Chairman's Letter - August 15, 2003

Letter from Rory Clarke, Chairman, CEO:

The question on many shareholders minds these days, and certainly voiced in their emails to me is; “ Do we have a chance to survive today?”   The answer is:  we have a fighting chance, it is not going to be easy nor will it be quick.  Clearly we have to change what we are doing, it does not work.

This letter will provide a look at our recent past and a preliminary look at our Revised Corporate Strategy. 

In June of this year I was informed that Ford had found other remedies for their cleaning/decontamination problems. Consequently the purchase orders for the gear-cleaning systems we were expecting in 2003, triggered by the approval of the first gear-cleaning machine, were cancelled, a revenue reduction of over $1 million for 2003. This happened despite the superior cleanliness standards we attained, exceeding the Ford standard by a significant margin. To further add to the agony, our apparent preferred position as the technology of choice for a new transmission line providing 9 machines in each of 2004, 2005 and 2006 was no longer available. This major setback took us by surprise especially considering the 6 years of effort in which we had supported their requests for testing of products. Ford’s current financial concerns must have a major influence in their decision-making. 

In July, Sam Visaisouk, President and Chief Operating Officer resigned from Universal Ice Blast. Personally I was not happy to see him leave. While his departure was sudden and unexpected, shareholders and customers should know that the ice blast technology is well embedded in the company with all of our staff. We are moving forward and have increased our emphasis on new products and refinements to existing equipment.

Mr. Norman Fisher, patent holder and key employee, has been instrumental in many innovative aspects of the technology since 1993.  His and other employee’s knowledge will advance the technology into new markets through the initiatives of the Technology Circle. 

While we received disconcerting news from Ford about the cancellation of orders, they did confirm their internal assessment of ice blast technology for de-burring/cleaning applications. They had concluded that the ice blast brought advantages in both cost and improved performance over of competing technologies. 

Our relationship with Metaldyne is providing further confirmation that the ice blast technology has a rightful place in the deburring and cleaning applications of valve bodies and other machined aluminum components. Metaldyne and UIBI are continuing with testing parts for automotive manufacturers and their suppliers.

A division of Magna (Canadian manufacturer) has recently completed testing and evaluation of ice blast for deburring applications. The testing has resulted in RFQ’s being issued to two UIBI endorsed machine tool builders for an expected order to be issued before September 30^th..

The Public Works Dept of the US Navy, Washington D.C. has indicated that they would rent equipment for a 4 month period to supplement their existing ice blast system.  We will know for sure in September/October.

A Portland, Oregon asbestos abatement contractor is currently on an extended rental with an ice blast system for a high-rise building abatement project.

Belfor US, a large international emergency restoration company has just completed rental of two ice blast machines on a fire and smoke damage application at the AOL-Time Warner building in NYC.

Our Dutch distributor has recently acquired another industrial cleaning partner for long-term rentals of ice blast machines in Europe.

In order to effect a change from the existing method of doing business to one that has a different emphasis, my staff and I developed a transition strategy outlined in a short term Tactical Plan. These steps will take us into new actions and will form the basis for a Revised Business Plan, which is still being discussed and written.

Excerpts of the short term Tactical Plan are:

The Revised Business Plan will focus on revenues Sources from two markets.

1. Licensed Partners for the Precision Cleaning markets.

And

2. Rental Revenue strategy into Industrial markets with Licensed and Non-licensed Partners.

The details of which are being developed and in some cases implemented each day.

Effective immediately I have instituted a Technology Circle.

The Circle will:

Ensure that all knowledge is shared.

Ensure that credit is given to all members of the team.

Ensure that no idea is too small to bring to the Technology Circle.

Be chaired by an experienced engineer brought in from outside.

Has already started work on new products, directed to these 2 new markets:

Mid market:  New products would be innovative, small, and mobile. Potential customers would be: McDonalds, Wendy’s, AAMCO and businesses that require specialty cleaning to replace chemical cleaning.

Continue to focus on improving existing equipment, already we have identified the key areas for improvement..

Corporately:

We have decided that we will make smaller margins, but deliver greater volumes.

Our focus is on the rental markets.

There are other exciting opportunities in addition to those listed above.  

Lastly, to all shareholders, Stakeholders, all employees are dedicated and focused on this simplified Revised Business Plan. I appreciate your investment in the company.

Sincerely,

Rory Clarke.

Chairman, CEO

Letter from Rory Clarke, Chairman, CEO:

It has been six weeks since I last issued an update on our progress. Many have emailed me and asked that I provide more or regular information. The new Sarbanes/Oxley Act places an additional burden on companies with respect to providing information to the public. Therefore we can only do so much by way of news.

Here is a fast look at what we are doing and where we are headed:

Ford Motor Company: We designed a new product, a Rust Inhibitor Station and delivered it to Ford Sharonville in September. This fully automated machine extends our product line and fits a niche we have developed with our ice blast systems. We will release the details of this product in the near future on our website. Our engineering staff designed this fully automated machine so that it can easily be fitted into an existing line with minimum disruption. ELI in Detroit built the equipment for us and we had great support from the resident engineers at Sharonville. As with many first one of kind products, we will breakeven, however, subsequent machines will produce margins in line with industry standards and will not have the design and engineering costs associated with new product development.

We continue to work with Ford Advanced Manufacturing and Metaldyne to have our deburring and cleaning systems approved as Implementation Ready (IR). We have passed all the preliminary tests required thus far and are still proceeding with additional requirements to achieve IR. We have had outstanding support from both Ford AMTD and Metaldyne during this process.  The market is taking notice of the superior ice blast performance in deburring and cleaning of machined aluminum components and is now beginning to be recognized as a viable alternative to high pressure water blasting. This month we have had inquiries from three automotive manufacturer/suppliers to provide budgetary quotes. For those of you who are not familiar with the term, a budgetary quote is a fast look at the potential cost for a machine.  It does not bind either party, and is only an indication that they are interested.     

Magna Group: We are continuing to work with two divisions of Magna Corporation, which is a large Canadian multinational corporation.  Since we last reported, the group we are dealing with has completed its testing and has determined that ice blast is the best available technology to perform the deburring and cleaning of certain machined aluminum components. We have responded to a RFQ and are working with machine tool companies who have quoted directly to the Magna divisions to build this system. This is further confirmation that we are implementing our strategy of not being a machine tool builder. If the system is accepted, the Company will sell two ice generation units and engineering time.  My August 14^th letter estimated that by Sept 30^th we would have a PO for these two ice generation units; it appears that this could take up to 4 to 6 weeks before we see a purchase order.     

During September we were invited to present our deburring and deflashing systems for aluminum and plastic components to other divisions within the Magna Corporation. The preliminary results are promising.

NYSDOT.  The ice blast technology has been chosen as the method by which 6 bridges will be depainted in the State of New York. This approval is a follow up to the work we successfully completed in 1998, and is expected to start in the summer of 2004. We owe much of this success to the efforts provided by Dumond Chemical as well the diligence and consistent hard work of our current staff, especially key engineer, Mr. Mike Neil.  As disclosed in the August 14^th letter, the Company will derive revenues by renting equipment to the contractor. We have targeted this segment as being significant and will be seeking a Partner to go after this market. 

Asbestos abatement in Portland: The job was successful, and the equipment performed great, proving that Ice blast has “packaged” compact solutions for the asbestos abatement industry. This rental income will be reflected in our third quarter results.

New Product Development: The Technology Circle chaired by Bob Fuller has made significant progress since its formation in July. The Company has filed a provisional patent, which will allow the technology to enter middle and retail markets with new equipment and a revolutionary ice process.  One of the strategies to be employed is a joint venture with companies already established in these markets, using their branding and distribution prowess. While these plans are in the formative stage, we have identified companies, and any discussions with these companies will be subject to non-disclosure agreements while we further develop the technology 

The Tactical Plan we have developed to move the Company into its new direction is updated as follows;

Other Items.

Cash Flow.  Cash flow is tight however we continue to get the basics done and have come a long way with the development of the new products.  It is tough, but doable.

The Technology Circle has excelled itself in producing working prototype models of a concept in less than 8 weeks.

I hope that this letter will convey that the company is moving at a fast pace towards profitability and being cash flow positive.  We continue to reduce costs and are concentrating on those key elements of our Revised Business Plan that will move the Company forward to its stated objectives.

I would like to thank my team of employees and consultants, for their continued support and loyalty. Many of who have been significant contributors to the technology without recognition. To our shareholders, thank you for your patience and continued investment in the company.

Sincerely,

Rory Clarke.

Chairman, CEO