UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period_______to_______
Commission file number 33-00215
UNITED STATES ANTIMONY CORPORATION
(Name of small business issuer in its charter)
Montana 81-0305822
(State or other jurisdiction
of incorporation or organization) (I.R.S. Employer Identification No.)
P.O. Box 643, Thompson Falls, Montana 59873
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (406) 827-3523
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $.01 per share
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 X No
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B 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. [ ]
The registrant's revenues for its most recent fiscal year were $3,436,564.
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based on the average bid price of such stock, was $3,178,940 as of
March 4, 2002.
At March 4, 2002, the registrant had 26,906,959 outstanding shares of par
value $.01 common stock.
TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS....................................1
General...................................................1
History...................................................1
Overview-2001.............................................1
Risk Factors..............................................2
Antimony Division.........................................4
Zeolite Division..........................................5
Gold Division.............................................6
Environmental Matters.....................................7
Employees.................................................9
Other.....................................................9
ITEM 2. DESCRIPTION OF PROPERTIES..................................9
Antimony Division.........................................9
Gold Division.............................................9
Zeolite Division.........................................10
ITEM 3. LEGAL PROCEEDINGS.........................................10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......10
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS...................................................10
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS................................................11
ITEM 7. FINANCIAL STATEMENTS......................................13
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.......................13
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS, COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT.......................................................13
ITEM 10. EXECUTIVE COMPENSATION....................................14
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................14
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............16
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K..........................18
SIGNATURES............................................................21
FINANCIAL STATEMENTS..............................................F1-F24
PART I
Item 1. Description of Business
General
Explanatory Note: As used in this report, the terms "we," "us" and "our" are
used to refer to United States Antimony Corporation and, as the context
requires, its management.
Some of the information in this Form 10-KSB contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words as "may," "will," "expect,"
"anticipate," "believe," "estimate" and "continue," or similar words. You
should read statements that contain these words carefully because they:
-discuss our future expectations;
-contain projections of our future results of operations or of our
financial condition; and
-state other "forward-looking" information.
History
AGAU Mines, Inc., our corporate predecessor, was incorporated in June
1968 as a Delaware corporation to explore, develop and mine gold and silver
properties. United States Antimony Corporation was incorporated in Montana in
January 1970 to mine and produce antimony products. In June 1973, AGAU Mines,
Inc. was merged with and into us, with United States Antimony Corporation
being the surviving corporation in the merger. In December 1983, we suspended
antimony mining operations when it became possible to purchase antimony raw
materials more economically from foreign sources. Our principal business has
been the production and sale of antimony products, the mining, milling and
sale of gold, and recently, the production of zeolite products.
Overview-2001
Antimony Sales
During 2001, sales of our antimony products decreased approximately 30%.
The decrease was primarily due to negative economic conditions experienced by
many of our antimony customers. We believe that as economic conditions improve
our antimony sales will return to higher levels.
Bear River Zeolite, Inc.
We made substantial progress during 2001 in developing the processing
plant at our Bear River Zeolite ("BRZ") subsidiary's Idaho site. In addition,
during 2001, our sales and technical staff conducted research activities of
various applications for zeolite and identified several potential zeolite
customers that would benefit from using our zeolite products. We are
optimistic that our zeolite subsidiary will play an important role in our
future business operations.
Debenture Conversions
In 2001, holders of 100% of the outstanding convertible debentures,
converted their debentures, including $1,022,992 of principal, accrued
interest of $131,510 and $70,000 of accrued late registration penalties, into
6,012,846 shares of our common stock at the rate of $0.20 per share. The
conversions have relieved us from the debentures' repayment obligations and
contractual restrictions, and significantly reduced our total liabilities.
Yellow Jacket Reclamation
We almost fully completed our reclamation activities at our Yellow Jacket
property during 2001, with only minor tasks left to perform during the 2002
field season. Yellow Jacket reclamation has been a cash drain on our resources
since our abandonment of the operation in 1999.
1
Risk Factors
We believe it is important to communicate our expectations. However,
there may be events in the future that we are not able to accurately predict
or over which we have no control. The risk factors listed below, as well as
any cautionary language in this report, provide examples of risks,
uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward-looking
statements.
Our liabilities substantially exceed our assets. If we were liquidated before
our stockholders' deficit is eliminated, our common shareholders would lose
part or all of their investment.
In the event of our dissolution, the proceeds (if any) realized from the
liquidation of our assets will be distributed to our shareholders only after
satisfaction of claims of our creditors and preferred shareholders. The
ability of a purchaser of shares to recover all or any portion of the purchase
price for the shares in that event will depend on the amount of funds realized
and the claims to be satisfied by those funds.
We have a negative net worth, have incurred significant losses, and may expect
to incur losses in the future.
We have not generated an operating profit for several years. Instead we
have been able to continue operations from gross profit from our antimony
operations, sales of common stock and borrowings from banks and others. As of
December 31, 2001, we had a stockholders' deficit of $1,167,884; and we
anticipate that we will continue to incur net losses for the foreseeable
future unless and until we are able to establish profitable business
operations and reduce cash outflows from general and administrative expenses
and property reclamation costs. As of December 31, 2001, we had total current
assets of $234,962 and total current liabilities of $1,464,134, or negative
working capital of approximately $1,229,172.
We received an opinion from our auditors as of February 8, 2002 which raises
doubt about our ability to continue as a going concern.
Our audited financial statements for the year ended December 31, 2001,
which are included in this report, indicate that there was substantial doubt
as of February 8, 2002 about our ability to continue as a going concern due to
our need to generate cash from operations and obtain additional financing.
We are delinquent or in arrears on significant current liabilities; and
collection efforts by creditors could jeopardize our viability as a going
concern and close down our operations.
As of December 31, 2001, we are delinquent on the payment of several
current liabilities including payroll and property taxes of approximately
$210,000, accounts payable of approximately $538,000, judgments payable in the
amount of $46,523 and accrued interest payable in the amount of $14,640. In
the absence of payment arrangements, creditors could individually or
collectively demand immediate payment and jeopardize our ability to fund
operations and correspondingly damage our business. Creditors who are owed
taxes have the power to seize our assets for payment of amounts past due and
close down our operations.
Capital to meet our future needs may be unavailable on acceptable terms, which
would impair our plans to reduce dependence on foreign sources of antimony by
developing additional raw material supplies, to develop and expand our present
operations and to expand our product lines to include industrial minerals.
To fund future needs, we may seek to obtain additional capital from
public or private financing transactions, as well as borrowing and other
resources. However, we have a limited amount of authorized but unissued or
unreserved shares of common stock available for issuance; and we therefore may
not be able to meet our capital needs with equity funding unless and until our
shareholders authorize additional common stock. If additional shares are
authorized in the future, the issuance of equity or equity-related securities
to raise additional cash would result in dilution to our present
stockholders. Further, additional debt funding may not be available on
favorable terms, if at all.
2
Our existing debt is secured by pledges of substantially all of our assets.
Therefore, a default in the payment of the secured debt could result in a loss
of the related assets and our ability to continue operations.
As of December 31, 2001, our bank debt in the amount of $461,276 is
secured by a collateral pledge of substantially all of our mining equipment as
well as our patented and unpatented mining claims in Sanders County, Montana.
In the event we are unable to pay the bank debt as it matures, there is a risk
the bank may foreclose its security interest and we would lose all or a
portion of our equipment as well as our patented and unpatented mining claims.
We may be subject to civil liabilities, including fines and other penalties
imposed by federal and state security agencies, for issuing shares of stock
without a restrictive legend or for selling unregistered securities without an
available exemption.
During the first quarter of 2000, the Company issued 150,000 shares of
common stock to Bluewater Partners, Inc. as compensation for fiscal advisory
and consulting services. The stock certificate was issued without a
restrictive legend. Management was subsequently informed by legal counsel
that the certificate should have born a restrictive legend. We undertook to
retrieve the share certificate from Bluewater Partners, Inc.; however, we were
unsuccessful.
In addition, we have sold stock in transactions which may not qualify for
exemption from the registration requirements of the Securities Act of 1933.
The proceeds of these sales aggregated not more than $66,800 through December
2001. As a result, we may be subject to civil liabilities, including
liability to the purchasers to rescind the stock sales, as well as fines and
penalties imposed by federal and state securities agencies. The likelihood of
a claim and the ultimate outcome if a claim is asserted cannot be determined
at this time. A rescission claim may be brought by a purchaser up to three
years after the stock sale. In the event a claim is made, and the Company is
unable to pay it may not be able to fund its present level of operations which
may result in a reduction in the stock price and result in an adverse effect
on new shareholders. The Company does not presently have cash available to
rescind these stock sales.
Our current and former operations expose us to risks of environmental
liabilities.
Our research, development, manufacturing and production processes may
involve the controlled use of hazardous materials, and we may be subject to
various environmental and occupational safety laws and regulations governing
the use, manufacture, storage, handling, and disposal of hazardous materials
and some waste products. The risk of accidental contamination or injury from
hazardous materials cannot be completely eliminated. In the event of an
accident, we could be held liable for any damages that result and any
liability could exceed our financial resources. We also have three ongoing
environmental reclamation and remediation projects, one at our current
production facility in Montana and two at discontinued mining operations in
Idaho. Adequate financial resources may not be available to ultimately finish
the reclamation activities if changes in environmental laws and regulations
occur; and these changes could adversely affect our cash flow and
profitability. We do not have environmental liability insurance now; and we
do not expect to be able to obtain insurance at a reasonable cost. If we
incur liability for environmental damages while we are uninsured, it could
have a harmful effect on us and our financial condition. The range of
reasonably possible losses from our exposure to environmental liabilities in
excess of amounts accrued to date cannot be reasonably estimated at this time.
Our accruals for environmental obligations are current liabilities.
We have accruals totaling $225,163 on our balance sheet at December 31,
2001, for our environmental reclamation responsibilities, $137,639 of which
are classified as current based on the requirements of regulatory agencies
directing the reclamations. If we are not able to adequately perform our
reclamation activities on a timely basis, we could be subject to fines and
penalties from regulatory agencies.
3
Antimony Division
Our antimony mining properties, mill and metallurgical plant are located
in the Burns Mining District of Sanders County, Montana, approximately 15
miles west of Thompson Falls. We hold 12 patented lode claims, some of which
are contiguous, and 2 patented mill sites. We have no "proven reserves" or
"probable reserves" of antimony, as these terms are defined by the Securities
and Exchange Commission.
Prior to 1984, we mined antimony ore underground by driving drifts and
using slushers in room and pillar type stopes. Mining was suspended in
December 1983, because antimony could be purchased more economically from
foreign sources. Our underground antimony mining operations may be reopened
in the future should raw material prices warrant doing so. We now purchase
the majority of our raw antimony from China (approximately 70%) and, to a
lesser degree, Canada (approximately 15%). Antimony metal from Chinese
sources has been obtained primarily through brokers. In addition, we obtain
antimony metal from other foreign and domestic sources.
Because we depend on foreign sources for raw materials, there are risks
of interruption in procurement from these sources and/or volatile changes in
world market prices for these materials that are not controllable by us.
Changes in antimony metal export policy by the Chinese government could impair
availability of antimony metal and/or could increase antimony metal prices,
which could result in curtailed production, decreased profits, operating
result fluctuations or breach of contractual obligations to provide antimony
products to our customers.
We currently own 50% of the common stock of United States Antimony,
Mexico S.A. de C.V. ("USAMSA"), which was formed in April 1998. During 1998
and 1999, we invested capital and surplus equipment from our Thompson Falls
antimony operation in USAMSA, which was used for the construction of an
antimony processing plant in Mexico. During the later part of 2000 we
finalized our 50% investment in USAMSA. To date, two antimony processing
furnaces and a warehouse building have been built and limited antimony
processing has taken place. During 2001, USAMSA was idle and had no
production activities due to depressed antimony prices. USAMSA is pursuing
the assignment of mining concessions in the Mexican states of Zacatecas,
Coahuila, Sonora, Queretaro and Oaxaca. We hope USAMSA will begin in future
years to produce antimony metal and other products as processing opportunities
become available and as antimony prices dictate, although there can be no
assurance USAMSA will be profitable.
From refined antimony metal, we produce four antimony oxide products of
different particle size using proprietary furnace technology, several grades
of sodium antimonate using hydro metallurgical techniques, and specialty
antimony compounds. Antimony oxide is a fine, white powder that is used
primarily in conjunction with a halogen to form a synergistic flame retardant
system for plastics, rubber, fiberglass, textile goods, paints, coatings and
paper. Antimony oxide is also used as a color fastener in paint, as a
catalyst for production of polyester resins for fibers and film, as a
phosphorescent agent in fluorescent light bulbs and as a pacifier for
porcelains. Sodium antimonate is primarily used as a fining agent (degasser)
for glass in cathode ray tubes used in computer monitors and color television
bulbs and as a flame retardant. We also sell antimony metal for use in
bearings, storage batteries and ordnance.
We estimate (but have not independently confirmed) that our present share
of the domestic market for antimony oxide products is approximately 5% to 6%.
We have only one principal domestic competitor to the best of our knowledge.
The balance of domestic sales are foreign imports (primarily from Chinese and
Belgian suppliers).
In recent years we made substantial improvements to our analytical and
chemical research capabilities. Since March 1998, we have employed a Chief
Chemist who has devoted approximately 50% of his working time to research and
development activities. We have continued to pursue research and development
activities that have resulted in advances in our preparation, packaging and
quality of our antimony products. We believe that our ability to meet
customer product specifications gives us a competitive advantage. We believe
that we will be able to stay competitive in the antimony business because of
these advances. However, many of our competitors in the antimony industry
have substantially more capital resources and market share than us.
Therefore, our ability to maintain market share can be significantly affected
by factors outside of our control.
For the year ended December 31, 2001, we sold 3,607,139 pounds of
antimony products generating approximately $3.3 million in revenues. During
2000, we sold 5,039,327 pounds of antimony products generating approximately
$4.7 million in revenues. During 2001 and 2000, approximately 34% and 20%,
respectively, of our antimony sales were made to one customer. In addition,
during 2001 and 2000, 12% and 11% of our revenues were generated by antimony
product sales to a second individual customer. The loss of our "key" customer
could adversely affect business.
4
Marketing-During the first quarter of 1999, and in prior years dating back
to 1991, we marketed our antimony products with HoltraChem, Inc. and later its
successor, BCS, in a 50/50 profit sharing arrangement. In March 1999, we
notified BCS that we were terminating the agreements that HoltraChem had
assigned BCS, and that we would market and distribute antimony products
independently. As a result we took steps to market our products to existing
and prospective customers, and have been able to do so successfully. We
employ full-time marketing personnel and have negotiated various commission
based sales agreements with other chemical distribution companies.
Antimony Price Fluctuations-Our operating results have been, and will
continue to be, directly related to the market prices of antimony metal, which
have fluctuated widely in recent years. During 2001, antimony prices declined
to a 35-year low. The volatility of prices is illustrated by the following
table which sets forth the average prices of antimony metal per pound as
reported by sources deemed reliable by us.
Year Average Price
2001 $0.58
2000 0.67
1999 0.58
1998 0.63
1997 0.93
1996 1.60
1995 2.28
The range of sales prices for antimony oxide per pound was as follows for
the periods indicated:
Year High Low Average Price
2001 $5.99 $0.66 $0.93
2000 5.88 0.65 0.99
1999 5.52 0.65 0.85
1998 5.57 0.83 1.13
1997 5.75 0.98 1.41
1996 4.50 1.53 1.86
1995 3.12 0.89 2.56
Antimony metal prices are determined by a number of variables over which
we have no control. These include the availability and price of imported
metals, the quantity of new metal supply, and industrial and commercial
demand. If metal prices decline and remain depressed, our revenues and
profitability may be adversely affected.
We use various antimony raw materials to produce our products. We obtain
antimony raw material from sources in China, Canada and the U.S. Purchases
from Canadian and U.S. sources have been made at world market prices, as
established by the London Metals Bulletin from time to time. Antimony metal
from Chinese sources has been supplied by Fortune America Trading Ltd., a New
Jersey-based dealer, pursuant to a long-term supply contract to supply
antimony metal at a fixed price. Our USAMSA venture is intended eventually to
reduce our dependence on foreign sources; but during 2001 USAMSA was idle and
it is not expected to provide sufficient raw material for several years.
After a modest increase in antimony metal prices during 2000, antimony
metal prices plunged to a 35-year low during 2001. Low metal prices, combined
with substantial cutbacks in orders from our customers, led to an overall
decrease in antimony product sales for 2001 of approximately 30% from the
prior year. We believe that adverse economic conditions were primarily
responsible for the decrease in customer orders; we are confident that as
economic conditions improve our customers orders will increase.
Zeolite Division
We own 75% of Bear River Zeolite Company ("BRZ"), an Idaho corporation
incorporated on June 1, 2000. BRZ has entered into a lease with Webster Farm,
L.L.C. The lease entitles BRZ to surface mine and process zeolite on property
located in Preston, Idaho in exchange for a royalty payment. The royalty is a
percentage of the unprocessed ore sale price which varies between 5%-7%. The
minimum annual royalty during the first five years is $1,000. The royalty is
also payable on zeolite mined on adjacent BLM ground on which BRZ has located
additional claims, if BRZ accesses those claims across the leased property.
5
BRZ is has constructed a processing plant on the property and is currently
improving its productive capacity. We lease mining and processing equipment
to BRZ; and we have advanced development and start-up costs of approximately
$390,000. During 2001, we deployed our mining equipment to BRZ and began
limited zeolite production operations. During the fourth quarter of 2001, we
sold approximately 100 tons of zeolite to customers that used the material for
a variety of applications. We are pursuing marketing zeolite to entities in
the water filtration, environmental remediation and agricultural industries.
We are currently taking orders for our zeolite products and are optimistic
that orders will continue and increase during 2002.
We have no "proven reserves" or "probable reserves" of zeolite, as these
terms are defined by the Securities and Exchange Commission.
"Zeolite" refers to a group of minerals that consist of hydrated
aluminosilicates that loosely hold cations such as calcium, sodium, ammonium
and potassium. Water is held in cavities in the lattice. Because of its
ability to exchange one cation for another, a process known as
"cation-exchange capacity," zeolite is used for separating cations and is
often referred to as a "molecular sieve." BRZ's zeolite deposits have
characteristics which make the mineral useful for a variety of purposes
including:
-Soil Amendment and Fertilizer. We plan to produce a fertilizer
which will combine ammoniated zeolite with phosphate. (Ammonium contains
nitrogen, a plant nutrient.) Zeolite has been successfully used to fertilize
golf courses, sports fields, parks and common areas, and high value crops,
including corn, potatoes, soybeans, red beets, acorn squash, green beans,
sorghum sudangrass, Brussels sprouts, cabbage, carrots, tomatoes, cauliflower,
radishes, strawberries, wheat, lettuce and broccoli.
-Water Filtration. Zeolite is used for particulate removal in
swimming pools and municipal water systems, and for the removal of ammonium in
fisheries, fish farms, and aquariums.
-Sewage Treatment. Zeolite is used in sewage treatment plants to
remove nitrogen from waste streams and to deodorize methane gas.
-Nuclear Waste and Other Environmental Cleanup. Zeolite has shown
a strong ability to selectively remove strontium, cesium and various other
radioactive isotopes from solution. Zeolite can also be used for the cleanup
of soluble metals such as mercury, chromium, lead, zinc, arsenic, molybdenum,
nickel, cobalt, antimony, calcium, silver and uranium.
-Odor Control. A major cause of odor around cattle, hog, and
poultry feed lots is the generation of the ammonium in urea and fecal
material. The ability of zeolite to absorb ammonium prevents the formation of
ammonia gas which generates the odor.
-Gas Separation. Zeolite has been used for some time to separate
gases, to re-oxygenate of downstream water from sewage plants, smelters, pulp
and paper plants, and fish ponds and tanks, and to remove carbon dioxide,
sulfur dioxide and hydrogen sulfide from methane generators as organic waste,
sanitary landfills, municipal sewage systems and animal waste treatment
facilities.
-Miscellaneous Uses. Other uses include catalysts, petroleum
refining, building applications, solar energy and heat exchange, desiccants
and carriers for insecticides, pesticides and herbicides.
Gold Division
Yankee Fork Mining District. Until 1989, we mined and milled gold and
silver in the Yankee Fork Mining District in Custer County, Idaho. The site
is currently undergoing environmental remediation pursuant to an Idaho
Department of Environmental Quality consent decree. See "Environmental
Matters." We own two patented lode mining claims in the Yankee Fork District,
which are now idle.
Yellow Jacket Mining District. During the years from 1991 to 1996 we
mined, milled and sold gold bullion produced from the Yellow Jacket mine. The
Yellow Jacket property was put on a care and maintenance status. In 1999, we
abandoned our leasehold interests and began environmental remediation activity
at the Yellow Jacket (see "Environmental Matters") and began reclamation of
the Yellow Jacket tailings ponds and pit area.
6
Environmental Matters
Our exploration, development and production programs conducted in the
United States are subject to local, state and federal regulations regarding
environmental protection. Some of our production and mining activities are
conducted on public lands. We believe that our current discharge of waste
materials from our processing facilities is in material compliance with
environmental regulations and health and safety standards. The U.S. Forest
Service extensively regulates mining operations conducted in National
Forests. Department of Interior regulations cover mining operations carried
out on most other public lands. All operations by us involving the
exploration for or the production of minerals are subject to existing laws and
regulations relating to exploration procedures, safety precautions, employee
health and safety, air quality standards, pollution of water sources, waste
materials, odor, noise, dust and other environmental protection requirements
adopted by federal, state and local governmental authorities. We may be
required to prepare and present to the authorities data pertaining to the
effect or impact that any proposed exploration for or production of minerals
may have upon the environment. Any changes to our reclamation and remediation
plans which may be required due to changes in state or federal regulations
could have an adverse effect on our operations. The range of reasonably
possible loss in excess of the amounts accrued, by site, cannot be reasonably
estimated at this time.
We accrue environmental liabilities when the occurrence of such
liabilities is probable and the costs are reasonably estimable. The initial
accruals for all our sites are based on comprehensive remediation plans
approved by the various regulatory agencies in connection with permitting or
bonding requirements. Our accruals are further based on presently enacted
regulatory requirements and adjusted only when changes in requirements occur
or when management revises its estimate of costs required to comply with
existing requirements. As remediation activity has physically commenced,
management has been able to refine and revise its estimates of costs required
to fulfill future environmental tasks based on contemporaneous cost
information, operating experience, and changes in regulatory requirements. In
instances where costs required to complete our remaining environmental
obligations are clearly determined to be in excess of the existing accrual, we
have adjusted the accrual accordingly. When regulatory agencies require
additional tasks to be performed in connection with our environmental
responsibilities, we evaluate the costs required to perform those tasks and
adjust our accrual accordingly as the information becomes available. In all
cases, however, our accrual at year end is based on the best information
available at that time to develop estimates of environmental liabilities.
Yankee Fork Mill Site. In 1994, the U.S. Forest Service, under the
provisions of the Comprehensive Environmental Response Liability Act of 1980,
designated our cyanide leach plant at the Preachers Cove mill, which is
located six miles north of Sunbeam, Idaho on the Yankee Fork of the Salmon
River, as a contaminated site requiring cleanup of cyanide solution. In 1996,
we signed a consent decree related to the reclamation and remediation at the
Preachers Cove mill in Idaho as required by the Idaho Department of
Environmental Quality, and continued substantial reclamation activities as
required by the decree. During 1999, we updated and presented a Phase II
reclamation plan to the U.S. Forest Service detailing plans for the final
reclamation of the Yankee Fork Mill site. Based upon our analysis of costs
required to implement the specific tasks in the Phase II plan, we adjusted the
Yankee Fork reclamation accrual to reflect our current estimate of costs
required to complete reclamation tasks.
At December 31, 2000, the cyanide solution discharge was complete, the
mill removed, and most of the cyanide leach residue disposed of. Only earth
moving, monitoring activities and containment of the remaining leach residue
remain to complete the activities prescribed by the consent decree. Upon
completion of reclamation activities at the Preachers Cove mill site pursuant
to the consent decree, the site will be closed and the U.S. Forest Service
will terminate the consent decree.
During 2001 and 2000, reclamation activities were at a standstill pending
the completion of a biological assessment to be submitted to the National
Marine Fisheries Service and the U.S. Fish and Wildlife Service. In 2001, the
Idaho Department of Environmental Quality advised us that the ground water
monitoring requirements would be extended by an additional two years and we
accordingly increased our reclamation accrual at the property by $11,000.
During the latter half of 2001, we were given tenative clearance from the U.S.
Forest Service to commence the Phase II reclamation work, although comments
from the National Marine Fisheries service were still pending.
Antimony Processing Site. We have environmental remediation
obligations at our antimony processing site near Thompson Falls, Montana ("the
Stibnite Hill Mine Site"). Under the regulatory jurisdiction of the U.S.
Forest Service and subject to the operating permit requirements of the Montana
Department of Environmental Quality, we have performed substantial
environmental reclamation activities during 1999 and 2000. These activities
included installation of a PVC liner and a geotextile layer on two of the
tailings ponds and the removal of approximately 25,000 yards of tailings
material from a third pond. We made adjustments increasing our reclamation
accruals by $51,150 and $25,615 in fiscal years 1999 and 2000, respectively,
based upon management's revised estimates of costs to comply with regulatory
requirements in effect during the respective years. The regulatory agencies
require that, during 2002, we line a storm water pond and construct a water
treatment facility and thus fulfill the majority of our environmental
responsibilities at the Stibnite Hill Mine site.
7
In November of 2001, the Environmental Protection Agency ("EPA") listed
two by-products of our antimony oxide manufacturing process as hazardous
wastes. Antimony slag and antimony bag house filters are now subject to
comprehensive management and treatment standards under subtitle C of the
Resource Conservation and Recover Act ("RCRA") and emergency notification
requirements for releases to the environment under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"). The rule
becomes effective on May 20, 2002. The new rule will undoubtedly affect our
costs of producing antimony products. At December 31, 2001, we had
approximately 300 tons of antimony slag material at our site near Thompson
Falls, MT. We plan to dispose of as much slag material as possible prior to
the rule's effective date, although there can be no certainty that we will be
able to do so. We are not able to estimate the total costs that may be
associated with the new rule; however, we have increased our reclamation
accrual at December 31, 2001, at our antimony processing site by $36,000 based
on our best estimate of the costs associated with disposing of our current
hazardous waste inventory under EPA universal treatment standards.
Yellow Jacket Mine. During the second quarter of 1999, we began final
reclamation and closure at the Yellow Jacket property. Upon Yellow Jacket's
closure, we estimated the required costs and time to perform closure
activities, and adjusted the Yellow Jacket reclamation liability on a
quarterly basis, re-instating the accrual as costs were incurred (a total of
$73,893) to reflect estimated reclamation and closure costs left to incur.
During the third and fourth quarters of 1999 we began disassembly of the
mill and mill buildings and removed tailings waste from the tailings ponds.
In 2000, we evaluated progress on Yellow Jacket's closure and reclamation and
continued to adjust the reclamation liability for costs as incurred (a total
of $86,960) based upon labor and equipment cost experience in 1999 and our
estimate of costs related to specific tasks yet-to-complete at year end. The
reclamation activity is being overseen by the U.S. Forest Service and the
Idaho Department of Environmental Quality. During 2001, reclamation work
continued on the clean-up of non-cyanide tailings material at the property;
and at the end of 2001 the project was substantially complete. In November
of 2001, we received notification from the U.S. Forest Service outlining only
minor tasks to be performed during the 2002 field season. The Forest Service
complimented our to-date reclamation efforts, characterizing the site as a
potential "showcase for the mining industry." We have reduced our Yellow
Jacket reclamation accrual to $9,125 at December 31, 2001, based on our
estimate of costs remaining to complete the project
BRZ. During 2001, we recorded a reclamation accrual for our Bear River
Zeolite subsidiary, based on an analysis performed by management and reviewed
and approved by regulatory authorities for environmental bonding purposes.
The accrual of $7,500 represents the Company's estimated costs of reclaiming,
in accordance with regulatory requirements, the acreage disturbed by our
zeolite operations.
General. Reclamation activities at the Yellow Jacket Mine and the
Stibnite Hill Mine Site have proceeded informally under supervision of the
U.S. Forest Service and applicable State Departments of Environmental
Quality. We have complied with regulators' requirements and do not expect the
imposition of substantial additional requirements.
We have posted cash performance bonds with a bank and the U.S. Forest
Service in connection with our reclamation activities. In 2000 and 2001, the
U.S. Forest Service released a substantial portion of the environmental
bonding funds that had been deposited for remediation of the Yellow Jacket
Mine. Upon completion of reclamation activities at the Yellow Jacket Mine and
other sites, the bonds will be terminated and the applicable regulatory
authorities may release to us up to $87,550.
8
We believe we have accrued adequate reserves to fulfill our environmental
remediation responsibilities as of December 31, 2001. We have made
significant reclamation and remediation progress on all our properties over
the past three years and have complied with regulatory requirements in our
environmental remediation efforts. The change in amounts accrued for
environmental remediation activities in 1999, 2000 and as of December 31, 2001
is as follows:
Yankee Fork Thompson Falls Yellow Jacket Bear River
Mill Site Antimony Plant Mine Zeolite Totals
Balance December 31, 1998 $116,028 $272,200 $115,044 $503,272
-------- -------- -------- --------- --------
Less: Reclamation work (169,736) (73,893) (243,629)
Adjustments of Accrued
Remediation Costs (70,000) 51,150 73,893 55,043
Balance December 31, 1999 $ 46,028 $153,614 $115,044 $314,686
-------- -------- -------- --------- --------
Less: Reclamation work 0 (60,913) (86,960) (147,873)
Adjustments of Accrued
Remediation Costs 0 25,615 86,960 112,575
Balance December 31, 2000 $ 46,028 $118,316 $115,044 $279,388
-------- -------- -------- --------- --------
Less: Reclamation work (2,806) (89,757) (92,563)
Adjustments of Accrued
Remediation Costs 11,000 36,000 (16,162) $ 7,500 38,338
Balance December 31, 2001 $ 57,028 $151,510 $ 9,125 $ 7,500 $225,163
======== ======== ======== ========= ========
Employees
As of December 31, 2001, we employed 20 full-time employees. The number
of full-time employees may vary seasonally. None of our employees is covered
by any collective bargaining agreement.
Other
We hold no material patents, licenses, franchises or concessions; but we
consider our antimony processing plant proprietary in nature. We use the
trade name "Montana Brand Antimony Oxide" for marketing our antimony products.
We are subject to the requirements of the Federal Mining Safety and
Health Act of 1977, the Occupational Safety and Health Administration's
regulations, requirements of the state of Montana and the state of Idaho,
federal and state health and safety statutes and Sanders County, Lemhi County
and Custer County health ordinances.
Item 2. Description of Properties
Antimony Division
Our principal plant and mine are located in the Burns Mining District,
Sanders County, Montana, approximately 15 miles west of Thompson Falls,
Montana. We hold 2 patented mill sites and 12 patented lode mining claims
covering 192 acres. The lode claims are contiguous within two groups.
Antimony mining and milling operations were curtailed during 1983 due to
continued declines in the price of antimony. We are currently purchasing
foreign raw antimony materials and continue to produce antimony metal, oxide
and sodium antimonate from our antimony processing facility near Thompson
Falls, Montana.
Gold Division
Yankee Fork Mining District.
The Estes Mountain properties consist of 2 patented lode mining
claims in the Yankee Fork Mining District of Custer County, Idaho. These
claims are located approximately 12 miles from our former Preachers Cove
Mill. The mill has been dismantled and the property is nearing final
reclamation. (See "Description of Business-Environmental Matters.")
9
Yellow Jacket Mining District
The Yellow Jacket property consisted of 12 patented and various
unpatented lode mining claims located in the Yellow Jacket Mining District of
Lemhi County, Idaho, approximately 70 miles southwest of Salmon, Idaho.
During the second quarter of 1999, due to depressed precious metal prices and
the absence of a discovery of mineralized material that could be economically
mined, we abandoned our leasehold interests in the Yellow Jacket property and
began final reclamation and closure activities. (See "Description of
Business-Environmental Matters.")
Zeolite Division
We own 75% of Bear River Zeolite Company ("BRZ"), an Idaho corporation
incorporated on June 1, 2000. BRZ has entered into a mining lease with
Webster Farm, L.L.C. The lease entitles BRZ to surface mine and process
zeolite on property located in Preston, Idaho in exchange for a royalty
payment. The royalty is a percentage of the unprocessed ore sale price which
varies between 5%-7%. The minimum annual royalty during the first five years
is $1,000. The royalty is also payable on zeolite mined on adjacent Bureau of
Land Management ("BLM"), ground on which BRZ has located five additional BLM
claims, if BRZ accesses those claims across the leased property. BRZ is
currently constructing a processing plant on the property. Mining and
processing equipment will be leased to BRZ by us and we will advance
development and start-up costs.
Item 3. Legal Proceedings
We are not a party to any pending legal proceeding.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of our security holders during the
fourth quarter of 2001, and we did not hold an annual meeting of shareholders
during 2001.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Currently, our common stock is traded on the Over the Counter Bulletin Board
("OTCBB") under the symbol "UAMY." The following table sets forth the range
of high and low bid prices as reported by the OTCBB for the periods
indicated. The quotations reflect inter-dealer prices without retail mark-up,
mark-down or commission, and may not necessarily represent actual
transactions.
2001 High Low
First Quarter $0.41 $0.17
Second Quarter 0.53 0.24
Third Quarter 0.32 0.17
Fourth Quarter 0.31 0.16
2000 High Low
First Quarter $0.95 $0.22
Second Quarter 0.88 0.20
Third Quarter 0.78 0.32
Fourth Quarter 0.41 0.13
The approximate number of record holders of our common stock at March 4, 2002
is 2,700.
We have not declared or paid any dividends to our stockholders during the last
five years and do not anticipate paying dividends on our common stock in the
foreseeable future. Instead, we expect to retain our earnings for the
operation and expansion of our business.
10
Item 6. Management's Discussion and Analysis or Plan of Operations
Certain matters discussed are forward-looking statements that involve risks
and uncertainties, including the impact of antimony prices and production
volatility, changing market conditions and the regulatory environment and
other risks. Actual results may differ materially from those projected. These
forward-looking statements represent the Company's judgment as of the date of
this filing. The Company disclaims, however, any intent or obligation to
update these forward-looking statements.
Results of Operations
The Company reported a net loss of $976,837 during 2001 compared to net loss
of $67,999 in 2000. The net loss in 2001 was incurred from operations. The
net loss during 2000 is primarily attributable to a $985,425 loss from
operating activities, offset by an extraordinary gain of $917,726 recognized
on the conversion of a debt owed the Estate of Bobby C. Hamilton (see below).
Total revenues from antimony product sales for the year ended December 31,
2001, were $3,421,136 compared with $5,016,661 for the comparable period of
2000, a decrease of $1,595,525. The major factor contributing to this decrease
in sales of antimony products is the adverse economic conditions experienced
by the Company's customers during 2001. Sales of antimony products during the
year ended December 31, 2001 consisted of 3,607,139 pounds at an average sale
price of $0.93 per pound. During the year ended December 31, 2000, sales of
antimony products consisted of 5,039,327 pounds at an average sale price of
$1.00 per pound. Combined costs of antimony production and freight and
delivery were $3,114,295 or $0.86 per pound sold, for the year ended December
31, 2001, as compared to costs of antimony production and freight and delivery
of $4,543,771, or $0.90 per pound sold for the year ended December 31, 2000.
During the year ended December 31, 2001, the Company incurred expenses
totaling $392,740 associated with Bear River Zeolite start-up and development.
Sales of zeolite products were $15,428, with associated costs of sales of
$3,587 during the year ended December 31, 2001. No such costs or sales were
incurred during the year ended December 31, 2000, as the subsidiary did not
yet exist.
Care, maintenance, and reclamation costs at the Company's Yellow Jacket
property decreased from $241,244 during the year ended December 31, 2000, to
$10,822 during the year ended December 31, 2001. The decrease was primarily
due to the decrease of accrued reclamation cost adjustments during the year
ended December 31, 2001, and the property nearing its final reclamation.
General and administrative expenses were $494,950 during the year ended
December 31, 2001, compared to $631,869 during the year ended December 31,
2000. The decrease in general and administrative expenses from 2000 to 2001 is
primarily due to $153,000 of expenses relating to financial consulting services
provided the Company during the first quarter of 2000 that were not incurred
during 2001 and the allocation of approximately $76,000 of corporate general
and administrative expenses and sales expenses to Bear River Zeolite during
2001.
Sales expenses were $128,259 during the year ended December 31, 2001, compared
to $339,267 during the year ended December 31, 2000. The decrease in sales
expenses was principally due to management's restructuring of its sales staff
with less costly and fewer employees during the year ended December 31,
2001.
Interest expense was $152,070 during the year ended December 31, 2001 and was
comparable to interest expense of $157,145 incurred during the year ended
December 31, 2000.
Accounts receivable factoring expense was $91,069 during the year ended
December 31, 2001. Factoring expense incurred during the year ended December
31, 2000 was $100,956. The decrease in factoring expense corresponded to the
decrease in sales during 2001. Interest income decreased from $8,459 during
the year ended December 31, 2000, to $5,229 during the same period of 2001 due
to a corresponding decrease in interest bearing reclamation bonds held during
2001.
In 2000, the Company settled and extinguished a debt of approximately $1.5
million owed to the Estate of Bobby C. Hamilton through payment of $500,000
cash and issuance of 250,000 shares of the Company's restricted common stock.
In connection with the settlement the Company recorded an extraordinary gain
of $917,726. No transactions took place during 2001 that generated an
extraordinary gain.
11
Financial Condition and Liquidity
At December 31, 2001, Company assets totaled $725,619, and there was a
stockholders' deficit of $1,167,884. In addition at December 31, 2001, the
Company's total current liabilities exceeded its total current assets by
$1,316,696. Due to the Company's operating losses, negative working capital,
and stockholders' deficit, the Company's independent accountants included a
paragraph in the 2001 financial statements relating to a going concern
uncertainty. To continue as a going concern the Company must generate profits
from its antimony and zeolite sales and acquire additional capital resources
through the sale of its securities or from short and long-term debt financing.
Without financing and profitable operations, the Company may not be able to
meet its obligations, fund operations and continue in existence. While
management is optimistic, there can be no assurance that the Company will be
able to sustain profitable operations and meet its financial obligations.
Other significant financial commitments for future periods will include:
-Servicing notes payable to bank.
-Performing reclamation activities currently required on the
Company's properties.
-Maintaining an evergreen registration statement for common stock
purchase warrants held by certain shareholders.
-Paying delinquent property and payroll tax liabilities and
accounts payable.
-Fulfilling responsibilities with environmental, labor safety and
securities regulatory agencies.
Cash used by operating activities during 2001 was $251,409, and resulted
primarily from the twelve month loss of $976,837 as adjusted by decreasing
inventories, increasing accounts payable, the non-cash effects of depreciation
and amortization, and changes in other current assets and liabilities.
Cash used by investing activities during the year ended December 31, 2001 was
$148,653, of which $120,896 related to construction of capital assets to be
used at the Bear River Zeolite facility. The majority of the remaining
expenditures related to improving the Company's propane fuel storage at its
antimony processing site near Thompson Falls, Montana.
In connection with management's efforts to reduce the Company's long-term debt
that began in 2000 with the issuance of convertible debentures in order to
negotiate a debt settlement with the Estate of Bobby C. Hamilton (see Notes 11
and 12 to the financial statements), holders of 100% of the outstanding
convertible debentures converted their debentures during 2001. Holders
converted $1,022,992 of debenture principal, accrued interest of $131,510, and
$70,000 of accrued late registration penalties into 6,012,846 shares of our
common stock at the rate of $0.20 per share. The conversions of the Hamilton
Estate debt during 2000 and the convertible debentures of 2001 have relieved a
major portion of our long-term obligations and, significantly reduced our
total liabilities.
The Company was able to fund its operating loss and its acquisition of plant
and equipment during the year ended December 31, 2001, from net cash provided
from financing activities of $400,062. During the year ended December 31,
2001, $340,800 was generated from sales of 1,704,000 shares of unregistered
common stock and warrants. Net borrowings from a bank provided $105,274 of
cash during 2001. John C. Lawrence, the Company's president and a director,
advanced the Company a net amount of $94,895 during the year ended December
31, 2001.
The Company hopes that it will have additional financial resources from
increasing gross profits from its antimony business and sales of zeolite from
its newly formed Bear River Zeolite Company subsidiary.
12
Item 7. Financial Statements
The consolidated financial statements of the registrant are included herein on
pages F1-F24.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons,
Compliance with Section 16(a) of the Exchange Act
Identification of Directors and Executive Officers at December 31, 2001, are
as follows:
Name Age Affiliation with us Expiration of Term
John C. Lawrence 63 Chairman, President, Secretary, Annual meeting
and Treasurer; Director
Robert A. Rice 77 Director Annual meeting
Leo Jackson 60 Director Annual meeting
Business Experience of Directors and Executive Officers
John C. Lawrence. Mr. Lawrence has been the President and a Director
since our inception. Mr. Lawrence was the President and a Director of AGAU
Mines, Inc., our corporate predecessor, since the inception of AGAU Mines,
Inc. in 1968. He is a member of the Society of Mining Engineers and a
recipient of the Uuno Sahinen Silver Medallion Award presented by Butte Tech,
University of Montana.
Robert A. Rice. Mr. Rice is a metallurgist, having been employed by the
Bunker Hill Company, a wholly-owned subsidiary of Gulf Resources and Chemical
Corporation at Kellogg, Idaho, as Senior Metallurgist and Mill Superintendent
until his retirement in 1965. Mr. Rice has been a Director since 1975.
Leo Jackson. Mr. Jackson is a resident of El Paso, Texas. For the past
15 years, he has been a principal owner and the President of Production
Minerals, Inc., a company which has an indirect 25% interest in the stock of
USAMSA. Mr. Jackson is one of the principal owners of Minera de Roja, S.A. de
C.V., and has been involved in the production and marketing of industrial
minerals such as fluorspar and celestite in the United States and Mexico for
25 years. Mr. Jackson speaks fluent Spanish and has a BBA degree from the Sul
Ross State University in Texas. Mr. Jackson has been a Director since
February 1999.
We are not aware of any involvement by our directors or executive
officers during the past five years in legal proceedings that are material to
an evaluation of the ability or integrity of any director or executive
officer.
Director Resignation. During the fourth quarter of 2001, Gary D. Babbitt
resigned from the Board of Directors. Mr. Babbitt, a partner in the Boise,
Idaho law firm of Hawley Troxell Ennis & Hawley LLP, has served as the
Company's legal counsel for several years. Mr. Babbitt's resignation was not
due to any disagreements with the company or its management. Mr. Babbitt has
agreed to resume his role as the Company's general counsel.
Board Meetings and Committees. Our Board of Directors held twelve (12)
regular meetings during the 2001 calendar year. Each incumbent director
attended at least 75% of the meetings held during the 2001 calendar year, in
the aggregate, by the Board and each committee of the Board of which he was a
member. Our Board of Directors does not have a Compensation Committee, or a
Nominating Committee.
In June of 2001, our Board of Directors established an Audit Committee
consisting of two members of the Board of Directors not involved in our
day-to-day financial management.
13
Board Member Compensation. We paid directors' fees in the form of 6,000
shares of our common stock per director during 2000. During 2001, no similar
payments were made to directors. Directors are also reimbursed reasonable
out-of-pocket expenses in connection with attending meetings.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a)
of the Securities Exchange Act of 1934 requires our directors and executive
officers and the holders of 10% or more of our common stock to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and stockholders holding more than 10% of our
common stock are required by the regulation to furnish us with copies of all
Section 16(a) forms they have filed.
Based solely on our review of copies of Forms 3, 4, and 5 furnished to
us, Mr. Lawrence and Mr. Babbitt timely filed Form 4 reports during 2001. Mr.
Babbitt was not required to file a Form 5 covering the 2001 fiscal year. We
do not know if Mr. Rice and Mr. Jackson timely filed Form 4 reports during
2001 or Form 5 annual reports for the 2001 fiscal year. We do not know if
A.W. Dugan, a shareholder who became a 10% beneficial owner during 2000,
timely filed Form 3 or Form 4 reports during 2001, or timely filed a Form 5
report for the 2001 fiscal year.
Item 10. Executive Compensation
Summary Compensation Table
The Securities and Exchange Commission requires the following table setting
forth for fiscal years ending December 31, 2001, 2000 and 1999, the
compensation paid by USAC to its principal executive officer.
Annual Compensation Long-Term Compensation
Awards Payouts
Restricted Securities
Other Annual Options/ Underlying All Other All Other
Name and Principal Position Year Salary Bonus Compensation(1) Awards(2) LTIP SAR's Payouts Compensation
John C. Lawrence, President 2001 $96,000 N/A $5,538 $ 0 None None None
John C. Lawrence, President 2000 $81,000 N/A $4,673 $3,250 None None None
John C. Lawrence, President 1999 $72,000 N/A $4,154 $ 720 None None None
(1) Represents earned but unused vacation.
(2) These figures represent the fair values, as of the date of issuance,
of the annual Director's fee payable to Mr. Lawrence in the form of
shares of USAC's restricted Common Stock.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding beneficial ownership
of our common stock as of March 4, 2002, updated to reflect the conversion of
convertible debentures into our common stock in December 2001 at $0.20 per
share, by 1) each person who is known by us to beneficially own more than 5%
of our Series A, Series C or common stock; (ii) each of our executive officers
and directors; and (iii) all of our executive officers and directors as a
group. Unless otherwise stated, each person's address is c/o United States
Antimony Corporation, P.O. Box 643, 1250 Prospect Creek Road, Thompson Falls,
Montana 59873.
Name and Address of Amount and Nature of Percent of
Title of Class Beneficial Owner(1) Beneficial Ownership Class
Common stock The Maguire Family and 1,401,898(2) 5.2(1)
related entities as a group
c/o Walter L. Maguire, Sr.
P.O. Box 129
Keller, VA 23401
Common stock The Dugan Family 4,652,591(4) 16.5(1)
c/o A. W. Dugan
1415 Louisiana Street, Suite 3100
Houston, TX 77002
14
Common stock Thomson Kernaghan & Co Limited(6) 291,025(5) 1.1(1)
365 Bay Street
Toronto, Ontario M5H 2V2
CANADA
Preferred Series A A. Gordon Clark, Jr. 4,500(7) 100.0
stock 2 Musket Trail
Simsbury, CT 06070
Preferred Series C Walter L. Maguire, Sr. 49,091(7) 27.6
stock P.O. Box 129
Keller, VA 23401
Preferred Series C Richard A. Woods 48,305(7) 27.2
stock 59 Penn Circle West
Penn Plaza Apts.
Pittsburgh, PA 15206
Preferred Series C Dr. Warren A. Evans 48,305(7) 27.2
stock 69 Ponfret Landing Road
Brooklyn, CT 06234
Preferred Series C Edward Robinson 32,203(7) 18.1
stock 1007 Spruce Street 1st Floor
Philadelphia, PA 19107
Common stock John C. Lawrence 4,126,525(3) 15.11
Common stock Robert A. Rice 217,762 Nil
Common stock Leo Jackson 60,700 Nil
Common stock All Directors and executive
officers as a group
(3 persons) 4,404,987 16.3
(1) Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options or
warrants currently exercisable or convertible, or exercisable or convertible
within 60 days of March 4, 2002 are deemed outstanding for computing the
percentage of the person holding options or warrants but are not deemed
outstanding for computing the percentage of any other person. Percentages are
based on a total of 26,906,959 shares of common stock, 4,500 shares of Series
A Preferred Stock and 177,904 shares of Series C Preferred Stock outstanding
on March 4, 2002, and the shares issuable upon the exercise of options and
warrants exercisable on or within 60 days of March 4, 2002, as described
below.
(2) Includes 1,007,843 shares owned by the Maguire Foundation; 129,000
shares owned by Walter L. Maguire, Sr.; 45,500 shares owned by Walter L.
Maguire, Trustee; and 219,555 shares owned by Walter L. Maguire, Jr. Excludes
1,003,409 shares owned by the 1934 Maguire Trust.
(3) Includes 3,725,312 shares of common stock and warrants to purchase
401,213 shares of common stock. Excludes 75,000 shares owned by Mr.
Lawrence's sister, as to which Mr. Lawrence disclaims beneficial ownership.
(4) Includes 1,648,767 shares owned by A.W. Dugan; 183,333 shares owned by
Lydia Dugan; 1,561,440 shares, in the aggregate, owned by companies owned and
controlled by A.W. Dugan; and warrants issued to Mr. Dugan and companies
controlled by him to purchase 1,259,051 shares of common stock.
(5) Includes 141,025 warrants each to purchase one share of common stock
at $.39 per share beneficially owned by CALP II LP and Striker Capital, Ltd.
and 150,000 shares owned beneficially, and of record, by Thomson Kernaghan &
Co. Limited. CALP II LP, Striker Capital, Ltd. and Thomson Kernaghan & Co.
Limited are under the common control of Mark Valentine, Chief Executive
Officer of Thomson Kernaghan & Co., Limited, who has authority to vote and
dispose of the shares beneficially owned by each of them. Does not include
384,543 shares issuable upon exercise of warrants at $.39 per share and
192,272 shares issuable upon exercise of warrants at $.39 per share owned by
Ian McKinnon and Michelle McKinnon respectively. Ian McKinnon is the father
of Michelle McKinnon; both of whom were employees of Thomson Kernaghan & Co.
Limited and have represented that they are not controlled by, controlling, or
under common control of Thomson Kernaghan & Co. Limited.
15
(6) By Agreement effective July 11, 2000, Thomson Kernaghan & Co., Limited
purchased, as agent for other investors, $675,000 principal amount of
convertible debentures, an agent's warrant to purchase 961,358 shares of
Company's common stock at $.39 per share and a purchaser's warrant to purchase
432,692 shares of Company's common stock at $.39 per share. The debentures
were converted into shares of our common stock at $0.20 per share in December
2001. Thomson Kernaghan & Co., Limited is the beneficial owner of 150,000
shares of Company's common stock and disclaims beneficial ownership of the
warrants and shares issuable upon exercise of the warrants. Further, Thomson
Kernaghan has advised the Company that, except as indicated in note (5), it is
not a member of a group, as defined in § 13(d) of the Securities and
Exchange Act of 1934, which owns 5% or more of Company's common stock.
(7) The outstanding Series A and Series C preferred shares carry voting
rights.
Item 12. Certain Relationships and Related Transactions
Described below are transactions during the last two years to which we
are a party and in which any director, executive officer or beneficial owner
of five percent (5%) or more of any class of our voting securities or
relatives of our directors, executive officers or five percent (5%) beneficial
owners has a direct or indirect material interest. See also transactions
described in notes 4, 7, 9, 12, 14 and 17 to our Financial Statements as of
December 31, 2001.
-Leo Jackson, a director, is a principal owner and president of
Production Minerals, Inc., a company which indirectly owns 25% of the stock of
USAMSA. We own 50% of the stock of USAMSA.
-We reimburse John C. Lawrence, a director and Chief Executive
Officer, for operational and maintenance expenses incurred in connection with
our use of equipment owned by Mr. Lawrence, including welding trucks,
backhoes, and an aircraft. Reimbursements for 2001 totaled $50,765 (See Note
9 to our 2001 Financial Statements).
-On February 12, 2002 we sold A.W. Dugan, a shareholder and an
accredited investor, 250,000 shares of our common stock and agreed to issue
warrants to purchase 250,000 shares of common stock, for $0.20 per share or
$50,000. The warrants are exercisable at $0.30 per share and will be issued
after the Company amends its Articles of Incorporation to authorize more
shares of common stock for issue.
-At December 31, 2001, we owed legal fees in the amount of
$128,961 to our outside law firm in which Gary D. Babbitt, formerly a
director, is a partner.
-On December 26, 2001, we sold A.W. Dugan, a shareholder and an
accredited investor, 125,000 shares of our common stock and issued warrants to
purchase 125,000 shares of common stock, for $0.20 per share or $25,000. The
warrants are exercisable at $0.29 per share and expire on December 26, 2004.
-In late December 2001, we issued 1,938,261 shares of our common
stock to John C. Lawrence (a director, Chief Executive Officer and a
shareholder) and A.W. Dugan, a shareholder and an accredited investor, upon
conversion of $347,992 principal amount of debentures and $39,660 accrued
interest thereon at $0.20 per share.
-On December 11, 2001, we sold A.W. Dugan, a shareholder and an
accredited investor, 275,000 shares of our common stock and issued warrants to
purchase 150,000 shares of common stock, for $0.20 per share or $55,000. The
warrants are exercisable at $0.29 per share and expire December 11, 2004.
-Effective December 12, 2000, we issued our 10% convertible
debenture in the principal amount of $100,000 due December 12, 2003 to John C.
Lawrence, a director, president and shareholder. During the fourth quarter of
2000, we issued our 10% convertible debenture in the principal amount of
$50,000 due December 2003 to A.W. Dugan, a shareholder of the company and an
accredited investor. On December 5, 2000 we issued our 10% convertible
debenture due December 31, 2003 to John C. Lawrence, a director, president and
shareholder of the company, in the principal amount of $147,992. We also
issued related warrants to Mr. Lawrence and Mr. Dugan for 151,213 shares and
60,974 shares, respectively, of our common stock exercisable for five years at
$0.41 per share. In December 2001, the debentures including both principal
and accrued interest thereon were converted into 1,938,261 shares of our
common stock at $0.20 per share.
16
-On July 11, 2001, we sold Gary D. Babbitt, then a director,
45,000 shares of our common stock and issued warrants to purchase 22,500
shares of common stock, for $0.20 per share or $9,000. The warrants are
exercisable at $0.35 per share and expire July 11, 2004.
-On June 27, 2001, we sold Delaware Royalty, which is an affiliate
of A.W. Dugan, a stockholder and an accredited investor, 100,000 shares of our
common stock and issued warrants to purchase 100,000 shares of common stock,
for $0.20 per share or $20,000. The warrants are exercisable at $0.35 per
share and expire June 26, 2004.
-On May 25, 2001, we sold Delaware Royalty, which is an affiliate
of A.W. Dugan, a stockholder and an accredited investor, 200,000 shares of our
common stock and issued warrants to purchase 100,000 shares of common stock,
for $0.20 per share or $40,000. The warrants are exercisable at $0.35 per
share and expire May 25, 2004.
-On August 28, 2000, we authorized the issuance of 21,611 shares
of common stock to John C. Lawrence, a director and Chief Executive Officer,
and 934 shares of common stock to Robert A. Rice, a director. Mr. Lawrence
and Mr. Rice were entitled to receive these shares upon conversion of Series C
Preferred Stock in 1999. These shares were not issued at the time of
conversion because our calculation of the number of conversion shares
inadvertently failed to account for the impact of the anti-dilution provisions
of the Series C preferred stock, which were triggered by our issuance of
common stock for less than the Series C conversion price. These shares are
being issued retroactively to the date of conversion of the Series C Preferred
Stock, August 5, 1999. The adjusted conversion price was $0.5419 per share.
-On August 25, 2000, we sold 257,511 shares of our common stock to
A.W. Dugan, a stockholder and accredited investor, for $0.29125 per share or
$75,000 and issued to Mr. Dugan warrants exercisable at $0.39 per share to
purchase 48,077 shares of common stock. The warrants expire August 25, 2002.
-On July 12, 2000, we sold 100,000 shares of our common stock to
Nortex Corporation, a company controlled by A.W. Dugan, a stockholder and
accredited investor, for cash totaling $25,000, or $0.25 per share.
-On July 11, 2000, we issued our 10% Convertible debentures due
June 30, 2002 to Thomson Kernaghan & Co. Limited in the principal amount of
600,000, together with a Purchaser's Warrant for 384,615 shares and an Agent's
Warrant for 961,358 shares of our common stock exercisable for five years at
$0.39 per share. We subsequently agreed to issue an additional $75,000
principal amount of these 10% convertible debentures, together with an
additional Purchaser's Warrant for 48,077 shares of our common stock. The
debenture conversion price is based on market prices at the time of conversion
but not greater than $0.29125 per share.
-John C. Lawrence, a director and Chief Executive Officer,
advanced us $141,243, in the aggregate, for working capital in April and July
2000. In December 2000, the principal and accrued interest on this obligation
were exchanged for a 10% convertible debenture in the principal amount of
$147,992. During 2001, Mr. Lawrence advanced the Company a net amount of
$94,895 for working capital purposes, which amount was outstanding at December
31, 2001.
-On March 17, 2000, we issued to Thomson Kernaghan & Co. Limited,
which subsequently and for a period of time became the beneficial owner of
more than five percent of our common stock, 150,000 shares of common stock
pursuant to our 2000 Stock Plan, in consideration of financial consulting
services including the preparation and analysis of our financial condition and
financing options.
-On March 16, 2000, we issued 100,000 shares of our common stock
to A.W. Dugan, a stockholder and accredited investor, for cash totaling
$25,000, upon exercise of previously granted warrants to purchase common stock
for $0.25 per share.
-On February 2, 2000, we sold 125,000 shares of our common stock
to Delaware Royalty Company, Inc., a company controlled by A.W. Dugan, a
stockholder and accredited investor, for cash totaling $50,000 or $0.40 per
share.
17
-On January 3, 2000, we agreed to issue to A.W. Dugan, a principal
shareholder, warrants to purchase 300,000 shares of our common stock in
consideration of financial consulting services rendered by Mr. Dugan and
valued at $10,000. The warrants are exercisable at $0.25 per share and expire
January 25, 2003.
See also transactions described in notes 4, 7, 9, 12, 14 and 17 to USAC's
Financial Statements as of December 31, 2001.
Item 13. Exhibits and Reports on Form 8-K
Exhibit Number Description
3.01 Articles of Incorporation of USAC, filed as an exhibit to USAC's
Form 10-KSB for the fiscal year ended December 31, 1995 (File No.
1-8675), are incorporated herein by this reference.
3.02 Amended and Restated Bylaws of USAC, filed as an exhibit
to amendment No. 2 to USAC's Form SB-2 Registration Statement
Reg. No. 333-45508) are incorporated herein by this reference.
3.03 Articles of Correction of Restated Articles of Incorporation
of USAC.
4.01 Key Employees 2000 Stock Plan, filed as an exhibit to
USAC's Form S-8 Registration Statement filed on March 10,2000
(File No. 333-32216) is incorporated herein by this reference.
Documents filed with USAC's Annual Report on Form 10-KSB for the year ended
December 31, 1995 (File No. 1-8675), are incorporated herein by this
reference:
10.10 Yellow Jacket Venture Agreement
10.11 Agreement Between Excel-Mineral USAC and Bobby C. Hamilton
10.12 Letter Agreement
10.13 Columbia-Continental Lease Agreement Revision
10.14 Settlement Agreement with Excel Mineral Company
10.15 Memorandum Agreement
10.16 Termination Agreement
10.17 Amendment to Assignment of Lease (Geosearch)
10.18 Series B Stock Certificate to Excel-Mineral Company, Inc.
10.19 Division Order and Purchase and Sale Agreement
10.20 Inventory and Sales Agreement
10.21 Processing Agreement
10.22 Release and settlement agreement between Bobby C.
Hamilton and United States Antimony Corporation
10.23 Columbia-Continental Lease Agreement
10.24 Release of Judgment
10.25 Covenant Not to Execute
18
10.26 Warrant Agreements filed as an exhibit to USAC's Annual
Report on Form 10-KSB for the year ended December 31, 1996
(File No. 1-8675), are incorporated herein by this reference
10.27 Letter from EPA, Region 10 filed as an exhibit to
USAC's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1997 (File No. 001-08675) is incorporated
herein by this reference
10.28 Warrant Agreements filed as an exhibit to USAC's Annual
Report on Form 10-KSB for the year ended December 31, 1997
(File No. 001-08675) are incorporated herein by this reference
10.30 Answer, Counterclaim and Third-Party Complaint filed as
an exhibit to USAC's Quarterly Report on Forms 10-QSB for the
quarter ended September 30, 1998 (File No. 001-08675) is
incorporated herein by this reference
Documents filed with USAC's Annual Report on Form 10-KSB for the year ended
December 31, 1998 (File No. 001-08675), are incorporated herein by this
reference:
10.31 Warrant Issue-A.W. Dugan
10.32 Amendment Agreement
Documents filed with USAC's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1999 (File No. 001-08675) are incorporated herein by this
reference:
10.33 Warrant Issue-John C. Lawrence
10.34 PVS Termination Agreement
Documents filed as an exhibit to USAC's Form 10-KSB for the year ended
December 31, 1999 (File No. 001-08675) are incorporated herein by this
reference:
10.35 Maguire Settlement Agreement
10.36 Warrant Issue-Carols Tejada
10.37 Warrant Issue-Al W. Dugan
10.38 Memorandum of Understanding with Geosearch Inc.
10.39 Factoring Agreement-Systran Financial Services Company
10.40 Mortgage to John C. Lawrence
10.41 Warrant Issue-Al W. Dugan filed as an exhibit to USAC's
Quarterly Report on Form 10-QSB for the quarter ended
March 31, 2000 (File No. 001-08675) is incorporated
herein by this reference
10.42 Agreement between United States Antimony Corporation
and Thomson Kernaghan & Co., Ltd. filed as an exhibit to USAC form
10-QSB for the quarter ended June 30, 2000 (File No. 001-08675) are
incorporated herein by this reference.
10.43 Settlement agreement and release of all claims between
the Estate of Bobby C. Hamilton and United States Antimony
Corporation filed as an exhibit to USAC form 10-QSB for the quarter
ended June 30, 2000 (File No. 001-08675) are incorporated herein by
this reference.
10.44 Supply Contracts with Fortune America Trading Ltd.
filed as an exhibit to USAC form 10-QSB for the quarter ended
June 30, 2000 (File No. 001-08675) are incorporated herein by this
reference.
19
10.45 Amended and Restated Agreements with Thomson Kernaghan
& Co., Ltd, filed as an exhibit to amendment No. 3 to USAC's Form SB-2
Registration Statement (Reg. No. 333-45508), are incorporated herein
by this reference.
10.46 Purchase Order from Kohler Company, filed as an exhibit
to amendment No. 4 to USAC's Form SB-2 Registration Statement (Reg. No.
333-45508) are incorporated herein by this reference.
21.01 Subsidiary of USAC*
44.1 CERCLA Letter from U.S. Forest Service filed as an
exhibit to USAC form 10-QSB for the quarter ended June 30, 2000 (File
No. 001-08675) are incorporated herein by this reference and filed as
an exhibit to USAC's Form 10-KSB for the year ended December 31, 1995
(File No. 1-8675) is incorporated herein by this reference.
______________________
* Filed herewith.
There were no reports on Form 8-K filed during the quarter ended December 31,
2001.
Exhibit 21.01
Subsidiary of Registrant, as of December 31, 2001
Bear River Zeolite Company
c/o Box 643
Thompson Falls, MT 59873
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(b) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
UNITED STATES ANTIMONY CORPORATION
(Registrant)
By:/s/ John C. Lawrence
John C. Lawrence, President, Director
and Principal Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By:/s/ John C. Lawrence Date: April 10, 2002
John C. Lawrence, Director and President
(Principal Executive, Financial and Accounting
Officer)
By:/s/ Leo Jackson Date: April 10, 2002
Leo Jackson, Director
By:/s/ Robert A. Rice Date: April 10, 2002
Robert A. Rice, Director
21
Report of Independent Accountants
The Board of Directors and Stockholders of
United States Antimony Corporation
We have audited the accompanying consolidated balance sheets of United States
Antimony Corporation and its subsidiary as of December 31, 2001 and 2000, and
the related consolidated statements of operations, changes in stockholders'
deficit and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of United States
Antimony Corporation and its subsidiary as of December 31, 2001 and 2000, and
the consolidated results of their operations and their cash flows for the
years then ended, in conformity with accounting principles generally accepted
in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company has negative working capital, an
accumulated deficit and total stockholders' deficit that raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ DeCoria, Maichel & Teague P.S.
Spokane, Washington
February 8, 2002
F-1
United States Antimony Corporation and Subsidiary
Consolidated Balance Sheets
December 31, 2001 and 2000
2001 2000
ASSETS
Current assets:
Restricted cash $ 3,803 $ 8,518
Accounts receivable, less allowance
for doubtful accounts of $30,000 105,084 119,568
Inventories 126,075 221,457
----------- -------------
Total current assets 234,962 349,543
Investment in USAMSA, net 95,734 120,038
Properties, plants and equipment, net 307,373 237,300
Restricted cash for reclamation bonds 87,550 123,250
Deferred financing charges, net 63,789
----------- -------------
Total assets $ 725,619 $ 893,920
=========== =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Checks issued and payable $ 61,121 $ 107,133
Accounts payable 624,588 429,654
Accrued payroll and property taxes 256,320 241,588
Accrued payroll and other 82,790 89,680
Judgment payable 46,523 43,480
Accrued interest payable 14,640 47,324
Payable to related parties 121,082 10,307
Notes payable to bank, current 119,431 150,625
Accrued reclamation costs, current 137,639 80,000
----------- -------------
Total current liabilities 1,464,134 1,199,791
Debentures payable, net of discount 997,449
Notes payable to bank, noncurrent 341,845 205,377
Accrued reclamations costs, noncurrent 87,524 199,388
----------- -------------
Total liabilities 1,893,503 2,602,005
----------- -------------
Commitments and contingencies (Notes 1 and 17)
Stockholders' deficit:
Preferred stock, $.01 par value, 10,000,000 shares authorized:
Series A: 4,500 shares issued and outstanding
(liquidation preference $114,750) 45 45
Series B: 750,000 shares issued and outstanding
(liquidation preference $810,000) 7,500 7,500
Series C: 177,904 shares issued and outstanding
(liquidation preference $97,847) 1,779 1,779
Common stock, $.01 par value, 30,000,000 shares
authorized; 26,156,959 and 18,375,564 shares issued
and outstanding 261,569 183,755
Additional paid-in capital 16,791,610 15,352,386
Accumulated deficit (18,230,387) (17,253,550)
------------- -------------
Total stockholders' deficit (1,167,884) (1,708,085)
------------- -------------
Total liabilities and stockholders' deficit
$ 725,619 $ 893,920
============= =============
The accompanying notes are an integral part of these financial statements.
F-2
United States Antimony Corporation and Subsidiary
Consolidated Statements of Operations
For the years ended December 31, 2001 and 2000
2001 2000
Revenues:
Sales of antimony products and other $ 3,421,136 $ 5,016,661
Sales of zeolite products 15,428
--------------- ------------
3,436,564 5,016,661
Cost of zeolite production 3,587
Cost of antimony production 2,747,330 4,037,289
Freight and delivery 366,965 506,482
--------------- ------------
3,117,882 4,543,771
Gross profit 318,682 472,890
--------------- ------------
Other operating expenses:
Bear River Zeolite start-up and development 392,740
Reclamation 30,838 25,615
Care, maintenance, and reclamation-Yellow Jacket 10,822 241,244
General and administrative 494,950 631,869
Sales expenses 128,259 339,267
--------------- -----------
1,057,609 1,237,995
--------------- -----------
Other (income) expense:
Gain from accounts payable adjustment (29,322)
Interest expense 152,070 157,145
Factoring expense 91,069 100,956
Interest income and other (5,229) (8,459)
--------------- ----------
237,910 220,320
--------------- ----------
Loss before extraordinary item (976,837) (985,425)
Extraordinary gain on conversion of debts to common stock 917,726
--------------- ----------
Net loss $ (976,837) $ (67,699)
============== ===========
Basic net loss per share of common stock:
Before extraordinary item $ (0.05) $ (0.06)
Extraordinary item 0.05
-------------- -----------
Net loss $ (0.05) $ (0.01)
============== ===========
Basic weighted average shares outstanding 19,336,088 17,772,693
============== ===========
The accompanying notes are an integral part of these financial statements.
F-3
United States Antimony Corporation and Subsidiary
Consolidated Statements of Changes in Stockholders' Deficit
for the years ended December 31, 2001 and 2000
Preferred Stock
Series A Series B Series C Common Stock
Additional Paid Accumulated
Shares Amount Shares Amount Shares Amount Shares Amount In Capital Deficit Total
Balances
December 31, 1999 4,500 $ 45 750,000 $ 7,500 205,996 $ 2,060 16,900,252 $169,003 $ 14,824,048 $ (17,185,851) $(2,183,195)
Issuance of
common stock for cash 682,511 6,825 223,175 230,000
Exercise of stock
warrants 100,000 1,000 24,000 25,000
Issuance of common
stock for services 300,000 3,000 150,000 153,000
Issuance of common
stock as settlement
of debt 250,000 2,500 78,125 80,625
Conversion of series
C preferred stock to
common stock (28,092) (281) 28,092 281
Issuance of common
stock to former Series C
preferred stockholders 35,542 355 3,910 4,265
Warrants issued for
consulting services 10,000 10,000
Warrants issued in
connection with
convertible debentures 29,628 29,628
Common stock issued to
directors for compensation 79,167 791 9,500 10,291
Net loss (67,699) (67,699)
----- -- ------- ----- ------ ---- ---------- ------- ---------- ---------- ----------
Balances,
December 31, 2000 4,500 45 750,000 7,500 177,904 1,779 18,375,564 183,755 15,352,386 (17,253,550) (1,708,085)
Issuance of common
stock and warrants
for cash 1,704,000 17,040 323,760 340,800
Issuance of common
stock for convertible
debenture principal
and accrued intetrest 5,772,503 57,725 1,047,867 1,105,592
Issuance of common stock
in satisfaction of
liquated damages for
late registration 240,343 2,403 67,597 70,000
Reconciliation of
outstanding common
shares to transfer
agent's records 64,549 646 646
Net loss (976,837) (976,837)
----- ----- ------- ------- ------- ------ ---------- -------- ----------- ------------ -----------
Balances,
December 31, 2001 4,500 $ 45 750,000 $ 7,500 177,904 $1,779 26,156,959 $261,569 $16,791,610 $(18,230,387) $(1,167,884)
===== ===== ======= ======= ======= ====== ========== ======== =========== ============ ===========
The accompanying notes are an integral part of these financial statements.
F-4
United States Antimony Corporation and Subsidiary
Consolidated Statements of Cash Flows
for the years ended December 31, 2001 and 2000
2001 2000
Cash flows from operating activities:
Net loss $ (976,837) $ (67,699)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 137,084 152,377
Extraordinary gain on conversion of debts to common stock (917,726)
Gain from accounts payable adjustment (29,322)
Loss from unconsolidated investment 6,221
Reconciliation of outstanding common shares to transfer
agent's records 646
Provision for doubtful accounts (20,000)
Issuance of common stock in satisfaction of debenture
accrued interest 131,510
Issuance of common stock in satisfaction of liquidated
damages for late registration 70,000
Issuance of common stock to directors as compensation 10,291
Issuance of common stock and warrants for services 163,000
Issuance of common stock to former Series C holders 4,265
Change In:
Restricted cash 4,716 (8,291)
Accounts receivable 14,484 (39,363)
Inventories 95,382 55,142
Restricted cash for reclamation bonds 35,700 55,736
Accounts payable 194,934 (8,620)
Accrued payroll and property taxes 14,732 (22,079)
Accrued payroll and other (6,890) (42,784)
Judgment payable 3,043 2,835
Accrued interest payable (32,684) 36,769
Payable to related parties 110,775 2,179
Accrued reclamation costs (54,225) (35,299)
---------- ---------
Net cash used by operating activities (251,409) (791,089)
---------- ---------
Cash flows from investing activities:
Purchase of properties, plants and equipment (148,653) (38,499)
---------- ---------
Net cash used by investing activities (148,653) (38,499)
---------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock and warrants 340,800 230,000
Exercise of warrants 25,000
Proceeds from notes payable to bank 244,587 250,000
Principal payments on notes payable to bank (139,313) (219,963)
Change in checks issued and payable (46,012) 61,589
Proceeds from issuance of convertible debentures 1,022,992
Principal payments on note payable to Bobby C. Hamilton (540,030)
---------- ----------
Net cash provided by financing activities 400,062 829,588
---------- ----------
Net decrease in cash 0 0
Cash, beginning of year 0 0
---------- - ---------
Cash, end of year $ 0 $ 0
========== ==========
The accompanying notes are an integral part of these financial statements.
F-5
United States Antimony Corporation and Subsidiary
Consolidated Statements of Cash Flows, Continued:
for the years ended December 31, 2001 and 2000
2001 2000
Supplemental disclosures:
Cash paid during the year for interest $ 38,695 $ 119,866
============ =============
Noncash financing activities:
Discount on debentures payable for detachable warrants $ 29,682
Debenture principal converted to common stock $ 1,022,992
Series C preferred stock converted to common stock 281
Note payable to Bobby C. Hamilton converted to common stock 958,321
The accompanying notes are an integral part of these financial statements.
F-6
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements
1. Background of Company and Basis of Presentation:
AGAU Mines, Inc., predecessor of United States Antimony Corporation ("USAC" or
"the Company"), was incorporated in June 1968 as a Delaware corporation to
mine gold and silver. USAC was incorporated in Montana in January 1970 to mine
and produce antimony products. In June 1973, AGAU Mines, Inc. was merged into
USAC. In December 1983, the Company suspended its antimony mining operations
when it became possible to purchase antimony raw materials more economically
from foreign sources. The principal business of the Company has been the
production and sale of antimony products.
In September of 2000, the Company finalized its purchase of a 50% interest in
United States Antimony, Mexico S.A. de C.V. ("USAMSA") to mine, mill and
produce antimony metal and other related products from certain states in
Mexico.
During 2000, the Company formed a 75% owned subsidiary, Bear River Zeolite
Company ("BRZ"), to mine and market zeolite and zeolite products from a
mineral deposit in southeastern Idaho. In 2001, an operating plant was
constructed at the zeolite site; and zeolite production and sales commenced.
The financial statements have been prepared on a going concern basis, which
assumes realization of assets and liquidation of liabilities in the normal
course of business. At December 31, 2001, the Company had negative working
capital of approximately $1.2 million an accumulated deficit of approximately
$18.2 million and a total stockholders' deficit of approximately $1.2
million. Additionally, the Company is delinquent on the payment of several
current liabilities including payroll and property taxes totaling
approximately $210,000, accounts payable totaling approximately $538,000
including $102,500 payable to a law firm for legal fees incurred in preparing
a registration statement, a judgment payable totaling approximately $46,500,
and accrued interest payable totaling approximately $14,600. These factors,
among others, indicate that there is substantial doubt that the Company will
be able to meet its obligations and continue in existence as a going concern.
The financial statements do not include any adjustments that may be necessary
should the Company be unable to continue as a going concern.
To improve the Company's financial condition, the following actions have been
initiated or taken by management:
-In 2001 and 2000, the Company continued to devote substantial
efforts to the research and development of new antimony products and
applications. These efforts have resulted in advances in the Company's
preparation, packaging, and quality of the antimony products it delivers to
customers. The Company believes that it will be able to stay competitive in
the antimony business and begin to generate profits because of these
advances.
-The Company formed its BRZ subsidiary in 2001, with plans to
generate profits from the mining, processing and marketing of zeolite
products.
-In 2001 and 2000, the Company converted debentures and other debt
obligations totaling $1,154,502 and $958,321, respectively, of principal
and accrued interest into common stock of the Company. The conversions
decreased the Company's total liabilities considerably.
F-7
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements, Continued:
1. Background of Company and Basis of Presentation, Continued:
-In 2001, the Company generated $340,800 through sales of
1,704,000 shares of its unregistered common stock and warrants. The
Company plans to raise equity funding through additional stock sales in
2002, providing the Company is successful in amending its Articles of
Incorporation to authorize additional shares of its common stock for sale
and issue. However, there can be no assurance that the Company will be
able to successfully raise additional capital through the sale of its
stock.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. Concentration of Risk:
The Company purchases the majority of its raw antimony used in the production
of finished antimony products from Chinese producers through metal brokers.
If the supply of antimony from China is reduced, it is possible that the
Company's antimony product operations could be adversely affected. During the
years ended December 31, 2001 and 2000, 34% and 25%, respectively, of the
Company's revenues were generated by antimony product sales to one customer.
In addition, during 2001 and 2000, 12% and 11% of the Company's revenues were
generated by antimony product sales to a second individual customer. The loss
of the Company's "key" customers could adversely affect its business.
Many of the Company's competitors in the antimony industry have substantially
more capital resources and market share than the Company. Therefore, the
Company's ability to maintain its market share can be significantly affected
by factors outside of the Company's control.
The Company's revenues from antimony sales are strongly influenced by world
prices for such commodities, which fluctuate and are affected by numerous
factors beyond the Company's control, including inflation and worldwide forces
of supply and demand. The aggregate effect of these factors is not possible to
predict accurately.
3. Summary of Significant Accounting Policies:
Principles of Consolidation
The Company's consolidated financial statements also include the accounts of
Bear River Zeolite, Company, a 75% owned subsidiary. Intercompany balances
and transactions are eliminated in consolidation. The Company reports 100% of
BRZ's operating losses on its financial statements, as recoverability of the
minority investor's share of the losses is uncertain. The Company accounts
for its investment interest in its 50% owned foreign entity, USAMSA, by the
equity method.
Restricted Cash
Restricted cash consists primarily of cash held for payment of delinquent
payroll taxes and reclamation performance bonds.
F-8
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements, Continued:
3. Summary of Significant Accounting Policies, Continued:
Reclassifications
Certain reclassifications have been made to the 2000 financial statements in
order to conform to the 2001 presentation. These reclassifications have no
effect on net loss, total assets or stockholders' deficit as previously
reported.
Inventories
Inventories at December 31, 2001 and 2000, consisted of antimony metal, metal
in process and finished goods that are stated at the lower of first-in,
first-out cost or estimated net realizable value. Since the Company's
inventory is a commodity with a sales value that is subject to world prices
for antimony that are beyond the Company's control, a significant change in
the world market price of antimony could have a significant effect on the net
realizable value of inventories.
Deferred Financing Charges
Deferred financing charges related to convertible debenture sales are
amortized on a straight-line basis over the term of the debentures.
Properties, Plants and Equipment
Production facilities and equipment are stated at the lower of cost or
estimated net realizable value and are depreciated using the straight-line
method over their estimated useful lives (five to fifteen years). Vehicles and
office equipment are stated at cost and are depreciated using the
straight-line method over estimated useful lives of three to five years.
Maintenance and repairs are charged to operations as incurred. Betterments of
a major nature are capitalized. When assets are retired or sold, the costs and
related accumulated depreciation are eliminated from the accounts and any
resulting gain or loss is reflected in operations.
Management of the Company periodically reviews the net carrying value of all
of its properties on a property-by-property basis. These reviews consider the
net realizable value of each property to determine whether a permanent
impairment in value has occurred and the need for any asset write-down. The
Company considers current metal prices, cost of production, proven and
probable reserves and salvage value of the property and equipment in its
valuation.
Management's estimates of metal prices, operating capital requirements and
reclamation costs are subject to risks and uncertainties of changes affecting
the recoverability of the Company's investment in its properties, plants and
equipment. Although management has made its best estimate of these factors
based on current conditions, it is reasonably possible that changes could
occur in the near term which could adversely affect management's estimate of
net cash flows expected to be generated from its properties, and necessitate
asset impairment write-downs.
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 121, ("SFAS No. 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." The provisions
of SFAS No. 121 require that an impairment loss be recognized when the
estimated future cash flows (undiscounted and without interest) expected to
result from the use of an asset are less than the carrying amount of the
asset. Measurement of an impairment loss is based on the estimated fair value
of the asset if the asset is expected to be held and used.
F-9
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements, Continued:
3. Summary of Significant Accounting Policies, Continued:
Reclamation and Remediation
All of the Company's mining operations are subject to reclamation and closure
requirements. Minimum standards for mine reclamation have been established by
various governmental agencies. Costs are estimated based primarily upon
environmental and regulatory requirements and are accrued and charged to
expense over the expected economic life of the operation using the
units-of-production method. The liability for reclamation is classified as
current or noncurrent based on the expected timing of expenditures.
The Company accrues costs associated with environmental remediation
obligations when it is probable that such costs will be incurred and they are
reasonably estimable. Costs of future expenditures for environmental
remediation are not discounted to their present value. Such costs are based on
management's current estimate of amounts that are expected to be incurred when
the remediation work is performed within current laws and regulations. The
Company has restricted cash balances that have been provided to ensure
performance of its reclamation obligations.
It is reasonably possible that, due to uncertainties associated with defining
the nature and extent of environmental contamination, application of laws and
regulations by regulatory authorities, and changes in remediation technology,
the ultimate cost of remediation and reclamation could change in the future.
The Company continually reviews its accrued liabilities for such remediation
and reclamation costs as evidence becomes available indicating that its
remediation and reclamation liability has changed.
Income Taxes
The Company records deferred income tax liabilities and assets for the
expected future income tax consequences of events that have been recognized in
its financial statements. Deferred income tax liabilities and assets are
determined based on the temporary differences between the financial statement
carrying amounts and the tax bases of assets and liabilities using enacted tax
rates in effect in the years in which the temporary differences are expected
to reverse.
Revenue Recognition
Sales of antimony and zeolite products are recorded upon shipment to the
customer.
Income (Loss) Per Common Share
The Company accounts for its income (loss) per common share according to
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS No. 128"). Under the provisions of SFAS No. 128, primary and fully
diluted earnings per share are replaced with basic and diluted earnings per
share. Basic earnings per share is arrived at by dividing net income (loss)
available to common stockholders by the weighted average number of common
shares outstanding, and does not include the impact of any potentially
dilutive common stock equivalents. Common stock equivalents, including
warrants to purchase the Company's common stock and common stock issuable upon
the conversion of debentures, are excluded from the calculations when their
effect is antidilutive.
F-10
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements, Continued:
3. Summary of Significant Accounting Policies, Continued:
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"), requires companies to recognize
stock-based expense based on the estimated fair value of employee stock
options. Alternatively, SFAS No. 123 allows companies to retain the current
approach set forth in APB Opinion 25, "Accounting for Stock Issued to
Employees," provided that expanded footnote disclosure is presented. The
Company has not adopted the fair value method of accounting for stock-based
compensation under SFAS No. 123, but provides the pro forma disclosure
required when appropriate.
Recent Accounting Pronouncements
In August 2001, the FASB issued Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which will be effective for
financial statements issued for fiscal years beginning after December 15, 2001
and interim periods within those fiscal years. SFAS No. 144 requires that
long-lived assets to be disposed of by sale be measured at the lower of the
carrying amount or fair value less cost to sell, whether reported in
continuing operations or in discontinued operations. The Company anticipates
that the adoption of this statement will not have a material effect on its
financial statements.
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement No. 143, "Accounting for Asset Retirement Obligations," which
provides accounting requirements for retirement obligations associated with
tangible long-lived assets. The Company anticipates that the adoption of this
statement will not have a material effect on its financial statements.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation an Interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44
clarifies the application of APB Opinion No. 25 and, among other issues,
clarifies the following: the definition of an employee for purposes of
applying APB Opinion No. 25; the criteria for determining whether a plan
qualifies as a noncompensatory plan; the accounting consequence of various
modifications to the terms of the previously fixed stock options or awards;
and the accounting for an exchange of stock compensation awards in a business
combination. FIN 44 is effective July 1, 2000, and has been adopted by the
Company.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101 provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. All registrants are expected to
apply the accounting and disclosures described in SAB 101. As required, the
Company adopted SAB 101 in the fourth quarter of fiscal 2001, retroactive to
the beginning of the year.
F-11
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements, Continued:
4. Sales of Accounts Receivable:
The Company sells the majority of its accounts receivable to a financing
company pursuant to the terms of a factoring agreement entered into on March
30, 1999. According to the terms of the agreement, the receivables are sold
with full recourse and the Company assumes all risks of collectibility.
Accordingly, the Company maintains an allowance for doubtful accounts receivable
based upon the expected collectibility of all trade receivables. The
performance of all obligations and payments to the factoring company is
personally guaranteed by John C. Lawrence, the Company's president and a
director. As consideration for Mr. Lawrence's guarantee, the Company granted
a mortgaged security interest to Mr. Lawrence collateralized by the Company's
real and personal property. In addition, Mr. Lawrence was granted 250,000
warrants to purchase common stock of the Company exercisable at $0.25 per
share (see Note 14).
The factoring agreement requires that the Company pay a financing fee equal to
2% of the face amount of receivables sold. Financing fees paid by the Company
during the years ended December 31, 2001 and 2000 totaled $91,069 and
$100,956, respectively. For the years ended December 31, 2001 and 2000, net
accounts receivable of approximately $3.4 million and $4.9 million,
respectively, were sold under the agreement. Proceeds from the sales were
used to fund inventory purchases and operating expenses. The agreement is for
a term of one year with automatic renewal for additional one-year terms. The
Company's sales of accounts receivable qualify as sales under the provisions
of Statement of Financial Accounting Standards No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities."
5. Inventories:
The major components of the Company's inventories at December 31, 2001
and 2000, were as follows:
2001 2000
Antimony Metal $ 1,066 $ 32,187
Antimony Oxide 76,239 118,728
Sodium Antimonate 31,053 70,542
Zeolite 17,717
--------- ----------
$ 126,075 $ 221,457
========= ==========
At December 31, 2001 and 2000, antimony metal consisted principally of recast
metal from antimony-based compounds and metals purchased from foreign
suppliers, respectively. Antimony oxide inventory consisted of finished
product oxide held at the Company's plant or in independent warehouses
throughout the United States. Sodium antimonite inventory consisted of dry
finished product and wet raw materials, the majority of which were stored at
the Company's antimony plant near Thompson Falls, Montana. The Company's
zeolite inventory consists of salable zeolite material held at BRZ's mining
and production facility.
F-12
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements, Continued:
6. Properties, Plants and Equipment:
The major components of the Company's properties, plants and equipment at
December 31, 2001 and 2000 were as follows:
2001 2000
Mining equipment (1) $ 1,265,392 $ 1,265,392
Antimony mining buildings and equipment (2) 168,746 168,746
Antimony mill and equipment(2) 518,190 518,190
Chemical processing and office buildings 256,067 256,067
Chemical processing equipment 914,509 887,467
BRZ plant 120,896
Other 71,943 71,228
----------- ------------
3,315,743 3,167,090
Less accumulated depreciation 3,008,370 2,929,790
----------- ------------
$ 307,373 $ 237,300
=========== ============
(1) Substantially all of the Company's mining equipment is fully
depreciated. At December 31, 2001, mining equipment with an original cost
value of approximately $670,000, was in use at BRZ.
(2) At December 31, 2001 and 2000, substantially all of these assets are fully
depreciated and the antimony mining and milling buildings and equipment are
idle.
7. Investment in USAMSA:
In September of 2000, the Company finalized its 50% investment in United
States Antimony, Mexico S.A. de C.V. ("USAMSA").
The company translates the foreign currency financial statements of its
Mexican investment in accordance with the requirements of SFAS No. 52,
"Foreign Currency Translation." Assets and liabilities are translated at
current exchange rates, related revenues and expenses are translated at
average exchange rates in effect during the period, and the effects of
exchange rate changes are reflected in stockholders' equity. Unaudited
condensed financial information for USAMSA at December 31, 2001 and 2000, is
as follows:
2001 2000
ASSETS
Current assets $ 18,550 $ 48,908
Noncurrent assets 83,233 78,973
---------- ----------
Total assets $ 101,783 $ 127,881
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 52,556 $ 69,359
Stockholders' equity 49,227 58,522
---------- ----------
Total liabilities and stockholders' equity $ 101,783 $ 127,881
========== ==========
F-13
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements, Continued:
7. Investment in USAMSA, Continued:
2001 2000
Revenues:
Income from antimony processing $ $ 16,145
Processing costs (42,995)
---------- -----------
Gross loss (26,850)
Other income and (expense):
Administrative and other costs (12,441) (1,051)
Other income 3,023
--------- -----------
Net loss $ (12,441) $ (24,878)
========= ===========
8. Judgment Payable:
At December 31, 2001 and 2000, the Company owed $46,523 and $43,480,
respectively, to the Internal Revenue Service, in connection with a default
judgment in a bankruptcy proceeding.
The default judgment was originally entered against the Company by the United
States Bankruptcy Court in 1992 in favor of the bankruptcy estate of a former
legal counsel of the Company. In 1998, the Trustee of the estate assigned the
interest in the judgment to the Internal Revenue Service. The judgment
accrues interest at the Federal Judgment Interest Rate, which has approximated
6-7%, and is due in monthly installments of $3,000. During 2001 and 2000, the
Company made no payments on this judgment payable.
9. Due to Related Parties:
Amounts due to (from) related parties at December 31, 2001 and 2000 were as
follows (see also Note 16):
2001 2000
Entity owned by John C. Lawrence,
president and director $ 4,721 $ (503)
John C. Lawrence, president and director 116,361 10,810
--------- ---------
$ 121,082 $ 10,307
========= =========
Transactions affecting the payable to Mr. Lawrence during 2001 and 2000
were as follows:
2001 2000
Balance, beginning of year $ 10,810 $ 7,340
Equipment rental charges 50,765 29,709
Advances (payments), net 54,786 (26,239)
--------- ---------
Balance, end of year $ 116,361 $ 10,810
========= =========
F-14
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements, Continued:
10. Notes Payable to Bank:
Notes payable to First State Bank of Thompson Falls, Montana ("First State
Bank") at December 31, 2001, were as follows:
Term note payable, bearing interest at 10.5%; payable in
monthly installments of $3,384; maturing May 2010; collateralized
by certain equipment and patented and unpatented claims in Sanders
County, Montana; personally guaranteed by John C. Lawrence (president
and director) $ 199,389
Term note payable, bearing interest at 9.5%; outstanding principal and
accrued interest due February 2003; collateralized by certain
equipment and patented and unpatented claims in Sanders County, Montana;
personally guaranteed by John C. Lawrence 148,637
Term note payable, bearing interest at 11.0%; outstanding principal and
accrued interest due November 2001; collateralized by certain
equipment and patented and unpatented claims in Sanders County, Montana;
personally guaranteed by John C. Lawrence 18,100
Term note payable, bearing interest at 9.5%; outstanding principal and
accrued interest due January 2002; collateralized by certain
equipment and patented and unpatented claims in Sanders County, Montana;
personally guaranteed by John C. Lawrence 45,100
Note under $50,000 revolving line-of-credit, bearing interest at 10.5%;
principal and accrued interest due April 2002; collateralized by
certain equipment and patented and unpatented claims in Sanders County,
Montana; personally guaranteed by John C. Lawrence 50,050
-------------
Total 461,276
Less current portion (119,431)
-------------
Noncurrent portion $ 341,845
=============
At December 31, 2001, principal payments on the notes payable to
bank are due as follows:
Year Ending
December 31,
2002 $ 119,431
2003 168,529
2004 22,084
2005 24,518
2006 27,220
Thereafter 99,494
-------------
$ 461,276
=============
F-15
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements, Continued:
10. Notes Payable to Bank, Continued:
Each of the notes payable described above contains certain restrictive
covenants, including paying payroll and property taxes, as they are due. At
December 31, 2001, the Company was not in compliance with certain of the
covenants. The Company has obtained a waiver relating to these covenants,
which applies at December 31, 2001 and through December 31, 2002.
11. Note Payable to Bobby C. Hamilton:
At the beginning of fiscal year 2000, the Company owed Bobby C. Hamilton
("Hamilton") an unsecured note payable of $1,538,381, arising from the
settlement of litigation brought against Hamilton by the Company in 1995. The
terms for repayment of the note included the payment of principal and interest
(at 7.5% per annum) equal to 4% of the gross sales of the Company's
operations, with a minimum total annual payment of principal and interest of
$200,000. During 1999, Mr. Hamilton died and the note went into his personal
estate (the "Estate"). In an effort to improve the Company's financial
condition, the Company's management began negotiations during the second
quarter of 2000 to extinguish and settle the debt owed the Estate. As a result
of management's negotiations, the Company entered into a Settlement and
Release of All Claims Agreement (the "Settlement Agreement") with the Estate
on June 23, 2000. The Settlement Agreement extinguished the note payable to
the Estate in exchange for a cash payment of $500,000 and the issuance of
250,000 shares of the Company's unregistered common stock. The cash payment
was financed by the issuance of $600,000 of convertible debentures (see Note
12) pursuant to a financing agreement with Thomson Kernaghan & Co., Ltd., a
Canadian investment banker. The Settlement Agreement mutually released both
parties from any and all obligations between them, and included the Company's
indemnification of the Estate against any liabilities and claims that may
result from environmental remediation responsibilities on the Company's Idaho
gold properties.
12. Debentures Payable
Thomson Kernaghan & Co., Ltd.
In connection with the Settlement Agreement between the Company and the Estate
of Bobby C. Hamilton (see Note 11), the Company entered into a financing
agreement (the "Financing Agreement") with Thomson Kernaghan & Co., Ltd.
("TK") on July 11, 2000. The financing agreement provided, among other
things, for the sale of up to $1,500,000 of the Company's convertible
debentures. In July of 2000, the Company sold an initial traunche of $600,000
of convertible debentures and in August sold a second traunche of $75,000
pursuant to the agreement with TK. In connection with the debenture sales and
terms of the Financing Agreement, the Company issued stock purchase warrants
totaling 961,538 to the debenture purchasers' agent (TK) and 432,692 stock
purchase warrants to the debenture purchasers. The exercise price of the agent
and purchaser warrants is the closing bid price as reported by Bloomburg
L.P. on the trading day immediately preceding July 11, 2000 (the effective
date of the Financing Agreement), or $0.39 per share. The warrants expire in
July and August of 2005.
In December of 2001, debenture principal totaling $675,000 was converted into
3,375,000 shares of the Company's common stock. The Company also issued
459,245 shares of restricted common stock, not subject to the registration
rights pursuant to the Financing Agreement, as payment of accrued interest on
the debentures in an aggregate amount of $91,849. The conversion rate for the
debenture's principal and interest was $0.20 per share.
F-16
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements, Continued:
12. Debentures Payable, Continued:
Related Parties
During the fourth quarter of 2000, the Company sold $100,000 of convertible
debentures to Al Dugan, a significant shareholder, and $247,992 of convertible
debentures to John C. Lawrence, the Company's president and a director. The
debentures mature three years from the date of issuance and accrue interest at
10%, payable upon each issuance anniversary date. The debentures are
convertible into common stock at $0.31 per share or 75% of the average of the
three lowest closing bid prices per share of the Company's common stock as
reported by Bloomburg L.P. in the 20 trading days immediately preceding the
conversion date, whichever is lower. In connection with the issuance, Mr.
Dugan and Mr. Lawrence were issued warrants to purchase 60,974 shares and
151,213 shares, respectively, of the Company's unregistered common stock. The
warrants expire five years from their date of issue and are exercisable at
$0.41 per share.
In December of 2001, debenture principal totaling $347,992, and $39,660 of
accrued interest thereon were converted at $0.20 per share into 1,938,261
shares of the Company's restricted common stock.
13. 2000 Stock Plan
In January of 2000, the Company's Board of Directors resolved to create the
United States Antimony Corporation 2000 Stock Plan ("the Plan"). The purpose
of the Plan is to attract and retain the best available personnel for
positions of substantial responsibility and to provide additional incentive to
employees, directors and consultants of the Company to promote the success of
the Company's business. The maximum number of shares of common stock or
options to purchase common stock that may be issued pursuant to the Plan is
500,000. In connection with the Plan, the Company filed a Form S-8
registration statement with the Securities and Exchange Commission in March of
2000, registering the Plan's shares pursuant to Rule 416-c of the Securities
Act of 1933. At December 31, 2001 and 2000, 300,000 shares of the Company's
common stock had been issued under the Plan (see Notes 14 and 17).
14. Stockholders' Deficit:
Increase in Authorized Capital
On August 28, 2000, the Company's board of directors resolved to seek
shareholder approval of an amendment of the Company's Articles of
Incorporation to increase the aggregate number of shares of common stock the
Company shall have the authority to issue from 20,000,000 to 30,000,000. The
increase in authorized shares was approved by the Company's shareholders at
the annual meeting of the shareholders on October 31, 2000.
Stock Warrants
The Company's Board of Directors has the authority to issue incentive stock
warrants for the purchase of common stock to directors and employees of the
Company. The Company has also issued warrants in exchange for services
rendered the Company, personal guarantees of financial obligations and the
issuance of debentures.
F-17
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements, Continued:
14. Stockholders' Deficit, Continued:
Transactions in stock warrants are as follows:
Number of Exercise Expiration
Warrants Prices Date
Balance, December 31, 1999 1,219,356 $ 0.25-0.80
Warrants issued as compensation
for consulting services 300,000 $ 0.25 (A)
Warrants exercised (100,000) $ 0.25
Warrants issued in connection
with issuance of debentures 1,606,237 $ 0.39-0.41 (B)
Warrants issued in connection
with stock sale 48,077 $ 0.39 (C)
Warrants expired (669,356) $ 0.70-0.80
---------
Balance December 31, 2000 2,404,314
Warrants issued in connection with
stock sales 1,602,400 $ 0.29-$0.35 (D)
Warrants expired (100,000) $ 0.50
---------
Balance, December 31, 2001 3,906,714
=========
(A) Warrants are exercisable on or before January of 2003.
(B) 1,394,230 warrants are exercisable on or before July-August of
2005; 212,187 warrants are exercisable on or before November-
December of 2005.
(C) Warrants are exercisable on or before August of 2005.
(D) Warrants are exercisable on or before January and December of 2004
During 2002, John C. Lawrence, the Company's president and a director, and Al
W. Dugan, a major shareholder and affiliate, agreed to waive conversion
privileges on 401,213 and 686,460 stock purchase warrants, respectively, owned
by them until at such time as the Company's shareholders approve and increase
the number of shares of common stock the company is authorized to issue.
Issuance of Common Stock in Connection with Conversion of Debts and
Debentures
The Estate of Bobby C. Hamilton
In June of 2000, the Company issued 250,000 shares of its unregistered common
stock to the Estate of Bobby C. Hamilton (see Note 11) in exchange for the
settlement and extinguishment of the balance of a note payable due the Estate
after the Company's payment of $500,000. In connection with the
extinguishment of the remaining balance due of $958,321, the Company recorded
an extraordinary gain of $917,726 based on the value of the restricted shares
issued at the time.
F-18
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements, Continued:
14. Stockholders' Deficit, Continued:
Issuance of Common Stock in Connection with Conversion of Debts and
Debentures, Continued:
Convertible Debentures
During 2001, holders of 100% of the outstanding convertible debentures (see
Note 12) converted their debentures. The holders converted $1,022,992 of
debenture principal, accrued interest of $131,510, and $70,000 of accrued late
registration penalties into 6,012,846 shares of the Company's common stock.
Issuance of Common Stock for Cash
During 2001, the Company sold an aggregate of 700,000 shares of its
unregistered common stock, plus warrants to purchase 470,000 shares of common
stock exercisable at prices ranging between $0.29 to $0.35 per share, to Al
Dugan, and entities affiliated with him, for cash totaling $140,000, or $0.20
per share. Mr. Dugan is a significant shareholder and an affiliate of the
Company.
During 2001, the Company also sold an aggregate of 1,004,000 shares of its
unregistered common stock, plus warrants to purchase 1,132,400 shares of
common stock exercisable at prices ranging between $0.29 and $0.35 per share
to existing shareholders and other parties for cash of $200,800, or $0.020 per
share.
During 2000, the Company sold an aggregate of 582,511 shares of its
unregistered common stock, plus warrants to purchase 48,077 shares of common
stock exercisable at $0.39 per share, to Al Dugan and entities affiliated with
him, for cash in the amount of $175,000, or approximately $0.30 per share on
average. Of the shares issued to Mr. Dugan, 100,000 were issued pursuant to
the exercise of stock purchase warrants previously granted him.
In addition, during 2000, the Company sold 200,000 shares of its unregistered
common stock to an existing shareholder for cash in the amount of $80,000, or
$0.40 per share.
Issuance of Common Stock as Liquidated Damages
In July of 2000, the Company entered into a financing agreement with Thomson
Kernaghan & Co., Ltd. (see Note 12). The Financing Agreement contained a
registration rights agreement in which Company agreed to register the
convertible debenture purchasers' resale of the shares of common stock issued
upon conversion. The registration rights agreement also provided for
liquidated damages to be due if the Company failed to have an effective
registration statement filed by a specified registration deadline. The Company
failed to meet the required deadline and, in April of 2001, agreed to issue
240,343 shares of its registered common stock in satisfaction of $70,000 of
liquidated damage penalties. At the time of conversion of debentures in
December of 2001, those penalty shares were issued to debenture holders.
Issuance of Common Stock in Exchange for Services
In March 2000, the Company issued an aggregate of 300,000 shares of its common
stock pursuant to its 2000 Stock Plan (see Notes 13 and 17) to two companies
in exchange for financial consulting services provided the Company. In
connection with the issue, the Company recorded $153,000 of compensation
expense based on the Company's estimate of the value of the stock issued and
the services received.
F-19
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements, Continued:
14. Stockholders' Deficit, Continued:
Issuance of Common Stock Pursuant to Antidilution Provisions
During 2000, the Company issued 35,542 shares of its restricted common stock
to the former holders of Series C preferred stock pursuant to the antidilution
provisions of the Series C preferred shares. In connection with the issue,
the Company recorded an expense of $4,265 based upon management's estimate of
the fair value of the Company's restricted common stock shares when the Series
C holders converted to common stock in 1999. The Company made no adjustments
to its 1999 net loss or accumulated deficit as previously stated, based on the
immateriality of the transaction.
Preferred Stock
The Company's Articles of Incorporation authorize 10,000,000 shares of $.01
par value preferred stock. At December 31, 2001, 4,528,833 shares of
authorized preferred stock remained undesignated and available for issuance
with such rights and preferences, including liquidation, dividend, conversion
and voting rights, as the Board of Directors may determine.
During 1986, Series A preferred stock, consisting of 4,500 shares, was
established by the Board of Directors. These shares are nonconvertible,
nonredeemable and are entitled to a $1.00 per share per year cumulative
dividend. Series A preferred stockholders have voting rights for directors
only and a total liquidation preference equal to $45,000 plus dividends in
arrears. At December 31, 2001, 4,500 shares of Series A preferred stock were
outstanding; and cumulative dividends in arrears amounted to $69,750, or
$15.50 per share.
During 1993, Series B preferred stock, consisting of 1,666,667 shares, was
established by the Board of Directors and 1,666,667 shares were issued in
connection with the final settlement of litigation. The Series B preferred
stock has preference over the Company's common stock and Series A preferred
stock, has no voting rights (absent default in payment of declared dividends)
and is entitled to cumulative dividends of $.01 per share per year payable if
and when declared by the Board of Directors. In the event of dissolution or
liquidation of the Company, the preferential amount payable to Series B
restricted preferred stockholders is $1.00 per share plus dividends in
arrears. No dividends have been declared or paid with respect to the Series B
preferred stock. In 1995, 916,667 shares of Series B preferred stock were
surrendered to the Company and cancelled in connection with the settlement of
litigation against Bobby C. Hamilton. At December 31, 2001, cumulative
dividends in arrears on the 750,000 outstanding Series B shares were $60,000,
or $0.08 per share.
During 1997, the Company issued 2,560,762 shares of Series C preferred stock
in connection with the conversion of certain debts owed by the Company. The
rights, preferences, privileges and limitations of the Series C preferred
shares issued upon conversion of debt are set forth below:
Designation. The class of Convertible Preferred Stock, Series C, $0.01 par
value per share, consists of up to 3.8 million shares of the Company.
Voting Rights. The holders of Series C preferred shares shall have the right
to that number of votes equal to the number of shares of common stock issuable
upon conversion of such Series C preferred shares.
F-20
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements, Continued:
14. Stockholders' Deficit, Continued:
Preferred Stock, Continued:
Optional Conversion. A holder of Series C preferred shares had the right to
convert the Series C shares, at the option of the holder, at any time within
18 months following issuance, into shares of common stock at the ratio of 1:1,
subject to adjustment as provided below. During 1999, holders of 2,354,766
shares of Series C stock converted their shares into common stock of the
Company.
Liquidation Preference. In the event of any liquidation or winding up of
the Company, the holders of Series C preferred shares shall be entitled to
receive as a preference over the holders of common stock an amount per share
equal to $0.55, subject to the preferences of the holders of the Company's
outstanding Series A and Series B preferred stock.
Registration Rights. Twenty percent (20%) of the underlying common stock
issued upon conversion of the Series C preferred shares shall be entitled to
"piggyback" registration rights when, and if, the Company files a registration
statement for its securities or the securities of any other stockholder.
These shares are included in a registration statement on file with the
Securities and Exchange Commission.
Redemption. The Series C preferred shares are not redeemable by the
Company.
Antidilution Provisions. The conversion price of the Series C shares was
subject to adjustment to prevent dilution in the event that the Company issued
additional shares at a purchase price less than the applicable conversion
price (other than shares issued to employees, consultants and directors
pursuant to plans and arrangements approved by the Board of Directors, and
securities issued to lending or leasing institutions approved by the Board of
Directors). Accordingly, the conversion price was adjusted according to a
weighted-average formula, resulting in the issuance (in 2000) of an additional
35,542 shares of common stock to Series C holders who exercised their
conversion rights in 1999. The initial conversion price for the Series C
shares was $0.55 and was subsequently adjusted to $0.54 per share based on the
antidilution formula.
Protective Provisions. The consent of a majority interest of the holders of
Series C preferred shares shall be required for any action which (i) alters or
changes the rights, preferences or privileges of the Series C shares
materially and adversely; or (ii) creates any new class of shares having
preference over or being on a parity with the Series C shares.
During 2000, the Company converted 28,092 of shares of Series C preferred
stock into an equal number of common shares for a Series C preferred
stockholder that had timely noticed the Company of its desire to convert its
Series C shares during 1999. At December 31, 2001 and 2000, 177,904 shares of
Series C preferred stock remained outstanding and unconverted.
F-21
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements, Continued:
15. Income Taxes:
At December 31, 2001 and 2000, the Company had net deferred tax assets of
approximately $1,900,000. The deferred tax assets principally arise from net
operating loss carryforwards for income tax purposes. As management of the
Company cannot determine if it is more likely than not that the Company will
realize the benefit of its deferred tax assets, a valuation allowance equal
to the net deferred tax assets at both December 31, 2001 and 2000 has been
established.
At December 31, 2001, the Company had regular tax net operating loss
carryforwards of approximately $5,300,000 which expire in the years 2002
through 2021. At December 31, 2001, the Company had net operating loss
carryforwards for alternative minimum tax purposes of approximately
$4,900,000.
16. Related-Party Transactions:
In addition to transactions described in Notes 4, 7, 9, 10, 12, and 14 during
2001 and 2000, the Company had the following transactions with related
parties:
-During 2001 and 2000, the Company incurred legal expenses of
approximately $54,000 and $109,000, respectively, to a law firm affiliated
with Gary D. Babbitt, a director of the Company until his resignation
during the fourth quarter of 2001. At December 31, 2001 and 2000, the
Company had accrued $128,911 and $95,666, respectively, in its accounts
payable relating to legal fees due Mr. Babbitt's law firm. During 2001,
Mr. Babbitt purchased 45,000 shares of the Company's restricted common
stock and 22,500 stock purchase warrants exercisable at $0.35 per share,
for $9,000, or $0.20 per share.
-During 2000, the Company issued 79,167 shares of its unregistered
common stock to members of the Board of Directors for their duties as
directors. The stock awards were recorded as compensation expense
(director's fees) based upon the estimated value of the stock at the date
of issuance.
-During 2000, the Company finalized its investment interest in
USAMSA. Leo Jackson, a director and stockholder of the Company, owns
31.4% of Production Minerals Inc., which has an indirect interest of 25%
in the stock of USAMSA (see Note 7).
17. Commitments and Contingencies:
Until 1989, the Company mined, milled and leached gold and silver in the
Yankee Fork Mining District in Custer County, Idaho. In 1994, the U.S. Forest
Service, under the provisions of the Comprehensive Environmental Response
Liability Act of 1980 ("CERCLA"), designated the cyanide leach plant as a
contaminated site requiring cleanup of the cyanide solution. The Company has
been reclaiming the property and, as of December 31, 2001, the cyanide
solution cleanup was complete, the mill removed, and a majority of the cyanide
leach residue disposed of. In 1996, the Idaho Department of Environmental
Quality requested that the Company sign a consent decree related to completing
the reclamation and remediation at the Preachers Cove mill, which the Company
signed in December 1996.
F-22
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements, Continued:
17. Commitments and Contingencies, Continued:
In November of 2001, the Environmental Protection Agency ("EPA") listed two
by-products of the Company's antimony oxide manufacturing process as hazardous
wastes. Antimony slag and antimony bag house filters are now subject to
comprehensive management and treatment standards under subtitle C of the
Resource Conservation and Recovery Act ("RCRA"), and emergency notification
requirements for releases to the environment under CERCLA. During 2001, the
Company adjusted its reclamation accrual at its antimony processing site based
on an estimate of costs associated with disposing the Company's current
antimony slag inventory according to EPA universal treatment standards. While
it is probable that future costs will result from the EPA's listings, the
additional costs are not estimable at December 31, 2001.
The Company's management believes that USAC is currently in substantial
compliance with environmental regulatory requirements and that its accrued
environmental reclamation costs are representative of management's estimate of
costs required to fulfill its reclamation obligations. Such costs are accrued
at the time the expenditure becomes probable and the costs can reasonably be
estimated. The Company recognizes, however, that in some cases future
environmental expenditures cannot be reliably determined due to the
uncertainty of specific remediation methods, conflicts between regulating
agencies relating to remediation methods and environmental law
interpretations, and changes in environmental laws and regulations. Any
changes to the Company's reclamation plans as a result of these factors could
have an adverse affect on the Company's operations. The range of possible
losses in excess of the amounts accrued cannot be reasonably estimated at this
time.
During the first quarter of 2000, the Company issued 150,000 shares of its
common stock to Thomson Kernaghan & Co., Ltd., and 150,000 shares of its
common stock to Blue Water Partners, Inc. as compensation for fiscal advisory
and consulting services to be provided the Company. The shares were issued
pursuant to the Company's 2000 Stock Plan (see Note 13), and were believed by
the Company to be registered under a Form S-8 registration statement filed in
connection with the 2000 Stock Plan. The stock certificates issued to the two
companies therefore did not bear a restrictive legend. Subsequent to the
issuance of the shares, management was informed by its legal counsel that Form
S-8 cannot be used to register stock issued to consultants whose services
involve promotion of the Company's stock. In response to this information,
management immediately contacted both companies and requested that the
unlegended shares of common stock be returned to the Company in exchange for a
certificate bearing a restrictive legend. In March of 2001, Thomson Kernaghan
& Co., Ltd. returned 150,000 shares to the Company in exchange for 150,000
restricted shares. No response has been received from Blue Water Partners,
Inc. As a result of the issuance, the Company may be subject to civil
liabilities, including fines and other penalties imposed by federal and state
securities agencies. At December 31, 2001 and 2000, the Company had not
recorded any liability associated with the issuance of these shares, as
management believes the likelihood of a claim, and the ultimate outcome of a
claim if asserted, cannot be ascertained at this time.
During 2001, the Company issued a number of shares in transactions that may
not qualify for exemption from the Securities Act registration requirements
and may be in violation of Section 5 of the Securities Act of 1933. As a
result the Company may be subject to liabilities associated with the
rescission rights of the purchasers of these shares and fines and penalties
from securities regulators. At December 31, 2001, the Company had not
recorded any liability associated with the issuance of these shares, as
management believes the likelihood of a claim, and the ultimate outcome if a
claim is asserted, cannot be ascertained at this time.
F-23
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements, Continued:
18. Fair Value of Financial Instruments:
The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of Financial
Instruments." The estimated fair value amounts have been determined using
available market information and appropriate valuation methodologies. However,
considerable judgment is required to interpret market data and to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize in a current
market exchange.
The carrying amounts for cash, restricted cash, accounts receivable, accounts
payable and accrued expenses are reasonable estimates of their fair values.
The fair value of amounts due to related parties approximates their carrying
values of $121,082 and $10,307, respectively, at December 31, 2001 and
December 31, 2000, based upon the contractual cash flow requirements.
Judgments payable of $46,523 and $43,480, at December 31, 2001 and 2000,
respectively, approximate their carrying value based upon the judgment's
repayment requirements. The fair value of the Company's convertible
debentures and accrued interest of $997,449 and $47,324, respectively, at
December 31, 2000, approximated their carrying value based on management's
estimate the fair values of comparable debt instruments.
F-24