As filed with the Securities and Exchange Commission on November 6, 2001
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
AMENDMENT NO. 5
TO
FORM SB-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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UNITED STATES ANTIMONY CORPORATION
(Name of small business issuer in its charter)
Montana 3339 81-0305822
(State of jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or Classification Code Number) Identification
organization) Number)
P.O. Box 643
1250 Prospect Creek Road
Thompson Falls, Montana 59873
Telephone: (406) 827-3523
(Address and telephone number of principal executive offices)
----------------------------------
John C. Lawrence
President and Chairman
United States Antimony Corporation
P.O. Box 643
1250 Prospect Creek Road
Thompson Falls, Montana 59873
Telephone (406) 827-3523
(Name, address, and telephone
number of agent for service)
----------------------------------
COPY TO
Robert L. Sonfield, Jr., Esq.
Sonfield and Sonfield
770 South Post Oak Lane
Houston, Texas 77056
(713) 877-8333
(713) 877-1547 (fax)
------------------------------
Approximate date of proposed sale to the public: From time to time after the
effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [x]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
___________________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
-----------------------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
-----------------------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
=================================================================================================================
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered (1) Registered Offering Price Aggregate Registration
Per Share (2) Offering Price (2) Fee
----------------------------------------- ------------------ ------------------- ------------------- ------------
Common Stock, par value $.01 per share 6,268,065 $.20 $1,253,613 $313.40
----------------------------------------- ------------------ ------------------- ------------------- ------------
(1) This Registration Statement relates to the registration of 6,268,065
shares of common stock, $.01 par value, which we are obligated to register on
behalf of Selling Shareholders. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Financial Condition and
Liquidity" and "Selling Shareholders."
(2) This Registration Statement covers (i) 2,317,597 shares of common stock
issuable upon conversion of debentures at $0.29125 per share, and 1,682,403
additional shares issuable upon conversion if the market price is less than
$.29125 per share which we are required to register pursuant to a financing
agreement with purchasers of our convertible debentures; (ii) 1,394,050 shares
issuable upon exercise of related warrants at $0.39 per share; (iii) 150,000
shares of common stock held by a Selling Shareholder; (iv) 240,343 shares
issuable to the holders of debentures as penalties; and (v) 483,672 shares held
by former holders of Series C preferred stock. Pursuant to Rule 457(c) under the
Securities Act of 1933, the aggregate offering price of the common shares
underlying the debentures and the warrants is computed on the basis of the
average of the bid and asked price for our common stock in the over-the-counter
market on November 5, 2001.
The registrant hereby amends this registration statement on the date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on the date the Commission, acting pursuant to said Section 8(a), may
determine.
PRELIMINARY PROSPECTUS Subject To Completion, Dated OCTOBER ___, 2001
The information in this prospectus is not
complete and may be changed.
UNITED STATES ANTIMONY CORPORATION
6,268,065 Shares
Common Stock
We are registering the following shares for resale by Selling Shareholders.
See "Selling Shareholders":
o 4,000,000 shares of common stock issuable at a price per share equal to
the lower of $.29125 or 75% of the market price upon conversion of our
10% convertible debentures issued and issuable to 5 of the selling
shareholders;
o 240,343 liquidated damage shares of common stock issuable ratably to
the holders of our 10% convertible debentures. o 432,692 shares of
common stock issuable at $.39 per share upon exercise of warrants held
by 5 of the selling shareholders; o 961,358 shares of common stock
issuable at $.39 per share upon exercise of agent's warrants held by 3
of the selling shareholders;
o 150,000 shares of common stock held by 1 of the selling shareholders;
and
o 483,672 shares of common stock held by 13 of the selling shareholders
who converted their shares of our Series C Preferred Stock.
We will pay the expenses of registering these shares.
We will receive no part of the proceeds from any sale of the shares by the
selling shareholders. See "Selling Shareholders."
The selling shareholders will receive the price per share available in
the Over-The-Counter market. See "Determination of Offering Price."
---------------------------
Investing in these shares involves significant risks.
See "Risk Factors" section of this Prospectus beginning on page 2.
----------------------------
Our common stock is registered under Section 12(g) of the Securities Exchange
Act of 1934 and trades are reported on the Over-The-Counter Electronic Bulletin
Board (OTCBB) under the symbol "UAMY." The last reported sale price per share of
our common stock by the OTCBB on November 5, 2001 was $.20 per share.
The Securities and Exchange Commission and state
securities regulators have not approved or disapproved of
these securities or determined if this prospectus is
truthful or complete.
Any representation to the contrary is a criminal offense.
The date of this prospectus is ________, 2001
TABLE OF CONTENTS
Caption Page
PROSPECTUS SUMMARY.............................................................1
RISK FACTORS...................................................................2
USE OF PROCEEDS...............................................................10
DETERMINATION OF OFFERING PRICE...............................................10
DILUTION......................................................................10
SELLING SHAREHOLDERS..........................................................11
PLAN OF DISTRIBUTION..........................................................14
DESCRIPTION OF SECURITIES.....................................................15
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS......................18
DESCRIPTION OF BUSINESS.......................................................19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS....................................................................30
DESCRIPTION OF PROPERTY.......................................................36
DIRECTORS AND EXECUTIVE OFFICERS..............................................37
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................38
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................40
EXECUTIVE COMPENSATION........................................................42
LEGAL PROCEEDINGS.............................................................42
LEGAL MATTERS.................................................................42
EXPERTS.......................................................................43
WHERE YOU CAN FIND MORE INFORMATION...........................................43
INDEX TO FINANCIAL STATEMENTS..............................................F - 1
PROSPECTUS SUMMARY
The following summary highlights material information contained in this
prospectus. This summary does not contain all the information you should
consider before investing in the securities. Before making an investment
decision, you should read the entire prospectus carefully, including the "Risk
Factors" section, the financial statements and the notes to the financial
statements. Some of the statements made in this prospectus discuss future events
and developments, including our future business strategy and our ability to
generate revenue, income and cash flow. These forward-looking statements involve
risks and uncertainties which could cause results to differ materially from
those contemplated in these forward-looking statements.
The Company
Our principal business is the production of antimony products including
antimony metal, antimony oxides and sodium antimonate. In the year ended
December 31, 1999 and December 31, 2000, antimony product sales generated
revenues of approximately $4.7 million and $5 million, respectively.
Our antimony mining properties, mill and metallurgical plant are
located in Montana. Mining of antimony was suspended in 1983 because antimony
can be purchased more economically from foreign sources. We acquired a 50%
interest in United States Antimony, Mexico S.A. de C.V. ("USAMSA"), upon its
incorporation in Mexico in April 1998. USAMSA intends to produce antimony metal
and other products to be delivered to our Montana mill for processing. This
Mexican company has not commenced operations and is expected to remain in
developmental stages in the foreseeable future.
We have entered into a joint venture to mine, process and sell zeolite.
This venture is in the developmental stage but is not expected to contribute
materially to our operating revenue in the near future.
Our mailing address is P.O. Box 643 and our physical address is 1250
Prospect Creek Road, Thompson Falls, Montana 59873. Our telephone number is
(406) 827-3523.
The Offering
Common Stock Offered
For Resale:....... 6,268,065 shares, issuable to Selling Shareholders
upon conversion of our 10% convertible debentures,
exercise of related warrants; and, common stock held
by 14 selling shareholders
Shares Outstanding
Before the Offering(1) 19,134,564
----------------------
Shares Outstanding
After the Offering(2) 25,402,629
---------------------
Recent Price:..... As of November 5, 2001, the closing bid price of our
common stock reported on the Electronic Bulletin
Board was $.20.
Use of Proceeds:.. Working capital and general corporate purposes.(3)
Over-The-Counter
Electronic Bulletin
Board Symbol:..... UAMY
-----------------
(1) As of June 30, 2001.
(2) Assumes all shares registered in this prospectus are sold. In such event,
the registered shares will represent 24.67% of the total shares outstanding
after the offering. (3) We will receive no proceeds from the issuance of shares
of common stock upon the conversion of the 10% convertible debentures. If
exercised, we will receive proceeds from the sale of shares issuable upon the
exercise of warrants by the Selling Shareholders. We will not received proceeds
from resale of our common stock by the Selling Shareholders.
RISK FACTORS
You should carefully consider the following risks and all of the other
information set forth in this prospectus. Some of the following risks relate
principally to our business. Other risks relate to our financial condition, the
securities markets and ownership of our stock. The risks and uncertainties
described below are not the only ones facing our company. Additional risks and
uncertainties not presently known to us or that we currently believe to be
immaterial may also adversely affect our business.
If any of the following risks and uncertainties develop into actual
events, our business, financial condition or results of operations could be
harmed and the price of our stock could go down. This means you could lose all
or part of your investment.
There are risks associated with forward-looking statements made by us
and actual results may differ.
Some of the information in this Form SB-2 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: o discuss our
future expectations; o contain projections of our future results of operations
or of our financial condition; and o state other "forward-looking" information.
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 in this section, as well
as any cautionary language in this prospectus, 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. You should
be aware that the occurrence of the events described in these risk factors could
have an adverse effect on our business, results of operations and financial
condition.
Risks Related to This Offering
Our share price may decline because of the ability of the Selling Shareholders
to sell shares of our common stock, resulting in a loss of value to our other
shareholders.
This prospectus covers 6,268,065 shares for sale by the Selling
Shareholders. Sales of substantial amounts of our common stock by the Selling
Shareholders, or the possibility of sales of up to one-third of the presently
outstanding shares, could adversely affect the prevailing market price of our
common stock and impede our ability to raise capital through the issuance of
equity securities. Subject to applicable federal and state securities laws and
contractual limitations, after converting their debentures and/or exercising
their warrants to purchase shares of our common stock, the Selling Shareholders
may sell any and all of the Shares. Trading volume in our stock on the OTC
Bulletin Board has historically been light; and sale of blocks of common stock
could depress the market price of our stock.
By short-selling our stock, the Selling Shareholders could depress the market
price of our shares, enabling the Selling Shareholders to acquire more shares
upon exercise of debenture conversion rights and thereby increasing the dilution
of the other shareholders' equity in the company and resulting in a loss of
value to our other shareholders.
A short-sale is the sale of a security that the seller does not own or
that the seller owns but does not deliver. In order to deliver the security to
the purchaser, the short-seller will borrow the security, typically from a
broker-dealer or an institutional investor. The short-seller later closes out
the position by returning the security to the lender, typically by purchasing
equivalent securities on the open market. In general, short-selling is utilized
to profit from an expected downward price movement, or to hedge the risk of a
long position in the same security or in a related security.
Although short-selling serves useful market purposes, it also may be
used as a tool for manipulation. One example is the "bear raid" where an equity
security is sold short in an effort to drive down the price of the security by
creating an imbalance of sell-side interest. Short-selling at successively lower
prices may drive the market down and may accelerate a declining market by
exhausting all remaining bids at one price level, causing successively lower
prices to be established by long sellers. Further, short-selling can increase
stock price volatility.
The Securities and Exchange Commission has adopted rules which regulate
short-selling of securities listed on national securities exchanges. The
National Association of Securities Dealers similarly regulates Nasdaq National
Market Systems (NMS) securities. These rules do not apply to short sales of
securities, like our common stock, which are traded in the over-the-counter
market and quoted on the Electronic Bulletin Board.
Our debenture conversion price formula has no floor. Twenty percent
(20%) of our presently outstanding shares and two-thirds of the shares
registered by this prospectus are available to the Selling Shareholders at 75%
of the market price. The lower the market price for our common stock, the
greater the number of shares the Selling Shareholders can acquire upon
conversion of the debentures into common stock. The Selling Shareholders could
use a short-selling strategy to drive down the market price of our common stock
and then exercise conversion rights to acquire more shares and dilute the other
shareholders' interests in us.
Our Common Stock Is A "Penny Stock," And Compliance With Requirements For
Dealing In Penny Stocks May Make It Difficult For Holders Of Our Common Stock To
Resell Their Shares.
The limited public market for our common stock, is in what is known as
the over-the-counter market and, trading of our stock is quoted under the symbol
"UAMY" on the Electronic Bulletin Board operated for the NASD. At least for the
foreseeable future, our common stock will be deemed to be a "penny stock" as
that term is defined in Rule 3a51-1 under the Securities Exchange Act of 1934.
Rule 15g-2 under the Exchange Act requires broker/dealers dealing in penny
stocks to provide potential investors with a document disclosing the risks of
penny stocks and to obtain from these inventors a manually signed and dated
written acknowledgement of receipt of the document before effecting a
transaction in a penny stock for the investor's account. Compliance with these
requirements may make it more difficult for holders of our common stock to
resell their shares to third parties or otherwise, which could have a material
adverse effect on the liquidity and market price of our common stock (see
"Description of Securities - Penny Stock Rules").
Penny stocks are stocks:
o with a price of less than $5.00 per share unless traded on NASDAQ or a
national securities exchange;
Penny stock are also stocks which are issued by companies with:
o net tangible assets of less than:
>> $2.0 million (if the issuer has been in continuous operation for at
least three years); or
>> $5.0 million (if in continuous operation for less than three years);
or
o average revenue of less than $6.0 million for the last three years.
It is more difficult for our shareholders to sell their shares because we are
not, and may never be, eligible for NASDAQ or any National Stock Exchange.
We are not presently, and it is likely that for the foreseeable future
we will not be, eligible for inclusion in NASDAQ or for listing on any United
States national stock exchange. To be eligible to be included in NASDAQ, a
company is required to have not less than $4,000,000 in net tangible assets, a
public float with a market value of not less than $5,000,000, and a minimum bid
of price of $4.00 per share. At the present time, we are unable to state when,
if ever, we will meet the Nasdaq application standards. Unless we are able to
increase our net worth and market valuation substantially, either through the
accumulation of surplus out of earned income or successful capital raising
financing activities, we will never be able to meet the eligibility requirements
of NASDAQ. As a result, it will more difficult for holders of our common stock
to resell their shares to third parties or otherwise, which could have a
material adverse effect on the liquidity and market price of our common stock
The terms of the 10% Convertible Debenture financing transaction may result in
substantial dilution of our stock upon the conversion of the debentures and
warrants which have been issued and which may be issued in the future under the
terms of the financing agreement.
We entered into a financing agreement with Thomson Kernaghan and Co.
Limited, as agent for some of the Selling Shareholders. As part of the agreement
we issued and could issue additional 10% convertible debentures and warrants.
* Substantial dilution. Substantial dilution of our stock
will occur upon the conversion of the debentures and warrants which
have been issued and which may be issued in the future under the terms
of the agreement.
* No floor on the conversion price. The conversion price
of our outstanding debentures is the lower of the initial conversion
price of $.29125 per share or 75% of the average of the three lowest
closing bid prices of our common stock during the twenty trading days
preceding the conversion date; and there is no maximum number of shares
issuable upon conversion of the debentures.
* Selling shareholder may depress the trading price of
our stock. A debenture holder could partially convert to common stock,
sell that stock in a manner which depresses the trading price, and then
further convert a portion or all of the debenture at the lowered stock
price, thereby increasing the number of common shares issuable upon
conversion of each dollar of debenture and increasing the dilution of
the outstanding shares of our common stock.
* We may be required to issue more shares than we have
authorized. If the price of our common stock declines below
approximately $0.075, we will have insufficient shares of authorized
common stock available to enable conversion of all outstanding
debentures. In that event, we would be in breach of our obligations to
one or more debenture holders, who would then have the right to require
immediate repayment of the unpaid principal balance of the debenture
and accrued interest and could subject us to exposure to a claim for
damages.
* Limitation on future transactions. The potential and/or
actual dilution and agreement terms which prevent the following future
transactions may harm our stock price and our ability to obtain
additional financing, if needed.
The debenture agreement requires that so long as any of the
principal of or interest on the debentures remain unpaid or
unconverted, the Company shall not:
= merge or consolidate with any other entity;
= sell or otherwise dispose of a material portion of its assets (other than in
the ordinary course of business); = pay any dividend on its shares (including
any dividend payable in common stock or other property); = subdivide, split or
otherwise increase the number of shares of common stock; or = issue any common
stock or other equity securities, or any other stock, option, warrant, right or
other instrument that is convertible into or exercisable or exchangeable for
common stock or other equity securities, except for (a) securities of a
subsidiary that are issued to the Company; and (b) securities sold and options
granted to directors, officers and employees of the Company pursuant to bona
fide employee benefit plans.
To date, we have issued Thomson Kernaghan and Co. Limited $675,000
principal amount of debentures. The financing agreement requires Thomson
Kernaghan and Co. Limited to purchase up to $825,000 principal amount of
additional debentures upon our request prior to the June 30, 2002 Maturity Date
if specified conditions precedent are satisfied, including the condition that
the closing bid price of the Company's stock must exceed $0.50 per share. We
have no plans to issue additional debentures to Thomson Kernaghan and Co.
Limited.
Rights to acquire shares of common stock will result in dilution and possible
loss of value to other holders of common stock.
Outstanding warrants could adversely affect the terms on which we can
obtain additional financing, and the holders of these warrants can be expected
to exercise these securities at a time when, in all likelihood, we would be able
to obtain additional capital by offering shares of common stock on terms more
favorable to us than those provided by the exercise of these warrants. Holders
of the warrants will have the opportunity to profit from an increase in the
market price of our common stock, with resulting dilution in the interests of
the holders of our common stock. As of June 30, 2001, there were issued and
outstanding the following warrants:
--warrants held by our directors, officers, employees and affiliates to
purchase an aggregate of 582,463 shares of common stock with an
exercise price ranging from $.25 to $.41 per share.
--warrants held by unaffiliated third parties to purchase an aggregate
of 2,201,531 shares of common stock with an exercise price ranging from
$.25 to $.55 per share.
Our Board of Directors Can Issue Additional Shares Of Our Common Stock Without
The Consent Of Any Of Our Shareholders; Substantial Future Stock Issuances Could
Result In The Dilution Of Your Voting Power And Of Earnings Per Share Which
Could Decrease The Value Of Your Shares
Our Certificate of Incorporation authorizes the issuance of 30,000,000
shares of common stock. Upon the sale of all of the shares of common stock
offered hereby approximately 5,120,813 of our authorized common shares will
remain unissued. Our board of directors has the power to issue any or all of the
remaining 5,120,813 authorized common shares for general corporate purposes,
without shareholder approval. Potential investors should be aware that any stock
issuances may result in a reduction of the book value or market price of the
outstanding common shares. If we issue any additional common shares, any
issuance will reduce the proportionate ownership and voting power of each other
common shareholder. See "Description of Securities."
In the event of a liquidation of our business, any return of your investment in
our shares will be reduced because it is junior and subordinate to our present
and future debt financing.
Our corporate charter and bylaws do not contain any limitation on the
amount of indebtedness, funded or otherwise, we might incur. Accordingly, we
could become more highly leveraged, resulting in an increase in debt service
that will harm our ability to pay dividends to our stockholders and result in an
increased risk of default on our obligations. We expect to use indebtedness and
leveraging to finance operations and future development of our business which
increases the risk of any distribution to our stockholders.
Unexpected fluctuations in our quarterly operating results may cause our stock
price to decline and resulting a loss in the value of your investment.
A large proportion of our costs, including our selling, general and
administrative expenses, environmental reclamation costs, research and
development costs, and production costs, do not vary directly in relation to
sales. Thus, declines in revenue, even if small, could disproportionately affect
our quarterly operating results, could cause the results to differ materially
from expectations and could cause our stock price to decline.
Because we do not anticipate paying dividends on our common stock in the
foreseeable future the only way you can realize a return on an investment in our
stock is for the stock price to increase.
Rather, we plan to retain earnings, if any, for the operation and
expansion of business. Investment in our common stock is unsuitable for an
investor seeking income.
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 those funds.
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 have been
unsuccessful.
In addition, we have sold stock in transactions which may not qualify
for exemption from the Securities Act registration requirements. The proceeds of
these sales aggregate not more than $66,800. 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.
Risks Related to Our Financial Condition
We Have a Negative Net Worth, Have Incurred Significant Losses, and Expect
to Incur Losses in the Future. This Could Drive Down The Price of Our Stock.
We have not generated an operating profit for several years. Instead we
have been able to continue operations by gross profit from our antimony
operations, sales of common stock and borrowings from banks and others. As of
June 30, 2001, we had an accumulated deficit of $2,059,674 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. As of June 30,
2001, we had total current assets of $312,172 and total current liabilities of
$1,543,568 or negative working capital of approximately $1,231,396. If we fail
to establish profitable operations and continue to incur losses, the price of
our common stock could be expected to fall.
We Received An Opinion From Our Auditors As of March 22, 2001 Which Raises Doubt
About Our Ability to Continue After that Date as a Going Concern.
Our audited financial statements for the year ended December 31, 2000,
which are included in this prospectus, indicate that there was substantial doubt
as of March 22, 2001 about our ability to continue as a going concern due to our
need to generate cash from operations and obtain additional financing. In
addition to the very real risk to our ability to successfully operate our
business profitably, which our auditors have thus expressed, this type of "going
concern" qualification in our auditor's report can have a negative effect on the
price of our stock. If we fail to manage our growth in a manner that minimizes
these strains on our resources it could disrupt our operations and ultimately
prevent us from generating the revenues we expect.
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 June 30, 2001, we are delinquent on the payment of several
current liabilities including payroll and property taxes in the amount of
$146,632, accounts payable in the amount of $367,360, judgments payable in the
amount of $45,001 and accrued interest payable in the amount of $14,640. While
we have made payment arrangements with the internal revenue service regarding
the payment of delinquent payroll taxes totaling $38,555. There exists the risk
that creditors for which no payment arrangements have been made could
individually or collectively demand immediate payment and jeopardize our ability
to fund operations and correspondingly damage our business and adversely affect
the investments of potential new shareholders. Creditors who are owed taxes have
the power to seize our assets for payment of amounts past due and close down our
operations, which would also damage our business and adversely affect the
investments of potential new shareholders.
A major portion of our bank debt consists of variable-rate short-term
obligations, which subjects us to interest rate and refinancing risks.
We currently obtain working capital through a factoring arrangement
secured by accounts receivable and other collateral and through a line-of-credit
and other short-term loans secured by plant, property and equipment.
Our working capital line-of-credit and short-term loans are
variable-rate, short-term obligations, which expose us to interest rate and
refinancing risks. Changes in interest rates could adversely affect our results
of operations by increasing our borrowing costs and decreasing cash available to
fund operations; and there is no assurance that we will be able to refinance our
debt when it matures.
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 metal supplies, 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. The issuance of equity or equity-related securities to raise
additional cash could result in dilution to our stockholders. Further,
additional funding may not be available on favorable terms, if at all.
Our existing debt is secured by pledge of substantially all of our assets.
Therefore, a default in the payment of the secured debt could result in a loss
of the related asset and our ability to continue operations.
As of June 30, 2001, our bank debt in the amount of $424,772 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.
Terms of our outstanding 10% Convertible Debentures impose restrictions on our
future activities that may require us to decline an advantageous financing or
business opportunity.
The debenture agreement requires that so long as any of the principal
of or interest on the debentures remain unpaid or unconverted, the Company shall
not (i) merge or consolidate with any other entity; (ii) sell or otherwise
dispose of a material portion of its assets (other than in the ordinary course
of business); (iii) pay any dividend on its shares (including any dividend
payable in common stock or other property); (iv) subdivide, split or otherwise
increase the number of shares of common stock; or (v) issue any common stock or
other equity securities, or any other stock, option, warrant, right or other
instrument that is convertible into or exercisable or exchangeable for common
stock or other equity securities, except for (a) securities of a subsidiary that
are issued to the Company; and (b) securities sold and options granted to
directors, officers and employees of the Company pursuant to bona fide employee
benefit plans; provided, however, that the Company may issue such securities
enumerated in (v) above, with the prior written consent of the holders, which
consent the holder agrees not to unreasonably withhold.
Risks Related to Our Business
Death or disability of John C. Lawrence could adversely affect the management of
our business and could result in acceleration of guaranteed indebtedness.
Mr. Lawrence is our principal executive officer and is directly
involved, on a day-to-day basis, in our marketing, production, research and
development, and environmental reclamation activities. His death or incapacity
could adversely affect our operations and future prospects. In addition, Mr.
Lawrence personally guarantees our long-term bank debt and short-term
lines-of-credit; and the death, incapacity or insolvency of Mr. Lawrence
constitutes an event of default, which would entitle the lender to accelerate
maturity of the debt.
We are dependent on foreign sources for raw materials; and there are risks of
interruption in procurement from these sources, volatile changes in world market
prices for these materials as well as currency fluctuations that are not
controllable by us. Unavailability of adequate raw material or increase in
material prices could impair our production, sales or margins.
We obtain antimony metal, the raw material for our antimony products,
primarily from China. 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. In mid-2000, our principal supplier
of Chinese antimony metal was unwilling to supply antimony metal at contract
prices which were lower than rapidly rising world prices; and the supplier has
indicated it may be unable to meet contractual volume commitments to supply
antimony at any price. We have agreed to pay higher prices to assure a continued
supply of metal which, absent agreement of our principal customers to accept
corresponding price increases for our antimony products, could adversely affect
sales and gross margins.
Any product recall or product return could harm our customer relations, sales
and profitability.
Our antimony products are typically manufactured to meet individual
customer specifications, including maximum tolerance levels for impurities,
whiteness, color index, packaging requirements and bar coding. Failure to meet
those specifications may result in product returns or recalls. Product recalls
or returns may occur due to disputed labeling claims, manufacturing issues,
quality defects or other reasons.
Uninsured loss, acts of God could impair our plant, property and equipment, and
our ability to produce and sell our principal products.
Our Thompson Falls, Montana processing facility is not insured against
fire or catastrophic loss. In the event of a major earthquake, for example, our
production plant could be rendered inoperable for protracted periods of time,
which would adversely affect our earning and financial condition. Should an
uninsured loss occur, we could lose significant revenues and financial
opportunities in amounts which would not be compensated by insurance proceeds.
If we are unable to compete effectively with the larger producers we will not be
able to generate profits.
Some of our competitors in the antimony industry have substantially
more financial resources, marketing and development capabilities than we do.
Unlike our larger competitors, we lack the capital to stock substantial amounts
of raw material inventory and may be unable to supply product to our customers
if raw material availability declines or prices increase substantially.
Compliance with government regulations is costly and will depress our earnings.
We are subject to many and varied forms of government regulations,
including environmental, occupational health and safety, and mine safety laws
and regulations. For the year ended December 31, 2000, we have expended
approximately $113,000 to comply with environmental reclamation requirements
imposed by federal and state regulators. Our cash flow and profitability will be
reduced by the cost of complying with current and future laws, rules,
regulations, and policies, and by liabilities arising out of any of our past and
future conduct. See "Description of Business - Environmental Matters."
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 can not be reasonably estimated
at this time.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of
our common stock offered by the Selling Shareholders. The proceeds of sale of
the debentures were used to discharge indebtedness in the approximate amount of
$1,500,000 and to purchase raw materials. The debt was owed to the Estate of
Bobby C. Hamilton, and required minimum annual payments of principal and
interest which totaled $200,000 and consumed 4% of our gross revenues from
sales. See "Management Discussion and Analysis - Financial Condition and
Liquidity." The Series C preferred stock was issued in 1997 in payment of
defaulted debentures previously issued from time to time for working capital
purposes.
DETERMINATION OF OFFERING PRICE
The shares issued upon conversion of debentures will be issued at the
conversion price which is the lower of $0.29125 per share or 75% of the average
of the three lowest closing bid prices per share of the common stock as reported
by Bloomburg L.P. in the 20 trading days preceding the conversion date. Shares
will also be issued upon exercise of related warrants at $0.39 per share. The
conversion price and warrant exercise price were determined in arms-length
negotiations between us and the purchaser of our debentures.
Upon resale of the shares by the Selling Shareholders, the price per
share will be the market price available in the over-the-counter market.
DILUTION
At the close of business on June 30, 2001, there were 19,134,564
outstanding shares of our $0.01 par value common stock. The number of
outstanding shares of common stock:
(i) includes 35,124 shares which holders of Series C preferred
stock were entitled to receive upon conversion of their preferred stock
into common stock. These shares were not issued at the time of
conversion because our calculation of the number of conversion shares
inadvertently omitted to account for the impact of 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 35,132 shares are being issued to the pertinent stockholders
retroactively to the date of conversion of their Series C preferred
stock.
(ii) excludes approximately 67,000 shares of common stock
representing an unreconciled discrepancy between our stock ledger and
the transfer agent's records.
The Registration Rights Agreement with the purchasers of our
outstanding convertible debentures and related warrants requires us to register
5,784,393 shares of our common stock that, depending on the market price at the
time of conversion, we could be required to issue upon conversion of the
debentures and/or exercise of related warrants which are currently issued and
outstanding and held by Selling Shareholders. The minimum number of conversion
and warrant shares we are required to issue, if all debentures are converted at
the maximum conversion price of $.29125 per share and all related warrants are
exercised, is 3,711,647. We are also registering 483,672 shares held by the
Series C Holders.
The following table sets forth the net tangible book value per share at
June 30, 2001, and the net tangible book value per share assuming that 2,727,273
shares were issued at June 30, 2001 upon conversion of debentures at $0.2475 per
share (based on 75% of the lowest three bid prices for the 20 day period just
prior to June 30, 2001) and 1,394,050 shares were issued upon exercise of the
related warrants at $0.39 per Share. Net tangible book value per share as of
June 30, 2001 is calculated by dividing total tangible assets less total
liabilities, or ($2,059,674), by the number of shares outstanding, 19,134,564.
After giving effect to the issuance of 2,727,273 shares upon conversion
of debentures and 1,394,050 shares upon exercise of the related warrants, our
pro forma net tangible book value will increase to $(840,924), or $(0.072) per
share, representing an immediate increase in pro forma net tangible book value
of $0.036 per share for existing shareholders.
Net tangible book value at June 30, 2001 $(.108) per share
----------------
Net tangible book value after giving effect to issuance of 2,727,273
shares at $0.2475 per share and 1,394,050 shares
at $0.39 per Share $(.036) per share
----------------
Per share dilution to Selling Shareholders $(.072) per share
----------------
Percent dilution to Selling Shareholders 66.67%
-------
Selling Shareholders
The following table sets forth information with respect to the
Selling Shareholders as of July 31, 2001. John C. Lawrence is our Chairman of
the Board of Directors and Robert A. Rice is one of our directors. The other
Selling Shareholders are not currently our affiliates, and have not had a
material relationship with us during the past three years, other than as a
holder of our securities and the negotiation of the financing agreement. The
Selling Shareholders are not and have not been affiliated with a registered
broker-dealer. However, Thomson Kernaghan and Co. Limited is licensed by the
Province of Ontario, Canada as an investment dealer and broker. CALP II LP and
Striker Capital, Ltd. are affiliates of Thomson Kernaghan and Co. Limited. Ian
McKinnon is the father of Michelle McKinnon, both of whom were employees of
Thomson Kernaghan and Co. Limited.
The table assumes:
o all debentures are converted at $0.29125 per share and all warrants
are exercised at $0.39 per share.
o all of the shares that may be offered by the Selling Shareholders
actually are sold;
o the Selling Shareholders do not acquire beneficial ownership of any
other shares or dispose of any shares other than in this offering; and
o we do not issue or cancel any other shares.
----------------------------------- ------------------- ----------------- ------------- ----------------------- ----------------
NUMBER OF SHARES NUMBER OF
BENEFICIALLY Percent of SHARES THAT NUMBER OF SHARES PERCENT OF
OWNED BEFORE THE Class Before MAY BE BENEFICIALLY OWNED CLASS after
Name of Beneficial Owner(1) OFFERING offering(1) OFFERED after the offering offering(1)
----------------------------------- ------------------- ----------------- ------------- ----------------------- ----------------
----------------------------------- ------------------- ----------------- ------------- ----------------------- ----------------
Abuck Investments Ltd. (2)(7) 1,308,206 6.79 1,308,206 0 0
Archer Foundation 32,684 .17 6,536 26,148 0.10
Caliber Resources Ltd. (3) (7) 1,360,458 6.94 1,360,458 0 0
Claude H.C. Archer 163,423 .51 32,684 130,739 0.51
CALP II LP and Striker Capital 141,025 0.73 141,025 0 0
Ltd. (4) (8)
Delta Funds(11) 81,712 .43 16,342 65,370 0.26
H.R. Gurtsmith 49,026 .26 9,805 39,221 0.15
Barbara Howley 284,153 1.49 56,830 227,323 0.89
George W. Moffitt Jr. 49,027 .26 9,805 39,222 0.15
Ian McKinnon (5) 384,543 1.97 384,543 0 0
Ian McKinnon Family Trust 44,302 0.23 44,302 0 0
Michelle McKinnon (6) 192,272 0.99 192,272 0 0
Nancy Ann Moffitt 98,053 0.51 19,610 78,443 0.13
Nancy J. Moffitt 65,369 0.34 13,073 52,296 0.21
Sanders County Ledger 28,510 0.15 5,702 22,808 0.09
John C. Lawrence 3,537,827 17.4 266,354 3,271,473 12.30
JCL/Ham Pass Thru 138,398 0.72 27,679 110,719 0.44
Robert A. Rice 217,762 1.14 12,715 205,047 0.81
Sulico 32,684 0.17 6,536 26,148 0.10
Rebecca McKinnon(10) 88,604 0.46 88,604 0 0
Thomson Kernaghan and Co. Limited 150,000 0.78 150,000 0 0
(4) (7) (8)
Ursa Capital/Holdings Ltd. (7)(9) 432,581 2.26 432,581 0 0
------- ---- ------- - -
Total
----------------------------------- ------------------- ----------------- ------------- ----------------------- ----------------
1. Shares of common stock subject to options or warrants currently
exercisable or convertible, or exercisable or convertible within 60
days of June 30, 2001 are deemed outstanding for computing the
percentage of the person holding such option or warrant but are not
deemed outstanding for computing the percentage of any other person.
Percentages are based on a total of 19,134,564 shares of common stock
outstanding before the offering and 25,402,629 shares outstanding after
the offering.
2. Rebecca McKinnon has authority to vote and dispose of the shares
beneficially owned by Abuck Investments, Ltd. Mrs. McKinnon is the wife
of Ian McKinnon and mother of Michelle McKinnon, each of whom disclaim
any beneficial interest. Under the financing agreement, Abuck
Investments Ltd. agreed not to have the right to convert any debenture
or exercise any warrant if, after having given effect to the conversion
or exercise, it would be deemed to beneficially own more than 9.9% of
the then outstanding common stock. Includes 1,057,511 shares of common
stock issuable upon conversion of debentures, 141,026 shares of common
stock issuable upon exercise of warrants, and 109,669 shares of common
stock issued as liquidated damages for failure to have registration
statement declared effective.
3. Philip W. Johnston has authority to vote and dispose of the shares
beneficially owned by Caliber Resources Ltd. Under the financing
agreement, Caliber Resources Ltd. agreed not to have the right to
convert any debenture or exercise any warrant if, after giving effect
to the conversion or exercise, it would be deemed to beneficially own
more than 9.9% of the then outstanding common stock. Includes 233,000
shares of common stock issuable upon exercise of debentures, 92,949
shares of common stock issuable upon exercise of warrants, and 82,966
shares of common stock issued as liquidated damages for failure to have
registration statement declared effective.
4. CALP II LP, Striker Capital Ltd. and Thomson Kernaghan and Co. Limited
are under the common control of Mark Valentine, the Chief Executive
Officer of Thomson Kernaghan and Co. Limited, who has authority to vote
and dispose of the shares beneficially owned by any of them.
Accordingly, Thomson Kernaghan, CALP II and Striker Capital Ltd. may be
considered a group which beneficially owns all of the shares
beneficially owned by any of them. Under the financing agreement, CALP
II and Striker Capital Ltd. agreed not to have the right to convert any
debenture or exercise any warrant if, after having given effect the
conversion or exercise, both of them considered as a group would be
deemed to beneficially own more than 9.9% of the then outstanding
common stock. Includes 141,025 shares of common stock issuable upon
exercise of warrants.
5. Includes 384,543 shares of common stock issuable upon exercise of
warrants. Selling Shareholder is a former officer and
director of Thomson Kernaghan and disclaims being an affiliate.
6. Includes 192,272 shares of common stock issuable upon conversion
of warrants. Selling Shareholder was a non-management
employee and disclaims being an affiliate of Thomson Kernaghan.
7. By Agreement effective July 11, 2000 ("financing agreement"),
Thomson Kernaghan and 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 are convertible into common stock at the
lower of $0.29125 per share or 75% of the average of the
lowest closing bid prices during the 20 trading days preceding the
conversion date. Thomson Kernaghan and Co., Limited is the
beneficial owner of 150,000 shares of Company's common stock and
disclaims beneficial ownership of the debentures, warrants
and shares issuable upon conversion or exercise. Further,
Thomson Kernaghan has advised the Company that, except as
indicated in note (5), it is not a member of a group, as defined
inss. 13(d) of the Securities and Exchange Act of 1934,
which owns 5% or more of Company's common stock.
8. Thomson Kernaghan and Co. Limited is the record holder, as agent
for non-US persons under the Escrow Agreement, of a
certificate for 1,000,000 contingently issued shares issued in
escrow to facilitate issuance of common stock to the
debenture holders and warrant holders upon exercise of their
conversion or purchase rights. Thomson Kernaghan and Co. Limited
disclaims beneficial ownership of these shares.
9. Michelle McKinnon has authority to vote and dispose of the shares
beneficially owned by Ursa Capital/Holdings Ltd. Ms. McKinnon was a
non-management employee and disclaims being an affiliate of Thomson
Kernaghan. Under the financing agreement, Ursa Capital/Holdings Ltd.
agreed not to have the right to convert any debenture or exercise any
warrant if, after giving effect to the conversion or exercise, it would
be deemed to beneficially own more than 9.9% of the then outstanding
common stock. Includes 357,082 shares of common stock issuable upon
conversion of debentures, 38,462 shares of common stock issuable upon
exercise of warrants, and 37,037 shares of common stock issued as
liquidated damages for failure to have registration statement declared
effective.
10. Includes 20,000 shares of common stock issuable upon conversion of
debentures, 12,820 shares of common stock issuable upon exercise of
warrants, and 7,114 shares of common stock issued as liquidated damages
for failure to have registration statement declared effective.
11. George Moffitt has authority to vote and dispose of the shares
beneficially owned by Delta Funds.
Securities Purchase Agreement
The following is a summary description of the debenture purchase
agreement and does not contain all of the provisions of the agreement and other
supporting documents that are filed as exhibits to our registration statement of
which this prospectus is a part.
Effective July 11, 2000, we entered into a financing agreement to issue
up to $1,500,000 of 10% convertible debentures. The first tranche of $600,000
principal amount of debentures was issued effective July 11, 2000. Proceeds of
that debenture were applied to the settlement of an approximately $1.5 million
debt owed to a creditor, resulting in an approximately $839,000 reduction of our
stockholders' deficit and an improvement in our cash flow. We agreed to issue a
second tranche of $75,000 principal amount of debentures on August 31, 2000.
Proceeds of this debenture were used to purchase raw materials.
The debentures are convertible into our common stock at a price per
share equal to 75% of the average of the three lowest closing bid prices per
share of our common stock as reported by Bloomburg L.P. in the 20 trading days
immediately preceding the closing date of the debenture sale or the conversion
date, whichever is lower, but in any event not greater than $0.90 per share. For
the first two debentures totaling $675,000, the conversion price is the lower of
$0.29125 per share or 75% of the average of the three lowest closing bid prices
per share of our common stock as reported by Bloomburg L.P. in the 20 trading
days immediately preceding the conversion date. The exercise price of the
related warrants is the closing bid price as reported by Bloomburg L.P. on the
trading day immediately preceding the July 11, 2000 effective date of the
financing agreement, or $0.39 per share.
The $675,000 debentures issued to date are convertible into 2,317,597
shares of our common stock at the initial conversion price of $0.29125 per
share. If our stock price declines below $0.29125 per share and the debentures
are converted, the conversion price formula will result in a lower conversion
price and we will be required to issue a greater number of shares. There is no
floor on the conversion price; and the lower our stock price, the greater the
dilution of the outstanding shares upon conversion of the debentures. In
addition, we issued warrants to or on behalf of the debenture purchasers for an
aggregate of 1,394,050 shares of our common stock exercisable for $0.39 per
share. The closing bid price of our common stock reported on the
Over-the-Counter Bulletin Board on November 5, 2001 was $.20 per share.
Registration Rights. In the registration rights agreement with the
debenture purchasers, we agreed to register the Selling Shareholders' resale of
the shares of common stock to be issued upon conversion of the debentures and
upon exercise of the related warrants. For the $675,000 debentures issued to
date, the registration rights agreement requires that we register 150% of the
conversion shares and 100% of the warrant shares, or a total of 4,870,626 shares
of our common stock. With the concurrence of the holders of the $675,000 of
debentures we are registering the resale of a total of 4,000,000 shares of
common stock issuable upon conversion of the debentures. If we issue the
remaining $825,000 principal amount of debentures, we will be required by the
registration rights agreement to register an additional 4,777,773 shares of
common stock (representing 150% of the shares issuable upon conversion of the
additional debentures assuming a conversion price of $0.29125 per share plus
100% of the shares issuable upon exercise of related warrants). In addition, we
are liable for late filing liquidated damages which during April 2001 was agreed
to be $70,000 payable by issuing 240,343 shares of common stock, and have agreed
to register 150,000 shares issued to Thomson Kernaghan and Co. Limited for
payment of consulting fees.
If all outstanding debentures were converted to common stock at the
initial conversion price of $0.29125 per share and all of the outstanding
related warrants were exercised as of June 30, 2001, the debenture and warrant
holders would own, and would be able to sell pursuant to this prospectus,
3,711,647 shares of common stock representing 16.2% of the then outstanding
shares of our common stock.
We are also obligated to register the resale of 483,672 shares of our
common stock held by former holders of Series C Preferred Stock who converted
that preferred stock into common stock.
PLAN OF DISTRIBUTION
The Selling Shareholders and any of their pledges, assignees and
successors-in-interest, may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Shareholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the broker-
dealer solicits the purchaser;
o block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-
dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately-negotiated transactions;
o broker-dealers may agree with the Selling Shareholders to sell a
specified number of shares at a stipulated price per share;
o a combination of any of the methods of sale; and o any other method
permitted pursuant to applicable law.
The Selling Shareholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The Selling Shareholders may also engage in short sales against the
box, puts and calls and other transactions in our securities or derivatives of
our securities and may sell or deliver shares in connection with these trades.
The Selling Shareholders may pledge their shares of common stock to their
brokers under the margin provisions of customer agreements. If a Selling
Shareholder defaults on a margin loan, the broker may, from time to time, off
and sell the pledged shares.
Broker-dealers engaged by the Selling Shareholders may arrange for
other broker-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Shareholders (or, if any broker-dealer
acts as agent for the purchase of shares, from the purchaser) in amounts to be
negotiated. The Selling Shareholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
We are required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
Selling Shareholders, but excluding brokerage commissions or underwriter
discounts. We and the Selling Shareholders have agreed to indemnify each other
against named losses, claims, damages and liabilities, including liabilities
under the Securities Act.
Thomson Kernaghan is, and any other Selling Shareholders participating
in the distributions of our common stock may be, deemed to be an "underwriter"
within the meaning of Section 2(11) of the Securities Act of 1933; and any
profit on the sale of our common stock by Thomson Kernaghan or other Selling
Shareholder, and any commissions or discounts given to any broker dealer, may be
deemed to be underwriting commissions or discounts pursuant to the Securities
Act of 1933. In offering common stock for resale in the United States or to
persons who are citizens or residents of the United States, Thomson Kernaghan
will offer and sell common stock only to registered broker-dealers.
Pursuant to the Securities Exchange Act of 1934, any person engaged in
a distribution of the common stock offered by this prospectus may not
simultaneously engage in market making activities for our common stock during
the applicable "cooling off" periods prior to the commencement of the
distribution. In addition, the Selling Shareholders will be required to comply
with all the requirements of the Securities Exchange Act of 1934.
We have advised Thomson Kernaghan for itself and as agent for the
Selling Shareholders that, during the time as they may be engaged in a
distribution of any of the shares we are registering by the Registration
Statement, they are required to comply with Regulation M promulgated under the
Securities Exchange Act of 1934. In general, Regulation M precludes any Selling
Shareholder, any affiliated purchasers and any broker-dealer or other person who
participates in the distribution from bidding for or purchasing, or attempting
to induce any person to bid for or purchase, any security which is the subject
of the distribution until the entire distribution is complete. Regulation M
defines a "distribution" as an offering of securities that is distinguished from
ordinary trading activities by the magnitude of the offering and the presence of
special selling efforts and selling methods. Regulation M also defines a
"distribution participant" as an underwriter, prospective underwriter, broker,
dealer, or other person who has agreed to participate or who is participating in
a distribution.
Regulation M prohibits any bids or purchases made in order to stabilize
the price of a security in connection with the distribution of that security,
except as specifically permitted by Rule 104 of Regulation M. These stabilizing
transactions may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. We have advised the Selling
Shareholders that stabilizing transactions permitted by Regulation M allow bids
to purchase our common stock so long as the stabilizing bids do not exceed a
specified maximum, and that Regulation M specifically prohibits stabilizing that
is the result of fraudulent, manipulative, or deceptive practices. The Selling
Shareholders and distribution participants will be required to consult with
their own legal counsel to ensure compliance with Regulation M.
DESCRIPTION OF SECURITIES
Common Stock
We are authorized to issue 30,000,000 shares of common stock, $0.01 par
value, each share of common stock having equal rights and preferences, including
voting privileges. There were 19,134,564 shares of common stock outstanding at
the close of business on June 30, 2001. In addition, 1,394,050 shares of common
stock were reserved for issuance upon exercise of outstanding warrants to
purchase our common stock; and 4,240,343 shares were reserved for issuance upon
conversion of debentures and payment of liquidated damages to the debenture
holders.
The shares of our common stock constitute equity interests in us
entitling each shareholder to a pro rata share of cash distributions made to
common shareholders, including dividend payments. We had significant losses in
our last fiscal year. Therefore, it is unlikely that we will pay dividends on
our common stock in the next year. We currently intend to retain our future
earnings, if any, for use in our business. Any dividends declared in the future
will be at the discretion of our Board of Directors and subject to any
restrictions that may be imposed by our lenders.
The holders of our common stock are entitled to one vote for each share
of record. Shareholders are entitled to vote cumulatively with respect to the
election of our directors. Directors are elected by a plurality of the votes
cast by the voting stock entitled to vote at a meeting if a quorum is present.
With respect to matters other than the election of directors, a matter is
approved by the affirmative vote of the majority of the votes cast at a meeting
at which a quorum is present. In the event of our liquidation, dissolution or
winding up, the holders of common stock are entitled to share ratably in all
assets remaining available for distribution to them after payment of our
liabilities and after provision has been made for each class of stock having
preference in relation to our common stock. Holders of our common stock have no
conversion, preemptive or other subscription rights; and there are no redemption
provisions applicable to our common stock. All of the outstanding shares of our
common stock are duly authorized, validly issued, fully paid and non-assessable.
Preferred Stock
Our Articles of Incorporation authorize 10,000,000 shares of $.01 par
value preferred stock. Subject to amounts of outstanding preferred stock,
additional shares of preferred stock can be issued with rights and preferences,
including voting rights, as the Board of Directors shall determine.
During 1986, Series A preferred stock, consisting of 4,500 shares, was
established by the Board of Directors. These shares are nonconvertible,
non-redeemable 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 June 30, 2001, 4,500 shares of Series A preferred stock were outstanding; and
cumulative dividends in arrears amounted to $67,500, or $15.00 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 June 30, 2001, cumulative dividends in arrears on the 750,000
outstanding Series B shares were $56,250, or $0.075 per share.
During 1997, we issued 2,560,762 shares of Series C preferred stock in
connection with the conversion of debts we owed. 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 of our shares.
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 our common stock.
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.
Liquidation Preference. In the event of our liquidation or winding up,
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 our
outstanding Series A and Series B preferred stock.
Registration Rights. Twenty percent (20%) of the underlying common
stock issued on conversion of the Series C preferred shares is entitled
to "piggyback" registration rights when, and if, we file a registration
statement for our securities or the securities of any other
stockholder. These shares are included in this prospectus.
Redemption. The Series C preferred shares are not redeemable by us.
----------
Anti-dilution Provisions. The conversion price of the Series C shares
was subject to adjustment to prevent dilution in the event we 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, during the year 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 adjusted to $0.54 per share based on the anti-dilution formula.
Protective Provisions. The consent of a majority interest of the
holders of Series C preferred shares is 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 the year 2000, we 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 us of its desire to convert its Series C
shares during 1999. At June 30, 2001, 177,904 shares of Series C preferred stock
remained outstanding and unconverted.
Debentures
We have issued $675,000 of 10% convertible debentures due June 30, 2002
and related warrants to purchase our common stock. The debentures are due June
30, 2002 and accrue interest at 10% to be paid annually on each anniversary date
of the issue. The debentures are convertible into shares of our common stock at
a conversion price equal to the lower of (i) $0.29125 per share or (ii) 75% of
the average three lowest closing bid prices for our common stock as quoted by
Bloomburg L.P. in the 20 trading days immediately preceding the conversion date
of the debentures. The related warrants are exercisable for five years for $0.39
per share.
We have also issued 10% convertible debentures to John C. Lawrence, our
director and president, in the principal amount of $147,992 (due December 31,
2003) and $100,000 (due December 12, 2003) and to A.W. Dugan, a shareholder of
the company, in the principal amounts of $50,000 (due November 22, 2003) and
$50,000 (due December 2003). These debentures accrue interest at 10% to be paid
annually on each anniversary date of the issue. The debentures are convertible
into shares of our common stock at a conversion price equal to the lower of (i)
$0.31 per share or (ii) 75% of the average of the three lowest closing bid
prices for our common stock as quoted by Bloomburg LP in the 20 trading days
immediately preceding the conversion date. The exercise price for the related
warrants (aggregating 151,213 shares for Mr. Lawrence and 60,974 shares for Mr.
Dugan) is $0.41 per share. The holders of these debentures do not have
registration rights in connection with the common stock issuable upon conversion
of the debentures or exercise of the related warrants.
Penny Stock Rules
At the present time our common stock is traded in the over-the-counter
market and that trading activity is reported on the OTC Electronic Bulletin
Board.
The United States Securities and Exchange Commission "Securities
Enforcement and Penny Stock Reform Act of 1990" requires special disclosure
relating to the trading of any stock defined as a "penny stock." Commission
regulations generally define a penny stock to be an equity security that has a
market price of less than $5.00 per share and is not listed on The Nasdaq Small
Cap Stock Market or a major stock exchange. These regulations subject all
broker-dealer transactions involving our securities to special "Penny Stock
Rules." Following the completion of this offering the commencement of trading of
our common stock, and the foreseeable future thereafter, the market price of our
common stock is expected to be substantially less than $5 per share.
Accordingly, should anyone wish to sell any of our shares through a
broker-dealer, the sale will be subject to the Penny Stock Rules. These Rules
will affect the ability of broker-dealers to sell our shares (and will therefore
also affect the ability of purchasers in this offering to re-sell their shares
in the secondary market, if a market should ever develop.)
The Penny Stock Rules impose special sales practice requirements on
broker-dealers who sell shares defined as a "penny stock" to persons other than
their established customers or "Accredited Investors." Among other things, the
Penny Stock Rules require that a broker-dealer make a special suitability
determination respecting the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. In addition, the Penny Stock
Rules require that a broker-dealer deliver, prior to any transaction, a
disclosure schedule prepared in accordance with the requirements of the
Commission relating to the penny stock market. Disclosure also has to be made
about commissions payable to both the broker-dealer and the registered
representative and the current quotations for the securities. Finally, monthly
statements have to be sent to any holder of penny stocks disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the rule may affect the ability of
broker-dealers to sell our shares and may affect the ability of holders to sell
our shares in the secondary market. Accordingly, for so long as the Penny Stock
Rules are applicable to our common stock, it may be difficult to trade our stock
because compliance with the Penny Stock Rules can delay or preclude some trading
transactions. This could have an adverse effect on the liquidity and price of
our common stock.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table sets forth the range of high and low bid prices as
reported by the National Association of Securities Dealer's Over-the-Counter
Bulletin Board ("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. Currently, the stock is traded on the
OTCBB under the symbol "UAMY."
2001 High Low
---- ---
First Quarter $0.41 $0.17
Second Quarter 0.53 0.24
Third Quarter 0.32 0.17
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
1999 High Low
---- ---
First Quarter $0.16 $0.20
Second Quarter 0.17 0.17
Third Quarter 0.31 0.38
Fourth Quarter 0.16 0.16
1998 High Low
---- ---
First Quarter $0.20 $0.16
Second Quarter 0.28 0.16
Third Quarter 0.37 0.16
Fourth Quarter 0.28 0.13
The approximate number of record holders of our common stock at June
30, 2001 is 3,750.
No dividends have been paid or declared by us during the last five
years; and we 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.
DESCRIPTION OF BUSINESS
Overview
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 us 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 of antimony products and
the mining and milling of gold.
We have been able to sustain our operations through gross profit
produced from our antimony operations, common stock sales, and financing from
banks and other sources. There can be no assurance, however, that we will be
able to continue to meet our obligations and continue in existence as a going
concern (see Note 1 to the Financial Statements).
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 a broker. Significant increases in world antimony
metal prices have necessitated renegotiation of our supply contract with the
broker in order to assure continued availability of metal, resulting in higher
raw material costs. However, the increase in world prices has enabled us to
increase the prices of our antimony products and to increase our gross profits.
In addition, we are covering our customer supply contract requirements by
obtaining antimony metal from other foreign and domestic sources.
We are dependent on foreign sources for raw materials; and 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. We
obtain antimony metal, the raw material for our antimony products, primarily
(70%) from China. 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. During mid 2000, our principal
supplier of Chinese antimony metal was unwilling to supply antimony metal at
contract prices which are lower than rapidly rising world prices; and the
supplier indicated it might be unable to meet contractual volume commitments to
supply antimony at any price. We have agreed to pay higher prices to assure a
continued supply of metal which, absent agreement of our principal customers to
accept corresponding price increases for our antimony products, could adversely
affect sales and gross margins.
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 is being used for the construction of an antimony
processing plant in Mexico. To date, two antimony processing furnaces and a
warehouse building have been built and limited antimony processing has taken
place. USAMSA is pursuing the assignment of mining concessions in the Mexican
states of Zacatecas, Coahuila, Sonora, Queretaro and Oaxaca. USAMSA is expected
in future years to produce antimony metal and other products, utilizing our
processing facilities as processing opportunities become available and as
antimony prices dictate. These products would then be sent to our plant near
Thompson Falls, Montana for further processing.
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 stabilizer for fluid lubricants. 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 10% to
12%. We have had three principal domestic competitors. The other two domestic
competitors have collectively accounted for about 25% of domestic sales. The
balance of domestic sales are foreign imports (primarily from Chinese and
Belgian suppliers).
We employed two full time sales managers in 1999 and implemented
administrative systems needed to manage sales accounting and shipping logistics.
In connection with these efforts, we negotiated various commission-based sales
agreements with other chemical distribution companies, developed our own
web-site ("usantimony.com") and made substantial improvements to our analytical
and chemical research capabilities. Since March 1998, we have employed a Chief
Chemist who has devoted approximately 30% of his working time to research and
development activities. Accordingly, approximately $15,000 in salary and
benefits have been related to research and development activities during the
past two fiscal years. Additionally, during the past two fiscal years, we have
invested approximately $20,000 per year in lab equipment and facilities used in
research and development of new antimony products and applications. (None of our
research and development costs have been borne by customers of us.) These
efforts 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 and generate increasing profits
because of these advances.
For the year ended December 31, 2000, we sold 5,039,327 pounds of
antimony products generating approximately $5 million in revenues. During 1999,
we sold 5,517,443 pounds of antimony products generating approximately $4.7
million in revenues. During 1998, through our relationships with HoltraChem,
Inc. and BCS, we sold 2,834,186 pounds of antimony products, which generated
approximately $3.1 million in revenues. During 1998, 1999 and 2000,
approximately 20% of our antimony sales were made to one customer. However, we
have a stable and expanding customer base. Loss of any one customer could have
short-term impact on our revenues but would not materially adversely affect our
long-term prospects.
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 metals
were recovered by gravity and flotation mill, and the concentrates were leached
with cyanide to produce a bullion product at the Preachers Cove mill, which is
located on the Yankee Fork of the Salmon River. The Preachers Cove mill has been
dismantled and the site is 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. In 1990, we entered into a mining
venture agreement to mine and mill gold and silver ores at the Yellow Jacket
Mine located in the Yellow Jacket Mining District of Lemhi County, Idaho,
approximately 70 miles southwest of Salmon, Idaho. During the years from 1991 to
1996 we mined, milled and sold gold bullion produced from the mine. In 1996,
production at the Yellow Jacket was suspended due to recurring operating losses
and declines in precious metal prices. 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.
We have no "proven reserves" or "probable reserves" of gold, as these
terms are defined by the Securities and Exchange Commission.
Zeolite Division
We own 75% of Bear River Zeolite Company ("BRZ"), an Idaho corporation
incorporated on June 1, 2000. BRZ has entered into a ten-year mining lease with
Webster Farm, L.L.C. The lease entitles BRZ to surface mine and process zeolites
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 zeolites mined on adjacent BLM ground on which BRZ
has located additional 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. Production and sale of zeolites is not expected
to contribute materially to our operating revenues in the near future.
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. The ability of zeolites to
exchange one cation for another is known as their "cation-exchange capacity."
Zeolites are used for separating cations and are often referred to as "molecular
sieves." BRZ's zeolite deposits have characteristics which make the mineral
useful for a variety of purposes including: o Soil Amendment and Fertilizer. We
plan to produce a fertilizer called "Zeo-Phos," which will combine ammoniumated
zeolite
with phosphate mill shale available from the nearby Fort Hall Indian
Reservation. (Ammonium contains nitrogen, a plant nutrient.) Zeolites
have 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.
o 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.
o Sewage Treatment. Zeolite is used in sewage treatment plants to
remove nitrogen from waste streams and to deodorize methane gas.
o Nuclear Waste and Other Environmental Cleanup. Zeolites have shown a
strong ability to selectively remove strontium, cesium and various
other radioactive isotopes from solution. Zeolites 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.
o 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 zeolites to absorb ammonium prevents the formation of
ammonia gas which generates the odor.
o Gas Separation. Zeolites have been used for some time in the separation
of some gases, as re-oxygenation of downstream water from sewage
plants, smelters, pulp and paper plants, and fish ponds and tanks, and
removal of carbon dioxide, sulfur dioxide, and hydrogen sulfide from
methane generators as organic waste, sanitary landfills, municipal
sewage systems and animal waste treatment facilities.
o Miscellaneous Uses. Other uses include catalysts and petroleum
refining, building applications, solar energy and heat exchange,
carriers for insecticides, pesticides and herbicides, and desiccants.
Environmental Matters
The 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 USDA 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 account for our accrual of environmental liabilities when the costs
of such are probable and 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.
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 reduced the Yankee Fork reclamation accrual by $70,000, to reflect
our current estimate of costs required to complete reclamation tasks.
As of June 30, 2001, 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.
Reclamation activities are currently at a standstill due to weather
conditions at the site and the completion of a biological assessment to be
submitted to the National Marine Fisheries Service and the U.S. Fish and
Wildlife Service. Upon receiving clearance from the U.S. Forest Service to
commence the Phase II reclamation work, we anticipate substantial completion of
reclamation in a six to twelve month period.
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. We
plan to line a storm water pond and construct a water treatment facility, thus
fulfilling the majority of our environmental responsibilities at the Stibnite
Hill Mine site.
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
our estimate 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. Reclamation work is
commencing on the clean-up of non-cyanide tailings material at the property; and
we believe this project will be substantially completed by the end of 2001. In
2000, the U.S. Forest Service began releasing environmental bonding funds to us
that had been deposited for remediation of the Yellow Jacket Mine.
During 2001, we recorded a reclamation accrual for our Bear River
Zeolite subsidiary based on an analysis performed by management, and as reviewed
and approved by regulatory authorities for environmental bonding purposes. The
accrual of $7,500, represents the Company's estimated costs of reclaiming the
acreage disturbed by our zeolite operations in accordance with regulatory
requirements.
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 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. Upon completion of
reclamation activities, the bonds will be terminated and the applicable
regulatory authorities may release up to $123,250.
We believe we have accrued adequate reserves to fulfill our
environmental remediation responsibilities as of June 30, 2001. We have made
significant reclamation and remediation progress on all our properties over the
past three years and have complied with regulatory agencies in our environmental
remediation efforts. The change in amounts accrued for environmental remediation
activities in 1998, 1999 and as of June 30, 2001 is as follows:
============================== ================ ================ =============== =============== ===================
Bear River
Yankee Fork Thompson Falls Yellow Jacket Zeolite
Mill Site Antimony Plant Mine Totals
------------------------------ ---------------- ---------------- --------------- --------------- -------------------
Balance December 31, 1997 $171,500 $ 270,000 $115,044 $ 556,544
------------------------------ ---------------- ---------------- --------------- --------------- -------------------
Less: Reclamation work (55,472) (55,472)
------------------------------ ---------------- ---------------- --------------- --------------- -------------------
Adjustment of Accrued 2,200
Remediation Costs 2,200
------------------------------ ---------------- ---------------- --------------- --------------- -------------------
Balance December 31, 1998 $116,028 $ 272,200 $115,044 $503,272
------------------------------ ---------------- ---------------- --------------- --------------- -------------------
(73,893)
Less: Reclamation work (169,736) (243,629)
------------------------------ ---------------- ---------------- --------------- --------------- -------------------
Adjustment 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)
------------------------------ ---------------- ---------------- --------------- --------------- -------------------
Adjustment of Accrued 0 25,615 86,960 112,575
Remediation Costs
------------------------------ ---------------- ---------------- --------------- --------------- -------------------
Balance December 31, 2000 $ 46,028 $ 118,316 $115,044 $ 279,388
------------------------------ ---------------- ---------------- --------------- --------------- -------------------
------------------------------ ---------------- ---------------- --------------- --------------- -------------------
Less: Reclamation work (1,766) (10,666) (12,432)
------------------------------ ---------------- ---------------- --------------- --------------- -------------------
------------------------------ ---------------- ---------------- --------------- --------------- -------------------
Adjustment of Accrued
Remediation Costs $7,500 7,500
------------------------------ ---------------- ---------------- --------------- --------------- -------------------
------------------------------ ---------------- ---------------- --------------- --------------- -------------------
Balance June 30, 2001
$46,028 $116,550 $104,318 $7,500 $274,456
============================== ================ ================ =============== =============== ===================
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
our 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 were going to 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. The operating results of us have been and
will continue to be directly related to the market prices of antimony metal,
which have fluctuated widely in recent years. 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
---- -------------
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
---- ---- --- -------------
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 antimony metal as a raw material for our products. We obtain
antimony metal from sources in China (70%), Canada (15%) and the U.S. (15%).
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.
Until recently, antimony prices have been at a 35 year low. Beginning
in late June 2000, prices have risen dramatically, primarily as a result of
restrictions by the Chinese government on exports of antimony metal from China,
one of the principal suppliers of antimony. The fixed price set by the supply
contract with the dealer in Chinese-sourced metal was below current market
price. The dealer has refused to supply metal at the contracted price, forcing
us to purchase antimony metal from this dealer and other sources at current
world market prices. However, we have been able to raise our antimony product
prices to our customers and to increase our gross profits. Our USAMSA venture is
intended eventually to reduce our dependence on foreign sources but is not
expected to provide sufficient raw material for several years.
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 the marketing
of our antimony products.
We are subject to the requirements of the Federal Mining Safety and
Health Act of 1977, 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.
Employees. As of June 30, 2001, we employed 28 full-time
employees. The number of full-time employees may vary seasonally. None
of our employees is covered by any collective bargaining agreement.
[GRAPHIC OMITTED] [MAPS]
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This prospectus includes forward-looking statements that involve risks
and uncertainties.
"Forward looking statements" can be identified by the use of
forward-looking terminology such as "believes," "could," "possibly,"
"anticipates," "estimates," "projects," "expects," "may," "will," or "should."
The statements are subject to some risks, uncertainties and assumptions. No
assurances can be given that the future results anticipated by forward-looking
statements will be achieved. Our actual results may differ materially from these
forward-looking statements. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this prospectus.
Some of the 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 our judgment as of the date of this filing.
We disclaim, however, any intent or obligation to update these forward-looking
statements.
Results of Operations for the period ended December 31, 2000
The Company reported a net loss of $67,699 during 2000 compared to net
loss of $230,086 in 1999. The net loss in 2000 is primarily attributable to a
$985,425 loss from operating activities in 2000, offset by an extraordinary gain
recognized on the conversion of certain debts to common stock of $917,726. The
net loss in 1999 is primarily due to a net loss from operations of 307,677
offset by an extraordinary gain of $77,591 recognized on the conversion of
certain debts to common stock.
Total revenues from antimony product sales during 2000 were $5,016,661
compared to $4,710,278 in 1999. The increase in sales during 2000 was partially
due to the Company's sharing of 50% of antimony product sales with an affiliated
sales company during the first quarter of 1999 compared to selling all of its
antimony products independently during 2000. Sales of antimony products during
2000 were 5,039,327 pounds at an average sale price of $1.00 per pound; during
1999 5,517,443 pounds of antimony products were sold at an average sales price
of $0.85 per pound. Gross profit from antimony product sales was $472,890 in
2000, or 9% of sales, compared to $876,178 in 1999, or 18.6% of sales. The
decrease in gross profit during 2000 was due to rapidly escalating antimony
metal prices during the year that were quickly reflected in higher production
costs and, correspondingly, higher cost of sales. Antimony product sale prices
in the market reacted slower to the increase in metal prices however, as
competitors with greater quantities of finished goods inventory on hand were
able to continue selling products at prices that were in effect prior to the
increase in metal prices. During the last quarter of 2000 and the first quarter
of 2001, antimony product sales prices increased; and as a result, the Company
anticipates the return to a higher level of gross profit.
Combined care, maintenance and reclamation costs and exploration and
evaluation costs at the Yellow Jacket property totaled $241,244 during 2000
compared to $200,867 in 1999. The increase during 2000 was due to the Company's
increased reclamation activities during 2000 compared to 1999.
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 reduced the Yankee Fork reclamation
accrual by $70,000, to reflect our current estimate of costs required to
complete reclamation tasks.
During 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.
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 at our antimony processing site near Thompson
Falls, Montana. 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. We
plan to line a storm water pond and construct a water treatment facility during
2001, thus fulfilling the majority of our environmental responsibilities at the
Stibnite Hill Mine site.
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
our estimate 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.
General and administrative expenses increased from $400,432 in 1999, to
$631,869, an increase of $231,437 or approximately 58%. The increase in 2000
compared to 1999 was principally due to consulting expenses compensated with
shares of the Company's common stock totaling approximately $150,000 and legal
and accounting costs of approximately $64,000, associated with the filing of a
registration statement with the Securities and Exchange Commission.
Antimony sales expenses were $339,267 during 2000 and comparable to
sales expenses of $337,309 during 1999. Management expects sales expenses to
decrease in future periods based on restructuring efforts made to its sales
staff during 2000.
Interest expense of $157,145 in 2000 decreased compared to interest
expense of $185,985 in 1999 primarily due to the conversion of certain debts to
common stock in 2000. Interest and other income was $8,459 in 2000 and $12,190
in 1999. The decrease in interest and other income during 2000 was primarily due
to decreased interest earnings on reclamation bonds, when bonds were released to
the Company during 2000 as the Yellow Jacket property reclamation progressed.
In 2000, the Company settled and extinguished a debt owed the Estate of
Bobby C. Hamilton of approximately $1.5 million (see Financial Condition and
Liquidity) 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. In 1999, the Company
converted $682,397 of defaulted debenture principal and interest and $144,339 of
principal and interest related to certain mining lease royalties (Judgments
payable) into common stock of the Company. In connection with these conversions
the Company recorded an extraordinary gain of $77,591, and an addition to
paid-in-capital of 534,101.
Financial Condition and Liquidity at December 31, 2001
At December 31, 2000, Company assets totaled $893,920, and there was a
stockholders' deficit of $1,708,085. The stockholders' deficit decreased
$475,110 from the prior year, primarily due to the conversion of debts to common
stock. In order to continue as a going concern, the Company is dependent upon
(1) profitable operations from the antimony division, (2) additional equity
financing, and (3) continued availability of bank financing. Without financing
and profitable operations, the Company may not be able to meet its obligations,
fund operations and continue in existence. There can be no assurance that
management will be successful in its plans to improve the financial condition of
the Company.
Cash used by operations during 2000 was $791,089 compared to net cash
provided by operations during 1999 of $59,986, a change of approximately
$851,000. The change in cash used by operations in 2000 compared to cash
provided by operations in 1999 was primarily due to the operating loss (before
extraordinary item) of $985,425 in 2000 compared to the similar operating loss
of $307,677 during 1999.
Investing activities used $38,499 during 2000 compared to $76,417 used
in 1999. Cash used in investing activities during both years related exclusively
to purchases and construction of antimony plant and equipment.
Financing activities provided $829,588 during 2000 compared to $16,431
of cash in 1999. Cash from financing activities in 2000 related principally to
cash received from the sale of convertible debentures (and related warrants) and
common stock sales. Cash provided during 1999 related primarily to cash received
from bank financing.
Other significant financial commitments for future periods will
include:
* Servicing notes payable to bank.
* Servicing convertible debenture interest and principal
payments.
* Completion and maintenance of an evergreen
registration statement for common shares held by
certain shareholders.
* Keeping current on property, payroll, and income tax
liabilities and accounts payable.
* Fulfilling responsibilities with environmental, labor safety
and securities regulatory agencies.
In an effort to improve USAC's financial condition, USAC's management,
during the second quarter of 2000, negotiated the settlement of a debt of
approximately $1.5 million owed the Estate of Bobby C. Hamilton (the "Estate").
USAC 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 USAC's common stock.
The cash payment to the Estate was financed by the issuance of $600,000
of Debentures pursuant to a financing agreement with Thomson Kernaghan and Co.,
Ltd., a Canadian investment banker. The financing agreement with Thomson
Kernaghan provided, among other things, for the sale of up to $1,500,000 of
USAC's convertible debentures to the investment banker and its affiliates. The
debentures are convertible into common stock at a price per share equal to 75%
of the average of the three lowest closing bid prices per share of USAC's common
stock as reported by Bloomburg L.P. in the 20 trading days immediately preceding
the closing date of the debenture sale or the conversion date, whichever is
lower, but in any event not greater than $0.90 per share. The debentures are due
two years from their issue date and accrue interest at 10% to be paid annually
on each anniversary date of the issue. During 2000, USAC issued $675,000 of
convertible debentures pursuant to the financing agreement. The maximum
conversion price is $0.29125 per share. In connection with the debenture sale,
USAC issued warrants to purchase 1,394,230 shares of common stock at $0.39 per
share.
The financing agreement required that USAC execute a registration
rights agreement, binding USAC to prepare and file a registration statement with
the Securities and Exchange Commission registering the resale of shares of
common stock issuable upon conversion of the debentures and upon exercise of the
related warrants, and to increase the number of its authorized but outstanding
shares of common stock to accommodate the exercise of the warrants and
conversion of the debentures. During 2000, USAC expended substantial resources
in preparation of the registration statement; but as of the date of this report,
the registration statement has not yet become effective. The registration rights
agreement that USAC executed provides for certain liquidated damages to be
payable to the debenture holders for the delay of the effectiveness of the
registration statement. The liquidated damages are calculated as two percent
(2%) per month of the aggregate value of the principal amount of the debentures
outstanding combined with the aggregate exercise prices of the outstanding
purchasers' and agent's warrants issued in connection with the convertible
debentures, accrued on a daily basis subsequent to the registration deadline.
Accordingly, the filing of an effective registration statement for the
convertible debentures continues to be a significant priority of the Company.
During 2000, the Company issued $247,922 of 10% convertible debentures
(due December 2003) to John C. Lawrence, the Company's president and a director.
The debentures were issued in exchange for various cash advances the Company had
received for working capital purposes from Mr. Lawrence during the year. Also in
December 2000, USAC issued two $50,000 10% convertible debentures (one $50,000
debenture being due November 22, 2003 and the second debenture being due
December 12, 2003) to Al Dugan, a USAC shareholder and accredited investor, in
exchange for $100,000 cash paid by Mr. Dugan and used for working capital
purposes. The debentures issued to Mr. Lawrence and Mr. Dugan are convertible
into USAC's common stock at a conversion price which is the lower of $0.31 per
share or 75% of the average of the three lowest closing bid prices for USAC's
common stock as quoted by Bloomberg L.P. in the 20 trading days immediately
preceding the conversion date. In connection with the issuance of these
debentures USAC issued warrants to Mr. Lawrence and Mr. Dugan to purchase
151,213 and 60,974 shares of common stock, respectively, at $0.41 per share.
In 2000, the Company sold 782,511 shares of its common stock for
$255,000, with 100,000 shares sold pursuant to the exercise of stock purchase
warrants. Proceeds from stock sales were used to fund the Company's operations.
Results of Operations for the period ended June 30, 2001
During the second quarter of 2001 the Company's sales of antimony
products continued to be depressed due to a general slowdown of economic
conditions being experienced by a majority of the Company's customers. During
the first six months of 2001, approximately 31% of the Company's sales of
antimony products were to an individual customer and approximately 16% of sales
of antimony products were to a second individual customer, compared with
approximately 22% of the Company's sales of antimony products to an individual
customer during the six-month period ended June 30, 2000. During the second
quarter of 2001, the Company's 75% owned subsidiary, Bear River Zeolite Company
("BRZ") delivered its first sales of zeolite, consisting of approximately 36
tons of crushed zeolite material at an average sales price of $74 per ton, or
$2,655. To date, significant interest in BRZ's zeolite products has been
expressed by several potential users, and management believes the BRZ will be an
important contribution to the Company's business in the near future. During the
second quarter of 2001, the Company continued pursuing the preparation and
filing of a registration statement to register shares of common stock and
warrants relating to a financing arrangement entered into with Thomson Kernaghan
and Co., Ltd. during 2000.
During the second quarter of 2001, reclamation work at the Company's
Yellow Jacket mine site recommenced and substantial progress was made in
reclamation of the pit area. As a result of the reclamation work performed, the
Company expects to receive funds from the release of reclamation bonds held by
regulating agencies during the third quarter of 2001.
For the three-month period ended June 30, 2001 compared to the three-month
period ended June 30, 2000
The Company's operations resulted in a net loss of $238,083, or $0.01
per basic weighted average share outstanding, for the three-month period ended
June 30, 2001 compared with a net loss of $236,029 or $0.01 per basic weighted
average share outstanding for the three-month period ended June 30, 2000. The
increase in loss for the second quarter of 2001 compared to the similar quarter
of 2000 is primarily due to: 1) decreased antimony product sales and
corresponding decreases in gross profit (due to slowing economic conditions) 2)
legal and accounting expenses associated with the preparation of a registration
statement pursuant to a financing agreement with Thomson Kernaghan and Co., Ltd.
("TK") and, 3) development, production and start-up costs relating to the
Company's newly formed 75% owned subsidiary, Bear River Zeolite.
Total revenues from antimony product sales for the second quarter of
2001 were $1,076,909 compared with $1,190,413 for the comparable quarter of
2000, a decrease of $113,504. Sales of antimony products during the second
quarter of 2001 consisted of 1,184,110 pounds at an average sale price of $0.91
per pound. During the second quarter of 2000 sales of antimony products
consisted of 1,312,372 pounds at an average sale price of $0.91 per pound. Costs
of antimony production and costs of freight and delivery were $821,401 and
$118,921, or $0.69 and $0.10 per pound sold, respectively, for the three-month
period ended June 30, 2001 as compared to costs of antimony production and costs
of freight and delivery of $995,888 and $142,363, or $0.76 and $0.11 per pound
sold, respectively, for the three-month period ended June 30, 2000. The decrease
in cost of antimony production per pound during the first quarter of 2001 as
compared to the first quarter of 2000, resulted from a corresponding decrease in
antimony metal prices.
During the second quarter of 2001, the Company incurred expenses
totaling $119,425 associated with its newly formed 75% owned subsidiary, Bear
River Zeolite Company ("Bear River Zeolite" or "BRZ"). No such costs were
incurred during the second quarter of 2000, as the subsidiary did not yet exist.
In addition to the second quarter Bear River Zeolite production, start-up and
development expenses, the Company capitalized $40,613 in BRZ plant construction
costs during the second quarter of 2001.
Care, maintenance, and reclamation costs at the Company's Yellow Jacket
property decreased from $50,105 during the second quarter of 2000 to $2,500
during the second quarter of 2001. The decrease was primarily due to the
decrease of accrued reclamation cost adjustments during the second quarter of
2001, and the property nearing its final reclamation phase.
General and administrative expenses were $156,921 during the second
quarter of 2001, compared to $91,351 during the second quarter of 2000. The
increase in general and administrative costs during the second quarter of 2001
compared to the same quarter of 2000 was principally due to legal costs related
to the preparation of a registration statement of approximately $48,000 that
were accrued during the second quarter of 2001, and no such accrual during the
comparable period of 2000.
Sales expenses were $34,342 during the second quarter of 2001 compared
with $84,286 in the second quarter of 2000. The decrease was due to management's
restructuring of its sales staff with less costly and fewer employees.
Interest expense was $41,714 during the second quarter of 2001, and was
comparable to interest expense of $40,129 incurred during the second quarter of
2000. Included in interest expense during the second quarter of 2001 was $25,575
accrued on debentures payable and $3,161 of amortized debenture discounts.
Accounts receivable factoring expense was $23,911 during the second
quarter of 2001 and was comparable to $24,827 of factoring expense incurred
during the second quarter of 2000. Interest income decreased from $2,507 during
the second quarter of 2000 to $1,488 during the second quarter of 2001 due to a
corresponding decrease in reclamation bonds held during 2001.
For the six-month period ended June 30, 2001 compared to the six-month
period ended June 30, 2000
The Company's operations resulted in a net loss of $503,389, or $0.03
per basic weighted average share outstanding, for the six-month period ended
June 30, 2001 compared with a net loss of $466,889 or $0.03 per basic weighted
average share outstanding for the six-month period ended June 30, 2000.
Total revenues from antimony product sales for the six-month period
ended June 30, 2001 were $2,038,040 compared with $2,363,463 for the comparable
period of 2000, a decrease of $325,423. The major factor in the decrease in
sales of antimony products during the six-month period ended June 30, 2001,
compared to the same period of 2000, is substantially decreased sales volume
experienced in the first quarter of 2001. Sales of antimony products during the
six-month period ended June 30, 2001, consisted of 2,129,434 pounds at an
average sale price of $0.96 per pound. During the six-month period ended June
30, 2000, sales of antimony products consisted of 2,559,961 pounds at an average
sale price of $0.92 per pound. Costs of antimony production and costs of freight
and delivery were $1,623,769 and $222,535, or $0.76 and $0.10 per pound sold,
respectively, for the six-month period ended June 30, 2001, as compared to costs
of antimony production and costs of freight and delivery of $1,844,043 and
$243,977, or $0.72 and $0.09 per pound sold, respectively, for the six-month
period ended June 30, 2000. The increase in sales price and cost of antimony
production per pound during the six months ended June 30, 2001, is due to a
corresponding increase in antimony metal prices.
During the six-month period ended June 30, 2001, the Company incurred
expenses totaling $165,668 associated with Bear River Zeolite. No such costs
were incurred during the six-month period ended June 30, 2000, as the subsidiary
did not yet exist.
Care, maintenance, and reclamation costs at the Company's Yellow Jacket
property decreased from $77,906 during the six-month period ended June 30, 2000
to $2,860 during the six-month period ended June 30, 2001. The decrease was
primarily due to the decrease of accrued reclamation cost adjustments during the
six-month period ended June 30, 2001, and the property nearing its final
reclamation phase.
General and administrative expenses were $330,608 during the six-month
period ended June 30, 2001, compared to $344,195 during the six-month period
ended June 30, 2000. Included in general and administrative expenses during the
six-month period ended June 30, 2000, were $153,000 of expenses relating to
financial consulting services provided the Company during the first quarter of
2000. General and administrative expenses during the six-month period ended June
30, 2001, included legal costs relating primarily to the preparation of a
registration statement of approximately $94,000. Also included in general and
administrative costs during the six-month period ended June 30, 2001 was $70,000
related to the accrual of late filing penalties associated with the registration
statement.
Sales expenses were $72,838 during the six-month period ended June 30,
2001, compared with $194,351 during the six-month period ended June 30, 2000.
The decrease was due to management's restructuring of its sales staff, with less
costly and fewer employees.
Interest expense was $81,600 during the six-month period ended June 30,
2001, and was comparable to interest expense of $81,239 incurred during the
six-month period ended June 30, 2000. Included in interest expense during the
six-month period ended June 30, 2001 was $51,150 accrued on debentures payable
and $6,322 of amortized debenture discounts.
Accounts receivable factoring expense was $47,175 during the six-month
period ended June 30, 2001 and was comparable to $49,288 of factoring expense
incurred during the six-month period ended June 30, 2000. Interest income
decreased from $4,647 during the six-month period ended June 30, 2000 to $2,969
during the same period of 2001 due to a corresponding decrease in reclamation
bonds held during 2001.
Financial Condition and Liquidity at June 30, 2001
At June 30, 2001, Company assets totaled $882,429, and there was a
stockholders' deficit of $2,059,674. The stockholders' deficit increased
$351,589 from December 31, 2000, primarily due to the net loss incurred during
2001. At June 30, 2001, the Company's total current liabilities exceeded its
total current assets by $1,231,396. Due to the Company's operating losses,
negative working capital, and stockholders' deficit, the Company's independent
accountants included a paragraph in the 2000 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.
The Company has up to $825,000 available in additional borrowings from
the sale of convertible debentures under a financing agreement with a Canadian
investment banking firm, should it decide to utilize such. Management is also
optimistic about the prospect of future cash flows that may be generated from
its Bear River subsidiary.
Cash used by operating activities during the first six months of 2001
was $173,393, and resulted primarily from the six-month loss of $503,389 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 in investing activities during the first six months of 2001
was $92,689, of which $78,923 related to construction of capital assets to be
used at the Bear River Zeolite facility, and the majority of the remaining
expenditures related to improving the Company's propane fuel storage facilities.
The Company was able to fund its operating loss and its acquisition of
plant and equipment for the six-month period ended June 30, 2001, from net cash
provided from financing activities of $266,082. During the six-month period
ended June 30, 2001, $149,300 was generated from sales of 746,500 shares of
unregistered common stock and warrants. Net borrowings from a bank provided
$68,770 of cash during the first six months of 2001 and net advances from an
accounts receivable factoring company provided $34,691 during the first six
months of 2001. John C. Lawrence, the Company's president and a director, had
also advanced a net amount of $40,000 to the Company during the six-month period
ended June 30, 2001.
We anticipate funding our operations through additional sales of common
stock and debt financing in 2001. We believe that we will have additional
financial resources from increasing gross profits from our antimony business and
sales of zeolite from our newly formed Bear River Zeolite Company subsidiary.
A dispute with Thomson Kernaghan & Co. Limited concerning a possible
claim for late registration penalties under the financial agreement has been
settled by our June 19, 2001 agreement to issue ratably to our debenture
holders and to register for resale an additional 240,343 shares of common
stock.
DESCRIPTION OF PROPERTY
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 continues to produce antimony metal, oxide
and sodium antimonate from our antimony processing facility near Thompson Falls,
Montana.
Gold Division
Yankee Fork Mining District.
Estes Mountain. 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.
Preachers Cove Millsite. We had a 150-ton per day gravity and
flotation mill located approximately 50 miles west of Challis, Idaho
and 19 miles northeast of Stanley, Idaho on the Yankee Fork of the
Salmon River at Preachers Cove. The mill also had a cyanide leach plant
for the processing of concentrates into dore bullion. The plant has
been dismantled and the property is nearing final reclamation.
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. In 1996,
our personnel determined that the existing mineral resource was not economical
to mine without additional operating capital and an increase in current metals
prices. Accordingly, production operations at the Yellow Jacket property were
suspended and the mine placed on a care-and-maintenance status. Subsequent to
1996, we engaged in underground exploration activities at the property. 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 ten-year 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.
Production and sale of zeolite is not expected to contribute materially to our
operating revenues in the near future.
DIRECTORS AND EXECUTIVE OFFICERS
Affiliation
Name Age with us Expiration of Term
John C. Lawrence 62 Chairman, President, Secretary, Annual meeting
and Treasurer; Director
Robert A. Rice 76 Director Annual meeting
Leo Jackson 59 Director Annual meeting
Gary D. Babbitt 54 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 the principal owner 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.
Gary D. Babbitt. Mr. Babbitt is a partner in the Boise, Idaho law
firm of Hawley Troxell Ennis and Hawley LLP, and has served as our legal counsel
for several years. Mr. Babbitt concentrates his law practice in commercial
litigation, environmental matters and mining law. He is a member of the
Society of Mining Engineers, a director of the Idaho Mining Association,
and a trustee of the Rocky Mountain Mineral Law Foundation. Mr. Babbitt
was appointed as a director when the Board expanded to four members in November
2000.
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.
Board Meetings and Committees. Our Board of Directors held twelve (12)
regular meetings during the 2000 calendar year. Each incumbent director attended
at least 75% of the meetings held during the 2000 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.
Board Member Compensation. We pay directors' fees in the form of 6,000
shares of our common stock per year per director. 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 that 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 timely filed Form 4 reports during 2000 and timely filed a Form
5 annual report with covering the 2000 fiscal year. Mr. Babbitt is late filing a
Form 5 report for the 2000 fiscal year. We do not know if Mr. Rice and Mr.
Jackson timely filed, during 2000, Form 4 reports reporting receipt of annual
stock compensation or Form 5 annual reports for the 2000 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 2000, or timely filed a Form 5
report for the 2000 fiscal year.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial
ownership of our common stock as of June 30, 2001 (i) by each person who is
known by us to beneficially own more than 5% of our common stock; (ii) by each
of our officers and directors; and (iii) by all of our 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 1,501,898(2) 7.78 (1)
related entities as a group
c/o Walter L. Maguire, Sr.
P.O. Box 129
Keller, VA 23401
------------------------------------------------------------------------------------------------------------------------------------
Common stock The Dugan Family 2,863,072(4) 13.67 (1)
c/o A. W. Dugan
1415 Louisiana Street, Suite 3100
Houston, TX 77002
------------------------------------------------------------------------------------------------------------------------------------
Common stock Thomson Kernaghan and Co Limited(6) 291,025(5) 1.51 (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 3,537,827(3) 17.9
------------------------------------------------------------------------------------------------------------------------------------
Common stock Robert A. Rice 217,762 1.17
------------------------------------------------------------------------------------------------------------------------------------
Common stock Leo Jackson 60,700 Nil
------------------------------------------------------------------------------------------------------------------------------------
Common stock Gary D. Babbitt 5,967 Nil
------------ ---
------------------------------------------------------------------------------------------------------------------------------------
Common stock All Directors and executive
officers as a group
(4 persons) 3,822,256 19.07
--------- -----
------------------------------------------------------------------------------------------------------------------------------------
(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 June 30, 2001 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 19,134,564
shares of common stock, 4,500 shares of Series A Preferred Stock and
177,904 shares of Series C Preferred Stock outstanding on June 30,
2001, and the shares issuable upon the exercise of options and warrants
exercisable on or within 60 days of June 30, 2001, 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; 219,555 shares owned by Walter L.
Maguire, Jr.; and warrants issued to donees of Walter
L. Maguire, Sr. to purchase 100,000 shares of common stock. Excludes
1,003,409 shares owned by the 1934 Maguire Trust.
(3) Includes 2,336,640 shares of common stock, warrants to purchase 401,213
shares of common stock, and 799,974 shares issuable upon the conversion
of the principal balance of convertible debentures into common stock at
$0.31 per share. Excludes 75,000 shares owned by Mr. Lawrence's sister,
as to which Mr. Lawrence disclaims beneficial ownership.
(4) Includes 316,667 shares owned by A.W. Dugan; 183,333 shares owned by
Lydia Dugan; 1,631,440 shares, in the aggregate, owned by companies
owned and controlled by A.W. Dugan; warrants issued to Mr. Dugan to
purchase 409,051 shares of common stock; and 322,581 shares issuable
upon the conversion of the principal balance of convertible debentures
into common stock at $0.31 per share. The debenture conversion price is
the lower of $.31 per share or 75% of the average of the three lowest
closing bid prices during the 20 trading days prior to the conversion
date. If the actual conversion price is less than $.31 per share, the
debenture holder will be entitled to a greater number of common shares
upon conversion.
(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 and Co. Limited. CALP II LP, Striker Capital, Ltd. and
Thomson Kernaghan and Co. Limited are under the common control of Mark
Valentine, Chief Executive Officer of Thomson Kernaghan and 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 and Co. Limited and have represented that they are not
controlled by, controlling, or under common control of Thomson
Kernaghan and Co. Limited.
(6) By Agreement effective July 11, 2000, Thomson Kernaghan and 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 are convertible into common stock at the lower of
$0.29125 per share or 75% of the average of the lowest closing bid
prices during the 20 trading days preceding the conversion date.
Thomson Kernaghan and Co., Limited is the beneficial owner of 150,000
shares of Company's common stock and disclaims beneficial ownership of
the debentures, warrants and shares issuable upon conversion or
exercise. 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 ss. 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Described below are transactions during the last two years to which we
are a party and in which any of our directors or executive officer or any
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, 2000.
o 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.
o 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. Amounts for 2000 totaled $29,709. See note 9
to our 2000 Financial Statements. During the six months ended June 30,
2001, we reimbursed Mr. Lawrence $26,489 for these expenses.
o On July 11, 2001, we sold Gary Babbitt, 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.
o At June 30, 2001, we owed a legal fee in the amount of $121,582 to
our outside firm in which Gary Babbitt, a director, is a partner.
o 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. The conversion price
of these debentures is based on market prices at the time of
conversion, but not greater than $0.31 per shares. 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.
o On June 26, 2001, we sold Delaware Royalty, an affiliate of A.W. Dugan,
a stockholder and accredited investor, 100,000 shares of our common
stock and issued warrants to purchase 50,000 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.
o On May 25, 2001, we sold Delaware Royalty, an affiliate of A.W. Dugan,
a stockholder and 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.
o 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.
o 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.
o 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.
o On July 11, 2000, we issued our 10% Convertible debentures due June 30,
2002 to Thomson Kernaghan and 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.
o 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 the first six months of 2001, Mr. Lawrence advanced
the Company $50,000 for working capital purposes. At June 30, 2001
$40,000 of these advances were still owing.
o On March 17, 2000, we issued to Thomson Kernaghan and 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.
o 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.
o 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.
o 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.
EXECUTIVE COMPENSATION
Summary Compensation Table
The Securities and Exchange Commission requires the following table
setting forth for fiscal years ending December 31, 2000, 1999 and 1998, the
compensation paid by us to our principal executive officer.
-------------------------- ------ ----------------------------------- ---------------------------------------------
Annual Compensation Long-Term Compensation
-------------------------- ------ ----------------------------------- ---------------------------------------------
-------------------------- ------ ----------- ------- --------------- --------------------- -----------------------
Awards Payouts
-------------------------- ------ ----------- ------- --------------- --------------------- -----------------------
-------------------------- ------ ----------- ------- --------------- ---------- ---------- ---------- ------------
------------------------- Restricted Securities
Other Annual Options/ Underlying All All Other
Name and Principal Year Salary Bonus Compensation(1) Awards(3) LTIP SARs Other Compensation
Position Payouts
-------------------------- ------ ----------- ------- --------------- ---------- ---------- ---------- ------------
-------------------------- ------ ----------- ------- --------------- ---------- ---------- ---------- ------------
John C. Lawrence, 2000 $81,000 N/A $4,154 $3,250 None None None
President
-------------------------- ------ ----------- ------- --------------- ---------- ---------- ---------- ------------
-------------------------- ------ ----------- ------- --------------- ---------- ---------- ---------- ------------
John C. Lawrence, 1999 $72,000 N/A $4,154 $720 None None None
President
-------------------------- ------ ----------- ------- --------------- ---------- ---------- ---------- ------------
-------------------------- ------ ----------- ------- --------------- ---------- ---------- ---------- ------------
John C. Lawrence, 1998 $72,000 N/A $4,154 $844 None None None
President
-------------------------- ------ ----------- ------- --------------- ---------- ---------- ---------- ------------
(1) Represents earned but unused vacation.
(2) Increased to $96,000 beginning August 1, 2000.
(3) 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 our restricted common stock.
LEGAL PROCEEDINGS
Except as discussed in "Description of Business - Environmental
Matters", there are no material legal proceedings to which we are currently a
party or to which our property is subject.
LEGAL MATTERS
The validity of the issuance of our securities offered by this
prospectus has been passed upon for us by Sonfield and Sonfield, Houston, Texas.
EXPERTS
The consolidated balance sheets of United States Antimony Corporation
as of December 31, 1999 and December 31, 2000 and the related consolidated
statements of operations for the years then ended included in this prospectus s
have been audited by Decoria, Maichel and Teague P.S., independent auditors, as
stated in their report, which is included in this prospectus in reliance upon
the report of the firm given upon their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual reports, quarterly reports and current reports, proxy
statements and other information with the U.S. Securities and Exchange
Commission (SEC). In addition, we have filed with the SEC a Registration
Statement on Form SB-2 under the Securities Act of 1933 with respect to our
common stock offered in this prospectus. This prospectus does not contain all of
the information set forth in the registration statement and the exhibits and
schedules to that registration statement. For further information with respect
to us and our common stock, we refer you to the registration statement and its
exhibits and schedules. With respect to statements contained in this prospectus
as to the contents of any contract or other document, reference is made to the
copy of that contract or document filed as an exhibit to the registration
statement .
You may read and copy materials that we have filed with the SEC,
including the registration statement, at the following SEC Public Reference
Room:
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
You can call the SEC at 1-800-SEC-0330 for more information about the
operation of the Public Reference Room. Copies of our filings with the SEC are
also available to the public through the SEC's Internet website at
http:\\www.sec.gov.
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS AS OF December 31, 2000 and 1999 (AUDITED)
Independent Auditor's Report...................................................2
Consolidated Balance Sheets....................................................3
Consolidated Statements of Operations..........................................4
Consolidated Statements of Changes in Stockholders' Deficit....................5
Consolidated Statements of Cash Flows..........................................6
Notes to Consolidated Financial Statements..................................8-22
FINANCIAL STATEMENTS AS OF JUNE 30, 2001 (UNAUDITED)
Consolidated Balance Sheets...................................................23
Consolidated Statements of Operations.........................................24
Consolidated Statements of Cash Flows.........................................25
Notes to Consolidated Financial Statements.................................26-27
INDEPENDENT AUDITOR'S REPORT
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 subsidiaries as of December 31, 2000 and 1999, 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 generally accepted auditing
standards. 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 subsidiaries as of December 31, 2000 and 1999, and
the consolidated results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.
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.
As discussed in Note 20. to the consolidated financial statements, the Company
has restated certain amounts in its previously reported consolidated financial
statements for the year ended December 31, 1999.
Spokane, Washington
March 22, 2001, except for Note 20.
which is as of October 19, 2001
The accompanying notes are an integral part of
these financial statements.
United States Antimony Corporation and Subsidiaries
Consolidated Balance Sheets
December 31, 2000 and 1999
2000 1999
(as restated)
ASSETS
Current assets:
Restricted cash $ 8,518 $ 227
Inventories 221,457 276,599
Accounts receivable, less allowance
for doubtful accounts of $30,000 and $50,000 119,568 60,205
--------------- ------------------
Total current assets 349,543 337,031
Investment in USAMSA 111,088 111,088
Properties, plants and equipment, net 246,250 341,417
Restricted cash for reclamation bonds 123,250 178,986
Deferred financing charges, net 63,789
--------------- ------------------
Total assets $ 893,920 $ 968,522
=============== ==================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Checks issued and payable $ 107,133 $ 45,544
Accounts payable 429,654 467,596
Accrued payroll and property taxes 241,588 263,667
Accrued payroll and other 89,680 132,464
Judgment payable 43,480 40,645
Accrued interest payable 47,324 14,640
Due to related parties 10,307 8,128
Notes payable to bank, current 150,625 160,395
Note payable to Bobby C. Hamilton, current 87,596
Accrued reclamation costs, current 80,000 256,000
--------------- ------------------
Total current liabilities 1,199,791 1,476,675
Debentures payable, net of discount 997,449
Notes payable to bank, noncurrent 205,377 165,570
Note payable to Bobby C. Hamilton, noncurrent 1,450,785
Accrued reclamations costs, noncurrent 199,388 58,687
--------------- ------------------
Total liabilities 2,602,005 3,151,717
--------------- ------------------
Commitments and contingencies (Notes 1 and 18) Stockholders' deficit:
Preferred stock, $.01 par value, 10,000,000 shares authorized:
Series A: 4,500 shares issued and outstanding
(liquidation preference $110,250) 45 45
Series B: 750,000 shares issued and outstanding
(liquidation preference $802,500) 7,500 7,500
Series C: 177,904 and 205,996 shares issued and outstanding
(liquidation preference $97,847) 1,779 2,060
Common stock, $.01 par value, 30,000,000 and 20,000,000 shares
authorized; 18,375,564 and 16,900,252 shares issued and outstanding 183,755 169,003
Additional paid-in capital 15,352,386 14,824,048
Accumulated deficit (17,253,550) (17,185,851)
--------------- ------------------
Total stockholders' deficit (1,708,085) (2,183,195)
--------------- ------------------
Total liabilities and stockholders' deficit $ 893,920 $ 968,522
=============== ==================
The accompanying notes are an integral part of
these financial statements.
United States Antimony Corporation and Subsidiaries
Consolidated Statements of Operations
For the years ended December 31, 2000 and 1999
2000 1999
(as restated)
Revenues:
Sales of antimony products and other $ 5,016,661 $ 4,710,278
Cost of antimony production 4,037,289 3,511,097
Freight and delivery 506,482 323,003
--------------- ------------------
Gross profit 472,890 876,178
--------------- ------------------
Other operating expenses:
Exploration and evaluations 53,985
Reclamation-antimony 25,615 51,150
Care, maintenance, and reclamation-Yellow Jacket 241,244 146,882
General and administrative 631,869 400,432
Sales expenses 339,267 337,309
--------------- ------------------
1,237,995 989,758
--------------- ------------------
Other (income) expense:
Gain from accrued reclamation costs adjustment (70,000)
Gain from accounts payable adjustment (29,322) (16,440)
Interest expense 157,145 185,985
Factoring expense 100,956 106,742
Interest income and other (8,459) (12,190)
--------------- ------------------
220,320 194,097
--------------- ------------------
Loss before extraordinary item (985,425) (307,677)
Extraordinary gain on conversion of debts to common
stock 917,726 77,591
--------------- ------------------
Net loss $ (67,699) $ (230,086)
================ ===================
Basic net loss per share of common stock
Before extraordinary item $ (0.06) $ (0.02)
Extraordinary item 0.05 Nil
--------------- ------------------
Net loss $ (0.01) $ (0.02)
================ ===================
Basic weighted average shares outstanding 17,772,693 14,597,917
=============== ==================
Diluted net loss per share of common stock
Before extraordinary item $ (0.06) $ (0.02)
Extraordinary item 0.05 Nil
--------------- ------------------
Net loss $ (0.01) $ (0.02)
================ ===================
Diluted weighted average shares outstanding 17,772,693 14,839,455
=============== ==================
United States Antimony Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders' Deficit
for the years ended December 31, 2000 and 1999
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, 1998 4,500 $ 45 750,000 $ 7,500 2,560,762 $25,608 13,425,925$134,259 $14,079,260$(16,955,765)$(2,709,093)
Issuance of common stock for
cash purchased by employees 4,800 48 1,152 1,200
Issuance of common stock in
exchange for services 40,000 400 9,600 10,000
Issuance of common stock for
conversion of debts 1,036,761 10,368 729,656 740,024
Issuance of common stock to
employees for compensation 20,000 200 2,400 2,600
Issuance of common stock to
directors for compensation 18,000 180 1,980 2,160
Conversion of series C preferred
stock to common stock (2,354,766) (23,548) 2,354,766 23,548
Net income 304,015 304,015
------ ------ ------ --------- --------- --------- --------- ------- ----------- -------------
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)
(as restated)
Issuance of common stock for cash 682,511 6,825 223,175 230,000
Exercise of stock warrants 100,000 1,000 24 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 $ 15,532,386 $(17,253,550) $(1,708,085)
====== ======= ======= ========= ========= ========== ========== ======== ====
The accompanying notes are an integral part of
these financial statements.
United States Antimony Corporation and Subsidiaries
Consolidated Statements of Cash Flows
for the years ended December 31, 2000 and 1999
2000 1999
(as restated)
Cash flows from operating activities:
Net loss $ (67,699) $ (230,086)
Adjustments to reconcile net income (loss) to
net cash provided by operations:
Depreciation 133,666 130,714
Amortization of deferred financing charges 18,711
Write off of capitalized start-up costs 8,590
Extraordinary gain on conversion of debts to common stock (917,726) (77,591)
Gain from accrued reclamation costs adjustment (70,000)
Gain from accounts payable adjustment (29,322) (16,440)
Provision for doubtful accounts (20,000) 50,000
Issuance of common stock to directors as compensation 10,291 2,160
Issuance of common stock to employees as compensation 2,600
Issuance of common stock and warrants for services 163,000 10,000
Issuance of common stock to former Series C holders 4,265
Change In:
Restricted cash (8,291) (6)
Accounts receivable (39,363) (110,205)
Inventories 55,142 88,799
Restricted cash for reclamation bond 55,736
Deferred financing charges (82,500)
Accounts payable (8,620) 228,863
Accrued payroll and property taxes (22,079) 95,185
Accrued payroll and other (42,784) 35,752
Judgments payable 2,835 11,780
Accrued debenture interest payable 36,769 13,250
Payable to related parties 2,179 5,206
Accrued reclamation costs (35,299) (118,585)
--------------- ------------------
Net cash provided by operating activities (791,089) 59,986
--------------- ------------------
Cash flows from investing activities:
Purchase of properties, plants and equipment (38,499) (76,417)
--------------- ------------------
Net cash used in investing activities (38,499) (76,417)
--------------- ------------------
Cash flows from financing activities:
Proceeds from issuance of common stock and warrants 230,000
Exercise of warrants 25,000
Proceeds from bank term note payable 250,000 259,484
Payments on notes payable to bank (219,963) (200,330)
Change in checks issued and payable 61,589 14,455
Proceeds from issuance of convertible debentures 1,022,992
Payments on note payable to Bobby C. Hamilton (540,030) (57,178)
--------------- ------------------
Net cash provided by financing activities 829,588 16,431
--------------- ------------------
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 the financial statements.
United States Antimony Corporation and Subsidiaries
Consolidated Statements of Cash Flows, Continued:
for the years ended December 31, 2000 and 1999
2000 1999
Supplemental disclosures:
Cash paid during the year for interest $ 119,866 $ 157,239
=============== ==================
Noncash financing activities:
Discount on debentures payable for detachable warrants 29,682
Judgment payable converted to common stock 144,339
Debentures payable converted to common stock 335,000
Accrued debenture interest payable converted to common stock 347,397
Series C preferred stock converted to common stock 281 23,548
Note payable to Bobby C. Hamilton converted to common stock 958,321
United States Antimony Corporation and Subsidiaries
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. Up until the first quarter of 1999 the Company sold
its products pursuant to a profit sharing agreement with affiliated
chemical sales companies. On March 31, 1999, the company terminated the
agreement and started selling its products independently.
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, to mine and market zeolite and
zeolite products from a mineral deposit in south-eastern Idaho.
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, 2000, the Company had negative
working capital of approximately $850,000, an accumulated deficit of
approximately $17.2 million and a total stockholders' deficit of
approximately $1.7 million. 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:
o In 2000 and 1999, the Company devoted 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
generate increasing profits because of these advances.
o In 2000 and 1999, the Company converted debts totaling
$958,321 and $826,736, respectively, of principal and
accrued interest into common stock of the Company.
o During 2000, the Company negotiated a financing arrangement with
a Canadian investment banking firm, that provides borrowings of
up to $1.5 million in convertible debentures and related
warrants. Pursuant to this arrangement, the Company borrowed
$675,000 in 2000.
o In 2000, the Company generated $255,000 through sales of 682,511
shares of its unregistered common stock and warrants to existing
shareholders and the exercise of 100,000 stock purchase
warrants. The Company plans to raise equity funding through
additional stock sales in 2001. 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, 2000 and 1999,
25% and 20%, respectively, of the Company's revenues were generated by
antimony product sales to one customer. In addition, during 2000, 11% of
the Company's revenues were generated by antimony product sales to a
second individual customer.
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 accurately predict.
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
accounts for its investment interest in its 50% owned foreign entity,
USAMSA, by the equity method.
Restricted Cash
Restricted cash consists of cash held for investment in USAMSA, payment
of delinquent payroll taxes and reclamation performance bonds.
Inventories
Inventories at December 31, 2000 and 1999, consisted of ownership 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." SFAS No. 121 requires 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.
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 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
the 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.
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 June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended, which defines
derivatives, requires that all derivatives be carried at fair value, and
provides for hedge accounting when certain conditions are met. This
statement is effective for the first fiscal quarter of fiscal years
beginning after June 15, 2000. Adoption of this statement will not have a
material impact on the Company's consolidated financial position, results
of operations or cash flows.
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. The Company is required to adopt SAB 101 in the
fourth quarter of fiscal 2001, retroactive to the beginning of the year.
Adoption of SAB 101 will not have a material impact on the Company's
consolidated financial position, results of operations or cash flows.
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 April 1998, Statement of Position 98-5, "Reporting on the Costs of
Start-up Activities" ("SOP 98-5") was issued. SOP 98-5 provides guidance
on the financial reporting of start-up costs and organizational costs. It
requires costs of start-up activities and organizational costs to be
expensed as incurred. During 1999, the Company expensed $8,590 of
organizational costs that had previously been capitalized relating to its
investment in USAMSA. No cumulative effect of a change in accounting
principle was recognized, however, due to the immateriality of the
amount. If a cumulative effect had been recognized, accumulated deficit
at December 31, 1998 would have been increased by $8,590.
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 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 4% of the face
amount of the receivables sold up to $1,200,000, and 2% of the face
amount of receivables sold thereafter as a financing fee. Financing fees
paid by the Company during the year ended December 31, 2000 and 1999
totaled $100,956 and $106,742, respectively. At December 31, 2000 and
1999, net accounts receivable of $4,867,093 and $3,909,774, respectively,
had been 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, 2000
and 1999, were as follows:
2000 1999
Antimony Metal $ 32,187 $ 58,365
Antimony Oxide 118,728 206,316
Sodium Antimonate 70,542 11,918
------------------ -----------------
$ 221,457 $ 276,599
================== =================
At December 31, 2000 and 1999, antimony metal consisted primarily of lots
purchased from foreign suppliers; antimony oxide inventory consisted of
finished product oxide held at the Company's plant or in outside
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.
6. Properties, Plants and Equipment:
The major components of the Company's properties, plants and equipment
at December 31, 2000 and 1999 were as follows:
2000 1999
Gold mill and equipment(1) $ 37,890 $ 37,890
Gold 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 256,067 255,447
Chemical processing equipment 887,467 852,811
Other 80,178 76,955
------------------ -----------------
3,213,930 3,175,431 Less
accumulated depreciation 2,967,680 2,834,014
------------------ -----------------
$ 246,250 $ 341,417
================== =================
(1) The Company has removed the mill at Yankee Fork and most of the
mining and milling equipment as part of the reclamation process.
Substantially all of the remaining assets are fully depreciated.
(2)At December 31, 2000 and 1999, substantially all of these assets are
fully depreciated and the antimony milling buildings and equipment are
idle.
7. Investment in USAMSA:
In September of 2000, the Company finalized its 50% investment is United
States Antimony, Mexico S.A. de C.V. ("USAMSA").
The company translates the foreign currency financial statements of its
Mexican subsidiary in accordance with the requirements of SFAS No. 52,
"Foreign Currency Translation." Assets and liabilities are translated at
current exchange rates, and related revenues and expenses are translated
at average exchange rates in effect during the period. Unaudited
condensed financial information for USAMSA during 2000 is as follows:
December 31, 2000
ASSETS
Current assets $ 48,908
Noncurrent assets 78,973
------------------
Total assets $ 127,881
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 69,359
Stockholders' equity 58,522
------------------
Total liabilities and stockholders' equity $ 127,881
==================
Revenues:
Income from antimony processing $ 16,145
Processing costs (42,995)
-------------------
Gross loss (26,850)
-------------------
Other income and (expense):
Administrative and other costs (1,051)
Other income 3,023
------------------
Net loss $ (24,878)
===================
8. Judgment Payable:
At December 31, 2000 and 1999, the Company owed $43,480 and $40,645,
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 1999 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, 2000 and 1999 were
as follows (see also Note 17):
2000 1999
Entity owned by John C. Lawrence,
president and director $ (503) $ 788
John C. Lawrence, president and director 10,810 7,340
------------------ -----------------
$ 10,307 $ 8,128
================== =================
Transactions affecting the payable to Mr. Lawrence during 2000 and 1999
were as follows:
2000 1999
Balance, beginning of year $ 7,340 $ 2,485
Equipment rental charges 29,709 30,616
Payments (26,239) (25,761)
------------------ -----------------
Balance, end of year $ 10,810 $ 7,340
================== =================
10. Notes Payable to Bank:
Notes payable to First State Bank of Thompson Falls, Montana ("First
State Bank") at December 31, 2000 were as follows:
Ten-year term note bearing interest at 10.5%; dated May 5, 2000 payable
in monthly installments of $3,384; collateralized by certain
equipment and patented and unpatented mining claims in Sanders
County, Montana;
personally guaranteed by John C. Lawrence (president and director). $ 223,385
Note payable under a $95,000 revolving line-of-credit agreement; dated
December 18, 2000; bearing interest at 11.5%; collateralized by
certain equipment and patented and unpatented mining claims in
Sanders County, Montana; principal and accrued interest due at
maturity on December 15,
2001; personally guaranteed by John C. Lawrence. 88,257
Note payable under a $60,000 revolving line-of-credit dated December 26,
2000; bearing interest at 11.5%; collateralized by certain equipment
and patented and unpatented mining claims in Sanders County,
Montana; principal and accrued interest due at maturity on March 26,
2001; personally
guaranteed by John C. Lawrence. 36,305
Note payable under a $50,000 revolving line-of-credit dated April 2,2000;
bearing interest at 10.5%; collateralized by certain equipment and
patented and unpatented mining claims in Sanders County, Montana;
principal and accrued interest due at maturity on April 2, 2001;
personally guaranteed by John C. Lawrence. 8,055
-----------------
Total 356,002
Less current portion (150,625)
-----------------
Noncurrent portion $ 205,377
=================
At December 31, 2000, principal payments on the notes payable to bank are due as
follows:
Year Ending
December 31,
2001 $ 150,625
2002 19,993
2003 22,197
2004 24,642
2005 27,358
Thereafter 111,187
------------------
$ 356,002
==================
11. Note Payable to Bobby C. Hamilton:
At December 31, 1999, 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 and 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 and 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 and
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
tranche of $600,000 of convertible debentures and in August sold a second
tranche 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 the July 11, 2000 (The effective date
of the Financing Agreement), or $0.39 per share. The warrants expire in
July and August of 2005.
The Financing Agreement also contained a registration rights agreement in
which Company agreed to register the debenture purchasers' resale of the
shares of common stock issued upon conversion of the debentures and upon
exercise of the related purchasers and agents warrants. For the $675,000
of debentures issued as of December 31, 2000, the registration rights
agreement requires that the Company register 150% of the conversion
shares and 100% of the underlying agent and purchaser warrant shares. The
registration rights agreement also provides for liquidated damages to be
due if the Company fails to have an effective registration statement
filed by the registration deadline (see Note 18).
The debentures are convertible into common stock at $0.29125 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. The converting debenture holder may not, however, own more than
9.9% of the then outstanding common stock of the Company after the
conversion.
The debentures are payable in full at their maturity date on June 30,
2002, with interest payable at 10% per annum and due annually.
The debentures are transferable, subject to the rules and regulation of
the Securities Act of 1933, and exchangeable for an equal amount of
aggregate principal in different denominations. The debenture agreement
requires that so long as any of the principal of or interest on the
debentures remain unpaid or unconverted, the Company shall not (i) merge
or consolidate with any other entity; (ii) sell or otherwise dispose of a
material portion of its assets (other than in the ordinary course of
business); (iii) pay any dividend on its shares (including any dividend
payable in common stock or other property); (iv) subdivide, split or
otherwise increase the number of shares of common stock; or (v) issue any
common stock or other equity securities, or any other stock, option,
warrant, right or other instrument that is convertible into or
exercisable or exchangeable for common stock or other equity securities,
except for (a) securities of a subsidiary that are issued to the Company;
and (b) securities sold and options granted to directors, officers and
employees of the Company pursuant to bona fide employee benefit plans;
provided, however, that the Company may issue such securities enumerated
in (v) above, with the prior written consent of the holders, which
consent the holder agrees not to unreasonably withhold.
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.
The debentures are transferable, exchangeable for an equal amount of
aggregate principal in different denominations, and subject to the same
covenants regarding mergers, dispositions, dividend payments, and stock
sales as the convertible debentures sold pursuant to the financing
agreement with Thomas Kernaghan and Co., Ltd. (above).
In connection with the issuance, Mr. Dugan and Mr. Lawrence, were issued
60,974 and 151,213, respectively, stock purchase warrants. The warrants
expire five years from their date of issue and are exercisable for shares
of the Company's unregistered common stock at $0.41 per share.
The Company accounted for the detachable warrants issued in connection
with the debentures in accordance with Accounting Principles Board
Opinion No. 14, and calculated the fair value attributable to the
detachable warrants based upon the present value of the interest costs of
the debentures as compared to interest costs of the Company's alternative
financing sources. The resulting value was recorded as a discount against
the carrying value of the debentures, and amortized by the straight-line
method as interest expense over the terms of the debentures. During the
year ended December 31, 2000, $4,085 of the debentures payable discount
was amortized to interest expense.
At December 31, 2000, debentures payable are as follows:
Amount Maturing
$ 600,000 June, 2002
75,000 August, 2002
50,000 November, 2003
297,992 December, 2003
-------------
1,022,992
(25,543) Less amortized discount
$ 997,449
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,
2000, 300,000 shares of the Company's common stock had been issued under
the Plan (see Notes 14 and 18).
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.
Transactions in stock warrants are as follows:
Number of Exercise Expiration
Warrants Prices Date
Balance, December 31, 1998 1,094,356 $ 0.25-0.80
Warrants issued to John C.
Lawrence, president and director,
in connection with his personal guarantee
of a financing arrangement 250,000 $ 0.25 (A)
Warrants issued to a stockholder and
consultant as compensation for services 100,000 $ 0.55 (B)
Warrants expired (225,000) $ 0.50-0.70
------------
Balance, December 31, 1999 1,219,356 $ 0.25-0.80
------------
Warrants issued as compensation
for consulting services 300,000 $ 0.25 (C)
Warrants exercised (100,000) $ 0.25
Warrants issued in connection
with issuance of debentures 1,606,417 $ 0.39-0.41 (D)
Warrants issued in connection
with stock sale 48,077 $ 0.39 (E)
Warrants expired (669,356) $ 0.70-0.80
------------
Balance December 31, 2000 2,404,494
============
(A) Warrants are exercisable for as long as Mr. Lawrence personally guarantees
certain company financing arrangements. (B) Warrants are exercisable on or
before August of 2002. (C) Warrants are exercisable on or before January of
2003.
(D) 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.
(E) Warrants are exercisable on or before August of 2005.
Issuance of Common Stock to Employees
During 1999, the Company issued 20,000 shares of its unregistered common
stock to employees in recognition of their service to the Company. In
connection with the issue the Company recognized compensation expense of
$2,600 based upon the fair value of the unregistered shares issued.
Issuance of Common Stock in Connection with Conversion of Debts
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.
In November 1999, the Company entered into a Settlement Agreement and
Release of all Claims ("the Agreement") with Ronald Michael Meneo,
Trustee of the Walter L. Maguire 1935-1 Trust ("the Trust") and Walter L.
Maguire Sr., beneficiary of the Trust and stockholder and former director
of the Company. The Agreement settled litigations brought by the Trust
against the Company for default on certain debentures of the Company held
by the Trust and the resulting counterclaim against the Trust and Mr.
Maguire by the Company. The Agreement called for the issuance of 790,909
shares of the Company's unregistered common stock to the Trust in
exchange for the extinguishment of all indebtedness claimed owing to the
Trust or Mr. Maguire. In connection with the issuance, the Company
extinguished $335,000 of debenture principal and $347,397 of related
accrued interest thereon. The Company recorded an addition to
paid-in-capital (see Note 20.) of $534,101 on the extinguishment based
upon the value of the restricted shares issued at the time.
In October 1999, the Company extinguished a debt due Geosearch, Inc., a
former lessor of a mining interest to the Company, by issuing 245,852
shares of its unregistered common stock. The debt extinguished totaled
$144,339 of principal and accrued interest. The Company recorded an
extraordinary gain of $77,591 on the extinguishment based upon the value
of the restricted shares issued at the time.
Issuance of Common Stock for Cash
During 2000, the Company sold an aggregate of 582,511 shares of its
unregistered common stock and 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. Of the shares
issued to Mr. Dugan, 100,000 were issued pursuant to the exercise of
stock purchase warrants previously granted him. Mr. Dugan is a
significant shareholder of the Company.
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.
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 18) 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.
During 1999, the Company issued 40,000 shares of its unregistered common
stock and 100,000 warrants to purchase shares of common stock at $0.55
per share, exercisable until August 2002, to a consultant in exchange for
professional services rendered to the Company. The shares and related
warrants were recorded based on the value of services rendered.
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. Subject to amounts of outstanding
preferred stock, additional shares of preferred stock can be issued with
such rights and preferences, including voting rights, as the Board of
Directors shall 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, 2000, 4,500 shares of Series A
preferred stock were outstanding; and cumulative dividends in arrears
amounted to $65,250, or $14.50 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, 2000, cumulative dividends in arrears on the 750,000
outstanding Series B shares were $52,500, or $0.07 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.
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.
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.
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 currently being filed 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, 2000,
177,904 shares of Series C preferred stock remained outstanding and
unconverted.
15. Income Taxes:
At December 31, 2000 and 1999, the Company had net deferred tax assets of
approximately $1,900,000 and $2,700,000, respectively. 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, 2000 and 1999 has been established.
At December 31, 2000, the Company had regular tax net operating loss
carryforwards of approximately $5,300,000, which expire in the years 2001
through 2020, with the majority of the carryforwards expiring in 2001
through 2003. At December 31, 2000, the Company had net operating loss
carryforwards for alternative minimum tax purposes of approximately
$4,900,000.
16. Loss Per Common Share:
The following table presents a reconciliation of the numerators and
denominators of the basic and diluted earnings per share ("EPS")
computations for the year ended December 31, 1999:
Per Share
Loss Shares Amounts
Basic EPS:
Net loss before extraordinary item $ (307,677) 14,597,927 $(0.02)
Common stock warrants (1)
Series C preferred stock (2) 241,528 Nil
-------------- ------------- -------
Diluted EPS:
Net loss before extraordinary item $ (307,677) 14,839,455 $(0.02)
==============- ========== ======
(1) Common stock warrants totaling 1,219,356 outstanding during 1999 were not
included in the computation of diluted EPS at December 31, 1999, because
the various exercise prices of the warrants were greater than the average
market price of the Company's common stock.
(2) Series C preferred stock was convertible into common stock of the Company
on a share-for-share basis. The effect on the computation of diluted
weighted average shares outstanding is based upon the potential
conversion of the shares into common stock for the period of time the
preferred shares were outstanding and the effect of Series C preferred
stock antidilution provisions.
17. Related-Party Transactions:
In addition to transactions described in Notes 4, 7, 9, 10, 12, and 14
during 2000 and 1999, the Company had the following transactions with
related parties:
o During 2000 and 1999, the Company issued 79,167 and 18,000,
respectively, shares of its unregistered common stock to
members of the Board of Directors for their duties as
directors. The issuances have been recorded in the
consolidated financial statements as if they were issued in
the year they were earned. The stock awards were recorded as
compensation expense (director's fees) based upon the
estimated value of the stock at the date of issuance.
o In February 1999, the Board of Directors nominated Leo
Jackson to serve as a director. Mr. Jackson is a stockholder
of the Company and owns 31.4% of Production Minerals
Inc.,which has an indirect interest of 25% in the stock of
USAMSA (see Note 7).
18. 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,
2000, 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. The
Company also has environmental remediation obligations at its antimony
production facility near Thompson Falls, Montana and its former gold
mining property (Yellow Jacket) in Lemhi County, Idaho.
The Company's management believes that USAC is currently in substantial
compliance with environmental regulatory agencies and that its accrued
environmental reclamation costs are representative of management's
estimate of costs required to fulfill its reclamation obligations. 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. Such costs are accrued
at the time the expenditure becomes probable and the costs can reasonably
be estimated.
During the first quarter of 2000, the Company issued 150,000 shares of
its common stock to Thomson Kernaghan and 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 and Co., Ltd. returned 150,000shares 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, 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 if a claim is asserted cannot be ascertained at this
time.
In July of 2000, the Company entered into a financing agreement with
Thomson Kernaghan and Co., Ltd. (see Note 12). The financing agreement
provided, among other things, for the sale of up to $1,500,000 of the
Company's convertible debentures. The Financing Agreement also contained
a registration rights agreement in which Company agreed to register the
debenture purchasers' resale of the shares of common stock issued upon
conversion of the debentures and upon exercise of the related purchasers
and agents warrants. The registration rights agreement also provides for
liquidated damages to be due if the Company fails to have an effective
registration statement filed by the registration deadline. The liquidated
damages are calculated as two percent (2%) per month of the aggregate
value of the principal amount of the debentures outstanding combined with
the aggregate exercise prices of the outstanding purchasers' and agent's
warrants issued in connection with the convertible debentures, accrued on
a daily basis subsequent to the registration deadline. At December 31,
2000, the Company did not have a registration statement yet effective,
and the registration deadline had past. The Company has not accrued any
liability associated with liquidated damages that may be due (of
approximately $38,000 for the period from the registration deadline to
December 31, 2000) as of December 31, 2000, as the Company's management
and its legal counsel believes that while it is reasonably possible that
Thomson Kernaghan and Co., Ltd. will assert a liquidated damages claim
against the Company, it is most likely not probable, based upon the
circumstances surrounding the late registration filing and other factors.
19. 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 a reasonable estimate of their
fair values. The fair value of amounts due to related parties approximate
their carrying values of $10,307 and $8,128, respectively, at December
31, 2000 and December 31, 1999, based upon the contractual cash flow
requirements.
Judgments payable of $43,480 and $40,645, at December 31, 2000 and 1999,
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, approximate their carrying value based on management's
estimate the fair values of comparable debt instruments.
20. Restatement:
As discussed in Note 14, in 1999 the Company settled litigations brought
by a trust associated with a former director of the Company. As a result
of the settlement, the Company issued 790,909 shares of its unregistered
common stock to the trust in exchange for the extinguishment of $682,397
of indebtedness claimed owing to the trust. The Company recorded the
transaction by recognizing an extraordinary gain of $534,101 on the
extinguishment based upon the value of the restricted shares issued at
the time.
In connection with the filing of a registration statement with the
Securities and Exchange Commission ("the Commission") begun in 2000, the
Commission commented that if the trust was a related party to the
Company, the transaction may in essence be a capital transaction and
should be classified as a credit to additional paid-in capital versus an
extraordinary item. Although the Company believes the trust was not a
related party as defined by generally accepted accounting principles, the
Company agreed to restate the 1999 financial statements to reflect the
extinguishment as an addition to additional paid-in-capital in an effort
to facilitate the effectiveness of the registration statement.
The restatement has no effect on total stockholders' deficit or net loss
from operations as previously reported, the effects on accumulated
deficit, additional paid-in-capital, extraordinary gain on conversion of
debt to common stock, and net loss are illustrated as follows:
As previously
reported As restated
Additional paid-in capital $ 14,289,947 $ 14,824,048
Accumulated deficit (16,651,750) (17,185,851)
------------------ -----------------
Total stockholders' deficit (2,183,195) (2,183,195)
------------------ -----------------
Total liabilities and stockholders' deficit $ 968,522 $ 968,522
================== =================
Loss before extraordinary item (307,677) (307,677)
Extraordinary gain on conversion of debts
to common stock 611,692 77,591
------------------ -----------------
Net income (loss) $ 304,015 $ (230,086)
================== ==================
Basic and diluted net income (loss)
per share of common stock
Before extraordinary item $ (0.02) $ (0.02)
Extraordinary item 0.04 Nil
------------------ -----------------
Net income (loss) $ 0.02 $ (0.02)
================== ==================
United States Antimony Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
2001 2000
ASSETS
Current assets:
Restricted cash $ 5,966 $ 8,518
Inventories 153,688 221,457
Accounts receivable, less allowance
for doubtful accounts of $30,000 152,518 119,568
--------------- ------------------
Total current assets 312,172 349,543
Investment in USAMSA, net 102,905 111,088
Properties, plants and equipment, net 293,439 246,250
Restricted cash for reclamation bonds 130,750 123,250
Deferred financing charges, net 43,163 63,789
--------------- ------------------
Total assets $ 882,429 $ 893,920
=============== ==================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Checks issued and payable $ 80,454 $ 107,133
Accounts payable 609,152 429,654
Accrued payroll and property taxes 146,622 241,588
Accrued payroll and other liabilities 212,597 89,680
Judgment payable 45,002 43,480
Accrued debenture interest payable 98,474 47,324
Due to related parties 46,802 10,307
Notes payable to bank, current 236,896 150,625
Accrued reclamation costs, current 67,569 80,000
--------------- ------------------
Total current liabilities 1,543,568 1,199,791
Debentures payable, net of discount 1,003,771 997,449
Notes payable to bank, noncurrent 187,876 205,377
Accrued reclamation costs, noncurrent 206,888 199,388
--------------- ------------------
Total liabilities 2,942,103 2,602,005
--------------- ------------------
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $.01 par value, 10,000,000 shares authorized:
Series A: 4,500 shares issued and outstanding 45 45
Series B: 750,000 shares issued and outstanding 7,500 7,500
Series C: 177,904 shares issued and outstanding 1,779 1,779
Common stock, $.01 par value, 30,000,000 shares
authorized; 19,134,564 and 18,375,564 shares issued and outstanding 191,345 183,755
Additional paid-in capital 15,496,596 15,352,386
Accumulated deficit (17,756,939) (17,253,550)
--------------- ------------------
Total stockholders' deficit (2,059,674) (1,708,085)
--------------- ------------------
Total liabilities and stockholders' deficit $ 882,429 $ 893,920
=============== ==================
The accompanying notes are an integral part of the financial statements.
United States Antimony Corporation and Subsidiaries
Consolidated Statements of Operations (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
Revenues:
Sales of antimony products and other $ 1,076,909 $ 1,190,413 $ 2,038,040 $ 2,363,463
Sales of zeolite products 2,655 2,655
------------- ------------- ------------- -------------
1,079,564 1,190,413 2,040,695 2,363,463
Cost of antimony production 821,401 995,888 1,623,769 1,844,043
Freight and delivery 118,921 142,363 222,535 243,977
------------- ------------- ------------- -------------
940,322 1,138,251 1,846,304 2,088,020
Gross profit 139,242 52,162 194,391 275,443
------------- ------------- ------------- -------------
Other operating expenses:
Bear River Zeolite 119,425 165,668
Care, maintenance, and reclamation-Yellow Jacket 2,500 50,105 2,860 77,906
General and administrative 156,921 91,351 330,608 344,195
Sales expenses 34,342 84,286 72,838 194,351
------------- ------------- ------------- -------------
313,188 225,742 571,974 616,452
------------- ------------- ------------- -------------
Other (income) expense:
Interest expense 41,714 40,129 81,600 81,239
Factoring expense 23,911 24,827 47,175 49,288
Interest income and other (1,488) (2,507) (2,969) (4,647)
-------------- ------------- -------------- -------------
64,137 62,449 125,806 125,880
------------- ------------- ------------- -------------
Net loss $ (238,083) $ (236,029) $ (503,389) $ (466,889)
============== ============== ============== ==============
Basic net loss per share of common stock $ (0.01) $ (0.01) $ (0.03) $ (0.03)
============= ============== ============= ==============
Basic weighted average shares outstanding 18,948,294 17,625,252 18,608,177 17,334,092
============= ============= ============= =============
United States Antimony Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
For the six months ended
June 30, June 30,
2001 2000
Cash flows from operating activities:
Net loss $ (503,389) $ (466,889)
Adjustments to reconcile net loss to
net cash used by operations:
Depreciation and amortization 83,131 66,000
Accrued reclamation costs 7,500
Provision for doubtful accounts (20,000)
Issuance of common stock for consulting services 153,000
Change in:
Restricted cash 2,552 (3)
Accounts receivable (32,950) 10,243
Inventories 67,769 56,410
Restricted cash for reclamation bonds (7,500) 7,170
Prepaid expenses (1,747)
Accounts payable 194,510 64,612
Accrued payroll and property taxes (94,966) (8,166)
Accrued payroll and other 73,214 (32,029)
Judgments payable 1,522 1,422
Accrued debenture interest payable 51,150
Payable to related parties (3,505) (11,209)
Accrued reclamation costs (12,431) (35,300)
---------------- -------------
Net cash used by operating activities (173,393) (216,486)
---------------- -------------
Cash flows from investing activities:
Purchase of properties, plants and equipment (92,689) (35,079)
---------------- -------------
Net cash used in investing activities (92,689) (35,079)
---------------- -------------
Cash flows from financing activities:
Proceeds from issuance of common stock and warrants 149,300 155,000
Proceeds from related party advances 40,000 70,000
Proceeds from notes payable to bank, net 68,770 53,846
Proceeds from factoring company, net 34,691
Change in checks issued and payable (26,679) 12,749
Payments on note payable to Bobby C. Hamilton (40,030)
--------------- -------------
Net cash provided by financing activities 266,082 251,565
--------------- -------------
Net change in cash 0 0
Cash, beginning of period 0 0
--------------- -------------
Cash, end of period $ 0 $ 0
=============== =============
Supplemental disclosures:
Cash paid during the period for interest $ 19,068 $ 79,159
=============== =============
Non-cash investing activities:
Common stock and warrants issued for plant construction $ 2,500
===============
PART I - FINANCIAL INFORMATION, CONTINUED:
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
1. Basis of Presentation:
The unaudited consolidated financial statements have been prepared by the
Company in accordance with generally accepted accounting principles for
interim financial information, as well as the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of the Company's management, all adjustments
(consisting of only normal recurring accruals) considered necessary for a
fair presentation of the interim financial statements have been included.
Operating results for the six-month period ended June 30, 2001 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 2001. Certain consolidated financial statement amounts
for the six-month period ended June 30, 2000, have been reclassified to
conform to the 2001 presentation. These reclassifications had no effect on
the net loss or accumulated deficit as previously reported.
2. Loss Per Common Share
The Company accounts for its income (loss) per common share according to the
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.
3. Commitments and Contingencies:
Until 1989, the Company mined, milled and leached gold and silver in the
Yankee Fork Mining District in Custer County, Idaho. The metals were
recovered by a 150-ton per day gravity and flotation mill, and the
concentrates were leached with cyanide to produce a bullion product at the
Preachers Cove mill, which is located nine miles north of Sunbeam, Idaho on
the Yankee Fork of the Salmon River. 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. In 1996, the Company signed a
consent decree with the Idaho Department of Environmental Quality relating
to completing the reclamation and remediation at the Preachers Cove mill.
The Company's management believes that USAC is currently in substantial
compliance with environmental regulatory agencies and that its accrued
environmental reclamation costs are representative of management's estimate
of costs required to fulfill its reclamation obligations. 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. Such costs are accrued at the time the expenditure
becomes probable and the costs can reasonably be estimated.
During 2000, the Company issued 150,000 shares of its common stock to
Thomson Kernaghan and 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, 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 and Co., Ltd.returned
150,000 shares to the Company in exchange for 150,000 restricted shares,
that the Company agreed to register in conjunction with a Form SB-2
registration statement currently under review by the Securities and Exchange
Commission. 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.
The Company has also issued a small 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. The proceeds of these shares aggregate not more than $66,800. As a
result the Company may be subject to liabilities associated with the
rescission rights of purchasers of these shares and the fines and
penalties that federal and state securities agencies may impose.
At June 30, 2001, the Company had not recorded any liability associated with
the issuance of the shares describe above, as management believes the
likelihood of a claim and the ultimate outcome if any claims are asserted
cannot be ascertained at this time.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article X of our Bylaws ("Bylaws") essentially adopts and incorporates
the mandatory and permissive indemnification provisions of the Montana Business
Corporation Act, specifically Montana Code Annotated Sections 35-1-451 through
458. The following discussion of the Bylaws and Sections 35-1-451 through
35-1-458 is only a summary of the Bylaws and the Montana statutes.
We are required to provide mandatory indemnification of reasonable
expenses of a director or officer who is "wholly successful" in the defense of
any proceeding to which he was a party because he is or was a director or
officer. In addition, we are authorized to indemnify, to the fullest extent
permitted by law, and (subject to receipt of the undertaking described below) to
advance expenses to any person who is or was a director or officer of the
company, or was serving at the request of a director, officer, employee or
fiduciary of the company, against liabilities which may be incurred by such
person by reason of (or arising in part from) such capacity. In the case of
third-party claims, we are authorized to indemnify directors and officers
against liability incurred by reason of being a director or officer and (subject
to receipt of the undertaking described below) against expenses reasonably
incurred in connection with any action, suit or proceeding seeking to establish
such liability, if the director or officer acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interest of the
corporation. Similarly, in the case of actions by or in the right of the
corporation, indemnification of reasonable expenses only is (subject to receipt
of the undertaking described below) authorized if the director or officer acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interest of the corporation. Indemnification is authorized with respect
to any criminal action or proceeding where, in addition to satisfying the
foregoing good faith and reasonable belief standards, the director or officer
has no reasonable cause to believe that his conduct was unlawful. A director or
officer is entitled to apply for court-ordered indemnification in view of all
the relevant circumstances even if the director or officer did not meet the
statutory standards of conduct or has been adjudged liable to us or to have
improperly received a personal benefit.
Our authorization to advance an officer's or director's litigation
expenses is conditioned on the officer or director furnishing an undertaking to
repay the advance in the event we determine that the acts of the officer or
director were unauthorized or improper. We are permitted to procure liability
insurance on behalf of an officer, director or employee.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We will pay all expenses in connection with the registration of the
Shares of our common stock which may be resold by the Selling Shareholders
(including fees and disbursements of one legal counsel for the Selling
Shareholders). We will not pay any selling commissions or discounts allocable to
sales of those Shares by any Selling Shareholder or any fees and disbursements
of counsel and other representatives of the Series C Holders. The estimated
expenses of registration of the Shares are set forth below.
-------------------------------------- --------------------
Registration Fees $219.38
-------------------------------------- --------------------
Legal Fees (estimate) $100,000.00
-------------------------------------- --------------------
Accounting Fees (estimate) $15,000.00
====================================== ====================
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Below is a summary of sales of unregistered securities to our
directors, investors, employees and consultants. We believe that with a few
possible exceptions involving purchasers who do not meet the "accredited
investor" standard of Rule 501(a), each transaction is exempt from registration
pursuant to Sections 4(2), 4(6) and/or Rule 506 of the Securities Act of 1933
because (1) the transaction did not involve a public offering; (2) no
commissions were paid; (3) no underwriters were involved; and (4) (except for
the certificates issued on March 17, 2000 toThomson Kernaghan and Co.Limited and
Blue Water Partners, Inc.) a restrictive legend was placed on each certificate
evidencing the security.
During 2001, we sold $66,800 of common stock and related warrants, in
possible violation of the securities regulation requirements of Section 5 of the
Securities Act of 1933, to investors who may be unaccredited (334,000 shares at
$0.20 per share and warrants to purchase 167,000 shares exercisable for three
years at $0.35 per share). We may be liable for rescission of these transactions
under Section 12(a)(1) of the Securities Act of 1933 for up to three years after
the respective transaction dates.
In instances where warrants were issued, the underlying shares of
common stock are restricted as stated in the warrant contract.
On August 17, 2001, we sold Ceclie Hartigan, an accredited investor,
100,000 shares of our common stock and issued warrants to purchase 300,000
shares of our common stock, for $0.20 per share or $20,000. The warrants are
exercisable at $0.30 per share and expire August 17, 2004.
On July 25, 2001, we sold common stock and issued warrants to purchase
common stock to the following purchasers for $0.20 per share:
Livesey All Freight 20,000 shares ($4,000), and warrants for 10,000 shares
Michael and Julie Wyse 10,000 shares ($2,000), and warrants for 5,000 shares
Lon and Julie Ockler 10,000 shares ($2,000), and warrants for 5,000 shares
Mark and Karen Tomell 10,000 shares ($2,000), and warrants for 5,000 shares
The warrants are exercisable at $0.35 per share and expire July 25, 2004.
On July 11, 2001, we sold Gary Babbitt, 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 28, 2001, we sold Frank Chema, 15,000 shares of our common
stock and issued warrants to purchase 7,500 shares of common stock, for $0.20
per share or $3,000. The warrants are exercisable at $0.35 per share and expire
June 28, 2004.
On June 28, 2001, we sold Thomas Stewart, 25,000 shares of our common
stock and issued warrants to purchase 12,500 shares of common stock, for $0.20
per share or $5,000. The warrants are exercisable at $0.35 per share and expire
June 28, 2004.
On June 28, 2001, we sold an employee, Matt Keane, 15,000 shares of our
common stock and issued warrants to purchase 7,500 shares of common stock, for
$0.20 per share or $3,000. The warrants are exercisable at $0.35 per share and
expire June 28, 2004.
On June 27, 2001, we issued 12,500 shares of our common stock, valued
at $0.20 per share, to Bernie Stender and issued warrants to purchase 6,250
shares of common stock exercisable at $0.35 per share and expiring June 27,
2004, as compensation for consulting services with an estimated value of $2,500.
On June 26, 2001, we sold Charles Baxter, 10,000 shares of our common
stock and issued warrants to purchase 5,000 shares of common stock, for $0.20
per share or $2,000. The warrants are exercisable at $0.35 per share and expire
June 26, 2004.
On June 26, 2001, we sold Delaware Royalty, a stockholder, 100,000
shares of our common stock and issued warrants to purchase 50,000 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 June 20, 2001, we sold H Bar N, a vendor, 20,000 shares of our
common stock and issued warrants to purchase 10,000 shares of common stock, for
$0.20 per share or $4,000. The warrants are exercisable at $0.35 per share and
expire June 20, 2004.
On June 20, 2001, we sold Harlan Ockler, the owner of H Bar N, 30,000
shares of our common stock and issued warrants to purchase 15,000 shares of
common stock, for $0.20 per share or $6,000. The warrants are exercisable at
$0.35 per share and expire June 20, 2004.
On May 31, 2001, we sold Noel Keane Van Tol, a relative of an employee
10,000 shares of our common stock and issued warrants to purchase 5,000 shares
of common stock, for $0.20 per share or $2,000. The warrants are exercisable at
$0.35 per share and expire May 31, 2004.
On May 25, 2001, we sold Delaware Royalty, a stockholder 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 May 24, 2001, we sold Lee Fransdahl, 50,000 shares of our common
stock and issued warrants to purchase 25,000 shares of common stock, for $0.20
per share or $10,000. The warrants are exercisable at $0.35 per share and expire
May 24, 2004.
On April 30, 2001, we sold Stephen Nelson, 25,000 shares of our common
stock and issued warrants to purchase 12,500 shares of common stock, for $0.20
per share or $5,000. The warrants are exercisable at $0.35 per share and expire
April 30, 2004.
On April 30, 2001, we sold Stephen Holman, 24,000 shares of our common
stock and issued warrants to purchase 12,000 shares of common stock, for $0.20
per share or $4,800. The warrants are exercisable at $0.35 per share and expire
April 30, 2004.
On April 11, 2001, we sold an employee, Michael Floersch, 12,500 shares
of our common stock and issued warrants to purchase 6,250 shares of common
stock, for $0.20 per share or $2,500. The warrants are exercisable at $0.35 per
share and expire in April of 2004.
On March 16, 2001, we sold Tom McInsh, an existing shareholder and an
accredited investor, 25,000 shares of our common stock and issued warrants to
purchase 12,500 shares of common stock, for $0.20 per share or $5,000. The
warrants are exercisable at $0.35 per share and expire in March of 2004.
On February 26, 2001, we sold CDLM Investments, LP, an accredited
investor, 125,000 shares of our common stock and issued warrants to purchase
62,500 shares of common stock, for $0.20 per share or $25,000. The warrants are
exercisable at $0.35 per share and expire in February of 2004.
On February 12, 2001, we sold Tom McInsh, an existing shareholder and
an accredited investor, 25,000 shares of our common stock and issued warrants to
purchase 12,500 shares of common stock, for $0.20 per share or $5,000. The
warrants are exercisable at $0.35 per share and expire in February of 2004.
On January 22, 2001, we sold an employee, Matt Keane, 35,000 shares of
our common stock and issued warrants to purchase 17,500 shares of common stock,
for $0.20 per share or $7,000. The warrants are exercisable at $0.35 per share
and expire in January of 2004.
Effective December 31, 2000, we issued 35,542 shares of our own common
stock to former holders of Series C Preferred Stock pursuant to the
anti-dilution provisions of the Series C Preferred Stock. The shares were valued
at $4.265 based upon management's estimate of the value of our common stock at
the time the Series C holders converted.
Effective December 31, 2000, we issued 79,167 shares of our common
stock to four directors of the company for their services. The shares were
valued at $10.291 based on management's estimate of the value of the company's
common stock at the date of issue.
Effective December 31, 2000 we issued 28,092 shares of our common stock
to a Series C Preferred Stock holder in exchange for an equal number of Series C
Preferred shares. During 1999, we issued 2,354,766 shares of common stock in
exchange for the same number of Series C Preferred shares.
Effective December 12, 2000, we issued our 10% convertible debenture
due December 12, 2003 to John C. Lawrence, a director and President, in the
principal amount of $100,000, together with warrants for 60,974 shares of our
common stock exercisable for five years at $0.41 per share. This debenture and
warrant were issued in consideration of cash advances in the amount of $96,591
to meet working capital needs plus accrued interest payable to Mr. Lawrence in
the amount of $4,685. The debenture conversion price is based on market prices
at the time of conversion but not greater than $0.31 per share.
On December 5, 2000, we issued our 10% convertible debentures due
December 5, 2003 to A.W. Dugan, a shareholder and accredited investor, in the
principal amount of $50,000, together with related warrants for 30,487 shares of
our common stock exercisable for five years at $0.41 per share. The debenture
conversion price is based on market prices at the time of conversion but not
greater than $0.31 per share.
On December 5, 2000, we issued our 10% convertible debenture due
November 22, 2003 to A.W. Dugan, a shareholder and accredited investor, in the
principal amount of $50,000, together with related warrants for 30,487 shares of
our common stock exercisable for five years at $0.41 per share. The debenture
conversion price is based on market prices at the time of conversion but not
greater than $0.31 per share.
On December 5, 2000, we issued our 10% convertible debenture due
December 31, 2003 to John C. Lawrence, a director and President, in the
principal amount of $147,992, together with related warrants for 90,239 shares
of our common stock exercisable for five years at $0.41 per share. This
debenture and the related covenants were issued in consideration of $141,243
previously advanced to us to meet working capital needs, together with interest
accrued from the advance dates through December 31, 2000. The debenture
conversion price is based on market prices at the time of conversion but not
greater than $0.31 per share.
On August 25, 2000, we sold 257,511 shares of our common stock and
issued warrants to purchase 48,077 shares of common stock to A.W. Dugan, a
stockholder and accredited investor, for $0.29125 per share or $75,000. The
warrants are exercisable at $0.39 per share and 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 debenture due June 30,
2002 to Thomson Kernaghan and 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
10% convertible debenture, 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.
These debentures and warrants were issued in reliance on the exemption contained
in Regulation S of the Securities Act of 1933 because Thomson Kernaghan and Co.
Limited and each of the debenture purchasers warranted in the debenture purchase
agreement that it is not a "U.S. Person," as such term is defined in Rule 902(o)
of Regulation S, that the securities have not been offered to it in the United
States and that offers of securities of the Company shall not be made to United
States persons for a period of one year from the date of closing of all
debentures offered pursuant to the agreement.
On June 23, 2000, we agreed to issue 250,000 shares of our common stock
to the City of Moscow, Idaho (the sole beneficiary of the Estate of Bobby C.
Hamilton) as partial consideration for discharge of a debt due the Estate in the
approximate amount of $1,500,000. See "Management's Division and Analysis of
Financial Condition and Results of Operations - Financial Condition and
Liquidity."
On March 30, 2000, we sold 200,000 shares of our common stock to Thomas
H. McInish, an accredited investor, for $80,000 cash, or $0.40 per share.
On March 17, 2000, we issued to Thomson Kernaghan and Co. Limited 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. The certificate for these shares was
issued without a restrictive legend based on our erroneous belief that these
shares were registered under its Form S-8 Registration Statement filed on March
10, 2000 (File No. 333-32216).
On March 17, 2000, we issued to Blue Water Partners, Inc., in payment
of fees for financial consulting services, 150,000 shares of common stock
pursuant to our 2000 Stock Plan. The certificate for these shares was issued
without a restrictive legend based on our erroneous belief that these shares
were registered under its Form S-8 Registration Statement filed March 10, 2000
(File No. 333-32216).
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.
On January 3, 2000, we agreed to issue warrants to purchase 300,000
shares of unregistered common stock at $0.25 per share to A.W. Dugan. The
warrants expire January 25, 2003 and were issued in exchange for consulting
services valued at $10,000 provided to us.
Effective December 31, 1999, we issued 6,000 shares of common stock to
each of our three directors for services provided. These shares were valued at
$2,160 or $.12 per share.
On November 9, 1999, we issued 790,909 shares of common stock to the
Walter L. Maguire 1935-1 Trust, a trust related to a stockholder and our former
director, in connection with the settlement of litigation brought by the Trust.
The settlement resulted in discharge of our obligations to the Trust under
subordinated convertible debentures and convertible debentures totaling
$682,397, including principal and interest.
On October 4, 1999, we issued 245,852 shares of common stock in
Geosearch Inc., our creditor, in satisfaction of a debt due
Geosearch Inc. totaling $144,339, including principal and accrued interest.
On August 8, 1999, we issued 40,000 shares of common stock and warrants
to purchase 100,000 shares at $0.55 per share to Carlos Tejada, our consultant,
for services valued at $10,000.
On March 29, 1999, we issued stock bonuses aggregating 20,000 shares of
common stock to our employees. The shares were valued at $2,600 or $0.13 per
share.
On March 29, 1999, we sold 4,800 shares of common stock to an employee
for cash of $1,200, or $0.25 per share.
Effective December 31, 1998, we issued 25,000 shares of common stock to
Robert A. Rice, our director, in exchange for a $5,000 note receivable from Mr.
Rice. The note was satisfied in 1999 when Mr. Rice transferred to us equipment
having a fair market value equal to the amount of the note.
Effective December 31, 1998, we issued 6,000 shares of common stock to
each of our two directors for services provided. The shares were valued at
$1,687 or $0.14 per share.
Effective December 31, 1998, we sold 23,491 shares of our common stock
to Mike Rice, a relative of a director, Robert L. Rice, for services provided to
us with a fair value of $3,289.
On July 22, 1998, we sold 100,000 shares of our common stock and
100,000 warrants to purchase our common stock to A.W. Dugan, a stockholder and
accredited investor, for cash totaling $25,000. The warrants are exercisable at
$0.50 per share and expire July 28, 2001.
On February 17, 1998, we sold 40,000 shares of our common stock and
20,000 warrants to purchase our common stock to the Walter L. Maguire 1953
Trust, a trust related to Walter S. Maguire, Sr., who was a director until
December 31, 1998, for cash of $10,000. The warrants are exercisable at $0.50
per share and expire February 17, 2001.
On February 17, 1998, we sold 160,000 shares of our common stock and
80,000 warrants to purchase our common stock to Walter L. Maguire, Sr., a
former director, for cash of $40,000. The warrants are exercisable at
$0.50 per share and expire February 17, 2001. Mr. Maguire was an accredited
investor.
ITEM 27. EXHIBITS
The exhibits included as part of this Registration Statement are listed
on the Exhibit Index of this Registration Statement.
ITEM 28. UNDERTAKINGS (pursuant to Regulation S-B Item 512(a), (e))
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made
by the Selling Shareholder, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information set
forth in this Registration Statement; and
(iii)To include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
(e) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 ("Act") may be permitted to directors, officers and controlling persons
of the company pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment of expenses incurred or paid by a
director, officer or controlling person of the company in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, in
Thompson Falls, State of Montana, on November 5, 2001.
UNITED STATES ANTIMONY CORPORATION
By /s/John C. Lawrence
---------------------------------
John C. Lawrence, President and Chairman
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Capacity Date
/s/John C. Lawrence President and Chairman of the Board November 5, 2001
------------------------------------
John C. Lawrence (Principal Executive and Chief
Financial Officer and Director)
/s/Robert A. Rice Director November 5, 2001
------------------------------------
Robert A. Rice
/s/Leo Jackson Director November 6, 2001
------------------------------------
Leo Jackson
/s/Gary D. Babbitt Director November 6, 2001
------------------------------------
Gary D. Babbitt
EXHIBIT INDEX
to
registration statement on form sb-2
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.**
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.
5.01 Opinion of Sonfield and Sonfield*
10.0 Purchase Order from Kohler Company**
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
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 and 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.
10.45 Amended and Restated Agreements with Thomson Kernaghan and Co., Ltd. **
21.01 Subsidiary of USAC**
23.01 Consent of Sonfield and Sonfield (included in Exhibit 5.01) *
23.02 Consent of DeCoria, Maichel and Teague P.S. *
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.
**Previously filed.