Universal Ice Blast, Inc., (“UIBI” or the "Company") is a Nevada corporation organized in 1995 for the purpose of developing and marketing ice-blasting equipment for which it holds patents. The Company's office and warehouse facility is in Kirkland, Washington, a suburb of Seattle.  The Company designs, out sources its manufacturing and sells its equipment as well as providing ice blasting services and equipment rental. The Company creates environmentally friendly solutions to industrial cleaning and surface preparation needs.

The Company was initially engaged in technology and market research and development. Since 1998, the Company has worked with clients to develop tailored products, applications and cleaning systems to fulfill customers' requirements.

Ice Blast Technology

Ice blasting is a simple process that uses compressed air and ice crystals. Shot through a hose and directed with a nozzle, a fine, powerful mist is blasted onto a surface, acting like a chisel to remove debris. Ice blasting is a non-abrasive, cleaning process that uses ordinary tap water, compressed air and electricity to create an environmentally friendly, cost effective method to address a variety of cleaning needs. Ice blasting technology has advantages over other cleaning processes important to its markets, including:

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Superior cleanliness;

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Reliable, consistent operation;

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Low operating costs;

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Minimal waste;

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Non-abrasive; and

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Does not generate dust.

An ice blast machine is ready for work within seconds of pushing the start button. Ice particles are produced continuously at a rate of 200 pounds per hour. Using a two hose system, ice particles are transported through a low pressure hose to the blasting nozzle where a second higher pressure hose delivers up to 200 psi ("pounds per square inch") pressure to accelerate the ice particles towards the target surface. The solid ice particles displace surface contaminants through the energy from the impact and through the lateral deformation of the ice particles.

At the heart of the ice blast technology is the scrub and flush cleaning that takes place when the ice crystals impact onto a surface. Ice crystals deform to scrub on impact, and after impact melt into water to flush away debris. Thus, ice blasting has a scrubbing component that water blasting lacks and it uses significantly less water than water blasting, which results in less waste to be contained. Ice blasting creates no dust and utilizes no abrasives in the process, and is accordingly more gentle and cleaner than sand blasting. Known competitive disadvantages of ice blasting over other methods are that it is less abrasive than sand blasting, steel shot, walnut shells, and corn. Ice blasting will not remove deep rust or hard metal burrs. Because it is less abrasive, ice blasting is slower than some of the aforementioned processes.

Using the ice blasting cleaning process reduces waste as compared to other cleaning processes. Typical water blasting operations use from 1 to 6 gallons per minute or 60 to 360 gallons per hour. Ice blasting uses not more than 20 gallons per hour. Further, upon impact the ice particles explode, turning approximately half of its solid mass into vapor and the other half into liquid, thus resulting in even less wastewater to contain.

UIBI holds four patents (#5,913,711, #6,001,000, #6,270,394) and #6,536,220). These patents cover the method and equipment for manufacturing, transport, and continuous delivery of ice particles to a nozzle to do continuous ice blast cleaning work on various surfaces. One European patent, # EP 092 870B1, has been granted in Europe and the Company is applying for issuance in several countries. The Company also has other patent applications pending which cover various improvements to the methods and apparatus related to ice blast technology.

The Company filed a new patent application in covering the use of any particulate to make the ice abrasive. This has been found to be a significant addition to the technology and has opened up many new applications in the industrial and automotive markets.

Products and Services

The Company's cleaning products are designed to operate continuously, three shifts a day, seven days a week. The Company produces equipment models of a stationary design for use in manufacturing systems. Base sales prices for stationary models range from $69,000 to $130,000. The Company also produces equipment models of a more portable design for use on job sites. Base sales prices for stand-alone, portable models approximate $70,000. These units are capable of being set in trucks and other mobile containers and are built to withstand the rigors of industrial worksites.

The Company changed its business model during 2004 to licensing strategy in the form of manufacturing Licenses and Marketing/integration licenses. One license has been granted in the United States to manufacture its proprietary equipment. A license agreement has been entered into with a machine building company in Canada to market the Company’s products to its customers and integrate the Company products with other products of the licensee. The benefits of licensing the manufacture of equipment are a reduction in cost and improvement in build quality. The benefits of the licensing to integrators, includes relying on their core competency of machine building and total system integration with all automotive companies and their marketing and other relationships with these clients. It is expected that this will provide better margins and a faster sales cycle.

While some components have been purchased from primarily one source, MAJA Food Technology, most other parts and accessories used in assembly are available from multiple sources. Management of the Company believes that sufficient quantities of raw materials, parts and components utilized in making ice blasting equipment will continue to be available. No vendor of the Company is considered as the primary vendor and all components used in the equipment that the Company assembles can be either acquired from alternative sources or produced in-house.

In addition to selling its ice blasting equipment, the Company rents its equipment and also provides cleaning services when requested by customers. The Company intends to increase the rental income portion of the business. The Company has provided ice blasting cleaning services, primarily through its wholly-owned subsidiary, Midwest Ice Blast, Inc. ("Midwest"). Typically, cleaning contracts are of short duration and the Company sometimes uses subcontracted labor to perform the work. The primary focus of the Company is not to provide ice blast cleaning services, but to develop market niches and sales channel partners through which it can rent, lease or sell equipment.

The Company has primarily marketed its products and services directly to its customers, and has also developed indirect sales channels through sales agents and distributors and with other businesses involved in providing industrial and environmental cleaning services. The Company has a reciprocal marketing agreement with a company providing environmentally friendly chemical solutions for coating removal and cleaning to customers in architectural, industrial, automotive and marine markets, and an agreement with a distributor in Holland. The following table provides a listing of both domestic and foreign organizations with whom the Company has entered into distributorship and/or exclusive territory agreements:

Organization                               

Nature of Agreement                                   

Date          

Term        

Heydaal B.V.

Distributorship covering The Netherlands,

8/1/2000

5 years

dba Universal Ice Blast Europe

Belgium and Luxemburg

Napier Environmental

Reciprocal Marketing Agreement allowing

2/23/2001

Unlimited

Technologies, Inc.

for cross promotion of products

Delta, BC Canada

The distributorship agreement requires minimum purchases of ice blast equipment from the Company, which if not met will put the distributor in default of the agreement and allows the Company to seek other parties to distribute its products in those areas for which the distributor initially had exclusivity. The Napier agreement is subject to cancellation by either party upon 30 days written notice.

The agreement with Heydaal, B.V., generated revenues of $70,000 in 2000 and $38,700 in 2003. The agreement with Napier Environmental Technologies, Inc. allows us to provide an alternative solution to our customers , and is not designed to be a significant revenue source for the Company, and has yet to generate revenue.

The Company is the premier worldwide provider of crystalline ice blasting equipment.

Markets

The Company directs the current sales efforts for its cleaning equipment and services in the three markets of Precision Cleaning, Industrial Cleaning and Environmental Cleaning.

Precision Cleaning is cleaning to a defined tolerance, typically in a repetitive production setting where quality controls are closely measured and monitored. It usually involves removing surface contaminants from cast or machined mechanical parts, electronic components, or highly purified materials. It can also involve light" deburring" (removal of "burrs" created by cutting tools on machined soft metal - aluminum - parts). Ice blast technology is currently being used to clean and deburr electric motor armatures, transmission components and gears, engine and other cast parts for Japanese and American auto manufacturers.

During 2001 the Company designed, assembled, and delivered a precision gear cleaning ice blast system under the terms of a purchase order from Ford Motor Company (“Ford”). The purchase order was for a price of approximately $341,000 with commitments for additional similar systems. The machine was installed in January 2002 and became operational in March 2002. In June 2002, Ford notified the Company that Ford had accepted and approved the gear-cleaning system as Implementation Ready. Ford paid all amounts due to the Company under the terms of the initial purchase order.  As a result of Ford’s acceptance of the gear cleaning system, UIBI recognized approximately $341,000 in revenue during the year ended December 31, 2002. Costs associated with the system, also recognized during 2002, were approximately $344,000 resulting in a loss of approximately $3,000. In June 2003, the Company was informed that Ford would not be buying additional systems as previously discussed.

In the second half of 2003, the Company received approximately $ 47,000 for its testing and engineering design of deburring and cleaning of aluminum transmission components and provided to Ford Advanced Manufacturing and Technical division Group and Metaldyne Corporation. The Company expects that it would have these applications approved as “Implementation Ready” in the second quarter of 2004.

During the third quarter of 2003 the Company did extensive testing of aluminum GM engine components for a Canadian tier one supplier. While the Company was given assurances that orders would be placed, none have been made and have been delayed indefinitely.  

During 2003, the Company designed and sold a Rust Inhibitor booth to Ford. The equipment was built by a machine tool company and installed at Ford’s Sharonville, Ohio plant.

The Company continues to work with Todd Engineering of Cambridge Ontario in Canada to present our technology to the tier one suppliers to their automotive customers. Todd Engineering entered into a licensing agreement with the Company in January 2004 and is the exclusive licensee for the ice blast technology to be used in the Ontario market.

Industrial Cleaning includes, among other applications, manufacturing equipment cleaning, maintenance and refurbishing, glass and fiberglass plant cleaning, and plastic mold and dunnage cleaning. In addition to the advantages of reduced waste, superior cleaning, and dustless and chemical-free processes, ice blasting can reduce or eliminate the use of volatile organic compounds.

Industrial cleaning applications are not always confined to manufacturing plants. The Company has also demonstrated the effectiveness of ice blast equipment for the cleaning of locks and pump stations in the waterways of Holland, which resulted in an equipment sale to its Netherlands distributor during 2000. In the second quarter of 2002, the Company shipped an ice blast machine from its rental fleet to its Netherlands distributor to assist in the development of the European rental market. In February 2003, an additional four rental machines were shipped to Holland to support a large asbestos abatement job for Dow Chemical. The Company sees this as an important investment required in order to satisfy European rental demand.

In March 2002, the Company was recognized for its technology innovation by the Construction Innovation Forum and was a finalist for the Forum’s prestigious NOVA Award.

Environmental Cleaning projects utilizing ice blasting have included lead-based paint abatement and removal, and asbestos abatement and removal. The Company has invested three years in technology validation efforts to position its ice blast technology as a new, cost-effective and environmentally superior process. The Company has proven that the technology is effective for the removal of lead-based paint from cement and brick buildings, steel structures inside buildings and from steel overpass bridges.

As a result of work performed on a lead-based paint abatement pilot project, the Company's ice blast technology was nominated by the New York State Department of Transportation (NY DOT) for the 2000 Civil Engineering Research  Foundation Award for Innovation. The pilot project  consisted  of demonstrating  the effectiveness of ice blast in removing lead-based paint on two New York State bridges. The Company has been informed that the ice blast technology has been specified for five bridges which the Company understands has been bid upon in 2003 for depainting in 2004. Because of the nature of this bridge painting market, we cannot determine if we will be renting ice blasting equipment to the winning bidder until the NY DOT and the contractor have concluded their agreements. We expect notification in the second quarter of 2004 if they are going to use ice blast on these bridges during the 2004 painting season.

Nuclear decontamination is a segment of the environmental industry that is taking on added importance for UIBI. The Company built and delivered two special purpose ice blast machines in the last half of 2002 to customers with nuclear decontamination operations, Bruce Power LP and Ontario Power Generation, Inc. There were no sales in this market in 2003. Management still considers this to be a significant and growing market for the Company and in March 2004 we were asked to bid on equipment for a US power generating company.

While the Environmental Cleaning market continues to be considered important, the Company has focused most of its recent efforts in the Precision Cleaning market.

The following table reflects revenues derived from each of the three market segments described above including the percentage of the total for the years ending December 31, 2003, and 2002.

Market Segment

 Revenues

Percentage

 Revenues

Percentage

Precision Cleaning  

$

210,044

51%

$ 393,573

56%

Industrial Cleaning

204,953

49%

81,297

12%

Environmental Cleaning

               -

        -

   222,308

  32%

$

414,997

100%

$ 697,178

100%

The revenues and percentage mix reflected above should not be considered representative of future revenues and may vary dramatically dependent upon future contracts for ice blasting machines, rentals and services.

The following table is a listing of customers who have accounted for 10% or more of total revenues during 2003 and 2002:

Customer                                       

    2003    

     2002     

Ford Motor Company

$ 187,756

$ 355,070

Belfor USA

49,335

-

Bruce Power L.P.

-

89,350

Ontario Power Generation, Inc.

-

87,985

Ice Blast California, Inc.

-

34,400

Competition

Competition for the Company's products and services comes from high-pressure water blast, dry ice blast, soda blast, sand, glass bead and other abrasive blasting, manual labor and chemicals. The Company's ice blast technology has advantages over other blasting techniques in that no special blasting material must be purchased and cleaned up. Primary competitive advantages are waste minimization as compared to other techniques, low airborne contaminants, improved environmental and worker health compliance, continuous operation reliability and simple field implementation. Known competitive disadvantages of ice blasting over other methods are that it is less abrasive than sand blasting, steel shot, walnut shells, and corn. Ice blasting will not remove deep rust or hard metal burrs. Because it is less abrasive, ice blasting is slower than some of the aforementioned processes. However the addition of an abrasive particulate onto the ice stream will provide the Company with new opportunities.

Many or most of the Company's competitors are larger, more established businesses, which have, in many cases, long-standing relationships with their customers, substantial name recognition and greater financial resources. Further, as with most new technology, ice blasting has an early adopter hurdle to overcome as there is an inherent resistance to change that provide older methodologies a competitive advantage.

Government Regulation

While marketing opportunities are created as a result of numerous governmental and environmental regulations, the Company has determined that it complies with all such regulations, as a manufacturer, including OSHA requirements. Where the Company either sells or leases equipment to contractors in the lead based paint or asbestos abatement market, such sales or leases of equipment are not subject to the many regulations that are applicable to the contractors.

Further, the Company is not aware of any proposed governmental regulations which would impact or limit the Company's continued sale or lease of its equipment within the hazardous abatement industry nor are there any known costs and effects of compliance with existing environmental laws.

Research and Development Expenditures

The Company has expended approximately $178,000 and $224,000 for research and development activities during the years ended December 31, 2003 and 2002, respectively. Costs incurred consist primarily of salaries and related costs, and parts, materials and supplies directly involved in the research and development of new technology and are expensed as incurred. There are no material research and development activities that are borne directly by the Company's customers.

Employees

As of March 15, 2004, the Company had 6 employees, all of whom are full-time. None of the employees have employment agreements and none are represented by a collective bargaining agreement.