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, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period -------- to-------
Commission file number 33-00215
UNITED STATES ANTIMONY CORPORATION
(Name of small business issuer in its charter)
Montana 81-0305822
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 643, Thompson Falls, Montana 59873
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (406) 827-3523
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $.01 per share
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The registrant's revenues for its most recent fiscal year were $3,221,750
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 $5,500,829 as of
March 27, 2004.
At March 27, 2004, the registrant had 28,114,288 outstanding shares of par value
$0.01 common stock.
TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS 2
General. . . . . . . . . . . . . . . . . . . . . . . 2
History. . . . . . . . . . . . . . . . . . . . . . . 2
Overview-2003. . . . . . . . . . . . . . . . . . . . 2
Risk Factors . . . . . . . . . . . . . . . . . . . . 2
Antimony Division. . . . . . . . . . . . . . . . . . 4
Zeolite Division . . . . . . . . . . . . . . . . . . 6
Environmental Matters. . . . . . . . . . . . . . . . 7
Employees. . . . . . . . . . . . . . . . . . . . . . 8
Other. . . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 2. DESCRIPTION OF PROPERTIES 8
Antimony Division. . . . . . . . . . . . . . . . . . 8
Zeolite Division . . . . . . . . . . . . . . . . . . 9
ITEM 3. LEGAL PROCEEDINGS 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9
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. . . . . . . . . . . . . . . . . . 12
ITEM 10. EXECUTIVE COMPENSATION 13
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 16
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 20
CERTIFICATIONS . . . . . . . . . . . . . . . . . . . . . 21
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . F1-F22
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Explanatory Note: As used in this report, the terms "we," "us" and "our" are
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used to refer to United States Antimony Corporation and, as the context
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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:
-discuss our future expectations;
-contain projections of our future results of operations or of our
financial condition; and
-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-2003
Antimony Sales
During 2003, sales of our antimony products decreased approximately 16% from
that of 2002. The decrease was primarily due to increased imports of Chinese
material at low prices competing with our products.
Bear River Zeolite Company
During 2003, significant costs were incurred by BRZ to expand the plant, repair
equipment, and market the product. Sales of zeolite increased 140% during 2003
from 2002.
Yellow Jacket Reclamation
The Yellow Jacket mill site was essentially reclaimed in 2002. Little work was
performed in 2003. Two pieces of equipment still must be trucked out and survey
work must be completed in 2004. The expenses are estimated to be $6,000. Yellow
Jacket reclamation has been a cash drain on our resources since our abandonment
of the operation in 1999.
Yankee Fork Mill Site Reclamation
During 2003 most of the reclamation work was completed. Work scheduled for 2004
includes neutralization of leach tailings and storage of them in a trench, fill
dirt work, and seeding and fertilizing.
RISK FACTORS
There may be events in the future that we are not able to accurately predict or
over which we have no control. The risk factors listed below, as well as any
cautionary language in this report, provide examples of risks, uncertainties and
events that may cause our actual results to differ materially from the
expectations we describe in our forward-looking statements.
2
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. Instead we have
been able to continue operations from gross profit from our antimony operations,
sales of common stock and borrowings from banks and others. As of December 31,
2003, we had a stockholders' deficit of $1,692,337; 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, 2003, we had total
current assets of $204,134 and total current liabilities of $1,880,746, or
negative working capital of approximately $1,676,612.
Our auditors' report as of February 13, 2004 raised doubt about our ability to
continue as a going concern.
Our audited financial statements for the year ended December 31, 2003, which are
included in this report, indicate that there was doubt as of February 13, 2004
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, 2003, we are delinquent on the payment of several current
liabilities including payroll and property taxes of approximately $128,392,
accounts payable of approximately $600,000, judgments payable in the amount of
$53,130 and accrued interest payable in the amount of $16,645. 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, 2003, our bank debt in the amount of $553,532 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. On March 31,
2004 and all successive quarters pursuant to the terms of convertible and
secured convertible notes payable we will owe an interest payment 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
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 three ongoing environmental reclamation
and remediation projects, one at our current production facility in Montana and
two at discontinued mining operations in Idaho. Adequate financial resources
may not be available to ultimately finish the reclamation activities if changes
in environmental laws and regulations occur; and these changes could adversely
affect our cash flow and profitability. We do not have environmental liability
insurance now; and we do not expect to be able to obtain insurance at a
reasonable cost. If we incur liability for environmental damages while we are
uninsured, it could have a harmful effect on 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 $208,500 on our balance sheet at December 31, 2003,
for our environmental reclamation responsibilities, $151,000 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.
Prior to 1984, we mined antimony ore underground by driving drifts and using
slushers in room and pillar type stopes. Mining was suspended in December 1983,
because antimony could be purchased more economically from foreign sources. Our
underground antimony mining operations may be reopened in the future should raw
material prices warrant doing so. We now purchase the majority of our raw
antimony from China and Canada. Antimony metal from Chinese sources has been
obtained primarily through brokers.
Because we depend on foreign sources for raw materials, there are risks of
interruption in procurement from these sources and/or volatile changes in world
market prices for these materials that are not controllable by us. Changes in
antimony metal export policy by the Chinese government could impair availability
of antimony metal and/or could increase antimony metal prices, which could
result in curtailed production, decreased profits, operating result fluctuations
or breach of contractual obligations to provide antimony products to our
customers.
We currently own 50% of the common stock of United States Antimony, Mexico S.A.
de C.V. ("USAMSA"), which was formed in April 1998. During 1998 and 1999, we
invested capital and surplus equipment from our Thompson Falls antimony
operation in USAMSA, which was used for the construction of an antimony
processing plant in Mexico. During the later part of 2000 we finalized our 50%
investment in USAMSA. To date, two antimony processing furnaces and a warehouse
building have been built and limited antimony processing has taken place.
During 2003, 2002 and 2001, 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. The adjustment reduced our carrying value in USAMSA to equal 50% of
its net equity, or $18,625 at December 31, 2002. During 2003, our investment in
USAMSA decreased to $11,913, reflecting our share of its 2003 operating loss.
USAMSA is pursuing the assignment of mining concessions in the Mexican states of
Zacatecas, Coahuila, Sonora, Queretaro and Oaxaca. We hope USAMSA will begin in
future years to produce antimony metal and other products as processing
opportunities become available and as antimony prices dictate, although there
can be no assurance USAMSA will be profitable.
4
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 have only
one principal domestic competitor. The balance of domestic sales are foreign
imports (primarily from Chinese and Belgian suppliers).
In recent years we made substantial improvements to our analytical and chemical
research capabilities. Since March 1998, we have employed a Chief Chemist who
has devoted a substantial portion of his working time to research and
development activities. We have continued to pursue research and development
activities that have resulted in advances in our preparation, packaging and
quality of our antimony products. We believe that our ability to meet customer
product specifications gives us a competitive advantage. We believe that we
will be able to stay competitive in the antimony business because of these
advances. However, many of our competitors in the antimony industry have
substantially more capital resources and market share than us. Therefore, our
ability to maintain market share can be significantly affected by factors
outside of our control.
For the year ended December 31, 2002, we sold 3,479,394 pounds of antimony
products generating approximately $3.27 million in revenues. During 2003, we
sold 2,166,691 pounds of antimony products generating approximately $2.74
million in revenues. During 2002 and 2003, approximately 40% and 56%,
respectively, of our antimony sales were made to one customer, KOHLER Co.
Marketing We employ full-time marketing personnel and have negotiated various
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commission based sales agreements with other chemical distribution companies.
Antimony Price Fluctuations: Our operating results have been, and will continue
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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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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
---- ----- ----- --------------
2003 $5.45 $1.01 $ 0.92
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.
5
We use various antimony raw materials to produce our products. We obtain
antimony raw material from sources in China, Canada and the U.S. Purchases from
Canadian and U.S. sources have been made at world market prices, as established
by the London Metals Bulletin from time to time. Our USAMSA venture is intended
eventually to reduce our dependence on foreign sources; but during 2002 and
2003, USAMSA was idle and it is not expected to provide sufficient raw material
for several years.
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. The lease 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 sale
price, which varies between 8%-13%. 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 on zeolite products. BRZ has constructed a processing plant on
the property and is currently improving its productive capacity. We have
incurred development and start-up costs of $467,695. We are currently taking
orders for our zeolite products and are optimistic that orders will continue and
increase during 2003.
We have no "proven reserves" or "probable reserves" of zeolite, as these terms
are defined by the Securities and Exchange Commission.
"Zeolite" refers to a group of minerals that consist of hydrated
aluminosilicates that hold cations such as calcium, sodium, ammonium and
potassium in their crystal lattice. Water is loosely held in cavities in the
lattice. BRZ's zeolite deposits have characteristics, which make the mineral
useful for a variety of purposes including:
-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.
-Water Filtration. Zeolite is used for particulate, heavy metal and
ammonium removal in swimming pools, municipal water systems, fisheries, fish
farms, and aquariums.
-Sewage Treatment. Zeolite is used in sewage treatment plants to remove
nitrogen and as a carrier for microorganisms.
-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.
-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.
-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.
-Animal Nutrition. Feeding up to 2% zeolite increases growth rates,
decreases conversion rates, prevents worms, and increases longevity.
-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.
6
ENVIRONMENTAL MATTERS
Our exploration, development and production programs conducted in the United
States are subject to local, state and federal regulations regarding
environmental protection. Some of our production and mining activities are
conducted on public lands. We believe that our current discharge of waste
materials from our processing facilities is in material compliance with
environmental regulations and health and safety standards. The U.S. Forest
Service extensively regulates mining operations conducted in National Forests.
Department of Interior regulations cover mining operations carried out on most
other public lands. All operations by us involving the exploration for or the
production of minerals are subject to existing laws and regulations relating to
exploration procedures, safety precautions, employee health and safety, air
quality standards, pollution of water sources, waste materials, odor, noise,
dust and other environmental protection requirements adopted by federal, state
and local governmental authorities. We may be required to prepare and present
to the authorities data pertaining to the effect or impact that any proposed
exploration for or production of minerals may have upon the environment. Any
changes to our reclamation and remediation plans, which may be required due to
changes in state or federal regulations, could have an adverse effect on our
operations. The range of reasonably possible loss in excess of the amounts
accrued, by site, cannot be reasonably estimated at this time.
We accrue environmental liabilities when the occurrence of such liabilities is
probable and the costs are reasonably estimable. The initial accruals for all
our sites are based on comprehensive remediation plans approved by the various
regulatory agencies in connection with permitting or bonding requirements. Our
accruals are further based on presently enacted regulatory requirements and
adjusted only when changes in requirements occur or when management revises its
estimate of costs required to comply with existing requirements. As remediation
activity has physically commenced, management has been able to refine and revise
its estimates of costs required to fulfill future environmental tasks based on
contemporaneous cost information, operating experience, and changes in
regulatory requirements. In instances where costs required to complete our
remaining environmental obligations are clearly determined to be in excess of
the existing accrual, we have adjusted the accrual accordingly. When regulatory
agencies require additional tasks to be performed in connection with our
environmental responsibilities, we evaluate the costs required to perform those
tasks and adjust our accrual accordingly as the information becomes available.
In all cases, however, our accrual at year-end is based on the best information
available at that time to develop estimates of environmental liabilities.
Yankee Fork Mill Site.
During 2003, USAC spent $27,397 and essentially finished the bulk of the
reclamation work at the Yankee Fork mill site. In essence most of the work was
completed during 2003. During 2004 leach residue must be neutralized, moved by
truck and covered; some rolling stock must be removed, remaining dirt work must
be completed, and water monitoring must continue. At December 31, 2003, we have
accrued $45,000 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 1999 and 2000.
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, 2003, we have
accrued $150,000, 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. The Forest
Service complimented our to-date reclamation efforts, characterizing the site as
a potential "showcase for the mining industry." At December 31, 2003 we have
$6,000 accrued for the remaining reclamation activities.
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, 2003.
7
General.
Reclamation activities at the Yellow Jacket Mine and the Thompson Falls Antimony
Plant have proceeded informally under supervision of the U.S. Forest Service and
applicable State Departments of Environmental Quality. We have complied with
regulators' requirements and do not expect the imposition of substantial
additional requirements.
We have posted cash performance bonds with a bank and the U.S. Forest Service in
connection with our reclamation activities. In 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, 2003. We have made significant
reclamation and remediation progress on all our properties over the past three
years and have complied with regulatory requirements in our environmental
remediation efforts. The change in amounts accrued for environmental remediation
activities during the years ended December 31, 2002 and 2003
YANKEE FORK THOMPSON FALLS YELLOW JACKET BEAR RIVER
MILL SITE ANTIMONY PLANT MINE ZEOLITE TOTAL
Balance December 31, 2001 $ 57,028 $ 151,510 $ 9,125 $ 7,500 $225,163
Less: Reclamation Costs . (39,096) (6,960) (4,560) (50,616)
Adjustment of Accrued
Remediation Costs . . . . 22,068 22,068
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Balance 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
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Balance December 31, 2003 $ 45,000 $ 150,000 $ 6,000 $ 7,500 $208,500
============= ================ =============== ============ ========
EMPLOYEES
As of December 31, 2003, we employed 30 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; but we
consider our antimony processing plant proprietary in nature. We use the trade
name "Montana Brand Antimony Oxide" for marketing our antimony products.
We are subject to the requirements of the Federal Mining Safety and Health Act
of 1977, the Occupational Safety and Health Administration's regulations,
requirements of the state of Montana and the state of Idaho, federal and state
health and safety statutes and Sanders County, Lemhi County and Custer County
health ordinances.
ITEM 2. DESCRIPTION OF PROPERTIES
ANTIMONY DIVISION
Our principal plant and mine are located in the Burns Mining District, Sanders
County, Montana, approximately 15 miles west of Thompson Falls, Montana. We
hold 2 patented mill sites and 12 patented lode mining claims covering 192
acres. The lode claims are contiguous within two groups.
Antimony mining and milling operations were curtailed during 1983 due to
continued declines in the price of antimony. We are currently purchasing
foreign raw antimony materials and continue to produce antimony metal, oxide and
sodium antimonate from our antimony processing facility near Thompson Falls,
Montana.
8
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. The lease entitles BRZ to surface mine and process zeolite on
property located in Preston, Idaho in exchange for a royalty payment. The
royalty is a percentage of the unprocessed ore sale price, which varies between
8%-13%. 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, payable to a company controlled by Al Dugan,
a major shareholder and an affiliate. 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 2003.
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.
2002 HIGH LOW
-------------- ----- -----
First Quarter. $0.29 $0.12
Second Quarter 0.23 0.12
Third Quarter. 0.23 0.15
Fourth Quarter 0.22 0.15
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 27, 2004
is 2,642.
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 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 $798,634 in 2003 compared to a net loss of
$360,389 during 2002. The increase in the loss during 2003 was the result of
decreased antimony sales and increased general and administrative expenses.
9
Total revenues from antimony product sales for the year ended December 31, 2003,
were $2,742,419 compared with $3,274,007 for 2002, a decrease of $531,588.
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. During the year
ended December 31, 2002, sales of antimony products consisted of 3,479,394
pounds at an average sale price of $0.94 per pound. The decrease in the
amount of pounds sold during 2003 is greatly due to the Company's Chinese
competitors offering antimony oxide at sales prices less than the Company's cost
of production, resulting in the loss of customers to our competitors. Combined
cash costs of antimony production and freight and delivery were $2,403,070 or
$1.11 per pound sold, for the year ended December 31, 2003, as compared to cash
costs of antimony production and freight and delivery of $2,873,096, or $0.83
per pound sold for the year ended December 31, 2002. The increase in cash costs
per pound is partially due to an increase in production costs due to increased
propane prices and freight and delivery costs. Additionally, with fewer pounds
of Antimony products being sold, the fixed costs per pound of antimony produced
increased in 2003. Depreciation expense in the Antimony division was $41,288
during 2003 compared to $42,991 during 2002. The decrease in depreciation
expense was due to depreciable antimony processing equipment nearing the end of
its useful lives.
Sales of zeolite products were $479,331, with associated cash cost of sales
including freight and delivery costs of $529,397 during the year ended December
31, 2003, compared to sales of $199,890 and cash cost of sales including freight
and delivery costs of $265,390 during 2002. This represents an increase of 140%
from 2002 to 2003. The tons shipped in 2003 were 4,526 tons compared to 2,054
tons in 2002, an increase of 120%. Depreciation expense was $55,254 for BRZ
during 2003, compared to $41,071 during 2002. The increase in depreciation
expense during 2003 was due to more depreciable assets placed in service during
2003.
During the year ended December 31, 2003, the Company incurred general and
administrative expenses totaling $212,689 associated with BRZ compared to
$86,658 during 2002, the increase was due to increased sales effect of zeolite
products.
Reclamation at Yellow Jacket is essentially complete. Yankee Fork Mill Site
reclamation was $27,397 in 2003 compared to $22,068 in 2002. Water monitoring
and the disposal of certain materials are among the Company's final
responsibilities at Yankee Fork. The Company believes it is nearing the end of
its reclamation work at Yankee Fork.
Antimony general and administrative expenses were $434,563 during the year ended
December 31, 2003, compared to $327,936 during the year ended December 31, 2002.
The increase in general and administrative expenses from 2002 to 2003 is due to
an increase in consulting and other fees associated with the Company's financing
activities and its annual meeting of shareholders held in 2003.
BRZ sales expenses increased to $70,589 in 2003 from $62,654 in 2002, the
increase was due to increased production and marketing of zeolite in 2003.
Antimony sales expenses were $67,818 during the year ended December 31, 2003,
compared to $80,397 during the year ended December 31, 2002. The decrease in
antimony sales expenses during 2002 was primarily related to fewer sales
commissions paid to independent brokers for our products during 2003.
Interest expense was $82,855 during the year ended December 31, 2003 and was
comparable to interest expense of $80,462 incurred during the year ended
December 31, 2002. We expect our interest expense to increase during 2004 due
to the sale of a secured convertible note payable.
During 2002, we adjusted our investment in USAMSA to recognize an impairment of
its value. The adjustment reduced our carrying value in USAMSA by $60,526. No
such adjustment was made during 2003, except to absorb our share of USAMSA's
2003 operating loss.
Accounts receivable factoring expense was $106,175 during the year ended
December 31, 2003 compared to factoring expense incurred during the year ended
December 31, 2002 of $94,765. The increase was due to increased borrowing
activities with the Company's factoring agents. Interest income and other
income increased to $10,711 during the year ended December 31, 2003, from $3,728
during the same period of 2002, due to an increase in other miscellaneous income
in 2003.
During 2002, the sale of a 3% gross sales royalty in BRZ to a Company controlled
by Al Dugan resulted in revenue of $200,000. No similar BRZ royalty sales
occurred in 2003.
10
FINANCIAL CONDITION AND LIQUIDITY
At December 31, 2003, Company assets totaled $1,005,050, and there was a
stockholders' deficit of $1,692,337. In addition, at December 31, 2003, the
Company's total current liabilities exceeded its total current assets by
$1,676,612. Due to the Company's operating losses, negative working capital, and
stockholders' deficit, the Company's independent accountants included a
paragraph in our 2003 financial statements relating to a going concern
uncertainty. To continue as a going concern the Company must generate profits
from its antimony and zeolite sales and acquire additional capital resources
through the sale of its securities or from short and long-term debt financing.
Without financing and profitable operations, the Company may not be able to meet
its obligations, fund operations and continue in existence. While management is
optimistic, there can be no assurance that the Company will be able to sustain
profitable operations and meet its financial obligations.
Other significant financial commitments for future periods will include:
-Servicing notes payable to bank.
-Paying delinquent property and payroll tax liabilities and accounts
payable.
-Fulfilling responsibilities with environmental, labor safety and
securities regulatory agencies.
-Keeping current with the interest payment requirements of the secured
convertible and convertible notes payable.
Cash used by operating activities during 2003 was $449,459, and resulted
primarily from the twelve month loss of $798,634 as adjusted by increasing
accounts payable and related party payables, non-cash effects of depreciation
and amortization, and changes in other current assets and liabilities.
Cash used by investing activities during the year ended December 31, 2003 was
$121,437, all of which 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 the year ended December 31, 2003, from net cash provided from
financing activities of $570,896; including $345,000 generated from sales of
unregistered common stock and warrants, and proceeds from a secured convertible
note payable of $250,000.
The Company hopes that it will have additional financial resources from
increasing gross profits from its antimony business and sales of zeolite from
BRZ.
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements of the registrant are included herein on
pages F1-F22.
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.
11
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, 2003, are as
follows:
Affiliation
Name Age with us Expiration of Term
----------- ------ -------------- ------------------
John C. Lawrence. . . . . . 65 Chairman, President, Secretary, Annual meeting
and Treasurer; Director
Robert A. Rice. . . . . . . 79 Director Annual meeting
Leo Jackson . . . . . . . 62 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.
Board Meetings and Committees. Our Board of Directors held twelve (12) regular
------------------------------
meetings during the 2003 calendar year. Each incumbent director attended at
least 75% of the meetings held during the 2003 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 26,000 shares
-------------------------
of our Series D Preferred Stock per director during 2003.
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 2002. We do not know if Mr. Rice
and Mr. Jackson timely filed Form 4 or Form 5 reports during 2003. We do not
know if Al W. Dugan, a shareholder who became a 10% beneficial owner during
2000, timely filed Form 3, or Form 4, or Form 5 reports during 2003.
12
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, 2003, 2002 and 2001; the compensation
paid by USAC to its principal executive officer.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS PAYOUTS
----------------------- -----------------------
Restricted Securities
Other Annual Options/ Underlying All Other All Other
Name and Principal Position Year Salary Bonus Compensation (1) Awards (2) LTIP SARs Payouts Compensation
--------------------------- ------ --------- ------- --------------- ----------- ---------- -------- -------------
John C. Lawrence, President 2003 $ 96,000 N/A $ 5,538 $ 2,400 None None None
John C. Lawrence, President 2002 $ 96,000 N/A $ 5,538 $ 2,400 None None None
John C. Lawrence, President 2001 $ 96,000 N/A $ 5,538 $ 0 None None None
(1) Represents earned but unused vacation.
(2) These figures represent the fair values, as of the date of issuance, of
the annual director's fee payable to Mr. Lawrence in the form of shares of
USAC's Series D Preferred stock or restricted Common Stock.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of our
common stock as of March 27, 2004, 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 Maguire Family and 1,406,898(2) 5.0%
related entities as a group
c/o Walter L. Maguire, Sr.
P.O. Box 129
Keller, VA 23401
Common stock . . . . . . . . . . . . The Dugan Family 8,795,625(4) 26.4
c/o A. W. Dugan
1415 Louisiana Street, Suite 3100
Houston, TX 77002
Preferred Series A . . . . . . . . . A. Gordon Clark, Jr. 4,500(7) 100.0
stock. . . . . . . . . . . . . 2 Musket Trail
Simsbury, CT 06070
Preferred Series C . . . . . . . . . Walter L. Maguire, Sr. 49,091(7) 27.6
stock. . . . . . . . . . . . . . . . P.O. Box 129
Keller, VA 23401
Preferred Series C . . . . . . . . . Richard A. Woods 48,305(7) 27.2
stock. . . . . . . . . . . . . . . . 59 Penn Circle West
Penn Plaza Apts.
Pittsburgh, PA 15206
13
NAME AND ADDRESS OF. . . . . AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS . . . . . . . . . . . BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP CLASS(1)
------------------------------------ ----------------------------- --------------------- -----------
Preferred Series C . . . . . . . . . Dr. Warren A. Evans 48,305(7) 27.2
stock. . . . . . . . . . . . . . . . 69 Ponfret Landing Road
Brooklyn, CT 06234
Preferred Series C . . . . . . . . . Edward Robinson 32,203(7) 18.1
stock. . . . . . . . . . . . . . . . 1007 Spruce Street 1st Floor
Philadelphia, PA 19107
Preferred Series D . . . . . . . . . Gary D. Babbitt 475,000(5) (7) 22.5
877 W. Main Street, Suite 1000
Boise, ID 83702
Common stock . . . . . . . . . . . . John C. Lawrence 3,836,653(3) 12.8
Common stock . . . . . . . . . . . . Robert A. Rice 214,791 Nil
Common stock . . . . . . . . . . . . Leo Jackson 56,700 Nil
Preferred Series D . . . . . . . . . John C. Lawrence 2,551,070(6) (7) 88.7
Preferred Series D . . . . . . . . . Robert A. Rice 50,000 2.7
Preferred Series D . . . . . . . . . Leo Jackson 50,000 2.7
------------------------------------ ----------------------------- --------------------- -----------
Common stock and
Series D Preferred Stock . . . . . . All directors and executive
officers as a group
(3 persons). . . . 6,759,214 20.6
---------- ------
(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 27, 2004 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 28,114,288 shares of common stock, 4,500 shares of Series A
Preferred Stock, 177,904 shares of Series C Preferred Stock, and 1,863,672
shares of Series D Preferred Stock outstanding on March 27, 2004.
(2) Includes 1,007,843 shares owned by the Maguire Foundation; 129,000
shares owned by Walter L. Maguire, Sr.; 45,500 shares owned by Walter L.
Maguire, Trustee; and 224,555 shares owned by Walter L. Maguire, Jr. Excludes
1,003,409 shares owned by the 1934 Maguire Trust.
(3) Includes 2,086,653 shares of common stock and 1,750,000 stock purchase
warrants issuable through the conversion of a convertible note payable.
Excludes 75,000 shares owned by Mr. Lawrence's sister, as to which Mr. Lawrence
disclaims beneficial ownership.
(4) Includes 1,823,767 shares owned by Al W. Dugan; and 1,876,449 shares, in
the aggregate, owned by companies owned and controlled by Al W. Dugan; and
5,095,404 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.
(5) Includes warrants to purchase 250,000 shares of Series D Preferred
Stock.
(6) Includes 1,538,672 shares of Series D preferred stock and warrants to
purchase 1,012,398 shares of Series D Preferred Stock.
(7) 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.
14
-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.
-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.
-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 2003 and 2002 totaled $52,125 and $56,481,
respectively, in addition, we accrued interest expense of $7,795 and $13,688 on
net advances due Mr. Lawrence, for the years ended December 31, 2003 and 2002,
respectively.
-At December 31, 2003 and 2002, we owed legal fees in the amount of
$149,971 and $140,018, respectively, to an outside law firm in which Gary D.
Babbitt, formerly a director, is a partner.
-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.
-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 2002, we
issued Mr. Babbitt 24,000 shares of Series D preferred stock for his services
rendered.
-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.
-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 excercisable at
$0.20 per share until December 22, 2008.
-During 2003, the Company cancelled 1,388,672 shares of its common stock
and re-issued an equal amount of Series D preferred stock to John C. Lawrence,
the Company's president and a director.
-During 2003, John C. Lawrence, the Company's president and a director
converted $100,000 of current debt due him into a convertible long-term note
payable. In connection with the sale Mr. Lawrence received 1,000,000 stock
purchase warrants excercisable at $0.20 per share until December 22, 2007.
-During 2002, the Company issued 250,000 warrants to purchase shares of
Series D preferred stock to Gary D. Babbitt, for legal services rendered. The
warrants are excercisable at $0.20 per share and expire in 2005 and 2007.
-During 2002, the Company issued 151,213 warrants to purchase shares of
Series D preferred stock to John C. Lawrence in exchange for his warrants to
purchase 151,213 shares of the Company's common stock. The warrants are
excercisable at $0.20 per share and expire in 2005 and 2007.
-During 2002, the Company sold a 3% gross proceeds royalty on all zeolite
extracted from BRZ to Delaware Royalty Company, Inc., a company controlled by Al
Dugan, a major shareholder. The Company received $200,000 from the sale of the
royalty interest. During the years ended December 31, 2003 and 2002, the
Company paid Delaware Royalty Company, Inc. $11,575 and $705 in royalties,
respectively.
15
-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.
-During 2002, we issued 750,000 Series D Preferred Stock warrants to our
president, John C. Lawrence in consideration of his advances made to the
Company. The warrants expire in September of 2007, and are exercisable at $0.20
per share.
-On March 20, 2002 we sold Al W. Dugan, a major shareholder, 50,000 shares
of our common stock and agreed to issue warrants to purchase 50,000 shares of
common stock, for $0.20 per share or $10,000. The warrants are exercisable at
$0.30 per share.
-During the fourth quarter of 2002, the Company issued each of its three
directors, 24,000 shares of Series D Preferred Stock for their services as
directors.
-On February 12, 2002 we sold Al W. Dugan, a major shareholder, 250,000
shares of our common stock and agreed to issue warrants to purchase 250,000
shares of common stock, for $0.20 per share or $50,000. The warrants are
exercisable at $0.30 per share.
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)
16
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
17
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.
18
Reports on Form 8-K
Item 5. Other Events - October 10, 2003.
EXHIBIT 21.01
SUBSIDIARY OF REGISTRANT, AS OF DECEMBER 31, 2003
Bear River Zeolite Company
C/o Box 643
Thompson Falls, MT 59873
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Company's Board of Directors and audit committee reviews and approves audit
and permissible non-audit services performed by DeCoria, Maichel & Teague P.S.,
as well as the fees charged by DeCoria, Maichel & Teague P.S. for such services.
In its review of non-audit service fees and its appointment of DeCoria, Maichel
& Teague P.S. as the Company's independent accountants, the Board of Directors
considered whether the provision of such services is compatible with maintaining
DeCoria, Maichel & Teague P.S. independence. All of the services provided and
fees charged by DeCoria, Maichel & Teague P.S. in 2003 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 2003 and 2002 were $44,300 and $40,700, 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 2003 and 2002 were $2,600 and $2,335 respectively.
ALL OTHER FEES
There were no other fees billed by DeCoria, Maichel & Teague P.S. during the
last two fiscal years for products and services provided by DeCoria, Maichel &
Teague P.S.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(b) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
UNITED STATES ANTIMONY CORPORATION
(Registrant)
By:/s/ John C. Lawrence Date: April 8, 2004
-------------------------------
John C. Lawrence, President, Director
and Principal Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
By:/s/ John C. Lawrence Date: April 8, 2004
-------------------------------
John C. Lawrence, Director and President
(Principal Executive, Financial and Accounting
Officer)
By:/s/ Leo Jackson Date: April 12, 2004
--------------------------
Leo Jackson, Director
By:/s/ Robert A. Rice Date: April 12, 2004
----------------------------
Robert A. Rice, Director
20
Exhibit 31.1
CERTIFICATION
I, John C. Lawrence, certify that:
(1) I have reviewed this annual report on Form 10-KSB of United States Antimony
Corporation.
(2) Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;
(4) I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the small business issuer, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the small business issuer's internal
control over financial reporting that occurred during the small business
issuer's most recent fiscal quarter (the small business issuer's fourth fiscal
quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and
(5) I have disclosed, based on my most recent evaluation of internal control
over financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's Board of Directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's internal
control over financial reporting.
Date: April 8, 2004
/s/ John C. Lawrence
John C. Lawrence, President, and Chief Executive Officer
21
Exhibit 32.1
CERTIFICATION PURSUANT TO THE SARBANES-OXLEY ACT
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
I, John C. Lawrence, director and president of United States Antimony
Corporation (the "Registrant") do hereby certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to my knowledge:
1. This Annual Report on Form 10-KSB of the Registrant for the fiscal year
ended December 31, 2003, as filed with the Securities and Exchange Commission
(the "report"), fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
Date: April 8, 2004
/s/ John C. Lawrence
-----------------------
John C. Lawrence
President and Director
22
DeCoria,
Maichel
& Teague P.S.
REPORT OF INDEPENDENT ACCOUNTANTS
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, 2003 and 2002, and
the related consolidated statements of operations, changes in stockholders'
deficit and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of United States
Antimony Corporation and its subsidiary as of December 31, 2003 and 2002, 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
February 13, 2004
F-1
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 2003 and 2002
2003 2002
ASSETS
Current assets:
Accounts receivable, less allowance
for doubtful accounts of $30,000. . . . . . . . . . . . . . . . . . . . . . . $ 51,081 $ 106,971
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,053 123,307
------------- -------------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . 204,134 230,278
Investment in USAMSA, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,913 18,625
Properties, plants and equipment, net . . . . . . . . . . . . . . . . . . . . . . 554,311 529,416
Restricted cash for bank note payable . . . . . . . . . . . . . . . . . . . . . . 105,649 102,022
Restricted cash for reclamation bonds . . . . . . . . . . . . . . . . . . . . . . 99,043 91,186
Deferred financing costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
-------------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,005,050 $ 971,527
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Checks issued and payable . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 87,927 $ 53,641
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 909,696 783,799
Accrued payroll and property taxes. . . . . . . . . . . . . . . . . . . . . . . 197,761 280,247
Accrued payroll and other . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,085 85,838
Judgment payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,130 49,780
Accrued interest payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,645 18,663
Payable to related parties. . . . . . . . . . . . . . . . . . . . . . . . . . . 232,111 202,625
Stock subscriptions payable . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000
Notes payable to bank, current. . . . . . . . . . . . . . . . . . . . . . . . . 144,391 266,284
Accrued reclamation costs, current. . . . . . . . . . . . . . . . . . . . . . . 151,000 44,565
------------- -------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 1,880,746 1,820,442
Secured convertible and convertible notes payable . . . . . . . . . . . . . . . . 350,000
Notes payable to bank, noncurrent . . . . . . . . . . . . . . . . . . . . . . . . 409,141 345,638
Accrued reclamation costs, noncurrent . . . . . . . . . . . . . . . . . . . . . . 57,500 152,050
------------- -------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,697,387 2,318,130
------------- -------------
Commitments and contingencies (Notes 1 and 15)
Stockholders' deficit:
Preferred stock, $0.01 par value, 10,000,000 shares authorized:
Series A: 4,500 shares issued and outstanding
(liquidation preference $123,750 at December 31, 2003). . . . . . . . . . 45 45
Series B: 750,000 shares issued and outstanding
(liquidation preference $825,000 at December 31, 2003). . . . . . . . . . 7,500 7,500
Series C: 177,904 shares issued and outstanding
(liquidation preference $97,847 at December 31, 2003) . . . . . . . . . . 1,779 1,779
Series D: 1,863,672 and 96,000 shares issued and outstanding, respectively
(liquidation preference $4,659,180 at December 31, 2003). . . . . . . . . 18,636 960
Common stock, $0.01 par value, 50,000,000 and 30,000,000 shares authorized;
28,114,288 and 27,027,959 shares issued and outstanding, respectively . . . . 281,143 270,279
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . 17,387,970 16,963,610
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,389,410) (18,590,776)
------------- -------------
Total stockholders' deficit . . . . . . . . . . . . . . . . . . . . . . (1,692,337) (1,346,603)
------------- -------------
Total liabilities and stockholders' deficit . . . . . . . . . . . . . . $ 1,005,050 $ 971,527
============= =============
F-2
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2003 and 2002
2003 2002
Revenues:
Sales of antimony products and other. . $ 2,742,419 $ 3,274,007
Sales of zeolite products . . . . . . . 479,331 199,890
------------ ------------
3,221,750 3,473,897
------------ ------------
Cost of sales (exclusive of depreciation, as separately stated):
Cost of antimony production . . . . . . 2,140,714 2,541,657
Antimony depreciation . . . . . . . . . 41,288 42,991
Antimony freight and delivery . . . . . 262,356 331,439
Cost of zeolite production. . . . . . . 447,772 242,961
Zeolite depreciation. . . . . . . . . . 55,254 41,071
Zeolite freight and delivery. . . . . . 81,625 22,429
------------ ------------
3,029,009 3,222,548
------------ ------------
Gross profit. . . . . . . . . . . . . . . 192,741 251,349
------------ ------------
Other operating expenses:
Yankee Fork Mill site reclamation . . . 27,397 22,068
Antimony general and administrative . . 434,563 327,936
Antimony sales expenses . . . . . . . . 67,818 80,397
Zeolite general and administrative. . . 212,689 86,658
Zeolite sales expenses. . . . . . . . . 70,589 62,654
------------ ------------
813,056 579,713
------------ ------------
Other (income) expense:
Interest expense. . . . . . . . . . . . 82,855 80,462
USAMSA impairment adjustment. . . . . . 60,526
Factoring expense . . . . . . . . . . . 106,175 94,765
Interest income and other . . . . . . . (10,711) (3,728)
Zeolite royalty sale. . . . . . . . . . (200,000)
------------ -----------
178,319 32,025
------------ ------------
Net loss. . . . . . . . . . . . . . . . . $ (798,634) $ (360,389)
============ ============
Net loss per share of common stock. . . . $ (0.03) $ (0.01)
============ ============
Basic weighted average shares outstanding 27,175,607 26,907,102
============ ============
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, 2003 and 2002
TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL PAID ACCUMULATED
SHARES AMOUNT SHARES AMOUNT IN CAPITAL DEFICIT TOTAL
--------- ------- ----------- --------- ---------------- ------------- ------------
Balances, December 31, 2001 932,404 $ 9,324 26,156,959 $261,569 $ 16,791,610 $(18,230,387) $(1,167,884)
Issuance of common stock
and warrants for cash 871,000 8,710 163,360 172,070
Issuance of Series D preferred stock
to directors for services 96,000 960 8,640 9,600
Net loss (360,389) (360,389)
---------- ------- --------- --------- ----------- ------------- ------------
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 re-issued 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)
========= ======= =========== ========= ================ ============= ============
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, 2003 and 2002
2003 2002
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . $(798,634) $(360,389)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . 96,542 97,084
Series D preferred stock issued to directors and officer 22,800 9,600
Series D preferred stock issued for legal services . . . 20,100
USAMSA impairment adjustment . . . . . . . . . . . . . . 60,526
Loss from unconsolidated investment. . . . . . . . . . . 6,712 3,200
Change in:
Accounts receivable. . . . . . . . . . . . . . . . . . 55,890 (1,887)
Inventories. . . . . . . . . . . . . . . . . . . . . . (29,746) 2,768
Restricted cash for bank note payable. . . . . . . . . (3,627) (98,219)
Restricted cash for reclamation bonds. . . . . . . . . (7,857) (3,636)
Accounts payable . . . . . . . . . . . . . . . . . . . 125,897 159,212
Accrued payroll and property taxes . . . . . . . . . . (82,486) 23,927
Accrued payroll and other. . . . . . . . . . . . . . . 2,247 3,048
Judgment payable . . . . . . . . . . . . . . . . . . . 3,350 3,257
Accrued interest payable . . . . . . . . . . . . . . . (2,018) 4,023
Payable to related parties . . . . . . . . . . . . . . 129,486 81,543
Accrued reclamation costs. . . . . . . . . . . . . . . 11,885 (28,548)
---------- ----------
Net cash used by operating activities. . . . . . . . (449,459) (44,491)
---------- ----------
Cash flows from investing activities:
Purchase of properties, plants and equipment . . . . . . . . (121,437) (305,745)
---------- ----------
Net cash used by investing activities. . . . . . . . (121,437) (305,745)
---------- ----------
Cash flows from financing activities:
Proceeds from sale of common stock and warrants. . . . . . . 345,000 172,070
Proceeds from issuance of common stock subscriptions payable 35,000
Principal payments on notes payable to bank, net . . . . . . (58,390)
Proceeds from notes payable to bank, net . . . . . . . . . . 150,646
Proceeds from secured convertible note payable . . . . . . . 250,000
Change in checks issued and payable. . . . . . . . . . . . . 34,286 (7,480)
---------- ----------
Net cash provided by financing activities. . . . . . 570,896 350,236
---------- ----------
Net decrease in cash . . . . . . . . . . . . . . . . . . . . . 0 0
Cash, beginning of year. . . . . . . . . . . . . . . . . . . . 0 0
---------- ----------
Cash, end of year. . . . . . . . . . . . . . . . . . . . . . . $ 0 $ 0
========== ==========
Supplemental disclosures:
Cash paid during the year for interest . . . . . . . . . . . $ 73,727 $ 62,599
========== ==========
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
==========
Common stock cancelled and re-issued as Series D
preferred stock. . . . . . . . . . . . . . . . . . . . . $ 13,866
==========
F-5
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, 2003, the Company had negative working
capital of approximately $1.68 million, an accumulated deficit of approximately
$19.4 million, and a total stockholders' deficit of approximately $1.7 million.
Additionally, the Company is delinquent on the payment of several current
liabilities including payroll and property taxes totaling approximately
$138,000, accounts payable totaling approximately $600,000 including
approximately $240,000 payable to law firms, a judgment payable to the Internal
Revenue Service totaling approximately $53,000, and accrued interest payable
totaling approximately $17,000. 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:
-During 2003 and 2002, the Company made progress in developing its zeolite
product capabilities, and broadened its zeolite product line. The Company has
been developing a sales and marketing force and attracting new zeolite
customers.
-During the fourth quarter of 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 of current debt owed to the Company's president into a longer term
convertible note payable.
-During 2003, the Company sold an aggregate of 2,300,001 shares of its
unregistered common stock and warrants for $345,000; during 2002, the Company
sold an aggregate of 871,000 shares of its unregistered common stock and
warrants for cash of $172,070. The Company will mostly likely continue to offer
its stock for sale to finance its activities, there can be no assurances,
however, the Company will be successful in selling its stock.
-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.
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.
F-6
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 Chinese producers through metal brokers. If the
supply of antimony from China is reduced, it is possible that the Company's
antimony product operations could be adversely affected. During the years ended
December 31, 2003 and 2002, 56% and 40%, respectively, of the Company's antimony
revenues were generated by sales to one customer. Subsequent to year-end, the
Company terminated a sales agreement with its largest customer. Management
expects gross sales to decrease in the short-term, but gross profit from
remaining and future sales to increase overall. The ultimate outcome of this
event is still uncertain, however.
During 2003, 18% and 14% of the Company's revenues generated from zeolite
product sales were to one of two individual customers, respectively. During
2002, 55% of the Company's revenues generated from zeolite product sales were to
an individual customer. The loss of the Company's "key" customers could
adversely affect its business.
The Company's products are sold principally in the United States and, to a
lesser extent, Canada.
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.
Restricted Cash
----------------
Restricted cash consists primarily of cash held for payment of delinquent
payroll taxes, reclamation performance bonds, and security for a bank note
payable. Restricted cash held for reclamation and as security for a bank note
payable are held as certificates of deposit with reputable financial
institutions.
Deferred Financing Costs
--------------------------
Deferred financing costs relating to secured convertible notes payable are
amortized over the terms of the notes payable.
F-7
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Reclassifications
-----------------
Certain reclassifications have been made to the 2002 financial statements in
order to conform to the 2003 presentation. These reclassifications have no
effect on net loss, total assets or stockholders' deficit as previously
reported.
Inventories
-----------
Inventories at December 31, 2003 and 2002, primarily consisted of antimony
finished products, antimony metal and zeolite finished 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
their estimated useful lives (five to fifteen years). Vehicles and office
equipment are stated at cost and are depreciated using the straight-line method
over estimated useful lives of three to five years. Maintenance and repairs are
charged to operations as incurred. Betterments of a major nature are
capitalized. When assets are retired or sold, the costs and related accumulated
depreciation are eliminated from the accounts and any resulting gain or loss is
reflected in operations.
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.
Income Taxes
-------------
The Company records deferred income tax liabilities and assets for the expected
future income tax consequences of events that have been recognized in its
financial statements. Deferred income tax liabilities and assets are determined
based on the temporary differences between the financial statement carrying
amounts and the tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the temporary differences are expected to reverse.
F-8
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Reclamation and Remediation
-----------------------------
All of the Company's mining operations are subject to reclamation and closure
requirements. Minimum standards for mine reclamation have been established by
various governmental agencies. Costs are estimated based primarily upon
environmental and regulatory requirements and are accrued and charged to expense
over the expected economic life of the operation using the units-of-production
method. The liability for reclamation is classified as current or noncurrent
based on the expected timing of expenditures.
The Company accrues costs associated with environmental remediation obligations
when it is probable that such costs will be incurred and they are reasonably
estimable. Costs of future expenditures for environmental remediation are not
discounted to their present value. Such costs are based on management's current
estimate of amounts that are expected to be incurred when the remediation work
is performed within current laws and regulations. The Company has restricted
cash balances that have been provided to ensure performance of its reclamation
obligations.
It is reasonably possible that due to uncertainties associated with defining the
nature and extent of environmental contamination, application of laws and
regulations by regulatory authorities, and changes in remediation technology,
the ultimate cost of remediation and reclamation could change in the future. The
Company continually reviews its accrued liabilities for such remediation and
reclamation costs as evidence becomes available indicating that its remediation
and reclamation liability has changed.
Revenue Recognition
--------------------
Sales of antimony and zeolite products are recorded upon shipment and when
title passes to the customer. The Company's sales agreements provide
for no product returns or allowances.
Income (Loss) Per Common Share
----------------------------------
The Company accounts for its income (loss) per common share according to
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
No. 128"). Under the provisions of SFAS No. 128, primary and fully diluted
earnings per share are replaced with basic and diluted earnings per share.
Basic earnings per share is 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.
Stock-Based Compensation
-------------------------
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), 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-9
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
New Accounting Pronouncements
-------------------------------
In April 2002, the FASB issued SFAS No. 145, "Rescission of SFAS Statements No.
4, 44, and 64, Amendment of SFAS No. 13, and Technical Corrections." This
statement culminates the current requirements that gains and losses on debt
extinguishment must be classified as extraordinary items in the income
statement. Instead, such gains and losses will be classified as extraordinary
items only if they are deemed to be unusual and infrequent, in accordance with
the current GAAP criteria for extraordinary classifications. In addition, SFAS
No. 145 eliminates an inconsistency in lease accounting by requiring that
modifications of capital leases that result in reclassification as operating
leases be accounted for consistent with sales-leaseback accounting rules. The
statement also contains other nonsubstantive corrections to authoritative
accounting literature. The rescission of SFAS No. 4 is effective in fiscal years
beginning after May 15, 2002. The amendment and technical corrections of SFAS
No. 13 are effective for transactions occurring after May 15, 2002. All other
provisions of SFAS No. 145 are effective for financial statements issued on or
after May 15, 2002. SFAS No. 145 has no impact on the Company's financial
statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which addresses accounting for restructuring
and similar costs. SFAS No. 146 supersedes previous accounting guidance,
principally Emerging Issues Task Force Issue No. 94-3. SFAS No. 146 requires
that the liability for costs associated with an exit or disposal activity be
recognized when the liability is incurred. SFAS No. 146 also establishes that
the liability should initially be measured and recorded at fair value.
Accordingly SFAS No. 146 may affect the timing of recognizing future
restructuring costs as well as the amount recognized. The provisions of SFAS 146
are effective for exit or disposal activities that are initiated after December
31, 2002. SFAS No. 146 has no impact on the Company's financial statements.
In August 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain Financial
Institutions." SFAS No. 147 removes acquisitions of financial institutions from
the scope of SFAS No. 72 and FASB Interpretation No. 9, and requires that those
transactions be accounted for in accordance with SFAS No. 141 and SFAS No. 142.
In addition, SFAS No. 147 amends SFAS No. 144, to include in its scope long-term
customer-relationship intangible assets of financial institutions. The
provisions of SFAS No. 147 are generally effective October 1, 2002. SFAS No.
147 has no impact on the Company's financial statements.
In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting for Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, an interpretation of FASB Statements No.
5, 57 and 107 and rescission of FASB Interpretation No. 34, Disclosure of
Indirect Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 clarifies the
requirements for a guarantor's accounting for and disclosure of certain
guarantees issued and outstanding. It also requires a guarantor to recognize, at
the inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. This interpretation also incorporates
without reconsideration the guidance in FASB Interpretation No. 34, which is
being superseded. The adoption of FIN 45 has no material effect on the Company's
financial statements.
In November 2002, the Emerging Issues Task Force ("EITF") reached a consensus on
EITF 00-21, "Revenue Arrangements with Multiple Deliverables," related to the
timing of revenue recognition for arrangements in which goods or services or
both are delivered separately in a bundled sales arrangement. The EITF requires
that when the deliverables included in this type of arrangement meet certain
criteria they should be accounted for separately as separate units of
accounting. This consensus is effective prospectively for arrangements entered
into in fiscal periods beginning after June 15, 2003. EITF 00-21 will not have
an impact upon initial adoption and is not expected to have a material impact on
the Company's results of operations, financial position and cash flows.
F-10
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
New Accounting Pronouncements, Continued:
--------------------------------------------
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation, Transition and Disclosure, an amendment of FASB Statement No.
123." SFAS No. 148 provides alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based
employee compensation. It also amends the disclosure provisions of SFAS No. 123
to require prominent disclosure about the effects of reported net income of an
entity's accounting policy decisions with respect to stock-based employee
compensation. Finally, this Statement amends APB Opinion No. 28, Interim
Financial Reporting, to require disclosure about those effects in interim
financial information. The amendments to SFAS No. 123, which provides
alternative methods of transition for an entity that voluntarily changes to the
fair value based method of accounting for stock-based employee compensation is
effective for financial statements for fiscal years ending after December 15,
2002. The amendment to SFAS No. 123 relating to disclosures and the amendment to
Opinion 28 is effective for financial reports containing condensed financial
statements for interim periods beginning after December 15, 2002. Management
does not intend to adopt the fair value accounting provisions of SFAS No. 123
and currently believes that the adoption of SFAS No. 148 will not have a
material impact on the Company's financial statements.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." This standard amends and
clarifies the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and hedging activities under
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
This statement is effective prospectively for contracts entered into or modified
after June 30, 2003, and for hedging relationships designated after June 30,
2003. SFAS No. 149 will not have an impact upon initial adoption and is not
expected to have a material effect on the Company's results of operations,
financial position and cash flows.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
establishes standards for the classification and measurement of certain
financial instruments with characteristics of both liabilities and equity. The
requirements of SFAS No. 150 were initially required to become effective for the
Company for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. On November 7, 2003, the FASB issued FAS No.
150-3, deferring the effectiveness of SFAS No. 150 under certain circumstances.
The Company has evaluated the impact of SFAS No. 150 to determine the effect it
may have on its results of operations, financial position or cash flows and has
concluded that the adoption of this statement is not expected to have a material
effect on the Company's financial position or results of operations.
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.
F-11
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. SALES OF ACCOUNTS RECEIVABLE, CONTINUED:
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, 2003 and 2002 totaled $106,175 and $94,765,
respectively. For the years ended December 31, 2003 and 2002, net accounts
receivable of approximately $3.2 million and $3.3 million, respectively, were
sold under the agreement. Proceeds from the sales were used to fund inventory
purchases and operating expenses. The agreement is for a term of one year with
automatic renewal for additional one-year terms. The Company's sales of
accounts receivable qualify as sales under the provisions of Statement of
Financial Accounting Standards No. 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, 2003 and
2002, were as follows:
2003 2002
Antimony Metal. . $ 31,824 $ 7,406
Antimony Oxide. . 71,680 93,456
Sodium Antimonate 218 2,388
Zeolite . . . . . 49,331 20,057
-------- --------
$153,053 $123,307
======== ========
At December 31, 2003 and 2002, 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.
6. PROPERTIES, PLANTS AND EQUIPMENT
The major components of the Company's properties, plants and equipment at
December 31, 2003 and 2002 were as follows:
2003 2002
Mining equipment (1). . . . . . . . . . . $ 945,137 $ 945,137
Chemical processing and office buildings. 168,211 144,727
Chemical processing equipment . . . . . . 923,591 921,065
BRZ plant . . . . . . . . . . . . . . . . 522,057 426,630
Other . . . . . . . . . . . . . . . . . . 151,268 151,268
---------- ----------
2,710,264 2,588,827
Less accumulated depreciation . . . . . . 2,155,953 2,059,411
---------- ----------
$ 554,311 $ 529,416
========== ==========
(1) Substantially all of the Company's mining equipment is fully
depreciated. At December 31, 2003 and 2002, mining equipment with an original
cost of approximately $670,000, was in use at BRZ.
F-12
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 2003 and 2002, and the years then ended, is as follows:
2003 2002
ASSETS
Current assets . . . . . . . . . . . . . . . $15,286 $16,292
Noncurrent assets. . . . . . . . . . . . . . 68,588 73,102
------- -------
Total assets . . . . . . . . . . . . . . . $83,874 $89,394
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities. . . . . . . . . . . . . $60,048 $52,144
Stockholders' equity . . . . . . . . . . . . 23,826 37,250
------- -------
Total liabilities and stockholders' equity $83,874 $89,394
======= =======
2003 2002
RESULTS OF OPERATIONS
Expenses:
Administrative and other costs . . . . . $11,124 $ 6,401
------- -------
Net loss . . . . . . . . . . . . . . . . $11,124 $ 6,401
======= =======
USAMSA was idle during 2003 and 2002 due to unstable antimony metal prices and
the absence of sufficient operating capital. During 2002, the Company adjusted
the carrying value of its investment in USAMSA to equal 50% of USAMSA's net book
value. 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 and 2002, the Company owed $53,130 and $49,780,
respectively, to the Internal Revenue Service, in connection with a default
judgment in a bankruptcy proceeding.
The default judgment was originally entered against the Company by the United
States Bankruptcy Court in 1992 in favor of the bankruptcy estate of a former
legal counsel of the Company. In 1998, the Trustee of the estate assigned the
interest in the judgment to the Internal Revenue Service. The judgment accrues
interest at the Federal Judgment Interest Rate, and is due in monthly
installments of $3,000. During 2003 and 2002, the Company made no payments on
this judgment payable.
F-13
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. DUE TO RELATED PARTIES
Amounts due to related parties at December 31, 2003 and 2002 were as follows
(see Note 15):
2003 2002
Entity owned by John C. Lawrence, president and director. . . . . . . . . . . . . . . . . $ 7,368 $ 8,824
John C. Lawrence, president and director(1) . . . . . . . . . . . . . . . . . . . . . . . 224,743 193,801
---------- --------
$ 232,111 $202,625
========== ========
Transactions affecting the payable to Mr. Lawrence during 2003 and 2002 were as follows:
2003 2002
Balance, beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 193,801 $116,361
Equipment rental charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,125 56,481
Advances, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,817 20,959
Conversion to convertible note payable(2) . . . . . . . . . . . . . . . . . . . . . . . . (100,000)
---------- --------
Balance, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 224,743 $193,801
========== ========
(1) Includes accrued interest at 10% per annum of $21,484 and $13,688 for the
years ended December 31, 2003 and 2002, respectively.
(2) See Note 11.
10. NOTES PAYABLE TO BANK
Notes payable to First State Bank of Thompson Falls, Montana ("First State
Bank") at December 31, 2003, were as follows:
Term note payable, bearing interest at 9.0% through September 2008, then
prime plus 2% through maturity; payable in monthly installments
of $5,648; maturing September 2013 $ 438,612
Note payable under $150,000 revolving line-of-credit, bearing interest
at 6.0%; outstanding principal and accrued interest due June 2004. . 65,170
Note payable under $50,000 revolving line-of-credit, bearing interest
at 9.5%; outstanding principal and accrued interest due April 2004 . 49,750
-----------
553,532
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . (144,391)
-----------
Noncurrent portion . . . . . . . . . . . . . . . . . . . . . . . . . . $ 409,141
============
At December 31, 2003, principal payments on the notes payable to bank are
due as follows:
YEAR ENDING
DECEMBER 31,
-------------
2004. . . . . . . $ 144,391
2005. . . . . . . 32,236
2006. . . . . . . 35,260
2007. . . . . . . 38,567
2008. . . . . . . 42,185
Thereafter. 260,893
-------------
553,532
=============
F-14
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. NOTES PAYABLE TO BANK, CONTINUED:
Each of the notes payable described above 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. The note payable under a $150,000 revolving
line-of-credit is also collateralized by a certificate of deposit. The notes
also contain certain restrictive covenants, including paying payroll and
property taxes, as they are due. At December 31, 2003, 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,
2003 and through December 31, 2004.
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, 2003, $250,000
of principal was outstanding and due on the note.
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
unsecured, however, and not collateralized by any of the Company's assets. At
December 31, 2003, $100,000 was outstanding in the Convertible Note payable.
F-15
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. SECURED CONVERTIBLE NOTES PAYABLE, CONTINUED:
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 will be amortized as interest expense over the terms of the respective
convertible notes payable. During the year ended December 31, 2003, none of the
deferred offering costs had yet been amortized to interest expense.
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, 2001. . . . . . . . . . . . . . . . . 3,906,714 $0.25-$0.45 (A)
Warrants issued in connection with stock sales . . . . . 871,000 $ 0.30 (B)
Warrants issued for consulting services. . . . . . . . . 600,000 $ 0.30 (B)
Warrants issued in connection with BRZ purchase. . . . . 50,000 $ 0.45 (C)
Warrants exchanged for Series D warrants . . . . . . . . (151,213)
Warrants expired . . . . . . . . . . . . . . . . . . . . (100,000) $ 0.55
----------- -----------
Balance, December 31, 2002 . . . . . . . . . . . . . . . . 5,176,501
Warrants issued in connection with 2002 and
2003 stock sales . . . . . . . . . . . . . . . . . . . 2,550,001 $ 0.30 (D)
Warrants issued with secured convertible and convertible
notes payable. . . . . . . . . . . . . . . . . . . . . 3,000,000 $ 0.20 (E)
Warrants expired and cancelled . . . . . . . . . . . . . (300,400) $ 0.25
----------- -----------
Balance, December 31, 2003 . . . . . . . . . . . . . . . . 10,426,102
===========
F-16
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCKHOLDERS' DEFICIT, CONTINUED:
Common Stock Warrants, Continued:
------------------------------------
(A) Warrants are exercisable on or before January and December of 2004.
(B) Warrants are exercisable on or before September and November of 2005.
(C) Warrants are exercisable on or before May of 2005.
(D) Warrants are exercisable on or before June and December of 2006.
(E) Warrants are exercisable on or before December of 2007 and 2008.
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).
During 2002, the Company issued 1,151,213 warrants to purchase shares of Series
D preferred stock. Of the Series D warrants issued, 750,000 were issued to Mr.
Lawrence, in consideration for advances made by him to the Company; 250,000 were
issued to Mr. Babbitt, for legal services rendered; and an additional 151,213
were issued to Mr. Lawrence in exchange for his warrants to purchase 151,213
shares of the Company's common stock. The warrants are exercisable at $0.20 per
share and expire in 2005 and 2007.
Issuance of Common Stock for Cash
--------------------------------------
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.
During 2002, the Company sold an aggregate of 871,000 shares of its unregistered
common stock, plus warrants to purchase 871,000 shares of common stock
exercisable at $0.30 per share, to existing shareholders and other parties for
cash of $172,070. In connection with the stock sales during 2002, 600,000
warrants, exercisable at $0.30 and expiring in November 2005, were issued to a
stockholder and consultant for his services.
At December 31, 2002, the Company had stock subscriptions payable of $35,000
outstanding relating to its commitment to sell 175,000 shares of common stock
and common stock purchase warrants exercisable at $0.30 per share on or before
November of 2005. The shares and warrants were issued subsequently in 2003.
Common Stock Cancelled and Re-issued 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 re-issued 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.
F-17
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, Series A preferred stock, consisting of 4,500 shares, was
established by the Board of Directors. These shares are nonconvertible,
nonredeemable and are entitled to a $1.00 per share per year cumulative
dividend. Series A preferred stockholders have voting rights for directors only
and a total liquidation preference equal to $45,000 plus dividends in arrears.
At December 31, 2003, 4,500 shares of Series A preferred stock were outstanding
and cumulative dividends in arrears including the liquidation preference
amounted to $123,750, or $28.00 per share.
Series B
---------
During 1993, Series B preferred stock, consisting of 1,666,667 shares, was
established by the Board of Directors and 1,666,667 shares were issued in
connection with a 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 restricted preferred
stockholders is $1.00 per share plus dividends in arrears. No dividends have
been declared or paid with respect to the Series B preferred stock. In 1995,
916,667 shares of Series B preferred stock were surrendered to the Company and
cancelled in connection with the settlement of litigation against Bobby C.
Hamilton. At December 31, 2003, cumulative dividends in arrears on the 750,000
outstanding Series B shares were $75,000, or $0.10 per share. Total dividends
in arrears and liquidation preference were $825,000 at December 31, 2003.
Series C
---------
During 1997, the Company issued 2,560,762 shares of Series C preferred stock in
connection with the conversion of certain debts owed by the Company. During
1999, holders of 2,354,766 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, or $97,847, at
December 31, 2003. At December 31, 2003 and 2002, 177,904 shares of Series C
preferred stock remained outstanding and unconverted.
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, that
include but are not limited to, the affects of the subsequent sale of common
stock at prices less than the initial conversion price.
F-18
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCKHOLDERS' DEFICIT, CONTINUED:
Series D, Continued:
----------------------
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, 2003, the liquidation preference for Series D
preferred stock was $4,659,180.
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, 2003 and 2002, the Company had 1,863,672 and 96,000 shares of
Series D preferred stock outstanding, respectively (see Note 15).
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, 2003 and 2002, 300,000 shares of the Company's common stock had been issued
under the Plan.
14. INCOME TAXES
The Company had no income tax provision or benefit for the years ended
December 31, 2003 and 2002.
At December 31, 2003 and 2002, the Company had net deferred tax assets composed
as follows:
2003 2002
Arising from differences in the book and tax basis of
certain property assets . . . . . . . . . . . . . . $ 300,000 $ 250,000
Arising from net tax operating loss carryforwards . . 1,445,000 1,550,000
------------ ------------
Total deferred tax assets . . . . . . . . . . . . . . 1,745,000 1,800,000
------------ ------------
Valuation allowance . . . . . . . . . . . . . . . . . (1,745,000) (1,800,000)
------------ ------------
Net deferred tax assets . . . . . . . . . . . . . . $ 0 $ 0
============ ============
F-19
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. INCOME TAXES, CONTINUED:
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,
2003 and 2002 has been established.
At December 31, 2003 and 2002, the Company had unexpired regular tax net
operating loss carryforwards of approximately $4,250,000 and $4,700,000,
respectively, which expire in the years 2004 through 2023. At December 31,
2003, 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 2003
and 2002, the Company had the following transactions with related parties:
-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.
-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.
-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.
-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.
-During 2002, the Company sold a 3% gross proceeds royalty on all zeolite
extracted from BRZ to Delaware Royalty Company, Inc., a company controlled by a
Al Dugan, a major shareholder. The Company received $200,000 from the sale of
the royalty interest. During the years ended December 31, 2003 and 2002, the
Company paid Delaware Royalty Company, Inc. $11,575 and $705 in royalties,
respectively.
-During 2002, the Company issued 96,000 shares of its Series D preferred
stock to three members of the Board of Directors and Gary D. Babbitt, a former
director and the Company's legal counsel, for their duties as directors. The
stock awards were recorded as compensation expense (director's fees) based upon
the estimated value of the stock at the date of issuance.
F-20
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, 2003, 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 following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments." The
estimated fair value amounts have been determined using available market
information and appropriate valuation methodologies. However, considerable
judgment is required to interpret market data and to develop the estimates of
fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts the Company could realize in a current market
exchange.
The carrying amounts for cash, restricted cash, accounts receivable, accounts
payable and accrued expenses are reasonable estimates of their fair values. The
fair value of amounts due to related parties approximates their carrying values
of $232,111 and $202,625, respectively, at December 31, 2003 and December 31,
2002, based upon the contractual cash flow requirements.
F-21
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED:
The carrying amounts for judgments payable of $53,130 and $49,780, at December
31, 2003 and 2002, respectively, are reasonable estimates of their fair values
based upon the judgment's repayment requirements.
The carrying amount of the convertible secured and convertible notes payable
aggregating $350,000 at December 31, 2003, is a reasonable estimate of their
fair value.
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,
2003 and 2002 is as follows:
2003 2002
Revenues:
Antimony . . . . . . . . . . . . . $2,742,419 $3,274,007
Zeolite. . . . . . . . . . . . . . 479,331 199,890
---------- ----------
$3,221,750 $3,473,897
========== ==========
Cost of sales:
Production and freight and delivery:
Antimony . . . . . . . . . . . . . $2,403,070 $2,873,096
Zeolite. . . . . . . . . . . . . . 529,397 265,390
Depreciation:
Antimony . . . . . . . . . . . . . 41,288 42,991
Zeolite. . . . . . . . . . . . . . 55,254 41,071
---------- ----------
$3,029,009 $3,222,548
========== ==========
Gross profit . . . . . . . . . . . . . $ 192,741 $ 251,349
========== ==========
Other operating expenses:
Sales expense:
Antimony . . . . . . . . . . . . . $ 67,818 $ 80,397
Zeolite. . . . . . . . . . . . . . 70,589 62,654
General and administrative expense:
Antimony . . . . . . . . . . . . . 434,563 327,936
Zeolite. . . . . . . . . . . . . . 212,689 86,658
---------- ----------
$ 785,659 $ 557,645
========== ==========
Capital expenditures:
Antimony . . . . . . . . . . . . . $ 25,506 $ 0
Zeolite. . . . . . . . . . . . . . 95,931 305,745
---------- ----------
$ 121,437 $ 305,745
========== ==========
Properties, plant and equipment, net:
Antimony . . . . . . . . . . . . . $ 132,608 $ 147,886
Zeolite. . . . . . . . . . . . . . 421,703 381,530
---------- ----------
$ 554,331 $ 529,416
========== ==========
See Note 2 regarding sales to major customers.
F-22