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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2007
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period __________ to __________
Commission file number 33-00215
UNITED STATES ANTIMONY CORPORATION
(Name of small business issuer in its charter)
Montana 81-0305822
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
P.O. Box 643, Thompson Falls, Montana 59873
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (406) 827-3523
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $.01 per share
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act Yes [ ] No [X]
The registrant's revenues for its most recent fiscal year were $5,259,127.
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based on the average bid price of such stock, was $28,062,700 as of
March 20, 2008.
At March 20, 2008, the registrant had 42,519,243 outstanding shares of par value
$0.01 common stock.
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X ]
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TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS............................................ 2
General ...................................................... 2
History....................................................... 2
Overview-2007................................................. 2
Risk Factors.................................................. 2
Antimony Division............................................. 4
Zeolite Division.............................................. 5
Environmental Matters......................................... 6
Employees..................................................... 7
Other......................................................... 7
ITEM 2. DESCRIPTION OF PROPERTIES.......................................... 8
Antimony Division............................................. 8
Zeolite Division.............................................. 8
ITEM 3. LEGAL PROCEEDINGS.................................................. 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 8
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS............................................................ 8
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS......................................................... 9
ITEM 7. FINANCIAL STATEMENTS............................................... 10
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE................................ 11
ITEM 8-A CONTROLS AND PROCEDURES............................................ 11
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS, COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT .............................................................. 12
ITEM 10. EXECUTIVE COMPENSATION............................................. 13
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT......................................................... 14
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 15
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K................................... 16
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES............................. 19
SIGNATURES................................................................... 20
CERTIFICATIONS............................................................... 21
FINANCIAL STATEMENTS..................................................... F1-F24
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
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EXPLANATORY NOTE: As used in this report, the terms "we," "us" and "our"
are used to refer to United States Antimony Corporation and, as the context
requires, its management.
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Some of the information in this Form 10-KSB contains forward-looking statements
that involve substantial risks and uncertainties. You can identify these
statements by forward-looking words as "may," "will," "expect," "anticipate,"
"believe," "estimate" and "continue," or similar words. You should read
statements that contain these words carefully because they:
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.
HISTORY
United States Antimony Corporation ("USAC") was incorporated in Montana in
January 1970 to mine and produce antimony products. On April 1998 we formed
United States Antimony SA de CV ("USAMSA") to mine and smelt antimony in Mexico.
In December 1983, we suspended antimony mining operations but continued to
produce antimony products from domestic and foreign sources. On August 19, 2005,
USAC formed Antimonio de Mexico, S. A. de C. V. to explore and develop antimony
and silver deposits in Mexico. Bear River Zeolite Company ("BRZ") was
incorporated in 2000, and it mines and produces zeolite in southeastern Idaho.
Our principal business is the production and sale of antimony and zeolite
products.
OVERVIEW-2007
ANTIMONY SALES
During 2007, sales of our antimony products increased approximately 25% from
that of 2006. The profitability of the Antimony Division increased from $680,816
in 2006 to $681,137 in 2007.
ZEOLITE SALES
During 2007, sales of zeolite increased 4% in 2007 from 2006. Significant costs
were incurred by BRZ for the following:
o Expansion of the plant
o Construction of a new small packaging plant for odor control products
o Beginning the installation of a new fine-grinding plant o Installation
of line electricity
o Increased costs of fuel for drying, diesel-electric generators, and
trucking
o A large MSHA fine and the loss of two and a half months of production
o The process of running an unprofitable small packaging division
RISK FACTORS
There may be events in the future that we are not able to accurately predict or
over which we have no control. The risk factors listed below, as well as any
cautionary language in this report, provide examples of risks, uncertainties and
events that may cause our actual results to differ materially from the
expectations we describe in our forward-looking statements.
2
IF WE WERE LIQUIDATED, OUR COMMON SHAREHOLDERS COULD LOSE PART OR ALL OF THEIR
INVESTMENT.
In the event of our dissolution, the proceeds (if any) realized from the
liquidation of our assets will be distributed to our shareholders only after
satisfaction of claims of our creditors and preferred shareholders. The ability
of a purchaser of shares to recover all or any portion of the purchase price for
the shares in that event will depend on the amount of funds realized and the
claims to be satisfied by those funds.
WE HAVE AN ACCUMULATED DEFICIT, HAVE INCURRED SIGNIFICANT LOSSES, AND MAY INCUR
LOSSES IN THE FUTURE.
We have not generated an operating profit for several years. We have been able
to continue operations from gross profit from our antimony operations, sales of
common stock and borrowings from banks and others. As of December 31, 2007, we
had a stockholders' equity of $728,539. We may incur net losses for the
foreseeable future unless and until we are able to establish profitable business
operations and reduce cash outflows from general and administrative expenses. As
of December 31, 2007, we had total current assets of $503,037 and total current
liabilities of $1,850,139, or negative working capital of approximately
$1,347,102.
OUR AUDITORS' REPORT AS OF MARCH 20, 2008 RAISED DOUBT ABOUT OUR ABILITY TO
CONTINUE AS A GOING CONCERN.
Our audited financial statements for the year ended December 31, 2007, which are
included in this report, indicate that there was doubt about our ability to
continue as a going concern due to our need to generate cash from operations and
obtain additional financing.
WE ARE DELINQUENT OR IN ARREARS ON SIGNIFICANT CURRENT LIABILITIES; AND
COLLECTION EFFORTS BY CREDITORS COULD JEOPARDIZE OUR VIABILITY AS A GOING
CONCERN AND CLOSE DOWN OUR OPERATIONS.
As of December 31, 2007, we are delinquent on the payment of several current
liabilities including accounts payable of approximately $251,136 and accrued
interest payable of approximately $70,001. In the absence of payment
arrangements, creditors could individually or collectively demand immediate
payment and jeopardize our ability to fund operations and correspondingly damage
our business. Creditors who are owed taxes have the power to seize our assets
for payment of amounts past due and close down our operations.
CAPITAL TO MEET OUR FUTURE NEEDS FOR ANTIMONY AND ZEOLITE PRODUCTION MAY BE
UNAVAILABLE.
In order to ensure that the number of shares outstanding does not exceed the
amount authorized, the Company has no plans on selling additional shares of
common stock in the near future, will not authorize any grants under the stock
plan, and the president of the Company will not convert the note payable due
him. The Company plans to pursue increasing its authorized shares during 2008.
In the meantime, the Company is not able to raise funds by selling shares of its
common stock (see going concern discussion in Note 1 to the financial
statements). Further, additional debt funding may not be available on favorable
terms, if at all.
OUR EXISTING DEBT IS SECURED BY PLEDGES TO THE BANK AND TO OUR PRESIDENT, JOHN
C. LAWRENCE, OF SUBSTANTIALLY ALL OF OUR ASSETS. THEREFORE, A DEFAULT IN THE
PAYMENT OF ANY SECURED DEBT COULD RESULT IN A LOSS OF THE RELATED ASSETS AND OUR
ABILITY TO CONTINUE OPERATIONS.
As of December 31, 2007, our debt of approximately $36,601 is secured by a
collateral pledge of substantially all of our mining equipment. Pursuant to the
terms of convertible note payable, we owe quarterly interest payments, which if
we don't or are unable to pay will result in a default on the notes. Our
president, John C. Lawrence, has also guaranteed repayment of all our bank debt
and has a secured interest in our assets as well. 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.
WE MAY HAVE UNASSERTED LIABILITIES FOR ENVIRONMENTAL RECLAMATION.
Our research, development, manufacturing and production processes involve the
controlled use of hazardous materials, and we are 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 one ongoing environmental reclamation and
remediation projects at our current production facility in Montana. 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 our financial
condition and us. The range of reasonably
3
possible losses from our exposure to environmental liabilities in excess of
amounts accrued to date cannot be reasonably estimated at this time.
WE HAVE ACCRUALS FOR ENVIRONMENTAL OBLIGATIONS.
We have accruals totaling $107,500 on our balance sheet at December 31, 2007,
for our environmental reclamation responsibilities. If we are not able to
adequately perform our reclamation activities on a timely basis, we could be
subject to fines and penalties from regulatory agencies.
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 2 patented lode claims 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.
Environmental restrictions preclude mining at this site.
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.
Because we depend on foreign sources for raw materials, there are risks of
interruption in procurement from these sources and/or volatile changes in world
market prices for these materials that are not controllable by us.
We currently own 100% of the common stock, equipment, and the lease on real
property of United States Antimony, Mexico S.A. de C.V. ("USAMSA"), which was
formed in April 1998. During 2007, USAC spent approximately $344,000 in the form
of cash to purchase the equipment, a lease on the real property, and other
exploration costs. An additional $115,470 was spent to upgrade the plant which
includes furnaces, dust collectors, a furnace building, warehouse, scrubber,
office and laboratory, and slag repository. It is ready to put into operation.
The San Miguel mine is located in the State of Queretaro, Mexico. The mine is
currently permitted. A mill site with water has been located and a permit for
the mill is expected shortly. The mill equipment has been assembled in Montana
to ship to the mill site. Production from the mine and mill should begin during
2008. We currently own 100% of the stock in Antimonia de Mexico SA de CV which
owns the San Miguel Mine.
In our existing operations in Montana, from antimony raw materials, we produce
antimony oxide products of different particle size using proprietary furnace
technology, several grades of sodium antimonate using hydro metallurgical
techniques, and antimony metal. 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 an opacifier for
porcelains. Sodium antimonate is primarily used as a fining agent (degasser) for
glass in cathode ray tubes used in 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 3%. We are the only
significant U.S. producer of antimony products. The balance of domestic sales is
foreign imports (primarily from China).
For the year ended December 31, 2007, we sold 1,634,670 pounds of antimony
products generating approximately $4,117,000 in revenues which is an increase of
25%. During 2006, we sold 1,421,083 pounds of antimony products generating
$3,292,000. During 2007 and 2006, approximately 49% and 68%, respectively, of
our antimony sales were made to one customer.
MARKETING We employ full-time marketing personnel and have negotiated various
commission based sales agreements with other chemical distribution companies.
4
ANTIMONY PRICE FLUCTUATIONS: Our operating results have been, and will continue
to be, directly related to the market prices of antimony metal, which have
fluctuated widely in recent years. 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
---- -------------
2007 $2.52
2006 2.28
2005 1.73
2004 1.32
2003 1.21
2002 0.88
2001 0.58
2000 0.67
The range of sales prices for antimony oxide per pound was as follows for the
periods indicated:
YEAR HIGH LOW AVERAGE PRICE
---- ---- --- -------------
2007 5.45 2.23 $2.52
2006 5.14 1.76 2.28
2005 5.45 1.36 1.58
2004 5.45 0.95 1.48
2003 5.45 1.01 1.27
2002 5.25 0.71 0.99
2001 5.99 0.66 0.93
2000 5.88 0.65 0.99
Antimony metal prices are determined by a number of variables over which we have
no control. These include the availability and price of imported metals, the
quantity of new metal supply, and industrial and commercial demand. If metal
prices decline and remain depressed, our revenues and profitability may be
adversely affected.
We use various antimony raw materials to produce our products. We currently
obtain antimony raw material from sources in Canada and the U.S.
ZEOLITE DIVISION
We own 100% of Bear River Zeolite Company (BRZ), an Idaho corporation
incorporated on June 1, 2000. BRZ has a lease with Webster Farm, L.L.C. that
entitles BRZ to surface mine and process zeolite on property located near
Preston, Idaho, in exchange for a royalty payment. The royalty is a percentage
of the zeolite sales price (FOB mine). The minimum annual royalty during the
first five years is $1,000. During 2002, we sold additional royalty interests in
BRZ to a company controlled by Al Dugan, a majority shareholder and, as such, an
affiliate. The royalties granted Mr. Dugan's company a payment equal to 3% of
all gross sales (FOB mine) on zeolite products. On a combined basis, royalties
vary from 8%-13%. BRZ has constructed a processing plant on the property and is
currently improving its productive capacity. Through December 31, 2007, we had
spent approximately $3,000,000 to purchase and construct the processing plant
and develop sales.
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 hold cations such as calcium, sodium, ammonium and
potassium in their crystal lattice. Water is loosely held in cavities in the
lattice. BRZ's zeolite deposits have characteristics, which make the mineral
useful for a variety of purposes including:
5
o Soil Amendment and Fertilizer. Zeolite has been successfully used to
fertilize golf courses, sports fields, parks and common areas, and
high value crops, including corn, potatoes, soybeans, red beets, acorn
squash, green beans, sorghum sudangrass, brussel sprouts, cabbage,
carrots, tomatoes, cauliflower, radishes, strawberries, wheat, lettuce
and broccoli.
o Water Filtration. Zeolite is used for particulate, heavy metal and
ammonium removal in swimming pools, municipal water systems,
fisheries, fish farms, and aquariums.
o Sewage Treatment. Zeolite is used in sewage treatment plants to remove
nitrogen and as a carrier for microorganisms.
o Nuclear Waste and Other Environmental Cleanup. Zeolite has shown a
strong ability to selectively remove strontium, cesium and various
other radioactive isotopes from solution. Zeolite can also be used for
the cleanup of soluble metals such as mercury, chromium, copper, 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 manure. The
ability of zeolite to absorb ammonium prevents the formation of
ammonia gas, which generates the odor.
o Gas Separation. Zeolite has been used for some time to separate gases,
to re-oxygenate downstream water from sewage plants, smelters, pulp
and paper plants, and fish ponds and tanks, and to remove carbon
dioxide, sulfur dioxide and hydrogen sulfide from methane generators
as organic waste, sanitary landfills, municipal sewage systems and
animal waste treatment facilities.
o Animal Nutrition. Feeding up to 2% zeolite increases growth rates,
decreases conversion rates, prevents worms, and increases longevity.
o Miscellaneous Uses. Other uses include catalysts, petroleum refining,
building applications, solar energy and heat exchange, desiccants,
pellet binding, horse and kitty litter, floor cleaner and carriers for
insecticides, pesticides and herbicides.
ENVIRONMENTAL MATTERS
Our exploration, development and production programs conducted in the United
States are subject to local, state and federal regulations regarding
environmental protection. Some of our production and mining activities are
conducted on public lands. We believe that our current discharge of waste
materials from our processing facilities is in material compliance with
environmental regulations and health and safety standards. The U.S. Forest
Service extensively regulates mining operations conducted in National Forests.
Department of Interior regulations cover mining operations carried out on most
other public lands. All operations by us involving the exploration for or the
production of minerals are subject to existing laws and regulations relating to
exploration procedures, safety precautions, employee health and safety, air
quality standards, pollution of water sources, waste materials, odor, noise,
dust and other environmental protection requirements adopted by federal, state
and local governmental authorities. We may be required to prepare and present to
the authorities data pertaining to the effect or impact that any proposed
exploration for or production of minerals may have upon the environment. Any
changes to our reclamation and remediation plans, which may be required due to
changes in state or federal regulations, could have an adverse effect on our
operations. The range of reasonably possible loss in excess of the amounts
accrued, by site, cannot be reasonably estimated at this time.
We accrue environmental liabilities when the occurrence of such liabilities is
probable and the costs are reasonably estimable. The initial accruals for all
our sites are based on comprehensive remediation plans approved by the various
regulatory agencies in connection with permitting or bonding requirements. Our
accruals are further based on presently enacted regulatory requirements and
adjusted only when changes in requirements occur or when management revises its
estimate of costs required to comply with existing requirements. As remediation
activity has physically commenced, management has been able to refine and revise
its estimates of costs required to fulfill future environmental tasks based on
contemporaneous cost information, operating experience, and changes in
regulatory requirements. In instances where costs required to complete our
remaining environmental obligations are clearly determined to be in excess of
the existing accrual, we have adjusted the accrual accordingly. When regulatory
agencies require additional tasks to be performed in connection with our
environmental responsibilities, we evaluate the costs required to perform those
tasks and adjust our accrual accordingly as the information becomes available.
In all cases, however, our accrual at year-end is based on the best information
available at that time to develop estimates of environmental liabilities.
6
YANKEE FORK MILL SITE.
During 2006, USAC finished the bulk of the reclamation work at the Yankee Fork
mill site. On December 18, 2006, the Idaho Department of Environmental Quality
terminated the voluntary Consent Order. On January 22, 2007, the Department
dropped the requirement for any additional groundwater quality monitoring.
ANTIMONY PROCESSING SITE.
We have environmental remediation obligations at our antimony processing site
near Thompson Falls, Montana ("the Stibnite Hill Mine Site"). Under the
regulatory jurisdiction of the U.S. Forest Service and subject to the operating
permit requirements of the Montana Department of Environmental Quality require
that we line a storm water pond and construct a water treatment facility and
thus fulfill the majority of our environmental responsibilities at the Stibnite
Hill Mine site. At December 31, 2007, we have accrued $100,000.
YELLOW JACKET MINE.
During 2006, USAC received a reclamation award for the Yellow Jacket Mine from
the U. S. Forest Service, Idaho Department of Lands, U. S. Department of the
Interior Bureau of Land Management, Idaho Department of Water Resources, and
Idaho Fish and Game.
BRZ.
During 2001, we recorded a reclamation accrual for our Bear River Zeolite
subsidiary, based on an analysis performed by management and reviewed and
approved by regulatory authorities for environmental bonding purposes. The
accrual of $7,500 represents the Company's estimated costs of reclaiming, in
accordance with regulatory requirements; the acreage disturbed by our zeolite
operations and remains unchanged at December 31, 2007.
GENERAL.
Reclamation activities at the Thompson Falls Antimony Plant have proceeded under
supervision of the U.S. Forest Service and applicable State Departments of
Environmental Quality. We have complied with regulators' requirements and do not
expect the imposition of substantial additional requirements.
We have posted cash performance bonds with a bank and the U.S. Forest Service in
connection with our reclamation activities. In 2004, 2002 and 2001, the U.S.
Forest Service released a substantial portion of the environmental bonding funds
that had been deposited for remediation of the Yellow Jacket Mine.
We believe we have accrued adequate reserves to fulfill our environmental
remediation responsibilities as of December 31, 2007. We have made significant
reclamation and remediation progress on all our properties over the past three
years and have complied with regulatory requirements in our environmental
remediation efforts.
EMPLOYEES
As of December 31, 2007, we employed 52 full-time employees. The number of
full-time employees may vary seasonally. None of our employees are covered by
any collective bargaining agreement.
OTHER
We hold no material patents, licenses, franchises or concessions, however we
consider our antimony processing plant proprietary in nature. We use the trade
name "Montana Brand Antimony Oxide" for marketing our antimony products.
We are subject to the requirements of the Federal Mining Safety and Health Act
of 1977, the Occupational Safety and Health Administration's regulations,
requirements of the state of Montana and the state of Idaho, federal and state
health and safety statutes and Sanders County, Lemhi County and Custer County
health ordinances.
7
ITEM 2. DESCRIPTION OF PROPERTIES
ANTIMONY DIVISION
Our principal plant and mine are located in the Burns Mining District, Sanders
County, Montana, approximately 15 miles west of Thompson Falls, Montana. We hold
2 patented mill sites and 2 patented lode mining claims covering approximately
50 acres. The lode claims are contiguous.
Antimony mining and milling operations were curtailed during 1983 due to
continued declines in the price of antimony. We are currently purchasing foreign
raw antimony materials and continue to produce antimony metal, oxide and sodium
antimonate from our antimony processing facility near Thompson Falls, Montana.
ZEOLITE DIVISION
We own 100% of Bear River Zeolite Company ("BRZ"), an Idaho corporation
incorporated on June 1, 2000. BRZ has entered into a mining lease with Webster
Farm, L.L.C. that entitles BRZ to surface mine and process zeolite on property
located near Preston, Idaho, in exchange for royalty payments. The royalty is a
percentage of the processed ore sale price (FOB mine). 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. We are also subject to a 3% royalty on all gross zeolite sales
(FOB mine), payable to a company controlled by Al Dugan, a major shareholder and
an affiliate. On a combined basis, royalties vary from 8%-13%. BRZ has
constructed a processing plant on the property.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any pending legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 2007.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Currently, our common stock is traded on the Over the Counter Bulletin Board
("OTCBB") under the symbol "UAMY." The following table sets forth the range of
high and low bid prices as reported by the OTCBB for the periods indicated. The
quotations reflect inter-dealer prices without retail mark-up, markdown or
commission, and may not necessarily represent actual transactions.
2007 HIGH LOW
---- ---- ---
First Quarter $0.72 $0.39
Second Quarter 0.91 0.54
Third Quarter 0.81 0.47
Fourth Quarter 0.71 0.42
2006 HIGH LOW
---- ---- ---
First Quarter $0.68 $0.45
Second Quarter 0.75 0.40
Third Quarter 0.60 0.35
Fourth Quarter 0.59 0.39
The approximate number of record holders of our common stock at March 20, 2008
is 2,526.
8
We have not declared or paid any dividends to our stockholders during the last
five years and do not anticipate paying dividends on our common stock in the
foreseeable future. Instead, we expect to retain earnings, if any, for the
operation and expansion of our business.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Certain matters discussed are forward-looking statements that involve risks and
uncertainties, including the impact of antimony prices and production
volatility, changing market conditions and the regulatory environment and other
risks. Actual results may differ materially from those projected. These
forward-looking statements represent the Company's judgment as of the date of
this filing. The Company disclaims, however, any intent or obligation to update
these forward-looking statements.
RESULTS OF OPERATIONS
The Company reported a net loss of $623,692 in 2007 compared to a net loss of
$284,658 in 2006.
In the Antimony Division, sales increased from $3,292,109 in 2006 to $4,116,863
in 2007, an increase of 25%. Gross profit from antimony operations rose from
$680,816 in 2006 to $681,137 in 2007. The increases in revenues and gross profit
were due to sharp price increases in antimony and the processing of a legacy
stock pile owned by the Company. Sales of antimony products during the year
ended December 31, 2007 consisted of 1,634,670 pounds at an average sale price
of $2.52 per pound. During the year ended December 31, 2006, sales of antimony
products consisted of 1,421,083 pounds at an average sale price of $2.28 per
pound. Combined costs of antimony sales were $3,435,726 or $2.10 per pound sold
for the year ended December 31, 2007, as compared to $2,611,293 or $1.84 per
pound sold for the year ended December 31, 2006. Depreciation expense in the
Antimony division was $20,502 during 2007 compared to $24,205 during 2006.
Direct sales expenses were $44,328 for 2007 compared to $60,142 for 2006.
Total sales of zeolite products were $1,142,264 for 2007, compared with
$1,103,259 for 2006, an increase of 4%. Combined costs of zeolite sales were
$1,851,704 for 2007, compared with $1,560,863 for 2006. The tons shipped in 2007
were 9,147 tons at an average price of $124.88 per ton compared to 9,696 tons at
an average price of $112.91 in 2006, a 6% decrease in tonnage. Depreciation
expense was $144,912 for BRZ during 2007, compared to $109,259 during 2006.
Direct sales expenses for 2007 were $64,395 compared to $68,204 for 2006. The
loss from operations in 2007 was $709,440, which increased from $457,604 in
2006. This increase in the loss from operations was due to increased fuel costs
for diesel electric generators, equipment, and drying; a large MSHA fine; 2 1/2
months of lost production due to an accident and an unprofitable packaging
division.
The Company sold certain sales rights for the sale of zeolite for $300,000 and
$500,000 during 2007 and 2006, respectively. The agreement calls for shipping
zeolite product under this agreement beginning in 2008. At December 31, 2007,
the $800,000 has been recorded as deferred revenue and will be recognized over
the term of the agreement. The funds have been used in the installation of the
Raymond fine-grinding mill. Other improvements at the BRZ plant this year
include the installation of a small packaging plant: the installation of a
semi-automatic packaging line for large bags; the completion of the Raymond Mill
and the installation of line electricity.
During 2007, the Company incurred corporate general and administrative expenses
totaling $434,088, compared with $349,511 during 2006. The Company incurred
$256,611 of exploration expense during 2007 compared to $211,098 in 2006. The
exploration was on property located in Mexico.
The Company continued its sale of the surface rights of idle mining claims. In
2007, the Company sold $145,420 worth of claims compared to $70,000 in 2006. The
money was applied primarily to the retirement of bank debt, and the sales have
continued into 2008.
Reclamation at the Yellow Jacket Mine and the Yankee Fork Mill site is complete.
Revision in management estimates for remaining reclamation obligations resulted
in a decrease in overall reclamation accrual of $35,000 in 2006. There were no
revisions in 2007.
Net interest expense was $45,444 for 2007, compared with $127,294 for 2006.
Accounts receivable factoring expense was $94,989 for 2007, compared with
$89,211 for 2006.
9
FINANCIAL CONDITION AND LIQUIDITY
At December 31, 2007, Company assets totaled $3,345,889, and stockholders'
equity was $728,539. At December 31, 2007, the Company's total current
liabilities exceeded its total current assets by $1,347,102. Due to the
Company's operating losses and other liquidity concerns, the Company's
independent accountants included a paragraph in its report on our 2007 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 exercise of warrants to
purchase shares of common stock or 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 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.
In order to ensure that the number of shares outstanding does not exceed the
amount authorized, the Company has no plans on selling additional shares of
common stock in the near future, will not authorize any grants under the stock
plan, and the president of the Company will not convert the note payable due
him. The Company plans to pursue increasing its authorized shares during 2008.
In the meantime, the Company is not able to raise funds by selling shares of its
common stock (see going concern discussion in Note 1 to the financial
statements).
Other significant financial commitments for future periods will include:
o Servicing notes payable to bank.
o Paying delinquent property and payroll tax liabilities and accounts
payable.
o Fulfilling responsibilities with environmental, labor safety and
securities regulatory agencies.
o Keeping current with the interest payment requirements of an unsecured
convertible note payable.
We are currently in compliance with certain covenants of our notes payable
with First State Bank of Thompson Falls (Montana). The total balance of
these notes at December 31, 2007 was $36,601. These notes are personally
guaranteed by the Company's president, John C. Lawrence. During 2006, the
Company was not in compliance with certain covenants, related to not paying
payroll and property taxes when due, of its notes payable. As in past
years, the Company obtained a waiver from the bank indicating that they
will not call the notes due as a result of this non-compliance through
December 31, 2007.
Cash used by operating activities during 2007 was $347,295.
Cash used by investing activities during 2007 was $400,637, which was primarily
related to the construction and purchases of capital assets used at the Bear
River Zeolite facility and for Mexican investments.
The Company was able to fund its operating loss and its acquisition of plant and
equipment during 2007 from net cash provided by financing activities of
$611,314, including $834,578 generated from sales of unregistered common stock
and warrants.
The Company sold certain sales rights for the sale of zeolite for $300,000 and
$500,000 during 2007 and 2006, respectively. The agreement calls for shipping
zeolite product under this agreement in 2008. At December 31, 2007, the $800,000
has been recorded as deferred revenue and will be recognized over the term of
the agreement. The funds have been used in the installation of the Raymond
fine-grinding mill. Other improvements at the BRZ plant this year include the
installation of a small packaging plant: the installation of a semi-automatic
packaging line for large bags; the completion of the Raymond Mill and the
installation of line electricity.
The Company hopes that it will have additional financial resources from
increasing gross profits from its antimony business and sales of zeolite from
BRZ.
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements of the registrant are included herein on
pages F1-F24.
10
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 8-A. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND
PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms, and that such information
is accumulated and communicated to management, as appropriate, to allow timely
decisions regarding required disclosure. Our president, who serves as the chief
accounting officer, conducted an evaluation of the effectiveness of the
Company's disclosure controls and procedures (as defined in the Securities
Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of December 31, 2007.
Based upon this evaluation, it was determined that there were material
weaknesses affecting our internal control over financial reporting (descried
below) and, as a result of those weaknesses, our disclosure controls and
procedures were not effective as of December 31, 2007.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Management's annual report on internal control over financial reporting
-----------------------------------------------------------------------
The management of United States Antimony Corporation is responsible for
establishing and maintaining adequate internal control over financial reporting.
This internal control system has been designed to provide reasonable assurance
to the Company's management and Board of Directors regarding the preparation and
fair presentation of the Company's published financial statements.
All internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation.
The management of United States Antimony Corporation has assessed the
effectiveness of the Company's internal control over financial reporting as of
December 31, 2007. To make this assessment, we used the criteria for effective
internal control over financial reporting described in Internal
Control-Integrated Framework, issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
As a result of our assessment, we concluded that we have material weaknesses in
our internal control over financial reporting as of December 31, 2007. These
weaknesses are as follows:
o The Company does not have either internally or on its Board of
Directors the expertise to produce financial statements to be filed
with the SEC.
o The Company lacks proper segregation of duties. As with any company
the size of this Company, this lack of segregation of duties is due to
limited resources. The president authorizes the majority of the
expenditures and signs checks.
o The Company lacks accounting personnel with sufficient skills and
experience to ensure proper accounting for complex, non-routine
transactions.
o During its year end audit, our independent registered accountants
discovered material misstatements in our financial statements that
required audit adjustments.
We are aware of these material weaknesses and will develop procedures to ensure
that independent review of material transactions is performed. In addition, we
plan to consult with independent experts when complex transactions are entered
into.
11
Because these material weaknesses exist, management has concluded that the
Company's internal control over financial reporting as of December 31, 2007 is
not effective.
This annual report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the company to provide only management's
report in this annual report.
Changes in internal control over financial reporting
----------------------------------------------------
There have been no changes, during the quarter ended December 31, 2007, in the
Company's internal controls over financial reporting that have materially
affected, or are reasonably likely to materially affect, internal controls over
financial reporting.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
Identification of directors and executive officers at December 31, 2007, is as
follows:
Name Age Affiliation Expiration of Term
---- --- ----------- ------------------
John C. Lawrence 69 Chairman, President, Annual meeting
Secretary, and Treasurer;
Director
Leo Jackson 64 Director Annual meeting
Gary A. Babbitt 62 Director Annual meeting
Patrick W. Dugan, Esq. 55 Director Annual meeting
Russell C. Lawrence 39 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.
He has a vast background in mining, milling, smelting, chemical processing and
oil and gas.
LEO JACKSON. Mr. Jackson is a resident of El Paso, Texas. For the past 15 years,
he has been a principal owner and the president of Production Minerals, Inc., a
company which has an indirect 25% interest in the stock of USAMSA. Mr. Jackson
is one of the principal owners of Minera de Roja, S.A. de C.V., and has been
involved in the production and marketing of industrial minerals such as
fluorspar and celestite in the United States and Mexico for 25 years. Mr.
Jackson speaks fluent Spanish and has a BBA degree from the Sul Ross State
University in Texas.
GARY A. BABBITT. Mr. Babbitt has experience in mining industry with 30 years
dealing with joint ventures, financing, contracting and employment. He is
currently a partner in a business in Guadalajara, has a working knowledge of
Spanish and has negotiated contracts in Latin America. Mr. Babbitt has a B.A.
from the Albertson College of Idaho, and earned his J.D. from the University of
Chicago.
PATRICK W. DUGAN, ESQ. Mr. Dugan has been a Director, Vice President and General
Counsel of Nortex Corporation, a company involved in the oil and gas business,
for the past 17 years. He is also a Director, Vice President and General Counsel
of San Luis Development, L.P., and a Director of Gow Communications, LLC. Mr.
Dugan graduated with a B.A. and a J.D. from the University of Texas at Austin.
12
RUSSELL C. LAWRENCE. Mr. Lawrence has experience in the lines of applied
physics, mining, refining, excavation, electricity, electronics, and building
contracting. He graduated from the University of Idaho with a degree in physics
in 1994 and worked for the Physics Department at the University of Idaho for a
period of 10 years. He has also worked as a building contractor and for USAC at
the smelter and laboratory at Thompson Falls, for USAMSA in the construction of
the USAMSA smelter in Mexico, and for Antimonio de Mexico, S. A. de C. V. at the
San Miguel Mine and the Cadereyta mill site in Mexico.
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.
Robert A. Rice resigned from the Board of Directors in May 2006 due to health
problems.
Board Meetings and Committees. Our Board of Directors held six (6) regular
meetings during the 2007 calendar year. Each incumbent director attended at
least 75% of the meetings held during the 2007 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.
Our Board of Directors has established an Audit Committee consisting of one
member (Gary Babbitt) of the Board of Directors not involved in our day-to-day
financial management. Mr. Babbitt is not considered a financial expert; the
Company does not have the necessary capital resources to attract and retain an
independent financial expert to serve on its Audit Committee.
Board Member Compensation. We paid directors' fees in the form of 45,500 shares
of our common stock per director during 2007.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of the
Securities Exchange Act of 1934 requires our directors and executive officers
and the holders of 10% or more of our common stock to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. Officers,
directors and stockholders holding more than 10% of our common stock are
required by the regulation to furnish us with copies of all Section 16(a) forms
they have filed.
Based solely on our review of copies of Forms 3, 4 and 5 furnished to us, Mr.
Lawrence, Mr. Jackson, Mr. Babbitt, Mr. Dugan and Mr. Lawrence did not file
timely Forms 3, 4 or Form 5 reports during 2007.
Code of Ethics
The Company has adopted a Code of Ethics that applies to the Company's executive
officers and its directors. The Company will provide, without charge, a copy of
the Code of Ethics on the written request of any person addressed to the Company
at: United States Antimony Corporation, P.O. Box 643, Thompson Falls, MT 59873.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Securities and Exchange Commission requires the following table setting
forth for fiscal years ending December 31, 2007, 2006 and 2005; the compensation
paid by USAC to its principal executive officer.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS PAYOUTS
Restricted Securities
Other Annual Compensation Options/ Underlying All Other All Other
Name and Principal Position Year Salary Bonus (1) Awards(2) LTIP SARs Payouts Compensation
------------------------------ ------ --------- ------------ -------------- ---------- ----------- --------- ------------
John C. Lawrence, President 2007 $96,000 N/A $5,538 $5,270 None None None
------------------------------ ------ --------- ------------ -------------- ---------- ----------- --------- ------------
John C. Lawrence, President 2006 $96,000 N/A $5,538 $10,140 None None None
------------------------------ ------ --------- ------------ -------------- ---------- ----------- --------- ------------
John C. Lawrence, President 2005 $96,000 N/A $5,538 $7,150 None None None
------------------------------ ------ --------- ------------ -------------- ---------- ----------- --------- ------------
(1) Represents earned but unused vacation.
(2) These figures represent the fair values, as of the date of issuance, of the
annual director's fee payable to Mr. Lawrence in the form of shares of
USAC's common stock.
13
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of our
common stock as of March 20, 2008, by (i) each person who is known by us to
beneficially own more than 5% of our Series A, C, and D preferred stock or
common stock; (ii) each of our executive officers and directors; and (iii) all
of our executive officers and directors as a group. Unless otherwise stated,
each person's address is c/o United States Antimony Corporation, P.O. Box 643,
1250 Prospect Creek Road, Thompson Falls, Montana 59873.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP CLASS(1)
-------------- ------------------- -------------------- --------
Common stock Reed Family Limited Partnership 6,375,000 15
328 Adams Street
Milton, MA 02186
--------------------------------------------------------------------------------------------------
Common stock The Dugan Family 8,244,094(3) 19
c/o A. W. Dugan
1415 Louisiana Street, Suite 3100
Houston, TX 77002
--------------------------------------------------------------------------------------------------
Series C Preferred Richard A. Woods 48,305(6) 27
59 Penn Circle West
Penn Plaza Apts.
Pittsburgh, PA 15206
--------------------------------------------------------------------------------------------------
Series C Preferred Dr. Warren A. Evans 48,305(6) 27
69 Ponfret Landing Road
Brooklyn, CT 06234
--------------------------------------------------------------------------------------------------
Series C Preferred Edward Robinson 32,203(6) 18
1007 Spruce Street 1st Floor
Philadelphia, PA 19107
--------------------------------------------------------------------------------------------------
Common stock John C. Lawrence 3,982,298(2) 9
Common stock Robert A. Rice 404,021 Nil
Common stock Leo Jackson 170,645 Nil
Common stock Gary Babbitt 101,979 Nil
--------------------------------------------------------------------------------------------------
Series D Preferred John C. Lawrence 1,701,857(5)(6) 91
Series D Preferred Leo Jackson 102,000 5
--------------------------------------------------------------------------------------------------
Series D Preferred All directors and executive
officers as a group (3 persons) 1,751,005 100
--------------------------------------------------------------------------------------------------
(1) Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock subject
to options or warrants currently exercisable or convertible, or exercisable
or convertible within 60 days of March 20, 2008 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 42,519,243 shares of common stock,
177,904 shares of Series C Preferred Stock, and 1,751,005 shares of Series
D Preferred Stock outstanding on March 20, 2008.
(2) Includes 2,232,298 shares of common stock and 1,250,000 stock purchase
warrants, plus 500,000 shares issuable through the conversion of a
convertible note payable. Excludes 158,324 shares owned by Mr. Lawrence's
sister, as to which Mr. Lawrence disclaims beneficial ownership.
14
(3) Includes 4,520,017 shares owned by Al W. Dugan and 1,724,077 shares, in the
aggregate, owned by companies owned and controlled by Al W. Dugan. Excludes
183,333 shares owned by Lydia Dugan as to which Mr. Dugan disclaims
beneficial ownership.
(5) Includes 1,590,672 shares of Series D preferred stock and warrants to
purchase 111,185 shares of Series D Preferred Stock.
(6) The outstanding Series A, Series C and Series D preferred shares carry
voting rights.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Described below are transactions during the last two years to which we are a
party and in which any director, executive officer or beneficial owner of five
percent (5%) or more of any class of our voting securities or relatives of our
directors, executive officers or five percent (5%) beneficial owners has a
direct or indirect material interest. See also transactions described in notes
4, 7, 10, 11, 12, 13 and 16 to our Financial Statements as of December 31, 2007.
o Leo Jackson, a director, is a principal owner and president of Production
Minerals, Inc., a company which indirectly owned 25% of the stock of
USAMSA. During 2006, we purchased Production Mineral's interest in USAMSA
for 100,000 shares of unregistered common stock valued at $61,000.
o We reimbursed John C. Lawrence, a director and Chief Executive Officer, for
operational and maintenance expenses incurred in connection with our use of
equipment owned by Mr. Lawrence, including welding trucks, backhoes, and an
aircraft. Reimbursements for 2007 and 2006 totaled $61,247 and $75,041,
respectively. In addition, we accrued interest expense of $19,075 and
$21,234 on net advances due Mr. Lawrence, for the years ended December 31,
2007 and 2006, respectively.
o During 2007, the Company issued 45,500 of its common stock to its Board of
Directors as compensation for their services as directors. In connection
with the issuances, the Company recorded $96,655 in director compensation
expense.
o During 2006, the Company issued 22,750 shares of its common stock to each
member of its Board of Directors as compensation for their services as
directors and 225,000 shares to two directors for services performed in
development of Mexico operations.
o In 2006, the Company issued 45,000 shares of its common stock and warrants
in exchange for equipment purchased from one director.
o During 2007, the Board of Directors resolved that 6,667 shares of the
Company's Series D preferred stock held by Gary Babbitt, the Company's
former attorney and director, be cancelled and then reissued in an equal
number of shares of the Company's common stock.
o During 2006, the Board of Directors resolved that 256,000 shares of the
Company's Series D preferred stock be cancelled and reissued in an equal
number of shares of the company's common stock. The shares were held by the
Company's directors or former directors as follows: John Lawrence 26,000
shares; Robert Rice 128,000 shares, Lee Jackson 26,000 shares and Gary
Babbitt 76,000 shares.
o On December 22, 2003, the Company and its wholly-owned subsidiary BRZ,
entered into a Pledge, Assignment, and Security Agreement ("the Agreement")
with Delaware Royalty Company, Inc. ("Delaware"), a company controlled by
Al Dugan, a major shareholder of the Company. The Agreement was in
connection with the purchase of a $250,000 Secured Convertible Note Payable
("the Secured Note"), by Delaware from the Company. The Secured Note and
accrued interest of $31,250 were converted to 1,406,250 shares of common
stock in September of 2006.
15
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
3.01 Articles of Incorporation of USAC, filed as an exhibit to
USAC's Form 10-KSB for the fiscal year ended December 31,
1995 (File No.001-08675), are incorporated herein by this
reference.
3.02 Amended and Restated Bylaws of USAC, filed as an exhibit
to amendment No. 2 to USAC's Form SB-2 Registration
Statement (Reg. No. 333-45508) are incorporated herein by
this reference.
3.03 Articles of Correction of Restated Articles of
Incorporation of USAC.
3.04 Articles of Amendment to the Articles of Incorporation of
United States Antimony Corporation, filed as an exhibit to
USAC's Form 10-QSB for the quarter ended September 30,
2002 (File No. 001-08675), are incorporated herein by this
reference.
4.01 Key Employees 2000 Stock Plan, filed as an exhibit to
USAC's Form S-8 Registration Statement filed on March 10,
2000 (File No. 333-32216) is incorporated herein by this
reference.
Documents filed with USAC's Annual Report on Form 10-KSB for the year ended
December 31, 1995 (File No. 001-08675), 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
16
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. 001-08675), 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-Al 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) is 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-Carlos Tejada
10.37 Warrant Issue-Al W. Dugan
10.38 Memorandum of Understanding with Geosearch Inc.
10.39 Factoring Agreement-Systran Financial Services Company
10.40 Mortgage to John C. Lawrence
10.41 Warrant Issue-Al W. Dugan filed as an exhibit to USAC's
Quarterly Report on Form 10-QSB for the quarter ended
March 31, 2000 (File No. 001-08675) is incorporated herein
by this reference
10.42 Agreement between United States Antimony Corporation and
Thomson Kernaghan & Co., Ltd. filed as an exhibit to USAC
form 10-QSB for the quarter ended June 30, 2000 (File No.
001-08675) are incorporated herein by this reference.
10.43 Settlement agreement and release of all claims between the
Estate of Bobby C. Hamilton and United States Antimony
Corporation filed as an exhibit to USAC form 10-QSB for
the quarter ended June 30, 2000 (File No. 001-08675) are
incorporated herein by this reference.
10.44 Supply Contracts with Fortune America Trading Ltd. filed
as an exhibit to USAC form 10-QSB for the quarter ended
June 30, 2000 (File No. 001-08675) are incorporated herein
by this reference.
17
10.45 Amended and Restated Agreements with Thomson Kernaghan &
Co., Ltd, filed as an exhibit to amendment No. 3 to USAC's
Form SB-2 Registration Statement (Reg. No. 333-45508), are
incorporated herein by this reference.
10.46 Purchase Order from Kohler Company, filed as an exhibit to
amendment No. 4 to USAC's Form SB-2 Registration Statement
(Reg. No. 333-45508) are incorporated herein by this
reference.
Documents filed as an exhibit to USAC's Form 10-QSB for the quarter ended June
30, 2002 (File No. 001-08675) are incorporated herein by this reference.
10.47 Bear River Zeolite Company Royalty Agreement, dated May
29, 2002
10.48 Grant of Production Royalty, dated June 1, 2002
10.49 Assignment of Common Stock of Bear River Zeolite Company,
dated May 29, 2002
10.50 Agreement to Issue Warrants of USA, dated May 29, 2002
10.51 Secured convertible note payable - Delaware Royalty
Company dated December 22, 2003*
10.52 Convertible note payable - John C. Lawrence dated December
22, 2003*
10.53 Pledge, Assignment and Security Agreement dated December
22, 2003*
10.54 Note Purchase Agreement dated December 22, 2003*
14.0 Code of Ethics*
31.1 Rule 13a-14(a)/15d-14(a) Certifications Certification of
John C. Lawrence*
32.1 Section 1350 Certifications Certification of John C.
Lawrence*
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.
18
Reports on Form 8-K
Item 5.Other Events - October 10, 2003.
EXHIBIT 21.01
SUBSIDIARIES OF REGISTRANT, AS OF DECEMBER 31, 2007
Bear River Zeolite Company
C/o Box 643
Thompson Falls, MT 59873
Antimonio de Mexico S.A. de C.V.
C/o Box 643
Thompson Falls, MT 59873
United States Antimony, Mexico S.A. de C.V.
C/o Box 643
Thompson Falls, MT 59873
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Company's Board of Directors and audit committee reviews and approves audit
and permissible non-audit services performed by DeCoria, Maichel & Teague P.S.,
as well as the fees charged by DeCoria, Maichel & Teague P.S. for such services.
In its review of non-audit service fees and its appointment of DeCoria, Maichel
& Teague P.S. as the Company's independent accountants, the Board of Directors
considered whether the provision of such services is compatible with maintaining
DeCoria, Maichel & Teague P.S. independence. All of the services provided and
fees charged by DeCoria, Maichel & Teague P.S. in 2007 were pre-approved by the
Board of Directors and its audit committee.
AUDIT FEES
The aggregate fees billed by DeCoria, Maichel & Teague P.S. for professional
services for the audit of the annual financial statements of the Company and the
reviews of the financial statements included in the Company's quarterly reports
on Form 10-QSB for 2007 and 2006 were $57,390 and $54,769, respectively, net of
expenses.
AUDIT-RELATED FEES
There were no other fees billed by DeCoria, Maichel & Teague P.S. during the
last two fiscal years for assurance and related services that were reasonably
related to the performance of the audit or review of the Company's financial
statements and not reported under "Audit Fees" above.
TAX FEES
The aggregate fees billed by DeCoria, Maichel & Teague P.S. during the last two
fiscal years for professional services rendered by DeCoria, Maichel & Teague
P.S. for tax compliance for 2007 and 2006 were $3,850 and $3,200 respectively.
ALL OTHER FEES
There were no other fees billed by DeCoria, Maichel & Teague P.S. during the
last two fiscal years for products and services provided by DeCoria, Maichel &
Teague P.S.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(b) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
UNITED STATES ANTIMONY CORPORATION
(Registrant)
By: /s/ John C. Lawrence Date: March 26, 2008
--------------------------------
John C. Lawrence, President, Director
and Principal Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
By: /s/ John C. Lawrence Date: March 26, 2008
--------------------------------
John C. Lawrence, Director and
President (Principal Executive,
Financial and Accounting Officer)
By: /s/ Leo Jackson Date: March 26, 2008
--------------------------------
Leo Jackson, Director
By: /s/ Gary D. Babbitt Date: March 26, 2008
--------------------------------
Gary D. Babbitt, Director
By: /s/ Patrick Dugan Date: March 26, 2008
--------------------------------
Patrick Dugan, Director
By: /s/ Russell Lawrence Date: March 26, 2008
--------------------------------
Russell Lawrence, Director
20
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To 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, 2007 and 2006, and
the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated 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 consolidated 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, 2007 and
2006, and the consolidated results of their operations and their cash flows for
the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has negative working capital, and accumulated
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 consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ DeCoria, Maichel & Teague, P.S.
DeCoria, Maichel & Teague P.S.
Spokane, Washington
March 20, 2008
F-1
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2007 AND 2006
ASSETS
2007 2006
------------ ------------
Current assets:
Cash $ 81,747 $ 218,365
Accounts receivable, less allowance
for doubtful accounts of $30,000 168,676 93,596
Inventories 252,614 285,812
Deferred financing costs, net of amortization -- 3,750
------------ ------------
Total current assets 503,037 601,523
Properties, plants and equipment, net 2,777,116 2,065,341
Restricted cash for reclamation bonds 65,736 83,096
------------ ------------
Total assets $ 3,345,889 $ 2,749,960
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Checks issued and payable $ 69,484 $ 52,289
Accounts payable 808,748 655,252
Accrued payroll and payroll taxes 113,612 68,269
Other accrued liabilities 99,851 80,301
Deferred revenue, current 287,238 213,004
Accrued interest payable 25,231 29,055
Payable to related parties 254,085 254,585
Convertible note payable 100,000 100,000
Long-term debt, current 91,890 138,842
------------ ------------
Total current liabilities 1,850,139 1,591,597
Deferred revenue, noncurrent 640,000 400,000
Long-term debt, noncurrent 19,711 170,065
Accrued reclamation costs, noncurrent 107,500 107,500
------------ ------------
Total liabilities 2,617,350 2,269,162
------------ ------------
Commitments and contingencies (Note 1 and 17)
Stockholders' equity:
Preferred stock $0.01 par value, 10,000,000 shares authorized:
Series A: -0- shares issued and outstanding -- --
Series B: 750,000 shares issued and outstanding
(liquidation preference $847,500 at December 31, 2007) 7,500 7,500
Series C: 177,904 shares issued and outstanding
(liquidation preference $97,847 at December 31, 2007) 1,779 1,779
Series D: 1,751,005 and 1,757,672 shares issued and outstanding
(liquidation preference and cumulative dividends $4,549,838
and $4,525,357 at December 31, 2007 and 2006) 17,509 17,576
Common stock, $0.01 par value, 50,000,000 shares authorized;
42,519,243 and 39,761,309 shares issued and outstanding 425,192 397,613
Additional paid-in capital 21,243,249 20,399,328
Accumulated deficit (20,966,690) (20,342,998)
------------ ------------
Total stockholders' equity 728,539 480,798
------------ ------------
Total liabilities and stockholders' equity $ 3,345,889 $ 2,749,960
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-2
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
2007 2006
------------ ------------
ANTIMONY DIVISION
Revenues $ 4,116,863 $ 3,292,109
------------ ------------
Cost of sales:
Production costs 3,142,679 2,311,191
Depreciation 20,502 24,205
Freight and delivery 203,106 176,413
General and administrative 25,111 39,342
Direct sales expense 44,328 60,142
------------ ------------
Total cost of sales 3,435,726 2,611,293
------------ ------------
Gross profit - antimony 681,137 680,816
------------ ------------
ZEOLITE DIVISION
Revenues 1,142,264 1,103,259
------------ ------------
Cost of sales:
Production costs 1,146,168 1,082,740
Depreciation 144,912 109,259
Freight and delivery 91,144 47,823
General and administrative 267,813 112,239
Royalties 137,272 140,598
Direct sales expense 64,395 68,204
------------ ------------
Total cost of sales 1,851,704 1,560,863
------------ ------------
Gross profit (loss) - zeolite (709,440) (457,604)
------------ ------------
Total revenues - combined 5,259,127 4,395,368
Total cost of sales - combined 5,287,430 4,172,156
------------ ------------
Gross profit (loss) - combined (28,303) 223,212
------------ ------------
Other operating (income) expenses:
Corporate general and administrative 434,088 349,511
Exploration expense 256,611 211,098
Gain on sale of properties, plants and equipment (145,420) (234,244)
Change in estimated reclamation costs -- (35,000)
------------ ------------
Other operating (income) expenses 545,279 291,365
------------ ------------
Income (loss) from operations (573,582) (68,153)
------------ ------------
Other (income) expenses:
Interest expense, net 45,444 127,294
Factoring expense 94,989 89,211
Extinguishment of payables (90,323) --
------------ ------------
Other (income) expenses 50,110 216,505
------------ ------------
Net loss $ (623,692) $ (284,658)
============ ============
Net loss per share of common stock - basic and diluted $ (0.015) $ (0.008)
============ ============
Basic and diluted weighted average shares outstanding 41,375,287 36,917,464
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-3
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
TOTAL PREFERRED STOCK COMMON STOCK ADDITIONAL
--------------------------- --------------------------- PAID ACCUMULATED
SHARES AMOUNT SHARES AMOUNT IN CAPITAL DEFICIT TOTAL
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balances, December 31, 2005 2,941,576 $ 29,415 34,445,666 $ 344,457 $ 18,966,635 $(20,058,340) $ (717,833)
Issuance of common stock
and warrants for cash 3,192,393 31,924 960,675 992,599
Issuance of common stock to
Directors for services 91,000 910 34,580 35,490
Issuance of common stock to
Director in exchange for
equipment 45,000 450 27,000 27,450
Series D preferred stock
converted into common stock (256,000) (2,560) 256,000 2,560 --
Issuance of common stock in
satisfaction of debt 1,406,250 14,062 267,188 281,250
Issuance of common stock in
exchange for remaining
interest in USAMSA 100,000 1,000 60,000 61,000
Issuance of common stock to
Directors for services
performed in development of
Mexico operations 225,000 2,250 83,250 85,500
Net loss (284,658) (284,658)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balances, December 31, 2006 2,685,576 26,855 39,761,309 397,613 20,399,328 (20,342,998) 480,798
Issuance of common stock and
warrants for cash 2,705,767 27,057 807,521 834,578
Issuance of common stock to
Directors for services 45,500 455 36,400 36,855
Series D preferred stock
converted into common stock (6,667) (67) 6,667 67 --
Net loss (623,692) (623,692)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balances, December 31, 2007 2,678,909 $ 26,788 42,519,243 $ 425,192 $ 21,243,249 $(20,966,690) $ 728,539
============ ============ ============ ============ ============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-4
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
2007 2006
------------ ------------
Cash Flows From Operating Activities:
Net loss $ (623,692) $ (284,658)
Adjustments to reconcile net loss to net cash
(used by) provided by operating activities:
Depreciation expense 165,414 133,464
Common stock issued to Directors for services 36,855 35,490
Deferred financing costs as interest expense 3,750 11,250
Gain on sale of properties, plants and equipment (145,420) (234,244)
Change in estimated reclamation costs -- (35,000)
Extingushment of payables (90,323) --
Change in:
Accounts receivable (75,080) 15,718
Inventories 33,198 (96,069)
Accounts payable (65,396) 93,871
Accrued payroll and payroll taxes 45,343 (35,771)
Other accrued liabilities 58,146 1,627
Deferred revenue 314,234 543,004
Accrued interest payable (3,824) 36,859
Payable to related parties (500) (51,907)
------------ ------------
Net cash (used by) provided by operating activities (347,295) 133,634
------------ ------------
Cash Flows From Investing Activities:
Purchase of properties, plants and equipment (563,417) (1,039,300)
Proceeds from sale of properties, plants and equipment 145,420 53,430
Restricted cash for reclamation bonds 17,360 3,821
------------ ------------
Net cash used by investing activities (400,637) (982,049)
------------ ------------
Cash Flows From Financing Activities:
Proceeds from sale of common stock and warrants, net of commissions 834,578 992,599
Principal payments of long-term debt (240,459) (204,583)
Change in checks issued and payable 17,195 (9,077)
------------ ------------
Net cash provided by financing activities 611,314 778,939
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (136,618) (69,476)
Cash and cash equivalents at beginning of year 218,365 287,841
------------ ------------
Cash and cash equivalents at end of year $ 81,747 $ 218,365
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-5
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED:
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
2007 2006
------------ ------------
Cash paid during year for interest $ 76,400 $ 96,839
============ ============
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Properties, plants & equipment acquired with accounts payable $ 270,619 $ --
Properties, plants & equipment purchased with long-term debt 43,153 --
Proceeds from sales of property applied to loans -- 180,815
Common stock issued to Director in exchange for equipment -- 27,450
Common stock issued to Directors in exchange for services
performed in development of Mexico operations -- 85,500
Common stock issued in satisfaction of debt and accrued interest -- 281,250
Common stock issued for conversion of preferred stock 67 2,560
Note payable issued for investment in USAMSA -- 55,000
Common stock issued for investment in USAMSA -- 61,000
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-6
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
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.
During 2000, the Company formed a 75% owned subsidiary, Bear River Zeolite
Company ("BRZ"), to mine and market zeolite and zeolite products from a mineral
deposit in southeastern Idaho. In 2001, an operating plant was constructed at
the zeolite site and zeolite production and sales commenced. During 2002, the
Company acquired the remaining 25% of BRZ and continued to produce and sell
zeolite products.
During 2005, the Company formed a 100% owned subsidiary, Antimonio de Mexico
S.A. de C.V. ("AM"), to explore and develop potential antimony properties in
Mexico (see note 8).
During 2006, the Company acquired the remaining 50% of United States Antimony,
Mexico S.A. de C.V. ("USAMSA") bringing its total ownership to 100% (see note
7).
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, 2007, the Company had negative working
capital of $1,347,102, an accumulated deficit of approximately $20.9 million. In
addition, the Company has minimal available authorized shares available to sell
in order to raise additional funds (see Note 13). 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 2007, the antimony division increased sales by $824,754. Continued
construction of the flotation mill and crusher in Mexico, permitting, and
land acquisition have positioned USAC to bring that antimony, silver and
gold operation on stream in 2008. USAC capitalized $272,820 that was spent
for construction of the mill and permitting in Mexico. This is a one time
expense that will be depreciated when the mine, mill, and smelter becomes
operational.
o At the Bear River Zeolite operation in 2007, a major accident resulted in a
two and a half month shut-down of production. However, BRZ completed
capital expenditures which included the completion of the Raymond mill that
increased mill capacity by 300 tons per day of fine particle products, the
moving of the semi-automatic bagging line that increased efficiency and
production, and made many other improvements. Additionally in 2007, BRZ
curtailed the bagging of small packages for another Company that lost money
in 2007.
2. CONCENTRATIONS OF RISK
The Company purchases most of the raw antimony used in the production of its
finished antimony products from foreign sources. During the years ended December
31, 2007 and 2006, approximately 49% and 68%, respectively, of the Company's
antimony revenues were generated by sales to one customer. During 2007 and 2006,
24% and 39%, respectively, of the Company's revenues generated from zeolite
product sales were to two customers. The loss of the Company's "key" customers
could adversely affect its business.
F-7
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
2. CONCENTRATIONS OF RISK, CONTINUED
The Company's revenues from antimony sales are strongly influenced by world
prices for such commodities, which fluctuate and are affected by numerous
factors beyond the Company's control, including inflation and worldwide forces
of supply and demand. The aggregate effect of these factors is not possible to
predict accurately.
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.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
---------------------------
The Company's consolidated financial statements include the accounts of BRZ,
USAMSA and AM, all wholly-owned subsidiaries. The Company accounted for its
investment interest in its 50% owned foreign entity, USAMSA, by the equity
method until March 21, 2006 when it acquired the remaining 50% of USAMSA (see
note 7). As of March 21, 2006, USAMSA is consolidated. Intercompany balances and
transactions are eliminated in consolidation.
Use of Estimates
----------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.
Reclassifications
-----------------
Certain reclassifications have been made to the 2006 financial statements in
order to conform to the 2007 presentation. These reclassifications have no
effect on net loss, total assets or stockholders' equity as previously reported.
Cash and Cash Equivalents
-------------------------
The Company considers cash in banks and investments with original maturities of
three months or less when purchased to be cash equivalents.
Restricted Cash
---------------
Restricted cash at December 31, 2007 and 2006 consists of cash held for
reclamation performance bonds, and is held as certificates of deposit with
reputable financial institutions.
Accounts Receivable
-------------------
Accounts receivable are stated at the amount that management expects to collect
from outstanding balances. Management provides for probable uncollectible
amounts through an allowance for doubtful accounts. Additions to the allowance
for doubtful accounts are based on management's judgment, considering historical
write-offs, collections and current credit conditions. Balances which remain
outstanding after management has used reasonable collection efforts are written
off through a charge to the allowance for doubtful accounts and a credit to the
applicable accounts receivable. Payments received on receivables subsequent to
being written off are considered a bad debt recovery. Changes in the allowance
for doubtful accounts have not been material to the financial statements.
F-8
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Inventories
-----------
Inventories at December 31, 2007 and 2006 consisted primarily of finished
antimony products, antimony metal and finished zeolite products that are stated
at the lower of first-in, first-out cost or estimated net realizable value.
Since the Company's antimony 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.
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
estimated useful lives of 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 seven 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. An impairment loss is
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.
Although management has made its best estimate of the factors that affect net
realizable value 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 assets, and
necessitate asset impairment write-downs.
Mineral Rights
--------------
The cost to obtain the legal right to explore, extract and retain at least a
portion of the benefits from mineral deposits are capitalized as mineral rights
in the year of acquisition.
Exploration and Development
---------------------------
The Company records exploration costs as operating expenses in the period they
occur, and capitalizes development costs on discrete mineralized bodies that
have proven reserves and are in development or production.
Deferred Financing Costs
------------------------
Deferred financing costs relating to secured convertible notes payable are
amortized over the terms of the notes payable and expensed if the debt is
retired early.
Asset Retirement Obligations
----------------------------
The Company recognizes the fair value of a liability for an asset retirement
obligation in the period in which it is incurred, if a reasonable estimate of
fair value can be made. The associated asset retirement costs are capitalized as
part of the carrying amount of the associated long-lived assets and depreciated
over the lives of the assets on a units of production basis. Reclamation costs
are allocated to accretion expense over the life of the related assets and are
adjusted for changes resulting from the passage of time and changes to either
the timing or amount of the original present value estimate underlying the
obligation.
F-9
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Reclamation and Remediation
---------------------------
All of the Company's mining operations are subject to reclamation and
remediation 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. 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 because of 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.
Revenue Recognition
-------------------
Sales of antimony and zeolite products are recorded upon shipment and when title
passes to the customer. Prepayments received from customers prior to the time
that products are shipped are recorded as deferred revenue. When the related
products are shipped, the amount recorded as deferred revenue is recognized as
revenue. The Company's sales agreements provide for no product returns or
allowances.
Revenue from exclusive sales agreement with multiple elements is recognized
prorata over the duration of the contract.
Common Stock Issued for Consideration Other than Cash
-----------------------------------------------------
All transactions in which goods or services are received for the issuance of
shares of the Company's common stock are accounted for based on the fair value
of the consideration received or the fair value of the common stock issued,
whichever is more readibly determinable.
In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 123(R), "Share-Based
Payment" to be implemented by small business issuers at the beginning of the
first interim or annual period beginning after December 15, 2005. This Statement
is a revision to SFAS No. 123, "Accounting for Stock-Based Compensation," and
supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees," under
which guidance the intrinsic value method was prescribed for awards to employees
for services. SFAS No. 123(R) requires the measurement of the cost of employee
services received in exchange for an award of equity instruments based on the
grant-date fair value of the award. The cost is recognized over the period
during which an employee is required to provide services in exchange for the
award. No compensation cost is recognized for equity instruments for which
employees do not render service.
The Company adopted SFAS No. 123(R) using the modified prospective transition
method, which required the application of the accounting standard as of January
1, 2006. There was no impact on the financial statements as of and for the year
ended December 31, 2006 as a result of the adoption of SFAS No. 123(R). In
accordance with the modified prospective transition method, the financial
statements for prior periods have not been restated to reflect, and do not
include, the impact of SFAS No. 123(R).
F-10
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Income Taxes
------------
Income taxes are accounted for under the liability method. Under this method,
deferred income tax liabilities or assets are determined at the end of each
period using the tax rate expected to be in effect when the taxes are actually
paid or recovered. A valuation allowance is recognized on deferred tax assets
when it is more likely than not that some or all of these deferred tax assets
will not be realized.
On January 1, 2007, the Company adopted FASB Interpretation No. 48 ("FIN No.
48") "Accounting for Uncertainty in Income Taxes." FIN No. 48 clarifies the
accounting for uncertainty in income taxes recognized in accordance with SFAS
No. 109 "Accounting for Income Taxes," prescribing a recognition threshold and
measurement attribute for the recognition and measurement of a tax position
taken or expected to be taken in a tax return. In the course of its assessment,
the Company has determined that it is subject to examination of our income tax
filings in the United States and state jurisdictions for the 2004 through 2006
tax years. In the event that the Company is assessed penalties and or interest,
penalties will be charged to other operating expense and interest will be
charged to interest expense.
The Company adopted FIN No. 48 using the modified prospective transition method,
which required the application of the accounting standard as of January 1, 2007.
There was no impact on the financial statements as of and for the year ended
December 31, 2007 as a result of the adoption of FIN No. 48. In accordance with
the modified prospective transition method, the financial statements for prior
periods have not been restated to reflect, and do not include, the impact of FIN
No. 48.
Income (Loss) Per Common Share
------------------------------
Basic earnings per share is calculated 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 notes
payable, are excluded from the calculations when their effect is antidilutive.
New Accounting Pronouncements
-----------------------------
In September 2006, the FASB issued SFAS No. 157 "Fair Value Measurements," which
is effective for fiscal years beginning after November 15, 2007, and for interim
periods within those years. SFAS No. 157 defines fair value, establishes a
framework for measuring fair value and expands the related disclosure
requirements. The company is currently evaluating the potential impact of this
statement on its financial statements and at this time it does not anticipate a
material effect.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" which establishes presentation and
disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities. The standard requires companies to provide additional information
that will help investors and other users of financial statements to more easily
understand the effect of the company's choice to use fair value on its earnings.
It also requires entities to display the fair value of those assets and
liabilities for which the company has chosen to use fair value on the face of
the balance sheet. This Statement is effective as of the beginning of an
entity's first fiscal year beginning after November 15, 2007. The Company is
currently evaluating the potential impact of this statement on the financial
statements and at this time does not anticipate a material effect.
F-11
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
In December 2007, the FASB revised SFAS No. 141 "Business Combinations". The
revised standard is effective for transactions where the acquisition date is on
or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. SFAS No. 141(R) will change the accounting for the
assets acquired and liabilities assumed in a business combination, as follows:
o Acquisition costs will be generally expensed as incurred;
o Noncontrolling interests (formally known as "minority interests") will
be valued at fair value at the acquisition date;
o Acquired contingent liabilities will be recorded at fair value at the
acquisition date and subsequently measured at either the higher of
such amount or the amount determined under existing guidance for
non-acquired contingencies;
o In-process research and development will be recorded at fair value as
an indefinite-lived intangible asset at the acquisition date;
o Restructuring costs associated with a business combination will be
generally expensed subsequent to the acquisition date; and
o Changes in deferred tax asset valuation allowances and income tax
uncertainties after the acquisition date generally will affect income
tax expense.
The adoption of SFAS No. 141(R) does not currently have a material effect on our
consolidated financial statements. However, any future business acquisitions
occurring on or after the beginning of the first annual reporting period
beginning on or after December 15, 2008 will be accounted for in accordance with
this statement.
In December 2007, FASB issued SFAS No. 160 "Non Controlling Interests in
consolidated financial statements - an amendment of ARB No. 51," which is
effective for fiscal years and interim periods within those years beginning on
or after December 15, 2008. SFAS No. 160 amends ARB 51 to establish accounting
and reporting standards for the non controlling ownership interest in a
subsidiary and for the deconsolidation of a subsidiary. The Company is currently
evaluating the potential impact of this statement on our consolidated financial
statements.
4. SALES OF ACCOUNTS RECEIVABLE
The Company sells its accounts receivable to a financing company pursuant to the
terms of a factoring agreement. According to the terms of the agreement, the
receivables are sold with full recourse and the Company assumes all risks of
collectability. Accordingly, the Company's allowance for doubtful accounts is
based upon the expected collectability of all trade receivables. The performance
of all obligations and payments to the factoring company is personally
guaranteed by John C. Lawrence, the Company's president and a director. As
consideration for Mr. Lawrence's guarantee, the Company granted a mortgaged
security interest to Mr. Lawrence collateralized by the Company's real and
personal property.
The factoring agreement requires the Company to pay a financing fee equal to 2%
of the face amount of receivables sold. Financing fees paid by the Company
during the years ended December 31, 2007 and 2006 totaled $94,989 and $89,211,
respectively. For the years ended December 31, 2007 and 2006, net accounts
receivable of approximately $4.48 million and $4.37 million, respectively, were
sold under the agreement.
Proceeds from the sales were used to fund inventory purchases and operating
expenses. The agreement is for a term of one year with automatic renewal for
additional one-year terms.
F-12
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
5. INVENTORIES
The major components of the Company's inventories at December 31, 2007 and 2006,
were as follows:
2007 2006
------------ ------------
Antimony Metal $ 17,393 $ 149,415
Antimony Oxide 181,587 115,414
Sodium Antimonate -- 1,326
Zeolite 53,634 19,657
------------ ------------
$ 252,614 $ 285,812
============ ============
At December 31, 2007 and 2006, antimony metal consisted principally of recast
metal from antimony-based compounds and metal purchased from foreign suppliers.
Antimony oxide inventory consisted of finished product oxide held at the
Company's plant. Sodium antimonite inventory consisted of dry finished product
and wet raw materials, the majority of which were stored at the Company's
antimony plant near Thompson Falls, Montana. The Company's zeolite inventory
consists of salable zeolite material held at BRZ's Idaho mining and production
facility.
6. PROPERTIES, PLANTS AND EQUIPMENT
The major components of the Company's properties, plants and equipment at
December 31, 2007 and 2006 are shown below. Approximately $1.2 million of
capitalized costs at December 31, 2007 have not yet been placed in service and,
therefore, have not been subject to depreciation.
2007 2006
------------ ------------
Antimony:
Equipment $ 1,329,930 $ 1,312,032
Buildings 528,730 508,308
Mineral rights 193,549 106,593
Land 190,106 141,351
Construction in progress 28,709 --
------------ ------------
2,271,024 2,068,284
Accumulated depreciation (1,203,332) (1,182,830)
------------ ------------
Total Antimony, net 1,067,692 885,454
------------ ------------
Zeolite:
Equipment 1,976,275 1,332,684
Building 1,217,275 1,194,044
------------ ------------
3,193,550 2,526,728
Accumulated depreciation (1,484,081) (1,346,841)
------------ ------------
Total Zeolite, net 1,709,469 1,179,887
------------ ------------
Properties, plants and equipment, net $ 2,777,161 $ 2,065,341
============ ============
7. INVESTMENT IN USAMSA
At December 31, 2005 and through March 21, 2006, the Company had a 50%
investment in United States Antimony, Mexico S.A. de C.V. ("USAMSA"). The
Company accounted for its 50% investment in USAMSA by the equity method. USAMSA
was idle during 2005 and 2004 because of unstable antimony metal prices and the
absence of sufficient operating capital. During 2005, the Company wrote off the
carrying value of USAMSA of $3,527 because of a lack of activity.
F-13
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
7. INVESTMENT IN USAMSA, CONTINUED
In its effort to pursue operations in Mexico, the Company acquired the remaining
50% of USAMSA, on March 21, 2006 bringing its total ownership to 100%. The
purchase price for the 50% investment was $165,500 which consisted of the
following:
Cash $ 49,500
Common stock: 100,000 shares 61,000
Note payable 55,000
---------
Total $ 165,500
=========
The 100,000 shares of common stock were issued to Production Minerals, Inc.
which owned 25% of USAMSA. Production Minerals, Inc. is 31.4% owned by Leo
Jackson, a director and stockholder of the Company.
As stated above, the Company had written its investment in USAMSA to zero at
December 31, 2005. Therefore, these assets acquired had no book value at the
purchase date. USAMSA had no liabilities at the date of acquisition. The
purchase price was allocated to USAMSA's assets as follows:
Land and permits $ 47,000
Plant 63,500
Equipment 55,000
---------
Total $ 165,500
=========
At December 31, 2007 and 2006, USAMSA's financial statements are included in the
Company's consolidated financial statements.
8. INVESTMENT IN AM
During 2005, the Company created a new subsidiary, Antimonio de Mexico SA de CV
("AM"). AM was incorporated under the laws of Mexico and the State of Jalisco.
On December 16, 2005, AM signed a contract and option agreement that gives AM
the exclusive right to explore and exploit the San Miguel I and San Miguel II
concessions for an annual payment of $50,000, and an option to purchase payment
of $100,000 annually. Total payments will not exceed $1,430,344, reduced by
taxes paid. All installment payments must be paid when and if AM exercises the
option to purchase. During the year ended December 31, 2006, the Company decided
to pursue developing the concessions. The payments paid under this agreement in
2007 and 2006 totaled $86,956 and $106,593, respectively, and were capitalized
as mineral rights in accordance with the Company's accounting policies. AM does
not have any obligation to pay any amount under this contract.
A service agreement was also executed on December 16, 2005, for a mining
operator to provide consultation, with similar amounts payable as under the
Contract of Exploration and Option.
9. DEFERRED REVENUE
On October 25, 2006, the Company entered into an agreement to exclusively sell
pozzlan zeolite (PZ) to one individual, who is a shareholder of the Company,
over the next five years. The agreement calls for the individual to purchase a
minimum of 3,000 tons of PZ per month. If the minimum sales are not purchased
for a 90-day period of time, the exclusivity of sales to this individual is
forfeited. The agreement called for a sales price between $30 and $40 per ton
until June 1, 2007, at which time the Company can adjust its price as necessary
based on its production costs.
F-14
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
9. DEFERRED REVENUE, CONTINUED
The agreement commenced upon receipt of $500,000 from the buyer, which occurred
in 2006, and upon completion of permitting and construction of the new mill with
operational milling equipment (completed as of December 31, 2007).
During the year ended December 31, 2007, the Company received an additional
$300,000 to extend the life of the agreement and provide exclusivity for certain
other sales areas. The extension agreement was with a company, Zeolite Company
of America ("ZCA"), of which the initial individual is part owner. The extension
agreement lowered the monthly sales requirement to 350 tons per month and set
the sale price at $40 per ton beginning December 30, 2007. Should ZCA not
purchase or pay for the 350 tons per month for any three month period, ZCA would
lose its exclusivity and price commitment.
10. DUE TO RELATED PARTIES
Amounts due to related parties at December 31, 2007 and 2006 were as follows
(see Note 16):
2007 2006
------------ ------------
Entity owned by John C. Lawrence, president
and director $ 9,758 $ 28,998
John C. Lawrence, president and director(1) 244,327 225,587
------------ ------------
$ 254,085 $ 254,585
============ ============
(1) Includes accrued interest at 10% per annum of $108,082 and $89,008 at
December 31, 2007 and 2006, respectively.
Transactions affecting the payable to Mr. Lawrence during 2007 and 2006 were as
follows:
2007 2006
------------ ------------
Balance, beginning of year $ 225,587 $ 250,634
Equipment rental charges 52,062 63,697
Interest expense 19,130 21,289
Advances, net (52,452) (110,033)
------------ ------------
Balance, end of year $ 244,327 $ 225,587
============ ============
F-15
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
11. LONG-TERM DEBT
Long-term debt at December 31, 2007 and 2006 is as follows:
2007 2006
------------ ------------
Note payable to an individual. The balance will be paid
by a transfer of certain equipment owned by the company. $ 55,000 $ 55,000
Note payable to CNH Capital America, LLC, bearing interest
at 2.5%; payable in monthly installments of $1,115;
maturing May 2010; collateralized by equipment. 32,456 --
Note payable, bearing interest at 10%; payable in four
annual installments of $10,000 each beginning December
2005; not collateralized. 20,000 20,000
Note payable to First State Bank of Thompson Falls,
bearing interest at 10.5%; payable in monthly
installments of $1,073; maturing June 2008. 4,145 17,814
Term note payable to First State Bank of Thompson Falls,
bearing interest at 9.0% through February 2008, then
Wall Street prime rate plus 3.75% through maturity;
payable in monthly installments of $6,220; maturing
January 2020. -- 207,800
Equipment note payable, bearing interest at 7.25% through
April 2004, then bank prime through maturity; payable
in monthly installments of $393; maturing April 2009. -- 8,293
------------ ------------
111,601 308,907
Less current portion (91,890) (138,842)
------------ ------------
Noncurrent portion $ 19,711 $ 170,065
============ ============
At December 31, 2007, principal payments on long-term debt are due as follows:
YEAR ENDING
DECEMBER 31,
------------------
2008 $ 91,890
2009 13,065
2010 6,646
------------
$ 111,601
============
The note payable to First State Bank of Thompson Falls are collateralized by
accounts receivable, inventory, certain equipment, patented and unpatented
claims in Sanders County, Montana and are personally guaranteed by John C.
Lawrence, the Company's president and a director.
F-16
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
12. SECURED CONVERTIBLE AND CONVERTIBLE NOTES PAYABLE
Security Agreement and Secured Convertible Note Payable
-------------------------------------------------------
On December 22, 2003, the Company and its wholly-owned subsidiary BRZ, entered
into a Pledge, Assignment, and Security Agreement ("the Agreement") with
Delaware Royalty Company, Inc. ("Delaware"), a company controlled by Al Dugan, a
major shareholder of the Company. The Agreement was in connection with the
purchase of a $250,000 Secured Convertible Note Payable ("the Secured Note"), by
Delaware from the Company. The Agreement granted Delaware a first-priority
security interest in all of the issued and outstanding stock of BRZ in the event
the Company is unable to complete payment and performance under the obligations
associated with the Secured Note.
The Secured Note and accrued interest of $31,250 were converted to 1,406,250
shares of common stock in September of 2006.
Unsecured Convertible Note Payable
----------------------------------
On December 22, 2003, John C. Lawrence, the Company's president and a director,
agreed to convert $100,000 of related party debt due to him into a Convertible
Note Payable ("the Convertible Note"). The Convertible Note contains essentially
the same attributes and privileges that the Secured Note provides Delaware
Royalty Company, in that it accrues interest at 10% per annum and is convertible
into shares of the Company's common stock at an initial conversion price of
$0.20 per share. The conversion price of the Convertible Note is also subject to
the same anti-dilution adjustments as the Secured Note. The Convertible Note
matures on December 22, 2009, unless otherwise converted. The Convertible Note
is not collateralized by any of the Company's assets. At December 31, 2007 and
2006, $100,000 of principal was outstanding, and accrued interest on the note,
which is included in Payable to Related Parties, of $40,081 and $30,136,
respectively, was due.
Stock Purchase Warrants and Deferred Financing Charges
------------------------------------------------------
In connection with the issuance of the secured convertible and unsecured
convertible notes payable, Mr. Dugan and Mr. Lawrence were issued 2,000,000 and
1,000,000 stock purchase warrants, respectively. The warrants expire in December
of 2008 and are exercisable for shares of the Company's unregistered common
stock at $0.20 per share.
The Company accounted for the detachable warrants issued in connection with the
notes in accordance with Accounting Principles Board Opinion No. 14, and
estimated a fair value of $0.01 per warrant, or $30,000 attributable to the
detachable warrants. The resulting value was recorded as a deferred financing
cost and is being amortized as interest expense over the terms of the respective
convertible notes payable. During the years ended December 31, 2007 and 2006,
$3,750 and $11,350, respectively of interest expense was recognized as a result
of amortizing the deferred offering costs.
13. STOCKHOLDERS' EQUITY
The Company's Articles of Incorporation authorize 50,000,000 shares of $0.01 par
value common stock available for issuance with such rights and preferences,
including liquidation, dividend, conversion and voting rights, as the Board of
Directors may determine. At December 31, 2007, the number of common shares
outstanding and reserved is as follows:
F-17
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
13. STOCKHOLDERS' EQUITY, CONTINUED
Common shares issued and outstanding 42,519,243
-----------
Reserved shares for:
Warrants to purchase common stock 6,867,727
Conversion of note payable, including accrued interest 700,405
United States Antimony Corporation 2000 Stock Plan 200,000
-----------
Total reserved shares 7,768,132
-----------
Total outstanding and reserved 50,287,375
Authorized shares 50,000,000
-----------
Number of shares over allocated 287,735
===========
In addition, the Company has shares of Series D preferred stock of 1,751,005 and
warrants for purchase of 111,185 shares of Series D stock that are convertible
on a one to one basis for shares of common stock. However, such conversion
rights are subject to the availability of authorized but unissued shares of
common stock.
In order to ensure that the number of shares outstanding does not exceed the
amount authorized, the Company has no plans on selling additional shares of
common stock in the near future, will not authorize any grants under the stock
plan, and the president of the Company will not convert the note payable due
him. The Company plans to pursue increasing its authorized shares during 2008.
In the meantime, the Company is not able to raise funds by selling shares of its
common stock (see going concern discussion in Note 1).
Issuance of Common Stock for Cash
---------------------------------
During 2007 and 2006, the Company sold an aggregate of 2,705,767 and 3,192,393
shares, respectively, of its unregistered common stock to existing shareholders
and other parties for cash of $834,578 and $992,599, respectively. In connection
with sales of the Company's common stock, warrants to purchase shares of the
Company's common stock were granted in 2007 as follows: 15,000 shares at $0.60
and 648,334 shares at $0.50. In 2006, warrants to purchase 1,430,001 shares at
$0.60, 566,056 shares at $0.75 and 33,334 shares at $0.50 were granted.
Issuance of Common Stock for Services and Property
--------------------------------------------------
During 2007, the Company issued common stock to its directors as follows:
o All directors for services - a total of 45,500 shares
During 2006, the Company issued common stock to its directors as follows:
o All directors for services - a total of 91,000 shares
o Two directors for work performed - 225,000 shares
o One director in exchange for equipment - 45,000 shares and warrants to
purchase 45,000 shares at $0.30
o One director in exchange for USAMSA stock - 100,000 shares
Common Stock Issued in Satisfaction of Debt
-------------------------------------------
During 2006, the Company issued 1,406,250 shares of its unregistered common
stock in satisfaction of debt and related accrued interest.
F-18
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
13. STOCKHOLDERS' EQUITY, CONTINUED
Series D Preferred Stock Cancelled and Reissued as Common Stock
---------------------------------------------------------------
During 2007, the Board of Directors resolved that 6,667 shares of the Company's
Series D preferred stock be converted in an equal number of shares of the
company's common stock. The shares were held by the Company's director Gary
Babbitt's Pension and Profit Sharing Plan.
During 2006, the Board of Directors resolved that 256,000 shares of the
Company's Series D preferred stock be converted in an equal number of shares of
the company's common stock. The shares were held by the Company's directors or
former directors as follows: John Lawrence 26,000 shares; Robert Rice 128,000
shares, Leo Jackson 26,000 shares and Gary Babbitt 76,000 shares.
Common Stock Warrants
---------------------
The Company's Board of Directors has the authority to issue stock warrants for
the purchase of preferred or common stock to directors and employees of the
Company. The Company has also issued warrants in exchange for services rendered
the Company and in connection with sales of its unregistered common stock.
Transactions in common stock warrants are as follows:
NUMBER OF EXERCISE
WARRANTS PRICES
----------- -----------
Balance, December 31, 2005 8,146,695 $0.25-$0.45
Warrants granted in connection with 2006 stock sales 2,112,724 $0.50-$0.75
Warrants granted in connection with 2006 equipment purchase 45,000 $ 0.30
Warrants exercised (400,000) $0.25-$0.30
Warrants expired and cancelled (1,882,693) $0.20-$0.30
-----------
Balance, December 31, 2006 8,021,726 $0.25-$0.75
Warrants granted in connection with 2007 stock sales 663,334 $0.50-$0.60
Warrants exercised (1,532,333) $0.25-$0.60
Warrants expired and cancelled (285,000) $0.20-$0.25
-----------
Balance, December 31, 2007 6,867,727 $0.25-$0.75
===========
The above common stock warrants expire as follows:
YEAR ENDED DECEMBER 31:
2008 3,846,669
2009 2,357,724
2010 413,334
Thereafter 250,000
-------------
6,867,727
=============
Preferred Stock
The Company's Articles of Incorporation authorize 10,000,000 shares of $0.01 par
value preferred stock available for issuance with such rights and preferences,
including liquidation, dividend, conversion and voting rights, as the Board of
Directors may determine.
F-19
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
13. STOCKHOLDERS' EQUITY, CONTINUED
Series A
--------
During 1986, the Board established a Series A preferred stock, consisting of
4,500 shares. 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 at December 31, 2004, plus dividends in arrears. During 2005, the
remaining 4,500 outstanding shares of Series A preferred stock were converted to
common shares. Therefore, there were no shares of Series A preferred stock
outstanding and no related cumulative dividends in arrears at December 31, 2007
and 2006.
Series B
--------
During 1993, the Board established a Series B preferred stock, consisting of
1,666,667 shares. All 1,666,667 shares authorized 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 $0.01 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 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, 2007, cumulative dividends in arrears on the 750,000 outstanding
Series B shares were $97,500 or $0.13 per share. At December 31, 2006,
cumulative dividends in arrears on the 750,000 outstanding Series B shares were
$90,000, or $0.12 per share. Total dividends in arrears and liquidation
preference were $847,500 and $847,500 at December 31, 2007 and 2006,
respectively.
Series C
--------
During 1997, the Company issued 2,560,762 shares of Series C preferred stock in
connection with the conversion of certain debt owed by the Company. During 1999,
holders of 2,382,858 shares of Series C stock converted their shares into common
stock of the Company. The Series C shares have voting rights, are non-redeemable
and have a $0.55 per share liquidation preference. At December 31, 2007 and
2006, 177,904 shares of Series C preferred stock remained outstanding and the
liquidation preference amounted to $97,847 at December 31, 2007.
Series D
--------
During 2002, the Company established its Series D preferred stock. Holders of
the Series D preferred stock have the right, subject to the availability of
authorized but unissued common stock, to convert their shares into shares of the
Company's common stock without payment of additional consideration. The Series D
shares are initially convertible into the Company's common stock as determined
by dividing $0.20 by the conversion price in effect at the time of the
conversion. The initial conversion price of the Series D preferred stock is
$0.20, and subject to adjustment based upon anti-dilution provisions, which
include but are not limited to, the affects of the subsequent sale of common
stock at prices less than the initial conversion price.
DESIGNATION. The class of convertible Series D preferred stock, $0.01 par
value, consists of up to 2.5 million shares.
VOTING RIGHTS. The holders of Series D 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 D preferred shares.
REDEMPTION. The Series D preferred shares are not redeemable by the
Company.
F-20
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
13. STOCKHOLDERS' EQUITY, CONTINUED
LIQUIDATION PREFERENCE. The Series D holders are entitled to a liquidation
preference equal to the greater of $2.50 per share or the equivalent market
value of the number of shares of common stock into which each share of
Series D is convertible. At December 31, 2007 and 2006, the liquidation
preference for Series D preferred stock was $4,377,513 and $4,394,180,
respectively.
REGISTRATION RIGHTS. All of the underlying common stock issued upon
conversion of the Series D 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.
DIVIDENDS. The Series D holders are entitled to an annual dividend of
$0.0235 per share. The dividends are cumulative and payable after payment
and satisfaction of the Series A, B and C preferred stock dividends. At
December 31, 2007, cumulative dividends in arrears on the 1,751,005
outstanding Series D shares were $172,326. At December 31, 2006, cumulative
dividends in arrears on the 1,757,672 outstanding Series D shares were
$131,177.
During 2007, Series D holders converted 6,667 shares to common stock, as
discussed previously.
During 2006, Series D holders converted 256,000 shares to common stock, as
discussed previously.
During 2007 and 2006, no warrants were exercised to purchase shares of Series D
preferred stock.
At December 31, 2007 and 2006, the Company had 1,751,005 and 1,757,672 shares of
Series D preferred stock outstanding, respectively (see Note 16). The combined
liquidation preference and dividends in arrears totaled $4,549,838 and
$4,525,357 at December 31, 2007 and 2006, respectively.
Preferred Stock Warrants
------------------------
During 2005, the Company issued 1,000,000 warrants to purchase shares of Series
D preferred stock to John C. Lawrence, the Company's president and a director,
for incentive to improve the Company's financial position. These warrants are
exercisable at $0.25 and expired in October 2007. No preferred stock warrants
were issued in 2006.
Transactions in Series D preferred stock warrants are as follows:
NUMBER OF EXERCISE
WARRANTS PRICES
----------- -----------
Balance, December 31, 2005 2,196,185 $0.25-$0.30
Warrants granted --
Warrants exercised --
Warrants expired and cancelled (335,000) $0.20-$0.30
-----------
Balance, December 31, 2006 1,861,185 $0.20-$0.30
Warrants granted --
Warrants exercised --
Warrants expired and cancelled (1,750,000) $0.20-$0.25
-----------
Balance, December 31, 2007 111,185 $ 0.30
===========
The above Series D preferred stock warrants expire as follows:
F-21
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
YEAR ENDED DECEMBER 31:
2008 111,185
===========
14. 2000 STOCK PLAN
In January 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. At December 31,
2007 and 2006, 300,000 shares of the Company's common stock had been issued
under the Plan. There were no issuances under the Plan during 2007 and 2006.
15. INCOME TAXES
The Company had no income tax provision or benefit for the years ended December
31, 2007 and 2006.
At December 31, 2007 and 2006, the Company had net deferred tax assets composed
as follows:
2007 2006
----------- -----------
Arising from differences in the book and tax basis
of certain property assets $ 315,000 $ 300,000
Arising from limitation in deduction of foreign
exploration costs 238,000 $ 150,000
Arising from net tax operating loss carryforwards 1,071,000 1,174,000
----------- -----------
Total deferred tax assets 1,624,000 1,624,000
Valuation allowance (1,624,000) (1,624,000)
----------- -----------
Net deferred tax assets $ -- $ --
=========== ===========
The deferred tax assets were calculated based on an estimated 34% income tax
rate. 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,
2007 and 2006 has been established.
At December 31, 2007, the Company had unexpired regular tax net operating loss
carry forwards of approximately $3,150,000 which expire as follows:
Year Ending December 31:
2012 $ 154,000
2016 400,000
2018 292,000
2020 69,000
2021 653,000
2022 170,000
2023 733,000
2024 97,000
2025 300,000
2026 39,000
2027 243,000
-----------
$ 3,150,000
===========
F-22
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
16. RELATED-PARTY TRANSACTIONS
In addition to transactions described in Notes 4, 7, 10, 11, 12, and 13, during
2007 and 2006, the Company had the following transactions with related parties:
During 2007, the Company issued 45,500 of its common stock to members of
its Board of Directors as compensation for their services as directors. In
connection with the issuances, the Company recorded $35,490 in director
compensation. In addition, the Company has directors compensation of
$59,800 accrued as a liability of December 31, 2007.
During 2006, the Company issued 22,750 shares of its common stock to each
member of its Board of Directors as compensation for their services as
directors and 225,000 shares to two directors for services performed in
development of Mexico operations.
Also in 2006, the Company issued 45,000 shares of its common stock and
warrants in exchange for equipment purchased from one director and 100,000
shares of common stock to a director in exchange for his ownership interest
in USAMSA.
A director of the Company acts as legal counsel to the Company. During the
year ended December 31, 2007, the Company paid legal fees and expenses to
this director in the amount of $41,900. Of this amount, $11,900 has been
capitalized as properties, plant and equipment.
17. COMMITMENTS AND CONTINGENCIES
The Company's management believes that USAC is currently in substantial
compliance with environmental regulatory requirements and that its accrued
environmental reclamation costs are representative of management's estimate of
costs required to fulfill its reclamation obligations. Such costs are accrued at
the time the expenditure becomes probable and the costs can reasonably be
estimated. The Company recognizes, however, that in some cases future
environmental expenditures cannot be reliably determined due to the uncertainty
of specific remediation methods, conflicts between regulating agencies relating
to remediation methods and environmental law interpretations, and changes in
environmental laws and regulations. Any changes to the Company's reclamation
plans as a result of these factors could have an adverse affect on the Company's
operations. The range of possible losses in excess of the amounts accrued cannot
be reasonably estimated at this time.
In March of 2007, the Company sustained an industrial accident at the BRZ mine.
Based upon preliminary discussions with federal safety regulators, the Company
has recorded an estimated penalty of $100,140 as of December 31, 2007; the
actual amount could differ from this estimate.
18. 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 other current liabilities are reasonable estimates of their fair
values. The fair value of amounts due to related parties approximates their
carrying values based upon the contractual cash flow requirements.
F-23
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
The carrying amount of long-term debt is a reasonable estimate of its fair
value. The carrying amount of the convertible note payable is a reasonable
estimate of its fair value.
19. BUSINESS SEGMENTS
The Company has two operating segments, antimony and zeolite. Management reviews
and evaluates the operating segments exclusive of interest and factoring
expenses. Therefore, interest expense is not allocated to the segments. Selected
information with respect to segments for the years ended December 31, 2007 and
2006 is as follows:
2007 2006
------------ ------------
Capital expenditures:
Antimony
United States $ -- $ 5,983
Mexico 202,741 747,740
------------ ------------
Subtotal Antimony 202,741 753,723
Zeolite 674,448 514,528
------------ ------------
$ 877,189 $ 1,268,251
============ ============
Properties, plants and equipment, net:
Antimony
United States $ 117,212 $ 137,714
Mexico 950,481 747,740
------------ ------------
Subtotal Antimony 1,067,693 885,454
Zeolite 1,709,423 1,179,887
------------ ------------
$ 2,777,116 $ 2,065,341
============ ============
Total Assets:
Antimony
United States $ 504,215 $ 527,059
Mexico 950,481 747,740
------------ ------------
Subtotal Antimony 1,454,696 1,274,799
Zeolite 1,758,830 1,253,046
Corporate 132,363 222,115
------------ ------------
$ 3,345,889 $ 2,749,960
============ ============
See Note 2 regarding sales to major customers.
F-24