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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, 2004
[_] 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
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(Name of small business issuer in its charter)
Montana 81-0305822
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 643, Thompson Falls, Montana 59873
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (406) 827-3523
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [_]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The registrant's revenues for its most recent fiscal year were $3,122,892.
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 $16,043,531 as of
March 28, 2005.
At March 28, 2005, the registrant had 31,595,483 outstanding shares of par value
$0.01 common stock.
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TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS....................................... 2
General ................................................... 2
History.................................................... 2
Overview-2004.............................................. 2
Risk Factors............................................... 3
Antimony Division.......................................... 4
Zeolite Division........................................... 5
Environmental Matters...................................... 6
Employees.................................................. 8
Other...................................................... 8
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....................................................... 9
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS.................................................... 9
ITEM 7. FINANCIAL STATEMENTS.......................................... 11
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........................................................... 11
ITEM 10. EXECUTIVE COMPENSATION........................................ 12
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................... 13
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................ 14
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.............................. 15
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES........................ 18
SIGNATURES ....................................................... 19
CERTIFICATIONS ....................................................... 20
FINANCIAL STATEMENTS.................................................... F1-F24
PART I
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 was incorporated in Montana in January 1970
to mine and produce antimony products. In December 1983, we suspended antimony
mining operations but continued to produce antimony products from domestic and
foreign sources. 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-2004
ANTIMONY SALES
During 2004, sales of our antimony products decreased approximately 21% from
that of 2003. The contract with our major customer contained a "meet or release"
clause which required us to meet prices offered by our competitors, or release
the customer from their purchase commitment. Due to low prices offered to our
major customer by certain competitors, we decreased our sales prices to retain
the business. This significantly reduced our sales and gross profit during the
first three quarters of the year. Additionally, we decided during the first
quarter that we could no longer purchase Chinese raw materials and produce our
products economically. Accordingly, we discontinued the purchase of Chinese raw
materials and curtailed sales.
BEAR RIVER ZEOLITE COMPANY
During 2004, significant costs were incurred by BRZ to expand the plant, repair
equipment, research and develop new products, and to market the product. Sales
of zeolite increased 97% during 2004 from 2003.
YELLOW JACKET RECLAMATION
The Yellow Jacket mill site was essentially reclaimed in 2002. Little work was
performed in 2004 and 2003, and the project is complete.
YANKEE FORK MILL SITE RECLAMATION
During 2004 most of the reclamation work was completed. Work scheduled for 2005
includes water monitoring, seeding and fertilizing.
2
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.
OUR LIABILITIES SUBSTANTIALLY EXCEED OUR ASSETS. IF WE WERE LIQUIDATED BEFORE
OUR STOCKHOLDERS' DEFICIT IS ELIMINATED, OUR COMMON SHAREHOLDERS WOULD LOSE PART
OR ALL OF THEIR INVESTMENT.
In the event of our dissolution, the proceeds (if any) realized from the
liquidation of our assets will be distributed to our shareholders only after
satisfaction of claims of our creditors and preferred shareholders. The ability
of a purchaser of shares to recover all or any portion of the purchase price for
the shares in that event will depend on the amount of funds realized and the
claims to be satisfied by those funds.
WE HAVE A NEGATIVE NET WORTH, HAVE INCURRED SIGNIFICANT LOSSES, AND MAY INCUR
LOSSES IN THE FUTURE.
We have not generated an operating profit for several years, although we did
generate gross profit from operations during the fourth quarter of 2004. 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,
2004, we had a stockholders' deficit of $1,021,141 and 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 and property reclamation costs. As of December 31, 2004, we had total
current assets of $306,222 and total current liabilities of $1,098,710, or
negative working capital of approximately $792,488.
OUR AUDITORS' REPORT AS OF MARCH 21, 2005 RAISED DOUBT ABOUT OUR ABILITY TO
CONTINUE AS A GOING CONCERN.
Our audited financial statements for the year ended December 31, 2004, which are
included in this report, indicate that there was doubt as of March 21, 2005
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, 2004, we are delinquent on the payment of several current
liabilities including payroll and property taxes of approximately $74,000,
accounts payable of approximately $294,000 and accrued interest payable in the
amount of $30,890. 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 ON ACCEPTABLE TERMS.
To fund future needs, we may seek to obtain additional capital from public or
private financing transactions, as well as borrowing and other resources. The
issuance of equity or equity-related securities to raise additional cash would
result in dilution to our present stockholders. Further, additional debt funding
or common stock sales 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. IN ADDITION, WE OWE A SECURED
CONVERTIBLE NOTE PAYABLE TO A COMPANY CONTROLLED BY A SIGNIFICANT SHAREHOLDER
THAT IS SECURED BY 100% OF OUR STOCK IN BRZ. 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, 2004, our bank debt in the amount of $609,440 is secured by a
collateral pledge of substantially all of our mining equipment as well as our
patented and unpatented mining claims in Sanders County, Montana. Pursuant to
the terms of convertible and secured convertible notes 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 as well as our patented and unpatented mining claims.
3
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 two ongoing environmental reclamation and
remediation projects, one at our current production facility in Montana and one
at a discontinued mining operation in Idaho. Adequate financial resources may
not be available to ultimately finish the reclamation activities if changes in
environmental laws and regulations occur; and these changes could adversely
affect our cash flow and profitability. We do not have environmental liability
insurance now; and we do not expect to be able to obtain insurance at a
reasonable cost. If we incur liability for environmental damages while we are
uninsured, it could have a harmful effect on our financial condition and us. The
range of reasonably possible losses from our exposure to environmental
liabilities in excess of amounts accrued to date cannot be reasonably estimated
at this time.
SOME OF OUR ACCRUALS FOR ENVIRONMENTAL OBLIGATIONS ARE CURRENT LIABILITIES.
We have accruals totaling $142,500 on our balance sheet at December 31, 2004,
for our environmental reclamation responsibilities, $100,000 of which are
classified as current. 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 12 patented lode claims, some of which are contiguous,
and 2 patented mill sites. We have no "proven reserves" or "probable reserves"
of antimony, as these terms are defined by the Securities and Exchange
Commission. 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 50% of the common stock of United States Antimony, Mexico S.A.
de C.V. ("USAMSA"), which was formed in April 1998. During 1999 and 1998, we
invested capital and surplus equipment from our Thompson Falls antimony
operation in USAMSA, which was used for the construction of an antimony
processing plant in Mexico. During the later part of 2000 we finalized our 50%
investment in USAMSA. To date, two antimony processing furnaces and a warehouse
building have been built and limited antimony processing has taken place. During
2004 and 2003, USAMSA was idle and had no production activities due to volatile
antimony prices and the lack of operating and development capital. During 2002,
we adjusted our investment in USAMSA to recognize an impairment of its value.
During 2004 and 2003, our investment in USAMSA was further decreased, reflecting
our share of its 2004 and 2003 operating losses.
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 4%. We are the only
significant U.S. producer of antimony products. The balance of domestic sales
are foreign imports (primarily from Chinese and Belgian suppliers).
4
For the year ended December 31, 2004, we sold 1,474,636 pounds of antimony
products generating approximately $2.18 million in revenues. During 2003, we
sold 2,166,691 pounds of antimony products generating approximately $2.75
million in revenues. During 2004 and 2003, approximately 66% and 56%,
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.
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
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2004 $1.32
2003 1.21
2002 0.88
2001 0.58
2000 0.67
1999 0.58
1998 0.63
The range of sales prices for antimony oxide per pound was as follows for the
periods indicated:
YEAR HIGH LOW AVERAGE PRICE
---- ---- --- -------------
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
1999 5.52 0.65 0.85
1998 5.57 0.83 1.13
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, 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, 2004, we had spent
approximately $718,000 to purchase and construct the processing plant.
We have no "proven reserves" or "probable reserves" of zeolite, as these terms
are defined by the Securities and Exchange Commission.
5
"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:
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 2004, USAC spent $40,674 and essentially finished the bulk of the
reclamation work at the Yankee Fork mill site. Monitoring of the reclamation
site will continue through 2005. At December 31, 2004, we have accrued $5,000
for the remaining activities.
ANTIMONY PROCESSING SITE.
We have environmental remediation obligations at our antimony processing site
near Thompson Falls, Montana ("the Stibnite Hill Mine Site"). Under the
regulatory jurisdiction of the U.S. Forest Service and subject to the operating
permit requirements of the Montana Department of Environmental Quality, we
performed substantial environmental reclamation activities during 2000 and 1999.
The regulatory agencies 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, 2004, we have
accrued $130,000, most of which is classified as current for our antimony site
reclamation activities.
YELLOW JACKET MINE.
During 2002, we received notification from the U.S. Forest Service outlining
only minor tasks to be performed during the 2003 field season. These tasks have
been completed. At December 31, 2004, we have not accrued any liability for
reclamation activities at the Yellow Jacket Mine.
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, 2004.
GENERAL.
Reclamation activities at the Yellow Jacket Mine and 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, 2004. We have made significant
reclamation and remediation progress on all our properties over the past three
years and have complied with regulatory requirements in our environmental
remediation efforts. The changes in amounts accrued for environmental
remediation activities during the years ended December 31, 2004 and 2003 are as
follows:
YANKEE FORK THOMPSON FALLS YELLOW JACKET BEAR RIVER
MILL SITE ANTIMONY PLANT MINE ZEOLITE TOTAL
--------- -------------- ---- ------- -----
Balances, December 31, 2002 $ 40,000 $ 144,550 $ 4,565 $ 7,500 $ 196,615
Less: Reclamation Costs (22,397) (2,683) (25,080)
Adjustment of Accrued
Remediation Costs 27,397 8,133 1,435 36,965
---------- ---------- ---------- ---------- ----------
Balances, December 31, 2003 45,000 150,000 6,000 7,500 208,500
Less: Reclamation Costs (40,674) (4,441) (45,115)
Adjustment of Accrued
Remediation Costs 674 (15,559) (6,000) (20,885)
---------- ---------- ---------- ---------- ----------
Balances, December 31, 2004 $ 5,000 $ 130,000 $ -- $ 7,500 $ 142,500
========== ========== ========== ========== ==========
7
EMPLOYEES
As of December 31, 2004, we employed 31 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.
ITEM 2. DESCRIPTION OF PROPERTIES
ANTIMONY DIVISION
Our principal plant and mine are located in the Burns Mining District, Sanders
County, Montana, approximately 15 miles west of Thompson Falls, Montana. We hold
2 patented mill sites and 12 patented lode mining claims covering 192 acres. The
lode claims are contiguous within two groups.
Antimony mining and milling operations were curtailed during 1983 due to
continued declines in the price of antimony. We are currently purchasing foreign
raw antimony materials and continue to produce antimony metal, oxide and sodium
antimonate from our antimony processing facility near Thompson Falls, Montana.
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 2004.
8
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.
2004 HIGH LOW
---- ---- ---
First Quarter $ 0.51 $ 0.20
Second Quarter 0.51 0.25
Third Quarter 0.52 0.24
Fourth Quarter 0.50 0.34
2003 HIGH LOW
---- ---- ---
First Quarter $ 0.24 $ 0.14
Second Quarter 0.33 0.13
Third Quarter 0.26 0.16
Fourth Quarter 0.26 0.14
The approximate number of record holders of our common stock at March 28, 2005
is 2,631.
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 $93,164 in 2004 compared to a net loss of
$798,634 in 2003. The decrease in the loss during 2004 was primarily the result
of increased zeolite sales and decreased general and administrative expenses. In
addition, the company negotiated a reduction in one debt, and determined that
another debt was no longer valid due to the statute of limitations. This
resulted in non-operating revenue recognition of $150,994.
Total sales of antimony products were $2,179,956 for 2004, compared with
$2,746,880 for 2003, a decrease of $566,924. During the year ended December 31,
2004, sales of antimony products consisted of 1,474,636 pounds at an average
sale price of $1.48 per pound. Sales of antimony products during the year ended
December 31, 2003 consisted of 2,166,691 pounds at an average sale price of
$1.27 per pound. The decrease in the amount of pounds sold during 2004 primarily
attributable to two factors. The contract with our major customer contained a
"meet or release" clause which required us to meet prices offered by our
competitors, or release the customer from their purchase commitment. Due to low
prices offered to our major customer by certain competitors, we decreased our
sales prices to retain the business. This significantly reduced our sales and
gross profit during the first three quarters of the year. Additionally, we
decided during the first quarter that we could no longer purchase Chinese raw
materials and produce our products economically. Accordingly, we discontinued
the purchase of Chinese raw materials and curtailed sales.
Combined costs of antimony production and freight and delivery were $1,688,005,
or $1.14 per pound sold for the year ended December 31, 2004, as compared to
$2,396,554, or $1.11 per pound sold, for the year ended December 31, 2003. The
increase in costs per pound is partially due to an increase in production costs,
primarily due to increased propane prices. Additionally, with fewer pounds of
antimony products being sold, the fixed costs per pound of antimony produced
increased in 2004. Depreciation expense in the Antimony division was $41,449
during 2004 compared to $41,288 during 2003.
9
Total sales of zeolite products were $942,936 for 2004, compared with $479,331
for 2003, an increase of $463,605. This represents a sales increase of 97% from
2003 to 2004. Combined costs of zeolite production and freight and delivery were
$693,004 for 2004, compared with $545,572 for 2003. The tons shipped in 2004
were 10,333 tons compared to 4,526 tons in 2003, an increase of 128%.
Depreciation expense was $70,875 for BRZ during 2004, compared to $55,254 during
2003. The increase in depreciation expense during 2004 was due to more
depreciable assets placed in service during 2004.
During 2004, the Company incurred antimony-related general and administrative
expenses totaling $337,409, compared with $468,477 during 2003. During 2004, the
Company incurred zeolite-related general and administrative expenses totaling
$260,405, compared with $155,839 during 2003. The overall decrease in general
and administrative expenses was due to concerted efforts to decrease overhead
costs.
Reclamation at Yellow Jacket is complete. Yankee Fork Mill Site reclamation was
$40,674 in 2004 compared to $22,397 in 2003. The Company believes it has
completed its reclamation work at Yankee Fork. Water monitoring and vegetation
are the Company's final responsibilities at Yankee Fork. The Company spent
$4,441 for reclamation work during 2004 at the Thompson Falls antimony plant
compared to $2,683 during 2003.
Antimony sales expenses were $48,005 for 2004, compared with $67,818 for 2003.
BRZ sales expenses decreased to $52,410 in 2004, from $104,550 in 2003. The
decrease in antimony sales expenses during 2004 was primarily related to fewer
sales commissions paid to independent brokers for our products during 2004. The
decrease in BRZ sales expenses was due to completion of additional marketing
efforts of zeolite in Canada in 2003.
Interest expense was $112,663 for 2004, compared with $82,855 for 2003. We
expect our interest expense to increase during 2005 due to the financing of
equipment purchased during 2004.
Accounts receivable factoring expense was $88,952 for 2004, compared with
$106,175 for 2003. The decrease was due to decreased antimony sales and fewer
accounts receivable.
FINANCIAL CONDITION AND LIQUIDITY
At December 31, 2004, Company assets totaled $1,106,764, and there was a
stockholders' deficit of $1,021,141. In addition, at December 31, 2004, the
Company's total current liabilities exceeded its total current assets by
$792,488. Due to the Company's operating losses, negative working capital, and
stockholders' deficit, the Company's independent accountants included a
paragraph in our 2004 financial statements relating to a going concern
uncertainty. To continue as a going concern the Company must generate profits
from its antimony and zeolite sales and acquire additional capital resources
through the sale of its securities or from short and long-term debt financing.
Without financing and profitable operations, the Company may not be able to meet
its obligations, fund operations and continue in existence. While management is
optimistic, there can be no assurance that the Company will be able to sustain
profitable operations and meet its financial obligations.
Other significant financial commitments for future periods will include:
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 the
secured and unsecured convertible notes payable.
Cash used by operating activities during 2004 was $426,042, and resulted
primarily from the reduction of current liabilities.
Cash used by investing activities during 2004 was $221,016, which was primarily
related to the construction and purchases of capital assets used at the Bear
River Zeolite facility.
The Company was able to fund its operating loss and its acquisition of plant and
equipment during 2004 from net cash provided by financing activities of
$658,700, including $633,229 generated from sales of unregistered common stock
and warrants.
The Company hopes that it will have additional financial resources from
increasing gross profits from its antimony business and sales of zeolite from
BRZ.
10
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements of the registrant are included herein on
pages F1-F24.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 8-A. CONTROLS AND PROCEDURES
The Registrant's president has evaluated the Registrant's disclosure controls
and procedures within 90 days of the filing date of this annual report. Based
upon this evaluation, the Registrant's president concluded that the Registrant's
disclosure controls and procedures are effective in ensuring that material
information required to be disclosed is included in the reports that it files
with the Securities and Exchange Commission.
There were no significant changes in the Registrant's internal controls or, to
the knowledge of the management of the Registrant, in other factors that could
significantly affect these controls subsequent to the evaluation date.
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, 2004, is as
follows:
Name Age Affiliation Expiration of Term
---- --- ----------- ------------------
John C. Lawrence 66 Chairman, President, Annual meeting
Secretary, and Treasurer;
Director
Robert A. Rice 80 Director Annual meeting
Leo Jackson 63 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.
ROBERT A. RICE. Mr. Rice is a metallurgist, having been employed by the Bunker
Hill Company, a wholly-owned subsidiary of Gulf Resources and Chemical
Corporation at Kellogg, Idaho, as Senior Metallurgist and Mill Superintendent
until his retirement in 1965. Mr. Rice has been a director since 1975.
LEO JACKSON. Mr. Jackson is a resident of El Paso, Texas. For the past 15 years,
he has been a principal owner and the president of Production Minerals, Inc., a
company which has an indirect 25% interest in the stock of USAMSA. Mr. Jackson
is one of the principal owners of Minera de Roja, S.A. de C.V., and has been
involved in the production and marketing of industrial minerals such as
fluorspar and celestite in the United States and Mexico for 25 years. Mr.
Jackson speaks fluent Spanish and has a BBA degree from the Sul Ross State
University in Texas. Mr. Jackson has been a director since February 1999.
We are not aware of any involvement by our directors or executive officers
during the past five years in legal proceedings that are material to an
evaluation of the ability or integrity of any director or executive officer.
11
BOARD MEETINGS AND COMMITTEES. Our Board of Directors held twelve (12) regular
meetings during the 2004 calendar year. Each incumbent director attended at
least 75% of the meetings held during the 2004 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 (Robert A. Rice) of the Board of Directors not involved in our day-to-day
financial management. Mr. Rice 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 52,000 shares
of our Series D Preferred Stock per director during 2004.
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 timely filed Form 4 reports during 2004. Mr. Rice
and Mr. Jackson did not file timely Form 4 or Form 5 reports during 2004. Al W.
Dugan, a shareholder who became a 10% beneficial owner during 2000, has timely
filed Form 4 reports during 2004.
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, 2004, 2003 and 2002; the compensation
paid by USAC to its principal executive officer.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------- ----------------------------------------------
AWARDS PAYOUTS
---------------------- ----------------------
Restricted Securities All
Name and Principal Other Annual Options/ Underlying Other All Other
Position Year Salary Bonus Compensation(1) Awards(2) LTIP SARs Payouts Compensation
-------- ---- ------ ----- --------------- --------- --------- ------- ------------
John C. Lawrence, 2004 $96,000 N/A $5,538 $19,500 None None None
President
John C. Lawrence, 2003 $96,000 N/A $5,538 $2,400 None None None
President
John C. Lawrence, 2002 $96,000 N/A $5,538 $0 None None None
President
(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 Series D Preferred stock.
12
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 28, 2005, 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 The Dugan Family 8,320,620(3) 23.02
C/o A. W. Dugan
1415 Louisiana Street, Suite 3100
Houston, TX 77002
-----------------------------------------------------------------------------------------------------------------------
Series A Preferred A. Gordon Clark, Jr. 4,500(6) 100.00
2 Musket Trail
Simsbury, CT 06070
-----------------------------------------------------------------------------------------------------------------------
Series C Preferred Walter L. Maguire, Sr. 49,091(6) 27.59
P.O. Box 129
Keller, VA 23401
-----------------------------------------------------------------------------------------------------------------------
Series C Preferred Richard A. Woods 48,305(6) 27.15
59 Penn Circle West
Penn Plaza Apts.
Pittsburgh, PA 15206
-----------------------------------------------------------------------------------------------------------------------
Series C Preferred Dr. Warren A. Evans 48,305(6) 27.15
69 Ponfret Landing Road
Brooklyn, CT 06234
-----------------------------------------------------------------------------------------------------------------------
Series C Preferred Edward Robinson 32,203(6) 18.11
1007 Spruce Street 1st Floor
Philadelphia, PA 19107
-----------------------------------------------------------------------------------------------------------------------
Series D Preferred Gary D. Babbitt 555,000(4)(6) 23.62
877 W. Main Street, Suite 1000
Boise, ID 83702
-----------------------------------------------------------------------------------------------------------------------
Common stock John C. Lawrence 3,917,853(2) 11.77
Common stock Robert A. Rice 204,791 Nil
Common stock Leo Jackson 56,700 Nil
-----------------------------------------------------------------------------------------------------------------------
Series D Preferred John C. Lawrence 3,603,070(5)(6) 92.10
Series D Preferred Robert A. Rice 102,000 5.37
Series D Preferred Leo Jackson 102,000 5.37
-----------------------------------------------------------------------------------------------------------------------
Common stock and
Series D Preferred Stock All directors and executive
officers as a group
(3 persons) 7,986,414 22.63
-----------------------------------------------------------------------------------------------------------------------
(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 28, 2005 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 31,528,816
shares of common stock, 4,500 shares of Series A Preferred Stock,
177,904 shares of Series C Preferred Stock, and 1,899,672 shares of
Series D Preferred Stock outstanding on March 28, 2005.
(2) Includes 2,167,853 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.
13
(3) Includes 1,823,767 shares owned by Al W. Dugan; 1,876,449 shares, in
the aggregate, owned by companies owned and controlled by Al W. Dugan;
and 4,620,404 stock purchase warrants and shares issuable through the
conversion of a secured convertible note payable. Excludes 183,333
shares owned by Lydia Dugan as to which Mr. Dugan disclaims beneficial
ownership.
(4) Includes warrants to purchase 450,000 shares of Series D Preferred
Stock.
(5) Includes 1,590,672 shares of Series D preferred stock and warrants to
purchase 2,012,398 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, 9, 11 and 12 to our Financial Statements as of December 31, 2003.
o Leo Jackson, a director, is a principal owner and president of
Production Minerals, Inc., a company which indirectly owns 25% of
the stock of USAMSA. We own 50% of the stock of USAMSA.
o We reimburse John C. Lawrence, a director and Chief Executive
Officer, for operational and maintenance expenses incurred in
connection with our use of equipment owned by Mr. Lawrence,
including welding trucks, backhoes, and an aircraft. Reimbursements
for 2004 and 2003 totaled $48,179 and $52,125, respectively. In
addition, we accrued interest expense of $9,316 and $7,795 on net
advances due Mr. Lawrence, for the years ended December 31, 2004
and 2003, respectively.
o During 2004, the Company issued 52,000 shares of its Series D
preferred stock to each member of its Board of Directors as
compensation for their services as directors. In connection with
the issue, the Company recorded $58,500 in director compensation
based on an aggregate of 156,000 Series D shares issued.
o During 2004, 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 his assistance in procuring
financing. The warrants are exercisable at $0.25 per share and
expire in 2007.
o During 2003, the Company issued 111,185 warrants to purchase shares
of Series D preferred stock to John C. Lawrence, the Company's
president and a director, for his assistance in procuring equipment
financing. The warrants are exercisable at $0.30 per share and
expire in 2008.
o At December 31, 2003, we owed legal fees in the amount of $149,971
to an outside law firm in which Gary D. Babbitt, formerly a
director, is a partner. During 2004, this liability was settled for
a $20,000 cash payment, and a note for $40,000. The note issued is
included with the long-term debt at December 31, 2004, and the
amount of debt forgiven was recorded as a gain from forgiveness of
debt in other income.
o During 2003, the Company issued 26,000 shares of its Series D
preferred stock to each member of its Board of Directors as
compensation for their services as directors. In connection with
the issue, the Company recorded $7,800 in director compensation
based on an aggregate of 78,000 Series D shares issued.
o In June 2003, the Company issued 201,000 shares of Series D
preferred stock and 200,000 Series D preferred stock purchase
warrants to Gary D. Babbitt, a former director, for his consulting
services. In connection with the issue to Mr. Babbitt, the Company
recognized $20,100 of consulting expense based upon its estimated
value of the services rendered and shares issued. During 2004, Mr.
Babbitt converted 120,000 Series D preferred shares into 120,000
shares of common stock.
14
o In September 2003, the Company issued John C. Lawrence, the
Company's president and a director, 100,000 shares of Series D
preferred stock for his help in financing the Company's operations.
In connection with this issue, the Company recorded $15,000 of
compensation expense based on its estimated value of the shares
issued.
o During 2003, the Company sold a $250,000 secured convertible note
payable to a company controlled by Al Dugan, a major shareholder.
In connection with the sale Mr. Dugan received 2,000,000 stock
purchase warrants exercisable at $0.20 per share through December
2008.
o During 2003, the Company canceled 1,388,672 shares of its common
stock and reissued an equal amount of Series D preferred stock to
John C. Lawrence, the Company's president and a director.
o During 2003, John C. Lawrence, the Company's president and a
director converted $100,000 of current debt due him into an
unsecured convertible note payable. In connection with the sale Mr.
Lawrence received 1,000,000 stock purchase warrants exercisable at
$0.20 per share through December 2007.
o Included in the sale of the Company's common stock and common stock
warrants during 2003, were 333,334 shares of common stock and
333,334 common stock purchase warrants sold to companies controlled
by directors or immediate family members of directors of the
Company.
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)
15
10.18 Series B Stock Certificate to Excel-Mineral Company, Inc.
10.19 Division Order and Purchase and Sale Agreement
10.20 Inventory and Sales Agreement
10.21 Processing Agreement
10.22 Release and settlement agreement between Bobby C. Hamilton
and United States Antimony Corporation
10.23 Columbia-Continental Lease Agreement
10.24 Release of Judgment
10.25 Covenant Not to Execute
10.26 Warrant Agreements filed as an exhibit to USAC's Annual
Report on Form 10-KSB for the year ended December 31, 1996
(File No. 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) are incorporated herein by this
reference:
10.33 Warrant Issue-John C. Lawrence
10.34 PVS Termination Agreement
Documents filed as an exhibit to USAC's Form 10-KSB for the year ended December
31, 1999 (File No. 001-08675) are incorporated herein by this reference:
10.35 Maguire Settlement Agreement
10.36 Warrant Issue-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
16
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.
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*
21.01 Subsidiary of USAC*
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.
17
Reports on Form 8-K
Item 5. Other Events - October 10, 2003.
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 2004 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 2004 and 2003 were $36,500 and $44,300, 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 2004 and 2003 were $2,250 and $2,600 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.
18
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 28, 2005
------------------------------------------
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 28, 2005
------------------------------------------
John C. Lawrence, Director and President
(Principal Executive, Financial and Accounting
Officer)
By: /s/ Leo Jackson Date: March 28, 2005
-------------------------------------
Leo Jackson, Director
By: /s/ Robert A. Rice Date: March 28, 2005
----------------------------------------
Robert A. Rice, Director
19
| DECORIA, |
| MAICHEL |
| & TEAGUE |
| A PROFESSIONAL SERVICES FIRM |
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 subsidiary as of December 31, 2004 and 2003, and
the related consolidated statements of operations, changes in stockholders'
deficit and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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 financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of United States
Antimony Corporation and its subsidiary as of December 31, 2004 and 2003, and
the consolidated results of their operations and their cash flows for the years
then ended, in conformity with accounting principles generally accepted in the
United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has negative working capital, an accumulated
deficit and total stockholders' deficit that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ DeCoria, Maichel & Teague, P.S.
DeCoria, Maichel & Teague P.S.
Spokane, Washington
March 21, 2005
F-1
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2004 AND 2003
2004 2003
------------ ------------
ASSETS
Current assets:
Cash $ 11,642 $ --
Accounts receivable, less allowance for doubtful accounts of $30,000 56,774 51,081
Inventories 237,806 153,053
------------ ------------
Total current assets 306,222 204,134
Investment in USAMSA, net 3,527 11,913
Properties, plants and equipment, net 683,003 554,311
Restricted cash for bank note payable -- 105,649
Restricted cash for reclamation bonds 91,512 99,043
Deferred financing costs, net of amortization 22,500 30,000
------------ ------------
Total assets $ 1,106,764 $ 1,005,050
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Checks issued and payable $ -- $ 87,927
Accounts payable 441,085 909,696
Accrued payroll and payroll taxes 102,428 210,951
Other accrued liabilities 76,385 74,895
Deferred revenue 30,000 --
Judgment payable -- 53,130
Accrued interest payable 30,890 16,645
Payable to related parties 287,687 232,111
Long-term debt, current 30,235 144,391
Accrued reclamation costs, current 100,000 151,000
------------ ------------
Total current liabilities 1,098,710 1,880,746
Secured convertible and convertible notes payable 350,000 350,000
Long-term debt, noncurrent 636,695 409,141
Accrued reclamation costs, noncurrent 42,500 57,500
------------ ------------
Total liabilities 2,127,905 2,697,387
------------ ------------
Commitments and contingencies (Notes 1 and 16)
Stockholders' deficit:
Preferred stock, $0.01 par value, 10,000,000 shares authorized:
Series A: 4,500 shares issued and outstanding
(liquidation preference $126,000 at December 31, 2004) 45 45
Series B: 750,000 shares issued and outstanding
(liquidation preference $832,500 at December 31, 2004) 7,500 7,500
Series C: 177,904 shares issued and outstanding
(liquidation preference $97,847 at December 31, 2004) 1,779 1,779
Series D: 1,899,672 and 1,863,672 shares issued and outstanding
(liquidation preference $4,792,765 at December 31, 2004) 18,996 18,636
Common stock, $0.01 par value, 50,000,000 shares authorized;
31,528,816 and 28,114,128 shares issued and outstanding, respectively 315,289 281,143
Additional paid-in capital 18,117,824 17,387,970
Accumulated deficit (19,482,574) (19,389,410)
------------ ------------
Total stockholders' deficit (1,021,141) (1,692,337)
------------ ------------
Total liabilities and stockholders' deficit $ 1,106,764 $ 1,005,050
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-2
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
2004 2003
------------ ------------
Revenues:
Sales of antimony products $ 2,179,956 $ 2,746,880
Sales of zeolite products 942,936 479,331
------------ ------------
3,122,892 3,226,211
------------ ------------
Cost of sales:
Cost of antimony production 1,528,724 2,134,198
Antimony depreciation 41,449 41,288
Antimony freight and delivery 159,281 262,356
Cost of zeolite production 645,061 463,947
Zeolite depreciation 70,875 55,254
Zeolite freight and delivery 47,943 81,625
------------ ------------
2,493,333 3,038,668
------------ ------------
Gross profit 629,559 187,543
------------ ------------
Other operating expenses:
Antimony general and administrative 337,409 468,477
Antimony sales expenses 48,005 67,818
Zeolite general and administrative 260,405 155,839
Zeolite sales expenses 52,410 104,550
------------ ------------
698,229 796,684
------------ ------------
Other (income) expense:
USAMSA investment adjustment 18,387 6,712
Interest expense 112,663 82,855
Factoring expense 88,952 106,175
Gain on sale of properties, plants and equipment (20,000) --
Gain due to forgiveness of debt (150,994) --
Change in estimated reclamation costs (20,885) --
Interest income (3,629) (6,249)
------------ ------------
Net other expense 24,494 189,493
------------ ------------
Net loss $ (93,164) $ (798,634)
============ ============
Net loss per share of common stock $ Nil $ (0.03)
============ ============
Basic weighted average shares outstanding 30,272,238 27,175,607
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-3
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
TOTAL PREFERRED STOCK COMMON STOCK ADDITIONAL
----------------------- ----------------------- PAID ACCUMULATED
SHARES AMOUNT SHARES AMOUNT IN CAPITAL DEFICIT TOTAL
---------- --------- ---------- --------- ----------- ------------ -----------
Balances, December 31, 2002 1,028,404 $ 10,284 27,027,959 $ 270,279 $16,963,610 $(18,590,776) $(1,346,603)
Issuance of common stock and
warrants for cash 2,300,001 23,000 322,000 345,000
Issuance of common stock and
warrants for common stock
subscriptions payable 175,000 1,750 33,250 35,000
Issuance of Series D
preferred stock to
Directors and others for
services 379,000 3,790 39,110 42,900
Common stock warrants issued
with secured convertible
and convertible notes
payable 30,000 30,000
Common stock cancelled and
reissued as Series D
preferred stock 1,388,672 13,886 (1,388,672) (13,886)
Net loss (798,634) (798,634)
---------- --------- ---------- --------- ----------- ------------ -----------
Balances, December 31, 2003 2,796,076 27,960 28,114,288 281,143 17,387,970 (19,389,410) (1,692,337)
Issuance of common stock
for cash 2,662,738 26,628 606,601 633,229
Issuance of common stock in
satisfaction of debt 631,790 6,318 66,313 72,631
Series D preferred stock
cancelled and reissued as
common stock (120,000) (1,200) 120,000 1,200
Issuance of Series D
preferred stock to
Directors for services 156,000 1,560 56,940 58,500
Net loss (93,164) (93,164)
---------- --------- ---------- --------- ----------- ------------ -----------
Balances, December 31, 2004 2,832,076 $ 28,320 31,528,816 $ 315,289 $18,117,824 $(19,482,574) $(1,021,141)
========== ========= ========== ========= =========== ============ ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-4
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
2004 2003
------------ ------------
Cash flows from operating activities:
Net loss $ (93,164) $ (798,634)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation expense 112,324 96,542
Amortization of deferred financing costs as interest expense 7,500 --
Series D preferred stock issued to directors and officer
as compensation 58,500 22,800
Series D preferred stock issued for consulting services -- 20,100
Gain on sale of properties, plants and equipment (20,000) --
Gain due to forgiveness of debt (150,994) --
Change in estimated reclamation costs (20,885) --
Loss from unconsolidated investment 8,386 6,712
Change in:
Accounts receivable (5,693) 55,890
Inventories (84,753) (29,746)
Restricted cash for bank note payable 105,649 (3,627)
Restricted cash for reclamation bonds 7,531 (7,857)
Accounts payable, net of amounts forgiven (298,116) 125,897
Accrued payroll and payroll taxes (108,523) (82,486)
Other accrued liabilities 1,490 2,247
Deferred revenue 30,000 --
Judgment payable, net of amount written off due to
statute of limitations -- 3,350
Accrued interest payable 14,245 (2,018)
Payable to related parties 55,576 129,486
Accrued reclamation costs (45,115) 11,885
------------ ------------
Net cash used by operating activities (426,042) (449,459)
------------ ------------
Cash flows from investing activities:
Purchase of properties, plants and equipment (241,016) (121,437)
Proceeds from sale of properties, plants and equipment 20,000 --
------------ ------------
Net cash used by investing activities (221,016) (121,437)
------------ ------------
Cash flows from financing activities:
Proceeds from sale of common stock and warrants 633,229 345,000
Principal payments on long-term debt, net (557,521) (58,390)
Proceeds from long-term debt, net 670,919 --
Proceeds from secured convertible note payable -- 250,000
Change in checks issued and payable (87,927) 34,286
------------ ------------
Net cash provided by financing activities 658,700 570,896
------------ ------------
Net increase in cash 11,642 0
Cash, beginning of year 0 0
------------ ------------
Cash, end of year $ 11,642 $ 0
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-5
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED:
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
Supplemental disclosures:
Cash paid during the year for interest $ 98,279 $ 73,727
============ ============
Noncash financing activities:
Common stock warrants issued with secured convertible
and convertible notes payable $ $ 30,000
============ ============
Common stock and warrants issued for common stock
subscriptions payable $ $ 35,000
============ ============
Conversion of payable to related parties to convertible
note payable $ $ 100,000
============ ============
Series D preferred stock cancelled and reissued as
common stock $ 120,000
============ ============
Common stock cancelled and reissued as Series D
preferred stock $ $ 13,886
============ ============
Common stock issued in satisfaction of debt $ 72,631 $
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-6
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BACKGROUND OF COMPANY AND BASIS OF PRESENTATION
AGAU Mines, Inc., predecessor of United States Antimony Corporation
("USAC" or "the Company"), was incorporated in June 1968 as a Delaware
corporation to mine gold and silver. USAC was incorporated in Montana in
January 1970 to mine and produce antimony products. In June 1973, AGAU
Mines, Inc. was merged into USAC. In December 1983, the Company suspended
its antimony mining operations when it became possible to purchase
antimony raw materials more economically from foreign sources. The
principal business of the Company has been the production and sale of
antimony products.
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.
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, 2004, the Company had negative
working capital of approximately $792,488, an accumulated deficit of
approximately $19.5 million, and a total stockholders' deficit of
approximately $1.0 million. Additionally, the Company is delinquent on
the payment of several current liabilities and has consistently incurred
negative cash flow from operating activities. 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 During 2004 and 2003, the Company made progress in developing its
zeolite production capabilities, and broadened its zeolite product
line. The Company has been developing a sales and marketing force
and attracting new zeolite customers.
o During 2003, the Company negotiated the sale of a $250,000 secured
convertible note payable to a company controlled by a major
shareholder of the Company. In addition, the Company was able to
convert $100,000 owed to the Company's president into a longer term
convertible note payable.
o During 2004, the Company sold an aggregate of 2,662,738 shares of
its unregistered common stock and warrants for $633,229; during
2003, the Company sold an aggregate of 2,300,001 shares of its
unregistered common stock and warrants for cash of $345,000. The
Company will most likely continue to offer its stock for sale to
finance its activities, but there can be no assurances, however,
that the Company will be successful in selling its stock.
o The Company has curtailed certain labor and overhead costs and is
considering the sale of certain of its land holdings in Sanders
County, Montana in an effort to provide more operating capital.
F-7
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 2004 and 2003, approximately 66% and 56%,
respectively, of the Company's antimony revenues were generated by sales
to one customer.
During 2004 and 2003, 44% and 32%, 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.
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
Bear River Zeolite Company, a wholly-owned subsidiary. Intercompany
balances and transactions are eliminated in consolidation. The Company
accounts for its investment interest in its 50% owned foreign entity,
USAMSA, by the equity method.
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 2003 financial statements
in order to conform to the 2004 presentation. These reclassifications
have no effect on net loss, total assets or stockholders' deficit as
previously reported.
Cash and Cash Equivalents
-------------------------
The Company considers cash in banks and investments with maturities of
three months or less when purchased to be cash equivalents.
Restricted Cash
---------------
Restricted cash at December 31, 2004, consists of cash held for
reclamation performance bonds, and is held as certificates of deposit
with reputable financial institutions.
F-8
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED:
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.
Inventories
-----------
Inventories at December 31, 2004 and 2003 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 five years. Maintenance and repairs are charged to operations as
incurred. Betterments of a major nature are capitalized. When assets are
retired or sold, the costs and related accumulated depreciation are
eliminated from the accounts and any resulting gain or loss is reflected
in operations.
The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 144, ("SFAS No. 144"), ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS. The provisions of SFAS No.
144 require that an impairment loss be recognized when the estimated
future cash flows (undiscounted and without interest) expected to result
from the use of an asset are less than the carrying amount of the asset.
Measurement of an impairment loss is based on the estimated fair value of
the asset if the asset is expected to be held and used.
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.
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.
Deferred Financing Costs
------------------------
Deferred financing costs relating to secured convertible notes payable
are amortized over the terms of the notes payable.
F-9
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED:
Asset Retirement Obligations
----------------------------
The Company adopted SFAS No. 143, ACCOUNTING FOR ASSET RETIREMENT
OBLIGATIONS, effective January 1, 2003. SFAS No. 143 requires that the
fair value of a liability for an asset retirement obligation be
recognized 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 unit
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.
Reclamation and Remediation
---------------------------
All of the Company's mining operations are subject to reclamation and
closure requirements. Minimum standards for mine reclamation have been
established by various governmental agencies. Costs are estimated based
primarily upon environmental and regulatory requirements and are accrued
and charged to expense over the expected economic life of the operation
using the units-of-production method. The liability for reclamation is
classified as current or noncurrent based on the expected timing of
expenditures.
The Company accrues costs associated with environmental remediation
obligations when it is probable that such costs will be incurred and they
are reasonably estimable. Costs of future expenditures for environmental
remediation are not discounted to their present value. Such costs are
based on management's current estimate of amounts that are expected to be
incurred when the remediation work is performed within current laws and
regulations. The Company has restricted cash balances that have been
provided to ensure performance of its reclamation obligations.
It is reasonably possible that due to uncertainties associated with
defining the nature and extent of environmental contamination,
application of laws and regulations by regulatory authorities, and
changes in remediation technology, the ultimate cost of remediation and
reclamation could change in the future. The Company continually reviews
its accrued liabilities for such remediation and reclamation costs as
evidence becomes available indicating that its remediation and
reclamation liability has changed.
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.
Stock-Based Compensation
------------------------
SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, as amended by SFAS
No. 148, requires companies to recognize stock-based expense based on the
estimated fair value of employee stock options. Alternatively, SFAS No.
123 allows companies to retain the current approach set forth in APB
Opinion 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, provided that
expanded footnote disclosure is presented. The Company has not adopted
the fair value method of accounting for stock-based compensation under
SFAS No. 123, but provides the pro forma disclosure required when
appropriate.
F-10
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Income (Loss) Per Common Share
------------------------------
The Company accounts for its income (loss) per common share according to
SFAS No. 128, EARNINGS PER SHARE. Under the provisions of SFAS No. 128,
primary and fully diluted earnings per share are replaced with basic and
diluted earnings per share. Basic earnings per share is 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 April 2004, the Financial Accounting Standards Board (the "FASB")
ratified Emerging Issues Task Force (EITF) Issue No. 04-2, which amends
SFAS No. 141, BUSINESS COMBINATIONS, to the extent all mineral rights are
to be considered tangible assets for accounting purposes. There had been
diversity in practice related to the application of SFAS No. 141 to
certain mineral rights held by mining entities that are not within the
scope of SFAS No. 19, FINANCIAL ACCOUNTING AND REPORTING BY OIL AND GAS
PRODUCING COMPANIES. The SEC staff's position previously was that
entities outside the scope of SFAS No. 19 should account for mineral
rights as intangible assets in accordance with Statement of Financial
Accounting Standards No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. The
Company's application of this EITF is not expected to have a material
effect on the Company's financial statements.
In November 2004, the FASB issued SFAS No. 151, INVENTORY COSTS, AND AN
AMENDMENT OF ARB NO. 43, CHAPTER 4. SFAS No. 151 amends ARB 43, Chapter 4
to clarify that abnormal amounts of idle facility expense, freight,
handling costs and wasted materials (spoilage) be recognized as current
period charges. It also requires that allocation of fixed production
overheads to the cost of conversion be based on normal capacity of
production facilities. SFAS No. 151 is effective for inventory costs
incurred during fiscal years beginning after June 15, 2005. The Company's
adoption of SFAS No. 151 is not expected to have a material effect on the
Company's financial statements.
In December 2004, the FASB issued SFAS No. 153, EXCHANGES OF NONMONETARY
ASSETS, AN AMENDMENT OF APB OPINION NO. 29. The amendments made by SFAS
No. 153 are based on the principle that exchanges of nonmonetary assets
should be based on the fair value of the assets exchanged. Further, the
amendments eliminate the narrow exception for nonmonetary exchanges of
similar productive assets and replace it with a general exception for
exchanges of nonmonetary assets that do not have commercial substance.
SFAS No. 153 is effective for nonmonetary asset exchanges occurring in
fiscal periods beginning after June 15, 2005 with earlier adoption
permitted. The provisions of this statement shall be applied
prospectively. The Company's adoption of SFAS No. 153 is not expected to
have a material effect on the Company's financial statements.
F-11
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED:
New Accounting Pronouncements, Continued
----------------------------------------
In December 2004, the FASB issued SFAS No. 123 (revised 2004),
SHARE-BASED PAYMENT ("Statement 123(R)"), which is a revision of SFAS No.
123, ACCOUNTING FOR STOCK-BASED COMPENSATION. Statement 123(R) also
supersedes Accounting Principles Board Opinion No. 25 ("APB 25"),
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and amends SFAS No. 95,
STATEMENT OF CASH FLOWS. Generally, the approach in Statement 123(R) is
similar to the approach prescribed by SFAS No. 123. Statement 123(R)
requires that all share-based payments to employees, including grants of
employee stock options, be recognized in the income statement based on
their fair values. Pro forma disclosure is no longer permitted. Statement
123(R) is effective for small business issuers at the beginning of the
first interim or annual period beginning after December 15, 2005.
As permitted by SFAS No. 123, management currently accounts for
share-based payments to employees using APB 25's intrinsic value method.
Management expects to adopt Statement 123(R) on January 1, 2006 using the
modified prospective method and is unable to estimate stock-based
compensation expense to be recorded in 2006.
During 2004, the Company granted stock warrants to employees for the
purchase of 410,000 shares of its common stock. These warrants are
exercisable at $.25 per share and expire in August 2007. The Company
currently accounts for stock warrants as prescribed by APB 25 and
discloses pro forma information, as provided by SFAS No. 123.
Pro forma net loss presented below was determined as if the Company had
accounted for the employee stock warrants granted during 2004 under the
fair value method of SFAS No. 123. The fair value of these warrants was
estimated at the date of grant using an option pricing model. Such models
require the input of highly subjective assumptions, including the
expected volatility of the stock price which may be difficult to estimate
for small business issuers traded on micro-cap stock exchanges. The
effect of SFAS No. 123 stock option expense on basic loss per share is
nil.
Net loss as reported for 2004 $ 93,164
SFAS No. 123 stock option expense 64,000
-------------
Pro forma net loss for 2004 $ 157,164
=============
If the Company accounted for its employee stock options under SFAS No.
123, compensation expense would have been $706,947 for the year ended
December 31, 2004.
The fair value of each warrant granted was estimated on the grant date
using the Black-Scholes option-pricing model, with the following weighted
average assumptions:
Risk-free interest rate 3.50%
Expected stock price volatility 153.00%
Expected dividend yield 0.00%
F-12
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO 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 collectibility. Accordingly, the Company's allowance
for doubtful accounts receivable is based upon the expected
collectibility of all trade receivables. The performance of all
obligations and payments to the factoring company is personally
guaranteed by John C. Lawrence, the Company's president and a director.
As consideration for Mr. Lawrence's guarantee, the Company granted a
mortgaged security interest to Mr. Lawrence collateralized by the
Company's real and personal property.
The factoring agreement requires that the Company pay a financing fee
equal to 2% of the face amount of receivables sold. Financing fees paid
by the Company during the years ended December 31, 2004 and 2003 totaled
$88,953 and $106,175, respectively. For both of the years ended December
31, 2004 and 2003, net accounts receivable of approximately $3.2 million
were sold under the agreement. Proceeds from the sales were used to fund
inventory purchases and operating expenses. The agreement is for a term
of one year with automatic renewal for additional one-year terms. The
Company's sales of accounts receivable qualify as sales under the
provisions of SFAS No. 140, ACCOUNTING FOR TRANSFERS AND SERVICING OF
FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES, A REPLACEMENT OF
FASB STATEMENT 125.
5. INVENTORIES
The major components of the Company's inventories at December 31, 2004
and 2003 were as follows:
2004 2003
------------ ------------
Antimony Metal $ 51,884 $ 31,824
Antimony Oxide 128,240 71,680
Sodium Antimonate 3,260 218
Zeolite 54,422 49,331
------------ ------------
$ 237,806 $ 153,053
============ ============
At December 31, 2004 and 2003, antimony metal consisted principally of
recast metal from antimony-based compounds and metal purchased from
foreign suppliers, respectively. Antimony oxide inventory consisted of
finished product oxide held at the Company's plant or in independent
warehouses throughout the United States. Sodium antimonite inventory
consisted of dry finished product and wet raw materials, the majority of
which were stored at the Company's antimony plant near Thompson Falls,
Montana. The Company's zeolite inventory consists of salable zeolite
material held at BRZ's Idaho mining and production facility.
F-13
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. PROPERTIES, PLANTS AND EQUIPMENT
The major components of the Company's properties, plants and equipment at
December 31, 2004 and 2003 were as follows:
2004 2003
---------- ----------
Mining equipment (1) $ 945,137 $ 945,137
Chemical processing and office buildings 168,211 168,211
Chemical processing equipment 923,591 923,591
BRZ plant 718,375 522,057
Other 195,966 151,268
---------- ----------
2,951,280 2,710,264
Less accumulated depreciation (2,268,277) (2,155,953)
---------- ----------
$ 683,003 $ 554,311
========== ==========
(1) Substantially all of the Company's mining equipment is fully
depreciated. At December 31, 2004 and 2003, fully depreciated mining
equipment with an original cost of approximately $670,000, was in use
at BRZ.
7. INVESTMENT IN USAMSA
The Company has a 50% investment in United States Antimony, Mexico S.A.
de C.V. ("USAMSA"). The Company accounts for its investment in USAMSA by
the equity method and translates the foreign currency financial
statements of USAMSA in accordance with the requirements of SFAS No. 52,
"Foreign Currency Translation." Assets and liabilities are translated at
current exchange rates, related revenues and expenses are translated at
average exchange rates in effect during the period, and the effects of
exchange rate changes are reflected in stockholders' equity. Unaudited
condensed financial information for USAMSA at December 31, 2004 and 2003,
and the years then ended, is as follows:
2004 2003
---------- ----------
ASSETS
Current assets $ 15,286 $ 15,286
Noncurrent assets 68,588 68,588
---------- ----------
Total assets $ 83,874 $ 83,874
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 76,822 $ 60,048
Stockholders' equity 7,052 23,826
---------- ----------
Total liabilities and
stockholders' equity $ 83,874 $ 83,874
========== ==========
F-14
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. INVESTMENT IN USAMSA, CONTINUED
2004 2003
---------- ----------
RESULTS OF OPERATIONS
Expenses:
Administrative and other costs $ 16,774 $ 11,124
---------- ----------
Net loss $ 16,774 $ 11,124
========== ==========
USAMSA was idle during 2004 and 2003 due to unstable antimony metal
prices and the absence of sufficient operating capital. Leo Jackson, a
director and stockholder of the Company owns 31.4% of Production
Minerals, Inc., which has an indirect interest of 25% in the stock of
USAMSA.
8. JUDGMENT PAYABLE
At December 31, 2003 the Company's financial statements included an
obligation for $53,130 to the Internal Revenue Service, in connection
with a default judgment in a bankruptcy proceeding. The default judgment
was originally entered against the Company by the United States
Bankruptcy Court in 1992 in favor of the bankruptcy estate of a former
legal counsel of the Company. In 1998, the Trustee of the estate assigned
the interest in the judgment to the Internal Revenue Service. During
2004, the Company was advised by legal counsel that this was no longer a
valid liability due to the expiration of the statute of limitations. As
of December 31, 2004, the Company removed this debt from its records, and
recorded a gain from forgiveness of debt in other income.
9. DUE TO RELATED PARTIES
Amounts due to related parties at December 31, 2004 and 2003 were as
follows (see Note 15):
2004 2003
---------- ----------
Entity owned by John C. Lawrence, president
and director $ 12,919 $ 7,368
John C. Lawrence, president and director (1) 274,768 224,743
---------- ----------
$ 287,687 $ 232,111
========== ==========
Transactions affecting the payable to Mr. Lawrence during 2004 and 2003
were as follows:
2004 2003
---------- ----------
Balance, beginning of year $ 224,743 $ 193,801
Equipment rental charges 48,179 52,125
Advances, net 1,846 78,817
Conversion to convertible note payable (2) -- (100,000)
---------- ----------
Balance, end of year $ 274,768 $ 224,743
========== ==========
(1) Includes accrued interest at 10% per annum of $30,799 and $21,484 at
December 31, 2004 and 2003, respectively.
(2) See Note 11.
F-15
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. LONG-TERM DEBT
Long-term debt at December 31, 2004 is as follows:
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 $ 609,440
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 17,490
Note payable, bearing interest at 10%; payable in four
annual installments of $10,000 each beginning December
2005; not collateralized 40,000
----------
666,930
Less current portion (30,235)
----------
Noncurrent portion $ 636,695
==========
At December 31, 2004, principal payments on long-term debt are due as
follows:
YEAR ENDING
DECEMBER 31,
------------
2005 $ 30,235
2006 35,856
2007 38,210
2008 40,635
2009 30,354
Thereafter 491,640
----------
$ 666,930
==========
The note payable to First State Bank of Thompson Falls is 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.
This note also contains certain restrictive covenants, including paying
payroll and property taxes as they are due. At December 31, 2004, the
Company was not in compliance with certain of the covenants. The Company
has obtained a waiver from First State Bank relating to these covenants,
which applies at December 31, 2004 and through December 31, 2005.
F-16
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. 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 accrues interest at 10% per annum with interest payable
quarterly, beginning March 31, 2004, and is convertible into shares of
the Company's common stock at an initial conversion price of $0.20 per
share up until 30 days prior to repayment of the Secured Note. In the
event the Company issues shares of its common stock for a consideration
per share less than the initial conversion price, the initial conversion
price is reduced to a new conversion price equal to the consideration per
share received by the Company for the additional shares of common stock
then issued so that the number of shares issuable to the holder of the
Secured Note upon conversion is proportionately increased. In the case of
shares issued without consideration, the initial conversion price shall
be reduced in an amount so as to maintain for the holder of the Secured
Note the right to convert the note into shares equal in amount to the
same percentage interest in the common stock of the Company as existed
immediately preceding the date the additional common stock was issued.
The Secured Note is subject to certain covenants, which include, among
other things, payment of the principal and accrued interest according to
the terms of the note, and the use of proceeds for the payment of
accounts payable and the purchase of inventory and mining equipment. The
Secured Note matures on December 22, 2007, unless otherwise converted. At
December 31, 2004, $250,000 of principal was outstanding and due on the
note.
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 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, 2007, unless otherwise converted. The Convertible Note is not
collateralized by any of the Company's assets. At December 31, 2004,
$100,000 was outstanding and due on the note.
Deferred Financing Charges
--------------------------
In connection with the issuance of the secured convertible and
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 2007, respectively, 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
year ended December 31, 2004, $7,500 of interest expense was recognized
as a result of amortizing the deferred offering costs.
F-17
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCKHOLDERS' DEFICIT
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 EXPIRATION
WARRANTS PRICES DATES
------------ ------------- ----------
Balance, December 31, 2002 5,176,501 $0.25 - $0.45
Warrants granted in connection with 2002 and 2003 stock
sales 2,550,001 $ 0.30 (A)
Warrants granted with secured convertible and
convertible notes payable 3,000,000 $ 0.20 (B)
Warrants expired and cancelled (300,400) $ 0.25
------------
Balance, December 31, 2003 10,426,102 $0.25 - $0.45
Warrants granted in connection with financing activities 1,925,000 $ 0.30 (C)
Warrants granted to employees 410,000 $ 0.25 (D)
Warrants exercised in connection with 2004 stock sales (2,358,333) $0.29 - $0.35
Warrants expired and cancelled (1,223,000) $0.29 - $0.35
------------
Balance, December 31, 2004 9,179,769 $0.25 - $0.45 (E)
============
(A) Warrants are exercisable on or before June and December 2006.
(B) Warrants are exercisable on or before December 2007 and 2008.
(C) Warrants were exercisable at varying dates through August 2007. All
of these warrants were exercised during 2004.
(D) Warrants are exercisable on or before August 2007.
(E) Warrants are exercisable at varying dates through December 2008.
F-18
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCKHOLDERS' DEFICIT, CONTINUED:
Preferred Stock Warrants
------------------------
During 2003, the Company issued 111,185 warrants to purchase shares of
Series D preferred stock to John C. Lawrence, the Company's president and
a director, for his assistance in procuring equipment financing. The
warrants are exercisable at $0.30 per share and expire in 2008. In
addition, during 2003, the Company issued 200,000 warrants to purchase
shares of Series D preferred stock to Gary D. Babbitt, the Company's
former attorney and director for consulting services provided the
Company. The warrants are exercisable at $0.30 per share and expire in
2006. (See Preferred Stock/Series D).
Issuance of Common Stock for Cash
---------------------------------
During 2004, the Company sold an aggregate of 2,662,738 shares of its
unregistered common stock to existing shareholders and other parties for
cash of $633,229. Proceeds from the sales were used to fund the Company's
operating activities.
During 2003, the Company sold an aggregate of 2,300,001 shares of its
unregistered common stock, plus warrants to purchase 2,375,001 shares of
its common stock at $0.30 per share. Proceeds from the sale totaled
$345,000, or approximately $0.15 per unit of shares and warrants sold,
and were used to fund the Company's operating activities.
Common Stock Issued in Satisfaction of Debt
-------------------------------------------
During 2004, the Company issued 631,790 shares of its unregistered common
stock in satisfaction of debt. In connection with the issuance of these
shares, the Company recognized gain due to forgiveness of debt in the
amount of $150,994.
Common Stock Cancelled and Reissued as Series D Preferred Stock
---------------------------------------------------------------
During 2003, the Board of Directors resolved that 1,388,672 shares of the
Company's common stock held by John C. Lawrence, the Company's president,
be cancelled and then reissued in an equal number of shares of the
Company's Series D preferred stock. The cancellation and re-issue
resulted from the Company's need to maintain its authorized common stock
available for issue within the maximum number of shares as provided by
its Articles of Incorporation, while it offered shares of its common
stock and warrants for sale.
Series D Preferred Stock Cancelled and Reissued as Common Stock
---------------------------------------------------------------
During 2004, the Board of Directors resolved that 120,000 shares of the
Company's Series D preferred stock held by Gary Babbitt, the Company's
the Company's former attorney and director, be cancelled and then
reissued in an equal number of shares of the Company's common stock.
F-19
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCKHOLDERS' DEFICIT, CONTINUED:
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.
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 plus dividends in arrears. At
December 31, 2004, 4,500 shares of Series A preferred stock were
outstanding and cumulative dividends in arrears and the liquidation
preference amounted to $126,000, or $28.00 per share.
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, 2004, cumulative dividends in arrears on the
750,000 outstanding Series B shares were $82,500, or $0.11 per share.
Total dividends in arrears and liquidation preference were $832,500 at
December 31, 2004.
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, 2004 and 2003, 177,904 shares of
Series C preferred stock remained outstanding and the liquidation
preference amounted to $97,847.
F-20
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCKHOLDERS' DEFICIT CONTINUED:
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.
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,
2004, the liquidation preference for Series D preferred stock was
$4,749,180.
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, 2004, cumulative dividends in arrears on
the 1,899,672 outstanding Series B shares were $43,585.
At December 31, 2004 and 2003, the Company had 1,899,672 and 1,863,672
shares of Series D preferred stock outstanding, respectively (see Note
15). The combined liquidation preference and dividends in arrears totaled
$4,792,765 at December 31, 2004.
13. 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, 2004 and 2003,
300,000 shares of the Company's common stock had been issued under the
Plan.
F-21
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. INCOME TAXES
The Company had no income tax provision or benefit for the years ended
December 31, 2004 and 2003.
At December 31, 2004 and 2003, the Company had net deferred tax assets
composed as follows:
2004 2003
------------ ------------
Arising from differences in the book and tax basis
of certain property assets $ 300,000 $ 300,000
Arising from net tax operating loss carryforwards 1,479,000 1,445,000
------------ ------------
Total deferred tax assets 1,779,000 1,745,000
------------ ------------
Valuation allowance (1,779,000) (1,745,000)
------------ ------------
Net deferred tax assets $ 0 $ 0
============ ============
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, 2004 and 2003 has been established.
At December 31, 2004 and 2003, the Company had unexpired regular tax net
operating loss carryforwards of approximately $4,350,000 and $4,250,000,
respectively, which expire in the years 2005 through 2024. At December
31, 2004, the Company had net operating loss carryforwards for
alternative minimum tax purposes of approximately $4,000,000.
15. RELATED-PARTY TRANSACTIONS
In addition to transactions described in Notes 4, 7, 9, 11, and 12,
during 2004 and 2003, the Company had the following transactions with
related parties:
o During 2004 and 2003, the Company issued 52,000 and 26,000 shares,
respectively, of its Series D preferred stock to each member of its
Board of Directors as compensation for their services as directors.
In connection with the 2004 issuances, the Company recorded $58,500
in director compensation based on an aggregate of 156,000 Series D
shares issued. In connection with the 2003 issuances, the Company
recorded $7,800 in director compensation based on an aggregate of
78,000 Series D shares issued.
o In June 2003, the Company issued 201,000 shares of Series D
preferred stock and 200,000 Series D preferred stock purchase
warrants to Gary D. Babbitt, a former director, for his consulting
services. In connection with the issue to Mr. Babbitt, the Company
recognized $20,100 of consulting expense based upon its estimated
value of the services rendered and shares issued.
o In September 2003, the Company issued John C. Lawrence, the
Company's president and a director, 100,000 shares of Series D
preferred stock for his help in financing the Company's operations.
In connection with this issue, the Company recorded $15,000 of
compensation expense based on its estimated value of the shares
issued.
o Included in the sale of the Company's common stock and common stock
warrants during 2003, were 333,334 shares of common stock and
333,334 common stock purchase warrants sold to companies controlled
by directors or immediate family members of directors of the
Company.
F-22
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. COMMITMENTS AND CONTINGENCIES
Until 1989, the Company mined, milled and leached gold and silver in the
Yankee Fork Mining District in Custer County, Idaho. In 1994, the U.S.
Forest Service, under the provisions of the Comprehensive Environmental
Response Liability Act of 1980 ("CERCLA"), designated the cyanide leach
plant as a contaminated site requiring cleanup of the cyanide solution.
In 1996, the Idaho Department of Environmental Quality requested that the
Company sign a consent decree related to completing the reclamation and
remediation at the Preachers Cove mill, which the Company signed in
December 1996.
The Company has been reclaiming the property and, as of December 31,
2004, the cyanide solution cleanup was complete, the mill removed, and a
majority of the cyanide leach residue disposed of.
In November of 2001, the Environmental Protection Agency ("EPA") listed
two by-products of the Company's antimony oxide manufacturing process as
hazardous wastes. Antimony slag and antimony bag house filters are now
subject to comprehensive management and treatment standards under
subtitle C of the Resource Conservation and Recovery Act ("RCRA"), and
emergency notification requirements for releases to the environment under
CERCLA. On November 26, 2002, the Company received a notice of violation
from the Montana Department of Environmental Quality ("Montana DEQ"). The
notice related to a hazardous waste discharge that was discovered during
a hazardous waste compliance evaluation inspection conducted at the
Company's Thompson Falls antimony facility. In response to the notice,
the Company removed certain antimony materials from its production area,
agreed to ensure the Montana DEQ that future releases of hazardous waste
would not occur and was assessed a fine. The Company continues to have
its premises inspected and tested by Montana DEQ for potential releases
of its hazardous wastes into the environment.
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.
17. 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 of $287,687 and $232,111,
respectively, at December 31, 2004 and December 31, 2003, based upon the
contractual cash flow requirements.
The carrying amount of long-term debt is a reasonable estimate of its
fair value. The carrying amount of the secured convertible and
convertible notes payable, aggregating $350,000 at December 31, 2004, is
a reasonable estimate of their fair value.
F-23
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. 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, 2004 and 2003 is as follows:
2004 2003
------------ ------------
Revenues:
Sales of antimony products $ 2,179,956 $ 2,746,880
Sales of zeolite products 942,936 479,331
------------ ------------
$ 3,122,892 $ 3,226,211
============ ============
Cost of sales:
Production and freight and delivery:
Antimony $ 1,688,005 $ 2,396,554
Zeolite 693,004 545,572
Depreciation:
Antimony 41,449 41,288
Zeolite 70,875 55,254
------------ ------------
$ 2,493,333 $ 3,038,668
============ ============
Gross profit $ 629,559 $ 187,543
============ ============
Other operating expenses:
Sales expense:
Antimony $ 48,005 $ 67,818
Zeolite 52,410 104,550
General and administrative expense:
Antimony 337,409 468,477
Zeolite 260,405 155,839
------------ ------------
$ 698,229 $ 796,684
============ ============
Capital expenditures:
Antimony $ 21,998 $ 25,506
Zeolite 219,017 95,931
------------ ------------
$ 241,015 $ 121,437
============ ============
Properties, plant and equipment, net:
Antimony $ 113,157 $ 132,608
Zeolite 569,846 421,703
------------ ------------
$ 683,003 $ 554,311
============ ============
See Note 2 regarding sales to major customers.
F-24