINANCING ACTIVITIES                                  |                                              |   |   |   |
|                                                                                |                                              |   |   |   |
| Common                      stock issued for financing costs                        | $                                                 | - | $ | 480,000 |
| Conversions                      of notes payable to equity                         | $                                                 | - | $ | 10,000 |
| Contribution                      of interest payable to capital                    | $                                                 | - | $ | 1,719,450 |
| Common                      stock issued for payment of obligation                  | $                                                 | - | $ | 242,590 |
| Warrants                      granted in conjunction with debt instruments          | $                                                 | 82,424 | $ | 1,053,930 |
| Common                      stock issued for extinguishments of related party debts | $                                                 | 41,250 | $ | 372,550 |
| Options                      granted                                                | $                                                 | 124,653 | $ | 80,894 |

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

| Buildings                      and improvements    | 25                      to 40 years      |
|----------------------------------------------------|------------------------------------------|
| Machinery                      and equipment       | 10                      to 30 years      |
| Well                      cavities and development | Units                      of production |
| Furniture                      and fixtures        | 5                      years             |

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

|                                           | 2005   | 2004         |
|------------------------------------------------|--------|--------------|
|                                           |   |         |   |   |
| Deferred                      tax assets:      |   |         |   |   |
| NOL                      Carryover             | $      | 12,790,200   | $ | 11,525,300 |
| Related                      Party             |   | 1,531,700    |   | 683,000 |
|                                           |   |         |   |   |
| Deferred                      tax liabilities: |   |         |   |   |
| Depreciation                                   |   | (338,300)    |   | (995,400) |
|                                           |   |         |   |   |
| Valuation                      allowance       |   | (13,983,600) |   | (11,212,900) |
| Net                      deferred tax asset    | $      | -            | $ | - |

|                                           | 2005   | 2004        |
|------------------------------------------------|--------|-------------|
|                                           |   |        |   |   |
| Book                      Income               | $      | (2,593,517) | $ | (2,849,530) |
| Meals                      & Entertainment |   | 580         |   | 955 |
| Depreciation                                   |   | 50,725      |   | (719,036) |
| Options                                        |   | 41,202      |   | 31,550 |
| Other                                          |   | -           |   | 26,870 |
| Valuation                      allowance       |   | 2,501,005   |   | 3,509,191 |
|                                           | $      | -           | $ | - |

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

|                                      | For                      the Years Ended June 30 |
|-------------------------------------------|--------------------------------------------------|
|                                      | 2005                                             | 2004 |
|                                      |                                             |   |   |   |
| Loss                      (numerator)     | $                                                | (6,650,032) | $ | (7,306,485) |
| Shares                      (denominator) |                                             | 16,898,237 |   | 15,474,745 |
| Per                      share amount     | $                                                | (0.39) | $ | (0.47) |

** **

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

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

|   | l. | Environmental                      Costs |
|--------|----|------------------------------------------|

|   | m. | Shipping                      and Handling Fees and Costs |
|--------|----|-----------------------------------------------------------|

|   | n. | Mineral                      Properties and Patents |
|--------|----|-----------------------------------------------------|

**SFAS            No. 145**

**SFAS            No. 146 **

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

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

**SFAS            No. 147**

**SFAS            No. 148**

**SFAS            No. 149**

**SFAS            No. 150**

**FASB            Interpretation No. 45**

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

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

**FASB            Interpretation No. 46**

|   | r. | Revenue                      Recognition |
|--------|----|------------------------------------------|

|   | s. | Deferred                      Financing Costs |
|--------|----|-----------------------------------------------|

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

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

|   | t. | Impairment                      of Long-Lived Assets |
|--------|----|------------------------------------------------------|

|   | u. | Acquisition                      Costs |
|--------|----|----------------------------------------|

|                                            | June                      30, 2005 |
|-------------------------------------------------|------------------------------------|
|                                            |                               |   |
| Raw                      materials and supplies | $                                  | 282,529 |
| Finished                      goods             |                               | 474,199 |
|                                            | $                                  | 756,728 |

|                                                 | June                      30, 2005 |
|------------------------------------------------------|------------------------------------|
|                                                 |                               |   |
| Prepaid                      insurance               | $                                  | 18,567 |
| Prepaid                      natural gas costs       |                               | 94,732 |
| Prepaid                      construction costs      |                               | 227,500 |
| Other                      prepayments &deposits |                               | 129,816 |
|                                                 | $                                  | 470,615 |

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

|                                                                | June                      30, 2005 |
|---------------------------------------------------------------------|------------------------------------|
|                                                                |                               |   |
| Property                      plant and equipment                   | $                                  | 16,448,589 |
| Cavities                      and well development                  |                               | 3,442,167 |
| Furniture                      and fixtures                         |                               | 71,436 |
| Mineral                      leases                                 |                               | 4,167,471 |
| Subtotal                                                            |                               | 24,129,663 |
| Less                      accumulated depreciation and amortization |                               | (3,368,567) |
| Total                                                               | $                                  | 20,761,096 |

|                                                         | June                      30, 2005 |
|--------------------------------------------------------------|------------------------------------|
| Patents                      acquired from IMC at fair value | $                                  | 50,000 |
| Less                      accumulated amortization           |                               | (6,168) |
| Net                      Patents                             | $                                  | 43,832 |

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

|   | · | AmerAlia                      received $3,500,000 in NSHI Series A Secured 10% Debentures                      utilizing                      funds it raised from accredited investors (see “AmerAlia Funding”,                      below); |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                      Sentient Entities invested an additional $2,000,000 in NSHI                      Secured Series                      A 10% Debentures. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $3,000,000                      in Secured Series A 10% Debentures; |
|--------|--------|---------------------------------------------------------------------|

|   | · | $11,300,000                      in Secured Subordinated Series B1                      Debentures; |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | · | $9,700,000                      in Secured Subordinated Series B2 Convertible                      Debentures. |
|--------|--------|----------------------------------------------------------------------------------------------------------------|

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

|   | · | $275,000                      of Secured Series A 10% Debentures; |
|--------|--------|-------------------------------------------------------------------|

|   | · | $12,000,000                      of Unsecured Subordinated Series C                      Debentures; |
|--------|--------|------------------------------------------------------------------------------------------------------|

|   | · | 4,949                      shares of Series A Preferred Stock having a liquidation value                      of                      $4,949,000; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an                      additional issue of common stock bringing the total common                      stock held by                      AmerAlia to 51,000 shares, being all the common stock                      issued. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Period                                                | Interest                      Rate Per                      Annum |
|-------------------------------------------------------|-------------------------------------------------------------------|
| March                      19, 2004 - June 30, 2004   | 1.5%                                                              |
| July                      1, 2004 - June 30, 2005     | 4.5%                                                              |
| July                      1, 2005 - June 30, 2006     | 7.5%                                                              |
| July                      1, 2006 - June 30, 2007     | 10.5%                                                             |
| July                      1, 2007 - February 19, 2008 | 13.5%                                                             |

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

| BLM                      Mineral Lease Bonds - NSI leases                          | $                      542,000 |
|------------------------------------------------------------------------------------|--------------------------------|
| Rock                      School Lease                                             | 35,000                         |
| Letter                      of credit re: EPA underground injection control permit | 231,730                        |
| Letter                      of credit re: DMG mining permit                        | 150,750                        |
|                                                                               | $                      959,480 |

|   | · | reimburse                      the Mars Trust for its expenses in obtaining these bonds (which                      totaled                      approximately $24,000); |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | pay                      the Mars Trust a fee of $75,000 per year to maintain the bonds;                      and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|

|   | · | remove                      the Mars Trust from liability for the bonds within two                      years. |
|--------|--------|----------------------------------------------------------------------------------------------------------------|

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

|   | · | AmerAlia                      shall pledge Series C Debentures to the Mars Trust in the current                      amount                      of the loan ($9,921,583); |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                      Trust shall receive the interest and any contingent interest                      or principal                      on the Series C Debenture and use any amounts received to pay                      any                      outstanding interest or principal under the Bank of America                      loan and to                      reduce amounts owed by AmerAlia to the Trust; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | If                      the amount of interest paid by the Trust to the Bank of America                      exceeds                      the amount of interest received by the Trust from the pledged                      Series C                      Debentures, the Trust agrees, upon AmerAlia’s written notice, to pay (i)                      65% of the total amount of interest due on the Bank of America                      loan during                      calendar year 2004, and; (ii) 50% of the total amount of interest                      due on                      the Bank of America loan during calendar year 2005. Such interest                      paid by                      the Trust using its own funds will become an AmerAlia obligation                      evidenced                      by a promissory note; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | To                      the extent that the Series C Debenture interest exceeds the                      Bank of                      America interest payments, the Trust will allow AmerAlia to                      reduce the                      outstanding interest and principal due under the promissory                      note issued to                      the Trust at the financial closing. After all the outstanding                      interest and                      principal due under any additional promissory notes and the                      promissory                      note issued at the financial closing has been paid, any excess                      Series C                      interest may be kept by the Trust as consideration for providing                      the                      guaranty; and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                      Mars Trust released its existing security interest in NSHI                      and AmerAlia                      upon the financial closing. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

| Assets                                                  |   |       |
|---------------------------------------------------------|--------|------------|
| Accounts                      receivable                | $      | 1,610,523  |
| Inventory                                               |   | 517,160    |
| Prepayments                      and deposits           |   | 50,675     |
| Buildings,                      machinery and equipment |   | 11,096,785 |
| Cavities                      and well development      |   | 2,700,000  |
| Water                      rights                       |   | 3,150,852  |
| Mineral                      leases                     |   | 4,167,471  |
| Patents                                                 |   | 50,000     |
| Total                      assets acquired              | $      | 23,343,466 |
|                                                    |   |       |
| Liabilities                                             |   |       |
| Accounts                      payable                   |   | 68,252     |
| Capital                      leases                     |   | 324,801    |
| Accrued                      liabilities                |   | 1,296,413  |
| Asset                      retirement obligation        |   | 1,050,000  |
| Total                      liabilities acquired         | $      | 2,739,466  |
| Net                      assets acquired                | $      | 20,604,000 |

|                                      | For                      the year ended |
|-------------------------------------------|-----------------------------------------|
|                                      | June                      30, 2003      |
| Sales                                     | $                                       | 14,797,634 |
| Cost                      of sales        |                                    | 14,906,225 |
| Loss                      from operations |                                    | (2,972,628) |
| Net                      loss             |                                    | (3,630,881) |
| Loss                      per share       | $                                       | (0.28) |

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

|                                            | June                      30, 2005 |
|-------------------------------------------------|------------------------------------|
|                                            |                               |   |
| Salaries                      and wages, taxes  | $                                  | 238,893 |
| Judgement                      payable (Hudson) |                               | 454,169 |
| Freight                                         |                               | 107,701 |
| Property                      tax               |                               | 72,000 |
| Other                                           |                               | 122,646 |
| Total                                           | $                                  | 995,409 |

|                                                                                    | June                      30, 2005 |
|-----------------------------------------------------------------------------------------|------------------------------------|
|                                                                                    |                               |   |
| Accrued                      directors fees                                             | $                                  | 158,482 |
|                                                                                    |                               |   |
| Accrued                      officer and director compensation, expenses & advances |                               | 769,179 |
|                                                                                    |                               |   |
| Note                      and interest payable to Jacqueline Badger Mars Trust;         |                               |   |
| principal                      and interest due December 31, 2005;                      |                               |   |
| interest                      at 7%; unsecured *                                        |                               | 469,628 |
|                                                                                    |                               |   |
| Various                      guaranty promissory notes payable to                       |                               |   |
| Jacqueline                      Badger Mars Trust due December 31, 2005;                |                               |   |
| Interest                      at 4.5%; unsecured*                                       |                               | 493,804 |
|                                                                                    |                               |   |
| Provision                      for accrued but unpaid interest due on                   |                               |   |
| Jacqueline                      Badger Mars Trust promissory notes*                     |                               | 59,079 |
|                                                                                    |                               |   |
| Unsecured                      advance repayable to Jacqueline Badger Mars              |                               | 6,827 |
|                                                                                    |                               |   |
|                                                                                    | $                                  | 1,956,999 |

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

|                                                                           | June                      30, 2005 |
|--------------------------------------------------------------------------------|------------------------------------|
|                                                                           |                               |   |
| NSHI                      Series A Secured 10% Debentures payable to the       |                               |   |
| Sentient                      Entities; due September 30, 2005 (1)             | $                                  | 5,000,000 |
|                                                                           |                               |   |
| NSHI                      Secured Subordinated Series B1 Debentures            |                               |   |
| payable                      to the Sentient Entities;                         |                               | 11,300,000 |
| due                      February 19, 2008 (1)                                 |                               |   |
|                                                                           |                               |   |
| NSHI                      Secured Subordinated Series B2 Debentures            |                               |   |
| payable                      to the Sentient Entities;                         |                               |   |
| due                      February 19, 2008                      (1)            |                               | 9,700,000 |
|                                                                           |                               |   |
| AmerAlia                      Series A Debenture Secured Promissory Notes      |                               |   |
| payable                      to accredited investors and financial institution |                               |   |
| 10%                      interest payable quarterly;                           |                               |   |
| due                      September 30, 2005 (2)                                |                               | 3,750,000 |

| AmerAlia                      Secured Promissory Notes payable to accredited |   |       |
|------------------------------------------------------------------------------|--------|------------|
| Investors;                      10% interest payable quarterly;              |   |       |
| due                      September 30, 2005 (2)                              |   | 500,000    |
|                                                                         |   |       |
| AmerAlia                      Series C Debenture Secured Promissory notes    |   |       |
| payable                      to two accredited investors,                    |   |       |
| due                      March 19, 2008 (3)                                  |   | 2,317,692  |
|                                                                         |   |       |
| Note                      payable to financial institution; principal        |   |       |
| and                      interest due December 31, 2005;                     |   |       |
| interest                      at 5.39% at June 30, 2005;                     |   |       |
| secured                      by a related party guaranty agreement           |   | 9,921,583  |
|                                                                         |   |       |
| Note                      payable to equipment manufacturer,                 |   |       |
| unsecured,                      interest only at 8% payable on               |   |       |
| March                      31, of each year, entire                          |   |       |
| principal                      due December 31, 2005.                        |   | 1,200,000  |
|                                                                         |   |       |
| Note                      payable to an investor, on call at 4.5%            |   | 100,000    |
|                                                                         |   |       |
| Note                      payable to McFarland Dewey Securities Co;          |   |       |
| unsecured,                      interest at 4%; due May 18, 2004             |   | 18,000     |
|                                                                         |   |       |
| Note                      payable to investor; unsecured, due                |   |       |
| on                      demand; at 10% interest.                             |   | 4,000      |
|                                                                         |   |       |
| Total                      notes payable                                     |   | 43,811,275 |
| Less                      current portion                                    |   | 20,493,583 |
| Total                      long-term debt                                    | $      | 23,317,692 |

|   | (1) | See                      Note 8 at Long Term Financing Agreements |
|--------|-----|-------------------------------------------------------------------|

|   | (2) | See                      Note 8 at AmerAlia Funding |
|--------|-----|-----------------------------------------------------|

|   | (3) | See                      Note 8 at Other Loans  |
|--------|-----|------------------------------------------------------|

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

| Fiscal Year | Amount |
|------------------|--------|
| 2006             | $      | - |
| 2007             |   | - |
| 2008             |   | 23,317,692 |
| 2009             |   | - |
| Total            | $      | 23317,692 |

|                                                                | Year                      Ended    |
|---------------------------------------------------------------------|------------------------------------|
|                                                                | June                      30, 2005 |
|                                                                |                               |   |
| Total                      minimum lease payments                   | $                                  | 243,525 |
| Less                      interest and taxes                        |                               | (33,219) |
| Present                      value of net minimum lease payments    |                               | 210,306 |
| Less                      current portion                           |                               | (68,905) |
| Long-term                      portion of capital lease obligations | $                                  | 141,401 |

| The                      aggregate principal maturities of capital leases are as                      follows: |
|----------------------------------------------------------------------------------------------------------------|
|                                                                                                           |
| Year                      ended June 30                                                                        | Amount |
|                                                                                                           |   |   |
| 2006                                                                                                           |   | 68,905 |
| 2007                                                                                                           |   | 43,429 |
| 2008                                                                                                           |   | 43,283 |
| 2009                                                                                                           |   | 50,291 |
| 2010                                                                                                           |   | 4,398 |
| Total                                                                                                          | $ | 210,306 |

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

| Year                      ended June 30 | Amount |
|-----------------------------------------|--------|
|                                    |   |   |
| 2006                                    | $      | 454,924 |
| 2007                                    |   | 219,000 |
| 2008                                    |   | 90,000 |
| 2009                                    |   | 30,000 |
| 2010                                    |   | - |
| Total                                   | $      | 793,925 |

|                                       | June                      30 |
|--------------------------------------------|------------------------------|
|                                       | 2005                         | 2004 |
| Net                      loss:             |                         |   |   |   |
| As                      reported           | $                            | (6,650,032) | $ | (7,306,485) |
| Pro                      forma             | $                            | (6,739,935) | $ | (7,840,479) |
|                                       |                         |   |   |   |
|                                       | June                      30 |
|                                       | 2005                         | 2004 |
| Basic                      loss per share: |                         |   |   |   |
| As                      reported           | $                            | (0.39) | $ | (0.47) |
| Pro                      forma             | $                            | (0.40) | $ | (0.51) |

----

**AMERALIA,                    INC. AND SUBSIDIARIES**

|                                                |                                       | Weighted             |  Weighted                        |
|-----------------------------------------------------|--------------------------------------------|----------------------|---------------------------------------|
|                                                |  Options,                             |  Average        |  Average                         |
|                                                |  Warrants                             |  Exercise  |  Grant                      Date |
|                                                |  and                      SAR’s |  Price          |  Fair                      Value |
|  Outstanding,                    June 30, 2004 |   4,665,000                      |  $1.35          |   $0.69                     |
|      Granted                    |  387,500                              |  $0.77          |  $0.44                           |
|      Expired/Canceled           |  (562,500)                            |  $1.05          |  $0.09                           |
|     Exercised                   |  (225,000)                            |  $0.60          |  $0.45                           |
|  Outstanding,                    June 30, 2005 |  4,265,000                            |  $0.96          |  $0.43                           |
|  Exercisable,                    June 30, 2005 |  4,265,000                            |  $0.96          |  $0.43                           |

| Expiration                      Date             | Price  | Number    |
|--------------------------------------------------|--------|-----------|
| June                      28, 2006               | $1.50  | 505,000   |
| June                      30, 2006               | $0.55  | 112,500   |
| March                      19, 2009              | $1.00  | 2,500,000 |
| May                      18, 2007                | $0.66  | 75,000    |
| June                      25, 2007               | $0.56  | 75,000    |
| June                      30, 2007               | $0.53  | 187,500   |
| April                      18, 2009              | $0.71  | 540,000   |
| April                      18, 2009              | $2.00* | 200,000   |
| June                      28, 2006 (SAR’s) | $1.50  | 70,000    |
|                                             |   | 4,265,000 |

|   | In                      June 2001, the Shareholders approved the 2001 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 market                      price 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. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**AMERALIA,                    INC. AND SUBSIDIARIES**

|   | 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. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Year                      ended June 30 | Amount |
|-----------------------------------------|--------|
| 2006                                    | $      | 100,000 |
| 2007                                    |   | 100,000 |
| 2008                                    |   | 100,000 |
| 2009                                    |   | 100,000 |
| Total                                   | $      | 400,000 |

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**AMERALIA,                    INC. AND SUBSIDIARIES**

|   | · | enhancing                      the management team with recruitments in production, marketing,                      finance                      and customer relations |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | implementing                      new accounting and management information systems |
|--------|--------|-------------------------------------------------------------------------------------|

|   | · | revitalizing                      and repairing production facilities thereby increasing efficiency                      and                      production capacity |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | gaining                      government permits to expand solution mining                      activity |
|--------|--------|---------------------------------------------------------------------------------------------------------|

|   | · | terminating                      restrictive marketing agreements and replacing them with new                      distribution                      agreements that have introduced us to more                      customers. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**AMERALIA,                    INC. AND SUBSIDIARIES**

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