================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(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, 2008
[ ] 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
(Exact name of registrant as specified in its charter)
Montana 81-0305822
(State or other jurisdiction (I.R.S. Employer
of 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-K contained in this form and will not 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-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer" and "small
reporting company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer [ ] Accelerated Filer [ ]
Non-Accelerated Filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act Yes [ ] No [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based on the average bid price of such stock, was $10,979,100 as of
March 20, 2009.
At March 20, 2009, the registrant had 46,719,576 outstanding shares of par value
$0.01 common stock.
================================================================================
TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS............................................ 3
General ...................................................... 3
History....................................................... 3
Overview-2008................................................. 3
Antimony Division............................................. 3
Zeolite Division.............................................. 5
Environmental Matters......................................... 5
Employees..................................................... 7
Other......................................................... 7
ITEM 1A. RISK FACTORS....................................................... 7
ITEM 1B. UNRESOLVED STAFF COMMENTS.......................................... 8
ITEM 2. DESCRIPTION OF PROPERTIES.......................................... 8
Antimony Division............................................. 8
Zeolite Division.............................................. 8
ITEM 3. LEGAL PROCEEDINGS.................................................. 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 8
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS............................................................ 8
ITEM 6. SELECTED FINANCIAL DATA............................................ 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS......................................................... 9
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK .............................................................. 11
ITEM 8. FINANCIAL STATEMENTS............................................... 11
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE................................ 11
ITEM 9A CONTROLS AND PROCEDURES............................................ 11
ITEM 9B OTHER INFORMATION.................................................. 12
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS, COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT .............................................................. 12
ITEM 11. EXECUTIVE COMPENSATION............................................. 14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT......................................................... 14
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 15
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES............................. 15
ITEM 15. EXHIBITS AND REPORTS ON FORM 8-K................................... 16
SIGNATURES................................................................... 20
CERTIFICATIONS............................................................... 21
FINANCIAL STATEMENTS..................................................... F1-F22
2
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
--------------------------------------------------------------------------------
EXPLANATORY NOTE: As used in this report, the terms "we," "us" and "our" are
used to refer to United States Antimony Corporation and, as the context
requires, its management.
--------------------------------------------------------------------------------
Some of the information in this Form 10-K contains forward-looking statements
that involve substantial risks and uncertainties. You can identify these
statements by forward-looking words as "may," "will," "expect," "anticipate,"
"believe," "estimate" and "continue," or similar words. You should read
statements that contain these words carefully because they:
o discuss our future expectations;
o contain projections of our future results of operations or of our
financial condition; and
o state other "forward-looking" information.
HISTORY
United States Antimony Corporation ("USAC") was incorporated in Montana in
January 1970 to mine and produce antimony products. On April 1998 we formed
United States Antimony SA de CV ("USAMSA") to mine and smelt antimony in Mexico.
In December 1983, we suspended antimony mining operations but continued to
produce antimony products from domestic and foreign sources. On August 19, 2005,
USAC formed Antimonio de Mexico, S. A. de C. V. to explore and develop antimony
and silver deposits in Mexico. Bear River Zeolite Company ("BRZ") was
incorporated in 2000, and it mines and produces zeolite in southeastern Idaho.
Our principal business is the production and sale of antimony and zeolite
products.
OVERVIEW-2008
ANTIMONY SALES
During 2008, sales of our antimony products decreased approximately 10% from
that of 2007. The profitability of the Antimony Division decreased from $681,137
in 2007 to $447,961 in 2008.
ZEOLITE SALES
During 2008, sales of zeolite increased 38% in 2008 from 2007 and the Zeolite
Division operating loss decreased from $709,440 in 2007 to $185,981 in 2008.
ANTIMONY DIVISION
Our antimony mill and metallurgical plant are located in the Burns Mining
District of Sanders County, Montana, approximately 15 miles west of Thompson
Falls. We hold 3 patented mill sites which are contiguous, and 2 patented mill
sites where the plant is located. We have no "proven reserves" or "probable
reserves" of antimony, as these terms are defined by the Securities and Exchange
Commission. Environmental restrictions preclude mining at this site.
Prior to 1984, we mined antimony ore underground by driving drifts and using
slushers in room and pillar type stopes. Mining was suspended in December 1983,
because antimony could be purchased more economically from foreign sources.
Because we depend on foreign sources for raw materials, there are risks of
interruption in procurement from these sources and/or volatile changes in world
market prices for these materials that are not controllable by us. We are
currently developing sources of antimony ore through our sites in Mexico and
working with suppliers in Central America, Europe and South America.
We currently own 100% of the common stock, equipment, and the lease on real
property of United States Antimony, Mexico S.A. de C.V. ("USAMSA"), which was
formed in April 1998. During 2007, USAC spent approximately
3
$344,000 in the form of cash to purchase the equipment, a lease on the real
property, and other exploration costs. An additional $115,470 was spent to
upgrade the plant which includes furnaces, dust collectors, a furnace building,
warehouse, scrubber, office and laboratory, and slag repository. It is ready to
put into operation.
The San Miguel mine is located in the State of Queretaro, Mexico. The mine is
currently permitted. A mill site with water has been located and a permit for
the mill is expected shortly. The mill equipment has been assembled in Montana
to ship to the mill site. Production from the mine and mill should begin during
2009. We currently own 100% of the stock in Antimonia de Mexico SA de CV (AM)
which owns the San Miguel Mine.
In our existing operations in Montana, from antimony raw materials we produce
antimony oxide products of different particle size using proprietary furnace
technology, several grades of sodium antimonate using hydro metallurgical
techniques, and antimony metal. Antimony oxide is a fine, white powder that is
used primarily in conjunction with a halogen to form a synergistic flame
retardant system for plastics, rubber, fiberglass, textile goods, paints,
coatings and paper. Antimony oxide is also used as a color fastener in paint, as
a catalyst for production of polyester resins for fibers and film, as a
phosphorescent agent in fluorescent light bulbs and as an opacifier for
porcelains. Sodium antimonate is primarily used as a fining agent (degasser) for
glass in cathode ray tubes used in television bulbs and as a flame retardant. We
also sell antimony metal for use in bearings, storage batteries and ordnance.
We estimate (but have not independently confirmed) that our present share of the
domestic market for antimony oxide products is approximately 2.5-3%. We are the
only significant U.S. producer of antimony products. The balance of domestic
sales is foreign imports (primarily from China).
For the year ended December 31, 2008, we sold 1,362,598 pounds of antimony
products generating $3,705,240 in revenues which is a decrease of 10%. During
2007, we sold 1,634,670 pounds of antimony products generating $4,116,863.
During 2008 and 2007, approximately 65% and 49%, respectively, of our antimony
sales were made to one customer.
MARKETING We employ full-time marketing personnel and have negotiated various
commission based sales agreements with other chemical distribution companies.
ANTIMONY PRICE FLUCTUATIONS: Our operating results have been, and will continue
to be, directly related to the market prices of antimony metal, which have
fluctuated widely in recent years. The volatility of prices is illustrated by
the following table, which sets forth the average prices of antimony metal per
pound as reported by sources deemed reliable by us.
YEAR AVERAGE PRICE
---- -------------
2008 $2.88
2007 2.52
2006 2.28
2005 1.73
2004 1.32
2003 1.21
2002 0.88
2001 0.58
2000 0.67
4
The range of sales prices for antimony oxide per pound was as follows for the
periods indicated:
YEAR HIGH LOW AVERAGE PRICE
---- ---- --- -------------
2008 7.50 2.35 $2.72
2007 5.45 2.23 2.52
2006 5.14 1.76 2.28
2005 5.45 1.36 1.58
2004 5.45 0.95 1.48
2003 5.45 1.01 1.27
2002 5.25 0.71 0.99
2001 5.99 0.66 0.93
2000 5.88 0.65 0.99
Antimony metal prices are determined by a number of variables over which we have
no control. These include the availability and price of imported metals, the
quantity of new metal supply, and industrial and commercial demand. If metal
prices decline and remain depressed, our revenues and profitability may be
adversely affected.
We use various antimony raw materials to produce our products. We currently
obtain antimony raw material from sources in Canada, the U.S and Europe.
ZEOLITE DIVISION
We own 100% of Bear River Zeolite Company (BRZ), an Idaho corporation
incorporated on June 1, 2000. BRZ has a lease with Webster Farm, L.L.C. that
entitles BRZ to surface mine and process zeolite on property located near
Preston, Idaho, in exchange for a royalty payment The royalty is a percentage of
the zeolite sales price (FOB mine). The current minimum annual royalty is
$5,000. In addition, BRZ has located more zeolite on U.S. Bureau of Land
Management land. During 2002, we sold additional royalty interests in BRZ to a
company controlled by Al Dugan, a significant shareholder and, as such, an
affiliate. The royalties granted Mr. Dugan's company a payment equal to 3% of
all gross sales (FOB mine) on zeolite products. On a combined basis, royalties
vary from 8%-13%. BRZ has constructed a processing plant on the property and is
has improved its productive capacity. Through December 31, 2008, we had spent
approximately $3,400,000 to purchase and construct the processing plant and
develop sales.
We have no "proven reserves" or "probable reserves" of zeolite, as these terms
are defined by the Securities and Exchange Commission.
"Zeolite" refers to a group of minerals that consist of hydrated
aluminosilicates that hold cations such as calcium, sodium, ammonium and
potassium in their crystal lattice. Water is loosely held in cavities in the
lattice. BRZ's zeolite deposits have characteristics which make the mineral
useful for a variety of purposes including:
o Soil Amendment and Fertilizer. Zeolite has been successfully used to
fertilize golf courses, sports fields, parks and common areas, and
high value crops, including corn, potatoes, soybeans, red beets, acorn
squash, green beans, sorghum sudangrass, brussel sprouts, cabbage,
carrots, tomatoes, cauliflower, radishes, strawberries, wheat, lettuce
and broccoli.
5
o Water Filtration. Zeolite is used for particulate, heavy metal and
ammonium removal in swimming pools, municipal water systems,
fisheries, fish farms, and aquariums.
o Sewage Treatment. Zeolite is used in sewage treatment plants to remove
nitrogen and as a carrier for microorganisms.
o Nuclear Waste and Other Environmental Cleanup. Zeolite has shown a
strong ability to selectively remove strontium, cesium and various
other radioactive isotopes from solution. Zeolite can also be used for
the cleanup of soluble metals such as mercury, chromium, copper, lead,
zinc, arsenic, molybdenum, nickel, cobalt, antimony, calcium, silver
and uranium.
o Odor Control. A major cause of odor around cattle, hog, and poultry
feed lots is the generation of the ammonium in urea and manure. The
ability of zeolite to absorb ammonium prevents the formation of
ammonia gas, which generates the odor.
o Gas Separation. Zeolite has been used for some time to separate gases,
to re-oxygenate downstream water from sewage plants, smelters, pulp
and paper plants, and fish ponds and tanks, and to remove carbon
dioxide, sulfur dioxide and hydrogen sulfide from methane generators
as organic waste, sanitary landfills, municipal sewage systems and
animal waste treatment facilities.
o Animal Nutrition. Feeding up to 2% zeolite increases growth rates,
decreases conversion rates, prevents worms, and increases longevity.
o Miscellaneous Uses. Other uses include catalysts, petroleum refining,
building applications, solar energy and heat exchange, desiccants,
pellet binding, horse and kitty litter, floor cleaner and carriers for
insecticides, pesticides and herbicides.
ENVIRONMENTAL MATTERS
Our exploration, development and production programs conducted in the United
States are subject to local, state and federal regulations regarding
environmental protection. Some of our production and mining activities are
conducted on public lands. We believe that our current discharge of waste
materials from our processing facilities is in material compliance with
environmental regulations and health and safety standards. The U.S. Forest
Service extensively regulates mining operations conducted in National Forests.
Department of Interior regulations cover mining operations carried out on most
other public lands. All operations by us involving the exploration for or the
production of minerals are subject to existing laws and regulations relating to
exploration procedures, safety precautions, employee health and safety, air
quality standards, pollution of water sources, waste materials, odor, noise,
dust and other environmental protection requirements adopted by federal, state
and local governmental authorities. We may be required to prepare and present to
the authorities data pertaining to the effect or impact that any proposed
exploration for or production of minerals may have upon the environment. Any
changes to our reclamation and remediation plans, which may be required due to
changes in state or federal regulations, could have an adverse effect on our
operations. The range of reasonably possible loss in excess of the amounts
accrued, by site, cannot be reasonably estimated at this time.
We accrue environmental liabilities when the occurrence of such liabilities is
probable and the costs are reasonably estimable. The initial accruals for all
our sites are based on comprehensive remediation plans approved by the various
regulatory agencies in connection with permitting or bonding requirements. Our
accruals are further based on presently enacted regulatory requirements and
adjusted only when changes in requirements occur or when management revises its
estimate of costs required to comply with existing requirements. As remediation
activity has physically commenced, management has been able to refine and revise
its estimates of costs required to fulfill future environmental tasks based on
contemporaneous cost information, operating experience, and changes in
regulatory requirements. In instances where costs required to complete our
remaining environmental obligations are clearly determined to be in excess of
the existing accrual, we have adjusted the accrual accordingly. When regulatory
agencies require additional tasks to be performed in connection with our
environmental responsibilities, we evaluate the costs required to perform those
tasks and adjust our accrual accordingly as the information becomes available.
In all cases, however, our accrual at year-end is based on the best information
available at that time to develop estimates of environmental liabilities.
YANKEE FORK MILL SITE.
During 2006, USAC finished the bulk of the reclamation work at the Yankee Fork
mill site. On December 18, 2006, the Idaho Department of Environmental Quality
terminated the voluntary Consent Order. On January 22, 2007, the Department
dropped the requirement for any additional groundwater quality monitoring.
6
ANTIMONY PROCESSING SITE.
We have environmental remediation obligations at our antimony processing site
near Thompson Falls, Montana ("the Stibnite Hill Mine Site"). Under the
regulatory jurisdiction of the U.S. Forest Service and subject to the operating
permit requirements of the Montana Department of Environmental Quality require
that we line a storm water pond and construct a water treatment facility and
thus fulfill the majority of our environmental responsibilities at the Stibnite
Hill Mine site. At December 31, 2008, we have accrued $100,000.
YELLOW JACKET MINE.
During 2006, USAC received a reclamation award for the Yellow Jacket Mine from
the U. S. Forest Service, Idaho Department of Lands, U. S. Department of the
Interior Bureau of Land Management, Idaho Department of Water Resources, and
Idaho Fish and Game.
BRZ.
During 2001, we recorded a reclamation accrual for our Bear River Zeolite
subsidiary, based on an analysis performed by management and reviewed and
approved by regulatory authorities for environmental bonding purposes. The
accrual of $7,500 represents the Company's estimated costs of reclaiming, in
accordance with regulatory requirements; the acreage disturbed by our zeolite
operations and remains unchanged at December 31, 2008.
GENERAL.
Reclamation activities at the Thompson Falls Antimony Plant have proceeded under
supervision of the U.S. Forest Service and Montana Department 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.
We believe we have accrued adequate reserves to fulfill our environmental
remediation responsibilities as of December 31, 2008. We have made significant
reclamation and remediation progress on all our properties over the past three
years and have complied with regulatory requirements in our environmental
remediation efforts.
EMPLOYEES
As of December 31, 2008, we employed 39 full-time employees. The number of
full-time employees may vary seasonally. None of our employees are covered by
any collective bargaining agreement.
OTHER
We hold no material patents, licenses, franchises or concessions, however we
consider our antimony processing plant proprietary in nature. We use the trade
name "Montana Brand Antimony Oxide" for marketing our antimony products.
We are subject to the requirements of the Federal Mining Safety and Health Act
of 1977, the Occupational Safety and Health Administration's regulations,
requirements of the state of Montana and the state of Idaho, federal and state
health and safety statutes and Sanders County, Montana and Franklin County,
Idaho health ordinances.
ITEM 1A. 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.
IF WE WERE LIQUIDATED, OUR COMMON SHAREHOLDERS COULD LOSE PART OR ALL OF THEIR
INVESTMENT.
7
In the event of our dissolution, the proceeds (if any) realized from the
liquidation of our assets will be distributed to our shareholders only after
satisfaction of claims of our creditors and preferred shareholders. The ability
of a purchaser of shares to recover all or any portion of the purchase price for
the shares in that event will depend on the amount of funds realized and the
claims to be satisfied by those funds.
WE HAVE AN ACCUMULATED DEFICIT, HAVE INCURRED SIGNIFICANT LOSSES IN THE PAST,
AND MAY INCUR LOSSES IN THE FUTURE.
Prior to 2008 we have not generated an operating profit for several years. We
have been able to continue operations from gross profit from our antimony
operations, sales of common stock and borrowings from banks and others. As of
December 31, 2008, we had a stockholders' equity of $1,783,498. We may incur net
losses for the foreseeable future unless and until we are able to establish
profitable business operations and reduce cash outflows from general and
administrative expenses. As of December 31, 2008, we had total current assets of
$229,826 and total current liabilities of $1,325,575, or negative working
capital of approximately $1,095,000.
OUR AUDITORS' REPORT AS OF MARCH 20, 2009 RAISED DOUBT ABOUT OUR ABILITY TO
CONTINUE AS A GOING CONCERN.
Our audited financial statements for the year ended December 31, 2008, which are
included in this report, indicate that there was doubt about our ability to
continue as a going concern due to our need to generate cash from operations and
obtain additional financing.
WE ARE DELINQUENT OR IN ARREARS ON SIGNIFICANT CURRENT LIABILITIES; AND
COLLECTION EFFORTS BY CREDITORS COULD JEOPARDIZE OUR VIABILITY AS A GOING
CONCERN AND CLOSE DOWN OUR OPERATIONS.
As of December 31, 2008, we are delinquent on the payment of several current
liabilities including accounts payable of approximately $400,000 and accrued
interest payable of approximately $60,000. 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.
WE MAY HAVE UNASSERTED LIABILITIES FOR ENVIRONMENTAL RECLAMATION.
Our research, development, manufacturing and production processes involve the
controlled use of hazardous materials, and we are subject to various
environmental and occupational safety laws and regulations governing the use,
manufacture, storage, handling, and disposal of hazardous materials and some
waste products. The risk of accidental contamination or injury from hazardous
materials cannot be completely eliminated. In the event of an accident, we could
be held liable for any damages that result and any liability could exceed our
financial resources. We also have one ongoing environmental reclamation and
remediation projects at our current production facility in Montana. Adequate
financial resources may not be available to ultimately finish the reclamation
activities if changes in environmental laws and regulations occur; and these
changes could adversely affect our cash flow and profitability. We do not have
environmental liability insurance now; and we do not expect to be able to obtain
insurance at a reasonable cost. If we incur liability for environmental damages
while we are uninsured, it could have a harmful effect on our financial
condition and us. The range of reasonably possible losses from our exposure to
environmental liabilities in excess of amounts accrued to date cannot be
reasonably estimated at this time.
WE HAVE ACCRUALS FOR ENVIRONMENTAL OBLIGATIONS.
We have accruals totaling $107,500 on our balance sheet at December 31, 2008,
for our environmental reclamation responsibilities. If we are not able to
adequately perform our reclamation activities on a timely basis, we could be
subject to fines and penalties from regulatory agencies.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
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
5 patented mill sites claims covering approximately 25 acres.
8
Antimony mining and milling operations were curtailed during 1983 due to
continued declines in the price of antimony. We are currently purchasing foreign
raw antimony materials and continue to produce antimony metal, oxide and sodium
antimonate from our antimony processing facility near Thompson Falls, Montana.
ZEOLITE DIVISION
We own 100% of Bear River Zeolite Company ("BRZ"), an Idaho corporation
incorporated on June 1, 2000. BRZ has entered into a mining lease with Webster
Farm, L.L.C. that entitles BRZ to surface mine and process zeolite on property
located near Preston, Idaho, in exchange for royalty payments. The royalty is a
percentage of the processed ore sale price (FOB mine). The current minimum
annual royalty is $5,000. The royalty is also payable on zeolite mined on
adjacent Bureau of Land Management ("BLM") ground on which BRZ has located five
additional BLM claims, if BRZ accesses those claims across the leased property.
We are also subject to a 3% royalty on all gross zeolite sales (FOB mine),
payable to a company controlled by Al Dugan, a major shareholder and an
affiliate. On a combined basis, royalties vary from 8%-13%. BRZ has constructed
a processing plant on the property.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any pending legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 2008.
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.OB" 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.
2008 HIGH LOW
---- ---- ---
First Quarter $0.70 $0.42
Second Quarter 0.67 0.45
Third Quarter 0.55 0.30
Fourth Quarter 0.35 0.15
2007 HIGH LOW
---- ---- ---
First Quarter $0.72 $0.39
Second Quarter 0.91 0.54
Third Quarter 0.81 0.47
Fourth Quarter 0.71 0.42
The approximate number of record holders of our common stock at March 20, 2009
is 2,500.
We have not declared or paid any dividends to our stockholders during the last
five years and do not anticipate paying dividends on our common stock in the
foreseeable future. Instead, we expect to retain earnings, if any, for the
operation and expansion of our business.
9
ITEM 6. SELECTED FINANCIAL DATA
A smaller reporting company is not required to provide the information required
by this item.
ITEM 7. 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 net income of $332,364 in 2008 compared to a net loss of
$623,692 in 2007.
In the Antimony Division, sales decreased from $4,116,863 in 2007 to $3,705,240
in 2008, a decrease of 10%. Gross profit from antimony operations fell from
$681,137 in 2007 to $447,961 in 2008. The decreases in revenues and gross profit
were due to the decreased supply of raw materials. Sales of antimony products
during the year ended December 31, 2008 consisted of 1,362,598 pounds at an
average sale price of $2.72 per pound. During the year ended December 31, 2007,
sales of antimony products consisted of 1,634,670 pounds at an average sale
price of $2.52 per pound. Combined costs of antimony sales were $3,257,279 or
$2.39 per pound sold for the year ended December 31, 2008, as compared to
$3,435,726 or $2.10 per pound sold for the year ended December 31, 2007.
Depreciation expense in the Antimony division was $23,075 during 2008 compared
to $20,502 during 2007. Direct sales expenses were $45,000 for 2008 compared to
$44,328 for 2007.
Total sales of zeolite products were $1,570,747 for 2008, compared with
$1,142,264 for 2007, an increase of 38%. Combined costs of zeolite sales were
$1,756,728 for 2008, compared with $1,851,704 for 2007. The tons shipped in 2008
were 11,919 tons at an average price of $131.79 per ton compared to 9,147 tons
at an average price of $124.88 in 2007, a 30% increase in tonnage. Depreciation
expense was $192,653 for BRZ during 2008, compared to $144,912 during 2007.
Direct sales expenses for 2008 were $72,287 compared to $64,395 for 2007. The
loss from operations in 2008 was $185,981, which decreased from $709,440 in
2007. This decrease in the loss from operations was due to decreased fuel costs
for diesel electric generators, equipment, and drying; a large decrease in MSHA
fines and elimination of an unprofitable bagging line.
The Company sold certain sales rights for the sale of zeolite for $300,000 and
$500,000 during 2007 and 2006, respectively. The agreement called for shipping
zeolite product under this agreement beginning in 2008. In 2008, the $800,000
was recorded as other income and was recognized in its entirety because the
agreement expired without any performance required by the Company. Improvements
at the BRZ plant this year included more silos, conveyors and other equipment.
During 2008, the Company incurred corporate general and administrative expenses
totaling $299,588, compared with $434,088 during 2007. The Company incurred
$342,161 of exploration expense during 2008 compared to $256,611 in 2007. The
exploration was on property located in Mexico.
The Company sold surface rights of idle mining claims in 2008. In 2008, the
Company sold claims worth $66,268 compared to $145,420 of sales in 2007.
Net interest expense was $40,938 for 2008, compared with $45,444 for 2007.
Accounts receivable factoring expense was $113,197 for 2008, compared with
$94,989 for 2007.
SUBSIDIARIES
The Company has a 100% investment in two subsidiaries in Mexico, USAMSA and AM,
whose carrying value was assessed at December 31, 2008 for impairment. Based on
management's assessment of the subsidiaries' future benefit to
10
the Company no impairment charges were deemed necessary at year-end. During the
first quarter of 2009 the Company's subsidiaries in Mexico commenced operations.
FINANCIAL CONDITION AND LIQUIDITY
At December 31, 2008, Company assets totaled $3,271,114, and stockholders'
equity was $1,783,498. At December 31, 2008, the Company's total current
liabilities exceeded its total current assets by $1,095,749. Due to the
Company's prior operating losses and other liquidity concerns, the Company's
independent accountants included a paragraph in its report on our 2008 financial
statements relating to a going concern uncertainty. To continue as a going
concern, the Company must generate profits from its antimony and zeolite sales
and acquire additional capital resources through exercise of warrants to
purchase shares of common stock or short and long-term debt financing. Without
financing and profitable operations, the Company may not be able to meet its
obligations, fund operations and continue existence. While management is
optimistic, there can be no assurance that the Company will be able to sustain
profitable operations and meet its financial obligations.
Other significant financial commitments for future periods will include:
o Servicing notes payable to bank.
o Paying delinquent property and payroll tax liabilities and accounts
payable.
o Fulfilling responsibilities with environmental, labor safety and
securities regulatory agencies.
Cash used by operating activities during 2008 was $378,576
Cash used by investing activities during 2008 was $259,592, which was primarily
related to the construction and purchases of capital assets used at the Bear
River Zeolite facility and for construction of a plant and mill in Mexico.
The Company was able to offset cash outflows from operations and its acquisition
of plant and equipment during 2008 from net cash provided by financing
activities of $610,269 including $687,496 generated from sales of unregistered
common stock and warrants.
The Company sold certain sales rights for the sale of zeolite for $300,000 and
$500,000 during 2007 and 2006, respectively. The agreement called for shipping
zeolite product under this agreement beginning in 2008. In 2008, the $800,000
was recorded as other income and was recognized in its entirety because the
agreement expired without any performance required by the Company. The funds
were used for the installation of a small packaging plant: the installation of a
semi-automatic packaging line for large bags; the completion of the Raymond Mill
and the installation of line electricity.
The Company hopes that it will have additional financial resources from
increasing gross profits from its antimony business and sales of zeolite from
BRZ.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A smaller reporting company is not required to provide the information required
by this item.
ITEM 8. FINANCIAL STATEMENTS
The consolidated financial statements of the registrant are included herein on
pages F1-F22.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9-A. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
11
We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms, and that such information
is accumulated and communicated to management, as appropriate, to allow timely
decisions regarding required disclosure. Our president, who serves as the chief
accounting officer, conducted an evaluation of the effectiveness of the
Company's disclosure controls and procedures (as defined in the Securities
Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of December 31, 2008.
Based upon this evaluation, it was determined that there were material
weaknesses affecting our internal control over financial reporting (described
below) and, as a result of those weaknesses, our disclosure controls and
procedures were not effective as of December 31, 2008.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Management's annual report on internal control over financial reporting
-----------------------------------------------------------------------
The management of United States Antimony Corporation is responsible for
establishing and maintaining adequate internal control over financial reporting.
This internal control system has been designed to provide reasonable assurance
to the Company's management and Board of Directors regarding the preparation and
fair presentation of the Company's published financial statements.
All internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation.
The management of United States Antimony Corporation has assessed the
effectiveness of the Company's internal control over financial reporting as of
December 31, 2008. To make this assessment, we used the criteria for effective
internal control over financial reporting described in Internal
Control-Integrated Framework, issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
As a result of our assessment, we concluded that we have material weaknesses in
our internal control over financial reporting as of December 31, 2008. These
weaknesses are as follows:
o The Company does not have either internally or on its Board of
Directors the expertise to produce financial statements to be filed
with the SEC.
o The Company lacks proper segregation of duties. As with any company
the size of this Company, this lack of segregation of duties is due to
limited resources. The president authorizes the majority of the
expenditures and signs checks.
o The Company lacks accounting personnel with sufficient skills and
experience to ensure proper accounting for complex, non-routine
transactions.
o During its year end audit, our independent registered accountants
discovered material misstatements in our financial statements that
required audit adjustments.
We are aware of these material weaknesses and will develop procedures to ensure
that independent review of material transactions is performed. In addition, we
plan to consult with independent experts when complex transactions are entered
into.
Because these material weaknesses exist, management has concluded that the
Company's internal control over financial reporting as of December 31, 2008 is
not effective.
This annual report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the company to provide only management's
report in this annual report.
12
Changes in internal control over financial reporting
----------------------------------------------------
There have been no changes, during the quarter ended December 31, 2008, in the
Company's internal controls over financial reporting that have materially
affected, or are reasonably likely to materially affect, internal controls over
financial reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. 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, 2008, is as
follows:
Name Age Affiliation Expiration of Term
---- --- ----------- ------------------
John C. Lawrence 70 Chairman, President, Annual meeting
Secretary, and Treasurer;
Director
Leo Jackson 65 Director Annual meeting
Gary A. Babbitt 63 Director Annual meeting
Patrick W. Dugan, Esq. 56 Director Annual meeting
Russell C. Lawrence 40 Director Annual meeting
BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS
JOHN C. LAWRENCE. Mr. Lawrence has been the president and a director since our
inception. Mr. Lawrence was the president and a director of AGAU Mines, Inc.,
our corporate predecessor, since the inception of AGAU Mines, Inc. in 1968. He
is a member of the Society of Mining Engineers and a recipient of the Uuno
Sahinen Silver Medallion Award presented by Butte Tech, University of Montana.
He has a vast background in mining, milling, smelting, chemical processing and
oil and gas.
LEO JACKSON. Mr. Jackson is a resident of El Paso, Texas. For the past 16 years,
he has been a principal owner and the president of Production Minerals, Inc. Mr.
Jackson is one of the principal owners of Minera de Roja, S.A. de C.V., and has
been involved in the production and marketing of industrial minerals such as
fluorspar and celestite in the United States and Mexico for 25 years. Mr.
Jackson speaks fluent Spanish and has a BBA degree from the Sul Ross State
University in Texas.
GARY A. BABBITT. Mr. Babbitt has experience in mining industry with 30 years
dealing with joint ventures, financing, contracting and employment. He has a
working knowledge of Spanish and has negotiated contracts in Latin America. Mr.
Babbitt has a B.A. from the Albertson College of Idaho, and earned his J.D. from
the University of Chicago.
PATRICK W. DUGAN, ESQ. Mr. Dugan has been a Director, Vice President and General
Counsel of Nortex Corporation, a company involved in the oil and gas business,
for the past 18 years. He is also a Director, Vice President and General Counsel
of San Luis Development, L.P., and a Director of Gow Communications, LLC. Mr.
Dugan graduated with a B.A. and a J.D. from the University of Texas at Austin.
RUSSELL C. LAWRENCE. Mr. Lawrence has experience in the lines of applied
physics, mining, refining, excavation, electricity, electronics, and building
contracting. He graduated from the University of Idaho with a degree in physics
in
13
1994 and worked for the Physics Department at the University of Idaho for a
period of 10 years. He has also worked as a building contractor and for USAC at
the smelter and laboratory at Thompson Falls, for USAMSA in the construction and
operation of the USAMSA smelter in Mexico, and for Antimonio de Mexico, S. A. de
C. V. at the San Miguel Mine and the Cadereyta mill site in Mexico.
We are not aware of any involvement by our directors or executive officers
during the past five years in legal proceedings that are material to an
evaluation of the ability or integrity of any director or executive officer.
BOARD MEETINGS AND COMMITTEES. Our Board of Directors held three (3) regular
meetings and one (1) special shareholder meeting during the 2008 calendar year.
Each incumbent director attended at least 75% of the meetings held during the
2008 calendar year, in the aggregate, by the Board and each committee of the
Board of which he was a member. Our Board of Directors does not have a
Compensation Committee or a Nominating Committee.
Our Board of Directors has established an Audit Committee consisting of one
member (Gary Babbitt) of the Board of Directors not involved in our day-to-day
financial management. Mr. Babbitt is not considered a financial expert; the
Company does not have the necessary capital resources to attract and retain an
independent financial expert to serve on its Audit Committee.
BOARD MEMBER COMPENSATION. We paid directors' fees in the form of 26,000 shares
of our common stock per director during 2008.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a) of the
Securities Exchange Act of 1934 requires our directors and executive officers
and the holders of 10% or more of our common stock to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. Officers,
directors and stockholders holding more than 10% of our common stock are
required by the regulation to furnish us with copies of all Section 16(a) forms
they have filed.
Based solely on our review of copies of Forms 3, 4 and 5 furnished to us, Mr.
Lawrence, Mr. Jackson, Mr. Babbitt, Mr. Dugan and Mr. Lawrence did not file
timely Forms 3, 4 or Form 5 reports during 2008.
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 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Securities and Exchange Commission requires the following table setting
forth for fiscal years ending December 31, 2008 and 2007; the compensation paid
by USAC to its principal executive officer.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS PAYOUTS
Restricted Securities
Name and Principal Position Other Annual Options/ Underlying All Other All Other
Year Salary Bonus Compensation(1) Awards(2) LTIP SARs Payouts Compensation
-------------------------------- ---- ------- ----- --------------- ---------- ---------- --------- ------------
John C. Lawrence, President 2008 $96,000 N/A $5,538 $6,760 None None None
-------------------------------- ---- ------- ----- --------------- ---------- ---------- --------- ------------
John C. Lawrence, President 2007 $96,000 N/A $5,538 $5,270 None None None
-------------------------------- ---- ------- ----- --------------- ---------- ---------- --------- ------------
14
(1) Represents earned but unused vacation.
(2) These figures represent the fair values, as of the date of issuance, of the
annual director's fee payable to Mr. Lawrence in the form of shares of
USAC's common stock.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of our
common stock as of March 20, 2009, by (i) each person who is known by us to
beneficially own more than 5% of our Series A, C, and D preferred stock or
common stock; (ii) each of our executive officers and directors; and (iii) all
of our executive officers and directors as a group. Unless otherwise stated,
each person's address is c/o United States Antimony Corporation, P.O. Box 643,
1250 Prospect Creek Road, Thompson Falls, Montana 59873.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP CLASS(1)
-------------- ------------------- -------------------- --------
Common stock Reed Family Limited Partnership 2,793,335 6
328 Adams Street
Milton, MA 02186
------------------------------------------------------------------------------------------------
Common stock The Dugan Family 6,362,927(3) 14
c/o A. W. Dugan
1415 Louisiana Street, Suite 3100
Houston, TX 77002
------------------------------------------------------------------------------------------------
Series C Preferred Richard A. Woods 48,305(4) 27
59 Penn Circle West
Penn Plaza Apts.
Pittsburgh, PA 15206
------------------------------------------------------------------------------------------------
Series C Preferred Dr. Warren A. Evans 48,305(4) 27
69 Ponfret Landing Road
Brooklyn, CT 06234
------------------------------------------------------------------------------------------------
Series C Preferred Edward Robinson 32,203(4) 18
1007 Spruce Street 1st Floor
Philadelphia, PA 19107
------------------------------------------------------------------------------------------------
Common stock John C. Lawrence 5,525,653(2) 12
Common stock Pat Dugan 78,000 Nil
Common stock Russ Lawrence 78,000 Nil
Common stock Leo Jackson 214,000 Nil
Common stock Gary Babbitt 56,167 Nil
------------------------------------------------------------------------------------------------
Series D Preferred John C. Lawrence 1,590,672(4) 91
Series D Preferred Leo Jackson 102,000 5
------------------------------------------------------------------------------------------------
Series D Preferred All directors and executive
officers as a group (3 persons) 1,751,005 100
(1) Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock subject
to options or warrants currently exercisable or convertible, or exercisable
or convertible within 60 days of March 20, 2009 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 46,719,576 shares of common stock,
177,904 shares of Series C Preferred Stock, and 1,751,005 shares of Series
D Preferred Stock outstanding on March 20, 2009.
(2) Includes 3,775,653 shares of common stock and 1,250,000 stock purchase
warrants, plus 500,000 shares issuable through the conversion of a
convertible note payable. Excludes 158,324 shares owned by Mr. Lawrence's
sister, as to which Mr. Lawrence disclaims beneficial ownership.
15
(3) Includes shares owned by Al W. Dugan and shares owned by companies owned
and controlled by Al W. Dugan. Excludes 183,333 shares owned by Lydia Dugan
as to which Mr. Dugan disclaims beneficial ownership.
(4) The outstanding Series A, Series C and Series D preferred shares carry
voting rights.
ITEM 13. 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, 9, 10, 11, 12, 15 and 19 to our Financial Statements as of December 31, 2008.
o We reimbursed John C. Lawrence, a director and Chief Executive Officer, for
operational and maintenance expenses incurred in connection with our use of
equipment owned by Mr. Lawrence, including welding trucks, backhoes, and an
aircraft. Reimbursements for 2008 and 2007 totaled $67,467 and $52,062,
respectively. In addition, we accrued interest expense of $10,328 and
$19,130 on net cash advances due Mr. Lawrence, for the years ended December
31, 2008 and 2007, respectively.
o During 2008, the Company issued 26,000 of its common stock to its Board of
Directors as compensation for their services as directors. In connection
with the issuances, the Company recorded $35,100 in director compensation
expense.
o During 2007, the Company issued 45,500 of its common stock to its Board of
Directors as compensation for their services as directors. In connection
with the issuances, the Company recorded $96,655 in director compensation
expense.
o During 2007, the Board of Directors resolved that 6,667 shares of the
Company's Series D preferred stock held by Gary Babbitt, the Company's
former attorney and director, be cancelled and then reissued in an equal
number of shares of the Company's common stock.
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 2008 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 2008 and 2007 were $67,432 and $57,390, 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 2008 and 2007 were $3,415 and $3,850 respectively.
16
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
ITEM 15. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.01 Articles of Incorporation of USAC, filed as an exhibit to
USAC's Form 10-KSB for the fiscal year ended December 31,
1995 (File No.001-08675), are incorporated herein by this
reference.
3.02 Amended and Restated Bylaws of USAC, filed as an exhibit to
amendment No. 2 to USAC's Form SB-2 Registration Statement
(Reg. No. 333-45508) are incorporated herein by this reference.
3.03 Articles of Correction of Restated Articles of Incorporation of
USAC.
3.04 Articles of Amendment to the Articles of Incorporation of
United States Antimony Corporation, filed as an exhibit to
USAC's Form 10-QSB for the quarter ended September 30, 2002
(File No. 001-08675), are incorporated herein by this reference.
4.01 Key Employees 2000 Stock Plan, filed as an exhibit to USAC's
Form S-8 Registration Statement filed on March 10, 2000 (File
No. 333-32216) is incorporated herein by this reference.
Documents filed with USAC's Annual Report on Form 10-KSB for the year ended
December 31, 1995 (File No. 001-08675), are incorporated herein by this
reference:
10.10 Yellow Jacket Venture Agreement
10.11 Agreement Between Excel-Mineral USAC and Bobby C. Hamilton
10.12 Letter Agreement
10.13 Columbia-Continental Lease Agreement Revision
10.14 Settlement Agreement with Excel Mineral Company
10.15 Memorandum Agreement
10.16 Termination Agreement
10.17 Amendment to Assignment of Lease (Geosearch)
10.18 Series B Stock Certificate to Excel-Mineral Company, Inc.
10.19 Division Order and Purchase and Sale Agreement
10.20 Inventory and Sales Agreement
10.21 Processing Agreement
10.22 Release and settlement agreement between Bobby C. Hamilton and
United States Antimony Corporation
10.23 Columbia-Continental Lease Agreement
17
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) is incorporated herein by this
reference:
10.33 Warrant Issue-John C. Lawrence
10.34 PVS Termination Agreement
Documents filed as an exhibit to USAC's Form 10-KSB for the year ended December
31, 1999 (File No. 001-08675) are incorporated herein by this reference:
10.35 Maguire Settlement Agreement
10.36 Warrant Issue-Carlos Tejada
10.37 Warrant Issue-Al W. Dugan
10.38 Memorandum of Understanding with Geosearch Inc.
10.39 Factoring Agreement-Systran Financial Services Company
10.40 Mortgage to John C. Lawrence
10.41 Warrant Issue-Al W. Dugan filed as an exhibit to USAC's
Quarterly Report on Form 10-QSB for the quarter ended March 31,
2000 (File No. 001-08675) is incorporated herein by this
reference
10.42 Agreement between United States Antimony Corporation and Thomson
Kernaghan & Co., Ltd. filed as an exhibit to USAC form 10-QSB
for the quarter ended June 30, 2000 (File No. 001-08675) are
incorporated herein by this reference.
18
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*
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.
Reports on Form 8-K
Item 5. Other Events - October 10, 2003.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(b) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
UNITED STATES ANTIMONY CORPORATION
(Registrant)
By: /s/ John C. Lawrence Date: March 30, 2009
---------------------------
John C. Lawrence, President, Director
and Principal Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
By: /s/ John C. Lawrence Date: March 30, 2009
---------------------------
John C. Lawrence, Director and President
(Principal Executive, Financial and
Accounting Officer)
By: /s/ Leo Jackson Date: March 30, 2009
---------------------------
Leo Jackson, Director
By: /s/ Gary D. Babbitt Date: March 30, 2009
---------------------------
Gary D. Babbitt, Director
By: /s/ Patrick Dugan Date: March 30, 2009
---------------------------
Patrick Dugan, Director
By: /s/ Russell Lawrence Date: March 30, 2009
---------------------------
Russell Lawrence, Director
20
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
United States Antimony Corporation
We have audited the accompanying consolidated balance sheets of United States
Antimony Corporation and its subsidiaries as of December 31, 2008 and 2007, and
the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of United
States Antimony Corporation and its subsidiaries as of December 31, 2008 and
2007, and the consolidated results of their operations and their cash flows for
the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has negative working capital and an
accumulated deficit which raise substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 1. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/Decoria, Maichel & Teague, P.S.
DeCoria, Maichel & Teague P.S.
Spokane, Washington
March 20, 2009
F-1
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2008 and 2007
ASSETS
2008 2007
------------ ------------
Current assets:
Cash and cash equivalents $ 53,848 $ 81,747
Accounts receivable, less allowance
for doubtful accounts of $10,000 and $30,000, respectively 66,761 168,676
Inventories 109,217 252,614
------------ ------------
Total current assets 229,826 503,037
Properties, plants and equipment, net 2,960,624 2,777,116
Restricted cash for reclamation bonds 80,664 65,736
------------ ------------
Total assets $ 3,271,114 $ 3,345,889
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Checks issued and payable $ 20,282 $ 69,484
Accounts payable 655,381 808,748
Accrued payroll and payroll taxes 53,080 113,612
Other accrued liabilities 57,695 99,851
Deferred revenue, current 65,441 287,238
Accrued interest payable 26,348 25,231
Payable to related parties 232,752 254,085
Convertible note payable 100,000 100,000
Long-term debt, current 114,596 91,890
------------ ------------
Total current liabilities 1,325,575 1,850,139
Deferred revenue, noncurrent -- 640,000
Long-term debt, noncurrent 54,541 19,711
Accrued reclamation costs, noncurrent 107,500 107,500
------------ ------------
Total liabilities 1,487,616 2,617,350
------------ ------------
Commitments and contingencies (Note 1 and 16)
Stockholders' equity:
Preferred stock $0.01 par value, 10,000,000 shares authorized:
Series A: -0- shares issued and outstanding -- --
Series B: 750,000 shares issued and outstanding
(liquidation preference $855,000 at December 31, 2008 and 2007) 7,500 7,500
Series C: 177,904 shares issued and outstanding
(liquidation preference $97,847 at December 31, 2008 and 2007) 1,779 1,779
Series D: 1,751,005 shares issued and outstanding
(liquidation preference and cumulative dividends $4,590,987
and $4,549,838, respectively) 17,509 17,509
Common stock, $0.01 par value, 60,000,000 and 50,000,000 shares
authorized; 45,868,535 and 42,519,243 shares issued and
outstanding, respectively 458,688 425,192
Stock subscriptions receivable (83,333) --
Additional paid-in capital 22,015,681 21,243,249
Accumulated deficit (20,634,326) (20,966,690)
------------ ------------
Total stockholders' equity 1,783,498 728,539
------------ ------------
Total liabilities and stockholders' equity $ 3,271,114 $ 3,345,889
============ ============
F-2
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2008 and 2007
2008 2007
------------ ------------
Antimony Division
Revenues $ 3,705,240 $ 4,116,863
------------ ------------
Cost of sales:
Production costs 2,934,552 3,142,679
Depreciation 23,075 20,502
Freight and delivery 192,820 203,106
General and administrative 61,832 25,111
Direct sales expense 45,000 44,328
------------ ------------
Total cost of sales 3,257,279 3,435,726
------------ ------------
Gross profit - antimony 447,961 681,137
------------ ------------
Zeolite Division
Revenues 1,570,747 1,142,264
------------ ------------
Cost of sales:
Production costs 1,021,023 1,146,168
Depreciation 192,653 144,912
Freight and delivery 128,240 91,144
General and administrative 138,069 267,813
Royalties 204,456 137,272
Direct sales expense 72,287 64,395
------------ ------------
Total cost of sales 1,756,728 1,851,704
------------ ------------
Gross profit (loss) - zeolite (185,981) (709,440)
------------ ------------
Total revenues - combined 5,275,987 5,259,127
Total cost of sales - combined 5,014,007 5,287,430
------------ ------------
Gross profit (loss) - combined 261,980 (28,303)
------------ ------------
Other operating (income) expenses:
Corporate general and administrative 299,588 434,088
Exploration expense 342,161 256,611
Gain on sale of properties, plants and equipment (66,268) (145,420)
Expired exclusivity contract (800,000) --
------------ ------------
Other operating (income) expenses (224,519) 545,279
------------ ------------
Income (loss) from operations 486,499 (573,582)
------------ ------------
Other (income) expenses:
Interest expense, net 40,938 45,444
Factoring expense 113,197 94,989
Extinguishment of payables -- (90,323)
------------ ------------
Other (income) expenses 154,135 50,110
------------ ------------
Net income (loss) $ 332,364 $ (623,692)
============ ============
Net income (loss) per share of
common stock:
Basic $ 0.01 $ (0.02)
============ ============
Diluted $ 0.01 $ (0.02)
============ ============
Weighted average shares outstanding:
Basic 43,049,076 41,375,287
============ ============
Diluted 43,549,076 41,375,287
============ ============
F-3
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the years ended December 31, 2008 and 2007
TOTAL PREFERRED STOCK COMMON STOCK STOCK ADDITIONAL
--------------------- ----------------------- SUBSCRIPTIONS PAID ACCUMULATED
SHARES AMOUNT SHARES AMOUNT RECEIVABLE IN CAPITAL DEFICIT TOTAL
---------- --------- ----------- -------- --------- ----------- ------------ ----------
Balances, December 31, 2006 2,685,576 $ 26,855 39,761,309 $397,613 $ -- $20,399,328 $(20,342,998) $ 480,798
Issuance of common stock and
warrants for cash 2,705,767 27,057 807,521 834,578
Issuance of common stock to
Directors for services 45,500 455 36,400 36,855
Series D preferred stock
converted into common stock (6,667) (67) 6,667 67 --
Net loss (623,692) (623,692)
---------- --------- ----------- -------- --------- ----------- ------------ ----------
Balances, December 31, 2007 2,678,909 26,788 42,519,243 425,192 -- 21,243,249 (20,966,690) 728,539
Issuance of common stock and
warrants 3,219,292 32,196 (83,333) 738,632 687,495
Issuance of common stock to
Directors for services 130,000 1,300 33,800 35,100
Net income 332,364 332,364
---------- --------- ----------- -------- --------- ----------- ------------ ----------
Balances, December 31, 2008 2,678,909 $ 26,788 45,868,535 $458,688 $ (83,333) $22,015,681 $(20,634,326) $1,783,498
========== ========= =========== ======== ========= =========== ============ ==========
F-4
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2008 and 2007
2008 2007
------------ ------------
Cash Flows From Operating Activities:
Net income (loss) $ 332,364 $ (623,692)
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Depreciation expense 215,728 165,414
Allowance for doubtful accounts (20,000) --
Common stock issued to Directors for services 35,100 36,855
Deferred financing costs as interest expense -- 3,750
Gain on sale of properties, plants and equipment (66,268) (145,420)
Gain on expiration of exclusivity agreement (800,000) --
Extingushment of payables -- (90,323)
Change in:
Accounts receivable 121,915 (75,080)
Inventories 143,397 33,198
Accounts payable (156,111) (65,396)
Accrued payroll and payroll taxes (60,532) 45,343
Other accrued liabilities (42,156) 58,146
Deferred revenue (61,797) 314,234
Accrued interest payable 1,117 (3,824)
Payable to related parties (21,333) (500)
------------ ------------
Net cash used by operating activities (378,576) (347,295)
------------ ------------
Cash Flows From Investing Activities:
Purchase of properties, plants and equipment (310,932) (563,417)
Proceeds from sale of properties, plants and equipment 66,268 145,420
Change in restricted cash for reclamation bonds (14,928) 17,360
------------ ------------
Net cash used by investing activities (259,592) (400,637)
------------ ------------
Cash Flows From Financing Activities:
Proceeds from sale of common stock and warrants,
net of commissions 687,496 834,578
Principal payments of long-term debt (28,025) (240,459)
Change in checks issued and payable (49,202) 17,195
------------ ------------
Net cash provided by financing activities 610,269 611,314
------------ ------------
Net decrease in cash and cash equivalents (27,899) (136,618)
Cash and cash equivalents at beginning of year 81,747 218,365
------------ ------------
Cash and cash equivalents at end of year $ 53,848 $ 81,747
============ ============
F-5
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED:
For the years ended December 31, 2008 and 2007
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
2008 2007
------------ ------------
Cash paid during year for interest $ 47,038 $ 76,400
============ ============
============ ============
Non-cash investing and financing activities:
Properties, plants & equipment acquired with accounts payable $ -- $ 270,619
Properties, plants & equipment purchased with long-term debt 85,560 43,153
Common stock issued for conversion of preferred stock -- 67
F-6
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
1. BACKGROUND OF COMPANY AND BASIS OF PRESENTATION
AGAU Mines, Inc., predecessor of United States Antimony Corporation ("USAC"
or "the Company"), was incorporated in June 1968 as a Delaware corporation
to mine gold and silver. USAC was incorporated in Montana in January 1970
to mine and produce antimony products. In June 1973, AGAU Mines, Inc. was
merged into USAC. In December 1983, the Company suspended its antimony
mining operations when it became possible to purchase antimony raw
materials more economically from foreign sources. The principal business of
the Company has been the production and sale of antimony products.
During 2000, the Company formed a 75% owned subsidiary, Bear River Zeolite
Company ("BRZ"), to mine and market zeolite and zeolite products from a
mineral deposit in southeastern Idaho. In 2001, an operating plant was
constructed at the zeolite site and zeolite production and sales commenced.
During 2002, the Company acquired the remaining 25% of BRZ and continued to
produce and sell zeolite products.
During 2005, the Company formed a currently 100% owned subsidiary,
Antimonio de Mexico S.A. de C.V. ("AM"), to explore and develop potential
antimony properties in Mexico (see note 7).
During 2006, the Company acquired the remaining 50% ownership in United
States Antimony, Mexico S.A. de C.V. ("USAMSA"). USAMSA is now a
wholly-owned subsidiary of the Company.
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, 2008, the Company had negative working
capital of $1,095,749, an accumulated deficit of approximately $20.6
million. These factors, among others, indicate that there is substantial
doubt that the Company will be able to meet its obligations and continue in
existence as a going concern. The financial statements do not include any
adjustments that may be necessary should the Company be unable to continue
as a going concern.
To improve the Company's financial condition, the following actions have
been initiated or taken by management:
o During 2008, the Company received stockholder authorization to
issue an additional 10 million shares of common stock, enabling
the Company to raise capital through sales of common stock, if
desired.
o The anticipated completion of the flotation mill and crusher in
Mexico, including permitting and land acquisition should allow
USAC to bring antimony, silver and gold operation on stream in
2009.
2. CONCENTRATIONS OF RISK
The Company purchases most of the raw antimony used in the production of
its finished antimony products from foreign sources. During the years ended
December 31, 2008 and 2007, approximately 65% and 49%, respectively, of the
Company's antimony revenues were generated by sales to one customer. During
2008 and 2007, 31% and 24%, respectively, of the Company's revenues
generated from zeolite product sales were to two customers. The loss of the
Company's "key" customers could adversely affect its business.
The Company's revenues from antimony sales are strongly influenced by world
prices for such commodities, which fluctuate and are affected by numerous
factors beyond the Company's control, including inflation and worldwide
forces of supply and demand. The aggregate effect of these factors is not
possible to predict accurately.
Many of the Company's competitors in the antimony industry have
substantially more capital resources and market share than the Company.
Therefore, the Company's ability to maintain its market share can be
significantly affected by factors outside of the Company's control.
F-7
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
---------------------------
The Company's consolidated financial statements include the accounts of
BRZ, USAMSA and AM, all wholly-owned subsidiaries. Intercompany balances
and transactions are eliminated in consolidation.
Use of Estimates
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassifications
-----------------
Certain reclassifications have been made to the 2007 financial statements
in order to conform to the 2008 presentation. These reclassifications have
no effect on net loss, total assets or stockholders' equity as previously
reported.
Cash and Cash Equivalents
-------------------------
The Company considers cash in banks and investments with original
maturities of three months or less when purchased to be cash equivalents.
Restricted Cash
---------------
Restricted cash at December 31, 2008 and 2007 consists of cash held for
reclamation performance bonds, and is held as certificates of deposit with
reputable financial institutions.
Accounts Receivable
-------------------
Accounts receivable are stated at the amount that management expects to
collect from outstanding balances. Management provides for probable
uncollectible amounts through an allowance for doubtful accounts. Changes
to the allowance for doubtful accounts are based on management's judgment,
considering historical write-offs, collections and current credit
conditions. Balances which remain outstanding after management has used
reasonable collection efforts are written off through a charge to the
allowance for doubtful accounts and a credit to the applicable accounts
receivable. Payments received on receivables subsequent to being written
off are considered a bad debt recovery.
Inventories
-----------
Inventories at December 31, 2008 and 2007 consisted primarily of finished
antimony products, antimony metal and finished zeolite products that are
stated at the lower of first-in, first-out cost or estimated net realizable
value. Since the Company's antimony inventory is a commodity with a sales
value that is subject to world prices for antimony that are beyond the
Company's control, a significant change in the world market price of
antimony could have a significant effect on the net realizable value of
inventories.
F-8
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Properties, Plants and Equipment
--------------------------------
Production facilities and equipment are stated at the lower of cost or
estimated net realizable value and are depreciated using the straight-line
method over estimated useful lives of five to fifteen years. Vehicles and
office equipment are stated at cost and are depreciated using the
straight-line method over estimated useful lives of three to seven years.
Maintenance and repairs are charged to operations as incurred. Betterments
of a major nature are capitalized. When assets are retired or sold, the
costs and related accumulated depreciation are eliminated from the accounts
and any resulting gain or loss is reflected in operations.
Management of the Company periodically reviews the net carrying value of
all of its properties on a property-by-property basis. These reviews
consider the net realizable value of each property to determine whether a
permanent impairment in value has occurred and the need for any asset
write-down. An impairment loss is recognized when the estimated future cash
flows (undiscounted and without interest) expected to result from the use
of an asset are less than the carrying amount of the asset. Measurement of
an impairment loss is based on the estimated fair value of the asset if the
asset is expected to be held and used.
Although management has made its best estimate of the factors that affect
net realizable value based on current conditions, it is reasonably possible
that changes could occur in the near term which could adversely affect
management's estimate of net cash flows expected to be generated from its
assets, and necessitate asset impairment write-downs.
Mineral Rights
--------------
The cost to obtain the legal right to explore, extract and retain at least
a portion of the benefits from mineral deposits are capitalized as mineral
rights in the year of acquisition.
Exploration and Development
---------------------------
The Company records exploration costs as operating expenses in the period
they occur, and capitalizes development costs on discrete mineralized
bodies that have proven reserves and are in development or production.
Deferred Financing Costs
------------------------
Deferred financing costs are amortized as interest expense over the terms
of the notes payable and expensed if the debt is retired early.
Asset Retirement Obligations
----------------------------
The Company recognizes the fair value of a liability for an asset
retirement obligation in the period in which it is incurred, if a
reasonable estimate of fair value can be made. The associated asset
retirement costs are capitalized as part of the carrying amount of the
associated long-lived assets and depreciated over the lives of the assets
on a units of production basis. Reclamation costs are allocated to
accretion expense over the life of the related assets and are adjusted for
changes resulting from the passage of time and changes to either the timing
or amount of the original present value estimate underlying the obligation.
Reclamation and Remediation
---------------------------
All of the Company's mining operations are subject to reclamation and
remediation requirements. Minimum standards for mine reclamation have been
established by various governmental agencies. Costs are estimated based
primarily upon environmental and regulatory requirements and are accrued.
The liability for reclamation is classified as current or noncurrent based
on the expected timing of expenditures.
F-9
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
The Company accrues costs associated with environmental remediation
obligations when it is probable that such costs will be incurred, and they
are reasonably estimable. Costs of future expenditures for environmental
remediation are not discounted to their present value. Such costs are based
on management's current estimate of amounts that are expected to be
incurred when the remediation work is performed within current laws and
regulations. The Company has restricted cash balances that have been
provided to ensure performance of its reclamation obligations.
It is reasonably possible that because of uncertainties associated with
defining the nature and extent of environmental contamination, application
of laws and regulations by regulatory authorities, and changes in
remediation technology, the ultimate cost of remediation and reclamation
could change in the future. The Company continually reviews its accrued
liabilities for such remediation and reclamation costs as evidence becomes
available indicating that its remediation and reclamation liability has
changed.
Revenue Recognition
-------------------
Sales of antimony and zeolite products are recorded upon shipment and when
title passes to the customer. Prepayments received from customers prior to
the time that products are shipped are recorded as deferred revenue. When
the related products are shipped, the amount recorded as deferred revenue
is recognized as revenue. The Company's sales agreements provide for no
product returns or allowances.
Revenue from exclusive sales agreement with multiple elements is recognized
prorata over the duration of the contract.
Common Stock Issued for Consideration Other than Cash
-----------------------------------------------------
All transactions in which goods or services are received for the issuance
of shares of the Company's common stock are accounted for based on the fair
value of the consideration received or the fair value of the common stock
issued, whichever is more readily determinable.
Income Taxes
------------
Income taxes are accounted for under the liability method. Under this
method, deferred income tax liabilities or assets are determined at the end
of each period using the tax rate expected to be in effect when the taxes
are actually paid or recovered. A valuation allowance is recognized on
deferred tax assets when it is more likely than not that some or all of
these deferred tax assets will not be realized.
On January 1, 2007, the Company adopted FASB Interpretation No. 48 ("FIN
No. 48") "Accounting for Uncertainty in Income Taxes." FIN No. 48 clarifies
the accounting for uncertainty in income taxes recognized in accordance
with SFAS No. 109 "Accounting for Income Taxes," prescribing a recognition
threshold and measurement attribute for the recognition and measurement of
a tax position taken or expected to be taken in a tax return. In the course
of its assessment, the Company has determined that it is subject to
examination of our income tax filings in the United States and state
jurisdictions for the 2004 through 2007 tax years. In the event that the
Company is assessed penalties and or interest, penalties will be charged to
other operating expense and interest will be charged to interest expense.
The Company adopted FIN No. 48 using the modified prospective transition
method, which required the application of the accounting standard as of
January 1, 2007. There was no impact on the financial statements as of and
for the year ended December 31, 2007 as a result of the adoption of FIN No.
48. In accordance with the modified prospective transition method, the
financial statements for prior periods have not been restated to reflect,
and do not include, the impact of FIN No. 48.
F-10
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Income (Loss) Per Common Share
------------------------------
Basic earnings per share is calculated by dividing net income (loss)
available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted earnings per share is
calculated based on the weighted average number of common shares
outstanding during the period plus the effect of potentially dilutive
common stock equivalents, including warrants to purchase the Company's
common stock (see note 12) and common stock issuable upon the conversion of
notes payable (see note 11).
New Accounting Pronouncements
-----------------------------
Effective January 1, 2008, we adopted the provisions of SFAS No. 157, "Fair
Value Measurements", for our financial assets and financial liabilities
without a material effect on our results of operations and financial
position. The effective date of SFAS No. 157 for non-financial assets and
non-financial liabilities has been deferred by FSP 157-2 to fiscal years
beginning after November 15, 2008, and we do not anticipate the impact of
adopting SFAS 157 for non-financial and non-financial liabilities to have a
material impact on our results of operations and financial position.
SFAS No. 157 expands disclosure requirements to include the following
information for each major category of assets and liabilities that are
measured at fair value on a recurring basis: The fair value measurement;
a. The level within the fair value hierarchy in which the fair value
measurements in their entirety fall, segregating fair value
measurements using quoted prices in active markets for identical
assets or liabilities (Level 1), significant other observable inputs
(Level 2), and significant unobservable inputs (Level 3);
b. For fair value measurements using significant unobservable inputs
(Level 3), a reconciliation of the beginning and ending balances,
separately presenting changes during the period attributable to the
following:
1) Total gains or losses for the period (realized and unrealized),
segregating those gains or losses included in earnings (or
changes in net assets), and a description of where those gains or
losses included in earnings (or changes in net assets) are
reported in the statement of income (or activities);
2) The amount of these gains or losses attributable to the change in
unrealized gains or losses relating to those assets and
liabilities still held at the reporting period date and a
description of where those unrealized gains or losses are
reported;
3) Purchases, sales, issuances, and settlements (net); and
4) Transfers in and/or out of Level 3.
At December 31, 2008, the company has no financial assets or liabilities
that are measured at fair value on a recurring basis other than restricted
cash in certificates of deposit, which are measured using Level 1 inputs.
We also adopted the provisions of SFAS No. 159, "The Fair Value Option for
Financial Liabilities", effective January 1, 2008. SFAS No. 159 permits
entities to choose to measure many financial assets and financial
liabilities at fair value. The adoption of SFAS No. 159 has not had a
material effect on our financial position or results of operations as of
and for the year ended December 31, 2008.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally
Accepted Accounting Principles" ("SFAS 162"). SFAS 162 identifies the
sources of accounting principles and the framework for selecting the
principles to be used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally
accepted accounting principles in the United States. It was effective
November 15, 2008, following the SEC's approval of the Public Company
Accounting Oversight Board amendments to AU Section
F-11
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
411, "The Meaning of Present Fairly in Conformity With Generally Accepted
Accounting Principles". The adoption of this statement did not have a
material effect on the Company's financial statements.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities" ("SFAS No. 161"). SFAS No. 161 amends
and expands the disclosure requirements of FASB Statement 133, "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS No. 133") to
require qualitative disclosures about objectives and strategies for using
derivatives, quantitative disclosures about fair value amounts of and gains
and losses on derivative instruments, and disclosures about credit risk
related contingent features in derivative agreements. The Statement is
effective for consolidated financial statements issued for fiscal years and
periods beginning after November 15, 2008. Early application is encouraged.
The Company is currently evaluating the impact of the adoption of SFAS No.
161.
In December 2007, the FASB revised SFAS No. 141 "Business Combinations".
The revised standard is effective for transactions where the acquisition
date is on or after the beginning of the first annual reporting period
beginning on or after December 15, 2008. SFAS No. 141(R) will change the
accounting for the assets acquired and liabilities assumed in a business
combination, as follows:
o Acquisition costs will be generally expensed as incurred;
o Noncontrolling interests (formally known as "minority interests")
will be valued at fair value at the acquisition date;
o Acquired contingent liabilities will be recorded at fair value at
the acquisition date and subsequently measured at either the
higher of such amount or the amount determined under existing
guidance for non-acquired contingencies;
o In-process research and development will be recorded at fair
value as an indefinite-lived intangible asset at the acquisition
date;
o Restructuring costs associated with a business combination will
be generally expensed subsequent to the acquisition date; and
o Changes in deferred tax asset valuation allowances and income tax
uncertainties after the acquisition date generally will affect
income tax expense.
The adoption of SFAS No. 141(R) does not currently have a material effect
on our consolidated financial statements. However, any future business
acquisitions occurring on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008 will be accounted
for in accordance with this statement.
In December 2007, FASB issued SFAS No. 160 "Non Controlling Interests in
Consolidated Financial Statements - An Amendment of ARB No. 51," ("SFAS
160") which is effective for fiscal years and interim periods within those
years beginning on or after December 15, 2008. SFAS 160 amends ARB 51 to
establish accounting and reporting standards for the non controlling
ownership interest in a subsidiary and for the deconsolidation of a
subsidiary. The Company is currently evaluating the potential impact of
this statement on our consolidated financial statements.
4. SALES OF ACCOUNTS RECEIVABLE
The Company sells its accounts receivable to a financing company pursuant
to the terms of a factoring agreement. According to the terms of the
agreement, the receivables are sold with full recourse and the Company
assumes all risks of collectability. Accordingly, the Company's allowance
for doubtful accounts is based upon the expected collectability of all
trade receivables. The performance of all obligations and payments to the
factoring company is personally guaranteed by John C. Lawrence, the
Company's president and a director. As consideration for Mr. Lawrence's
guarantee, the Company granted a mortgaged security interest to Mr.
Lawrence collateralized by the Company's real and personal property.
F-12
4. SALES OF ACCOUNTS RECEIVABLE, CONTINUED
The factoring agreement requires the Company to pay a financing fee equal
to 2% of the face amount of receivables sold. Financing fees paid by the
Company during the years ended December 31, 2008 and 2007 totaled $113,197
and $94,989, respectively. For the years ended December 31, 2008 and 2007,
net accounts receivable of approximately $4.93 million and $4.48 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.
5. INVENTORIES
The major components of the Company's inventories at December 31, 2008 and
2007 were as follows:
2008 2007
--------- ---------
Antimony Metal $ 40,907 $ 17,393
Antimony Oxide 15,525 181,587
Zeolite 52,785 53,634
--------- ---------
$ 109,217 $ 252,614
========= =========
At December 31, 2008 and 2007, antimony metal consisted principally of
recast metal from antimony-based compounds and metal purchased from foreign
suppliers. Antimony oxide inventory consisted of finished product oxide
held at the Company's plant. Sodium antimonite inventory consisted of dry
finished product and wet raw materials, the majority of which were stored
at the Company's antimony plant near Thompson Falls, Montana. The Company's
zeolite inventory consists of salable zeolite material held at BRZ's Idaho
mining and production facility.
6. PROPERTIES, PLANTS AND EQUIPMENT
The major components of the Company's properties, plants and equipment at
December 31, 2008 and 2007 are shown below. Approximately $1.1 million of
capitalized costs at December 31, 2008 have not yet been placed in service
and, therefore, have not been subject to depreciation.
2008 2007
----------- -----------
Antimony:
Equipment $ 1,395,293 $ 1,358,639
Buildings 547,401 528,730
Mineral rights 193,549 193,549
Land 315,354 190,106
----------- -----------
2,451,597 2,271,024
Accumulated depreciation (1,226,407) (1,203,332)
----------- -----------
Total Antimony, net 1,225,190 1,067,692
----------- -----------
Zeolite:
Equipment 2,038,748 1,976,275
Buildings 1,373,420 1,217,230
----------- -----------
3,412,168 3,193,505
Accumulated depreciation (1,676,734) (1,484,081)
----------- -----------
Total Zeolite, net 1,735,434 1,709,424
----------- -----------
Properties, plants and equipment, net $ 2,960,624 $ 2,777,116
=========== ===========
F-13
7. INVESTMENT IN AM
On December 16, 2005, AM signed a contract and option agreement that gives
AM the exclusive right to explore and exploit the San Miguel I and San
Miguel II concessions for an annual payment of $50,000, and an option to
purchase payment of $100,000 annually. Total payments will not exceed
$1,430,344, reduced by taxes paid. All installment payments must be paid
when and if AM exercises the option to purchase. During the year ended
December 31, 2007 payments totaled $86,956 and were capitalized as mineral
rights in accordance with the Company's accounting policies. No payments
were made under the agreement during 2008. AM does not have any obligation
to pay any amount under this contract.
8. DEFERRED REVENUE
On October 25, 2006, the Company entered into an agreement to exclusively
sell pozzlan zeolite (PZ) to one individual, who is a shareholder of the
Company, over the next five years. The agreement calls for the individual
to purchase a minimum of 3,000 tons of PZ per month. If the minimum sales
are not purchased for a 90-day period of time, the exclusivity of sales to
this individual is forfeited. The agreement called for a sales price
between $30 and $40 per ton until June 1, 2007, at which time the Company
can adjust its price as necessary based on its production costs.
The agreement commenced upon receipt of $500,000 from the shareholder
(buyer), which occurred in 2006, and upon completion of permitting and
construction of the new mill with operational milling equipment (completed
as of December 31, 2007).
During the year ended December 31, 2007, the Company received an additional
$300,000 to extend the life of the agreement and provide exclusivity for
certain other sales areas. The extension agreement was with a company,
Zeolite Company of America (ZCA), of which the shareholder is part owner.
The extension agreement lowered the monthly sales requirement to 350 tons
per month and set the sale price at $40 per ton beginning December 31,
2007. Should ZCA not purchase or pay for the 350 tons per month for any
three month period, ZCA would lose its exclusivity and price commitment.
During the second quarter of 2008 the exclusivity agreement became void due
to ZCA's failure to perform. As a result, the Company recognized the entire
$800,000 of deferred revenue related to the contract in the second quarter
of 2008.
9. DUE TO RELATED PARTIES
Amounts due to related parties at December 31, 2008 and 2007 were as
follows (see Note 15 and 19):
2008 2007
--------- ---------
Entity owned by John C. Lawrence, president
and director $ 8,595 $ 9,758
John C. Lawrence, president and director(1) 224,158 244,327
--------- ---------
$ 232,753 $ 254,085
========= =========
(1) Includes accrued interest at 10% per annum of $146,219 and $108,082 at
December 31, 2008 and 2007, respectively.
F-14
9. DUE TO RELATED PARTIES, CONTINUED
Transactions affecting the payable to Mr. Lawrence during 2008 and 2007
were as follows:
2008 2007
--------- ---------
Balance, beginning of year $ 244,327 $ 225,587
Equipment rental charges 70,767 52,062
Interest expense 38,137 19,130
Payments and advances, net (129,073) (52,452)
--------- ---------
Balance, end of year $ 224,158 $ 244,327
========= =========
10. LONG-TERM DEBT
Long-term debt at December 31, 2008 and 2007 is as follows:
2008 2007
---------- ----------
Note payable to an individual. The balance will be paid
by a transfer of certain equipment owned by the company. $ 55,000 $ 55,000
Note payable to CNH Capital America, LLC, bearing interest
at 4.5%; payable in monthly installments of $505; maturing
June 2013; collateralized by equipment. 24,854 --
Note payable to GE Capital, bearing interest at 6.32%; payable in
monthly installments of $908; maturing May 2011; collateralized by
equipment. 23,592 --
Note payable, bearing interest at 10%; payable in four annual
installments of $10,000 each beginning December 2005; not
collateralized. 20,000 20,000
Note payable to CNH Capital America, LLC, bearing interest
at 2.5%; payable in monthly installments of $1,115; maturing
May 2010; collateralized by equipment. 19,745 32,456
Note payable to GE Capital, bearing interest at 2.25%; payable in
monthly installments of $359; maturing July 2013; collateralized by
equipment. 18,745 --
Note payable to CNH Capital America, LLC, bearing interest
at 15%; payable in monthly installments of $135; maturing
April 2014; collateralized by equipment. 7,201 --
Note payable to First State Bank of Thompson Falls, bearing interest
at 10.5%; payable in monthly installments of $1,073; maturing
June 2008. -- 4,145
---------- ----------
169,137 111,601
Less current portion (114,596) (91,890)
---------- ----------
Noncurrent portion $ 54,541 $ 19,711
========== ==========
F-15
10. LONG-TERM DEBT, CONTINUED
At December 31, 2008, principal payments on debt are due as follows:
Year Ending
December 31,
------------
2009 $ 114,596
2010 24,137
2011 14,957
2012 9,966
Thereafter 5,481
---------
$ 169,137
=========
11. SECURED CONVERTIBLE AND CONVERTIBLE NOTES PAYABLE
Unsecured Convertible Note Payable
----------------------------------
On December 22, 2003, John C. Lawrence, the Company's president and a
director, agreed to convert $100,000 of related party debt due to him into
a Convertible Note Payable ("the Convertible Note"). The Convertible Note
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.
At December 31, 2008 and 2007, $100,000 of principal was outstanding, and
accrued interest on the note, which is included in Payable to related
parties, of $67,890 and $40,081, respectively, was due (see note 19).
Stock Purchase Warrants and Deferred Financing Charges
------------------------------------------------------
In connection with the issuance of the secured convertible and unsecured
convertible notes payable, Mr. Dugan, a former Director of the Company and
Mr. Lawrence were issued 2,000,000 and 1,000,000 stock purchase warrants,
respectively. The warrants expired in December of 2008 and were exercisable
for shares of the Company's unregistered common stock at $0.20 per share.
During 2008, 1.0 million of the warrants were exercised by Mr. Dugan. Also
see note 19.
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 was amortized as interest expense over the terms of the
respective convertible notes payable. During the years ended December 31,
2008 and 2007, $0 and $3,750, respectively of interest expense was
recognized as a result of amortizing the deferred offering costs.
12. STOCKHOLDERS' EQUITY
Issuance of Common Stock for Cash
---------------------------------
During 2008 and 2007, the Company sold an aggregate of 3,219,292 and
2,705,767 shares, respectively, of its unregistered common stock to
existing shareholders and other parties for $687,492 and $834,578,
respectively. In connection with sales of the Company's common stock,
warrants to purchase shares of the Company's common stock were granted in
2008 as follows: 158,400 at $0.75 and 31,250 at $0.60. In 2007, warrants to
purchase 15,000 shares at $0.60 and 648,334 shares at $0.50 were granted.
F-16
12. STOCKHOLDERS' EQUITY, CONTINUED
Issuance of Common Stock for Services and Property
--------------------------------------------------
During 2008 and 2007, the Company issued 130,000 and 45,500 shares,
respectively, of common stock to its directors for services.
Series D Preferred Stock Cancelled and Reissued as Common Stock
---------------------------------------------------------------
During 2007, the Board of Directors resolved that 6,667 shares of the
Company's Series D preferred stock be converted in an equal number of
shares of the company's common stock. The shares were held by the Company's
director Gary Babbitt's Pension and Profit Sharing Plan.
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.
During 2008, the Company's Board of Directors authorized a reduction in the
exercise price of all outstanding warrants that become due prior to June
30, 2009 to $0.20 per share.
Transactions in common stock warrants are as follows:
Number of Exercise
Warrants Prices
---------- -----------
Balance, December 31, 2006 8,021,726 $0.20-$0.75
Warrants granted in connection with 2007 stock sales 663,334 $0.50-$0.60
Warrants exercised (1,532,333) $0.25-$0.60
Warrants expired and cancelled (285,000) $0.20-$0.25
----------
Balance, December 31, 2007 6,867,727 $0.20-$0.75
Warrants granted in connection with 2008 stock sales 189,650 $0.60-$0.75
Warrants exercised (2,662,293) $0.20-$0.60
Warrants expired and cancelled (833,334) $ 0.60
----------
Balance, December 31, 2008 3,561,750 $0.20-$0.75
==========
The above common stock warrants expire as follows:
Year Ended December 31:
2009 2,724,391
2010 413,334
2011 174,025
Thereafter 250,000
---------
3,561,750
=========
Preferred Stock
---------------
The Company's Articles of Incorporation authorize 10,000,000 shares of
$0.01 par value preferred stock available for issuance with such rights and
preferences, including liquidation, dividend, conversion and voting rights,
as the Board of Directors may determine.
F-17
12. STOCKHOLDERS' EQUITY, CONTINUED
Series B
--------
During 1993, the Board established a Series B preferred stock, consisting
of 1,666,667 shares. All 1,666,667 shares authorized were issued in
connection with the final settlement of litigation. The Series B preferred
stock has preference over the Company's common stock and Series A preferred
stock; has no voting rights (absent default in payment of declared
dividends); and is entitled to cumulative dividends of $0.01 per share per
year, payable if and when declared by the Board of Directors. In the event
of dissolution or liquidation of the Company, the preferential amount
payable to Series B preferred stockholders is $1.00 per share plus
dividends in arrears. No dividends have been declared or paid with respect
to the Series B preferred stock. In 1995, 916,667 shares of Series B
preferred stock were surrendered to the Company and cancelled in connection
with the settlement of litigation against Bobby C. Hamilton. At December
31, 2008, cumulative dividends in arrears on the 750,000 outstanding Series
B shares were $105,000 or $0.14 per share. At December 31, 2007, cumulative
dividends in arrears on the 750,000 outstanding Series B shares were
$97,500, or $0.13 per share. Total dividends in arrears and liquidation
preference were $855,000 and $847,500 at December 31, 2008 and 2007,
respectively.
Series C
--------
During 1997, the Company issued 2,560,762 shares of Series C preferred
stock in connection with the conversion of certain debt owed by the
Company. During 1999, holders of 2,382,858 shares of Series C stock
converted their shares into common stock of the Company. The Series C
shares have voting rights, are non-redeemable and have a $0.55 per share
liquidation preference. At December 31, 2008 and 2007, 177,904 shares of
Series C preferred stock remained outstanding and the liquidation
preference amounted to $97,847.
Series D
--------
During 2002, the Company established its Series D preferred stock. Holders
of the Series D preferred stock have the right, subject to the availability
of authorized but unissued common stock, to convert their shares into
shares of the Company's common stock without payment of additional
consideration. The Series D shares are initially convertible into the
Company's common stock as determined by dividing $0.20 by the conversion
price in effect at the time of the conversion. The initial conversion price
of the Series D preferred stock is $0.20, and subject to adjustment based
upon anti-dilution provisions, which include but are not limited to, the
affects of the subsequent sale of common stock at prices less than the
initial conversion price.
DESIGNATION. The class of convertible Series D preferred stock, $0.01
par value, consists of up to 2.5 million shares. VOTING RIGHTS. The
holders of Series D preferred shares shall have the right to that
number of votes equal to the number of shares of common stock issuable
upon conversion of such Series D preferred shares.
REDEMPTION. The Series D preferred shares are not redeemable by the
Company.
LIQUIDATION PREFERENCE. The Series D holders are entitled to a
liquidation preference equal to the greater of $2.50 per share or the
equivalent market value of the number of shares of common stock into
which each share of Series D is convertible. At December 31, 2008 and
2007, the liquidation preference for Series D preferred stock was
$4,377,513 and $4,377,513, respectively.
REGISTRATION RIGHTS. All of the underlying common stock issued upon
conversion of the Series D preferred shares shall be entitled to
"piggyback" registration rights when, and if, the Company files a
registration statement for its securities or the securities of any
other stockholder.
DIVIDENDS. The Series D holders are entitled to an annual dividend of
$0.0235 per share. The dividends are cumulative and payable after
payment and satisfaction of the Series A, B and C preferred stock
dividends. At December 31, 2008 and 2007, cumulative dividends in
arrears on the 1,751,005 outstanding Series D shares were $213,474 and
$172,326, respectively.
F-18
12. STOCKHOLDERS' EQUITY, CONTINUED
During 2007, Series D holders converted 6,667 shares to common stock, as
discussed previously.
During 2008 and 2007, no warrants were exercised to purchase shares of
Series D preferred stock.
At December 31, 2008 and 2007, the Company had 1,751,005 shares of Series D
preferred stock outstanding. The combined liquidation preference and
dividends in arrears totaled $4,590,987 and $4,549,838 at December 31, 2008
and 2007, respectively.
Preferred Stock Warrants
------------------------
During 2005, the Company issued 1,000,000 warrants to purchase shares of
Series D preferred stock to John C. Lawrence, the Company's president and a
director, for incentive to improve the Company's financial position. These
warrants are exercisable at $0.25 and expired in October 2007. No preferred
stock warrants were issued in 2008 or 2007.
Transactions in Series D preferred stock warrants are as follows:
Number of Exercise
Warrants Prices
---------- -----------
Balance, December 31, 2006 1,861,185 $0.25-$0.30
Warrants granted --
Warrants exercised --
Warrants expired and cancelled (1,750,000) $0.20-$0.25
----------
Balance, December 31, 2007 111,185 $0.20-$0.30
Warrants granted --
Warrants exercised --
Warrants expired and cancelled (111,185) $ 0.30
----------
Balance, December 31, 2008 --
==========
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, 2008 and 2007, 300,000
shares of the Company's common stock had been issued under the Plan. There
were no issuances under the Plan during 2008 and 2007.
14. INCOME TAXES
The Company had no income tax provision or benefit for the years ended
December 31, 2008 and 2007.
F-19
14. INCOME TAXES, CONTINUED
At December 31, 2008 and 2007, the Company had net deferred tax assets
composed as follows:
2008 2007
---------- ----------
Arising from differences in the book and
tax basis of certain property assets $ 316,000 $ 315,000
Arising from limitation in deduction of
foreign exploration costs 354,000 238,000
Arising from net tax operating loss
carryforwards 844,000 1,071,000
---------- ----------
Total deferred tax assets 1,514,000 1,624,000
Valuation allowance (1,514,000) (1,624,000)
---------- ----------
Net deferred tax assets $ -- $ --
========== ==========
The deferred tax assets were calculated based on an estimated 34% income
tax rate. As management of the Company cannot determine if it is more
likely than not that the Company will realize the benefit of its deferred
tax assets, a valuation allowance equal to the net deferred tax assets at
both December 31, 2008 and 2007 has been established.
At December 31, 2008, the Company had unexpired federal regular tax net
operating loss carryforwards of approximately $2,500,000 which expire
between 2012 and 2028. In addition, the Company had unexpired Montana and
Idaho state regular tax net operating loss carryforwards of approximately
$670,000 and $130,000, respectively, which expire between 2011 and 2027.
The income tax provision (benefit) differs from the amount of income tax
determined by applying the U.S. federal income tax rate to pretax income
(loss) for the years ended December 31, 2008 and 2007 due to the following:
2008 2007
---------- ----------
Computed "expected" tax provision (benefit) $ 113,000 $ (212,000)
Effect of permanent differences (3,000) 44,000
Increase in valuation allowance -- 168,000
Release of valuation allowance (110,000) --
---------- ----------
$ -- $ --
========== ==========
On January 1, 2007, the Company adopted Financial Accounting Standards
Board Interpretation No. 48 ("FIN No. 48") "Accounting for Uncertainty in
Income Taxes." FIN No. 48 clarifies the accounting for uncertainty in
income taxes recognized in accordance with SFAS No. 109 "Accounting for
Income Taxes," prescribing a recognition threshold and measurement
attribute for the recognition and measurement of a tax position taken or
expected to be taken in a tax return. In the course of our assessment, we
have determined that we are subject to examination of our federal income
tax filings in the United States for the 2005 through 2008 tax years. State
of Montana income tax filings are subject to examination for the 2003
through 2008 tax years and State of Idaho income tax filings are subject to
examination for the 2005 through 2008 tax years. There were no uncertain
tax positions taken by the Company. In the event that the Company is
assessed penalties and or interest, penalties will be charged to other
operating expense and interest will be charged to interest expense. There
was no impact on the financial statements as of and for the years ended
December 31, 2008 and 2007 as a result of adoption of FIN No. 48.
F-20
15. RELATED-PARTY TRANSACTIONS
In addition to transactions described in Notes 4, 8, 9, 11 and 12, during
2008 and 2007, the Company had the following transactions with related
parties:
During 2008, the Company issued 130,000 shares of its common stock to
members of its Board of Directors as compensation for their services
as directors. In connection with the issuances, the Company recorded
$35,100 in director compensation. In addition, the Company has
directors compensation of $23,400 accrued as a liability of December
31, 2008.
During 2007, the Company issued 45,500 of its common stock to members
of its Board of Directors as compensation for their services as
directors. In connection with the issuances, the Company recorded
$35,490 in director compensation.
During 2008, the Company paid $33,201 to a director of the Company for
development of Mexican mill sites.
A director of the Company acts as legal counsel to the Company. During
the years ended December 31, 20008 and 2007, the Company paid legal
fees and expenses to this director in the amount of $36,500 and
$41,900, respectively. During 2007 $11,900 of legal fees were
capitalized as properties, plant and equipment.
Royalty expense of $47,491 and $29,943 was incurred for the years
ended December 31, 2008 and 2007, respectively, to a company
controlled by Al Dugan, a significant shareholder and affiliate, based
on gross sales (FOB mine) of zeolite.
16. COMMITMENTS AND CONTINGENCIES
The Company's management believes that USAC is currently in substantial
compliance with environmental regulatory requirements and that its accrued
environmental reclamation costs are representative of management's estimate
of costs required to fulfill its reclamation obligations. Such costs are
accrued at the time the expenditure becomes probable and the costs can
reasonably be estimated. The Company recognizes, however, that in some
cases future environmental expenditures cannot be reliably determined due
to the uncertainty of specific remediation methods, conflicts between
regulating agencies relating to remediation methods and environmental law
interpretations, and changes in environmental laws and regulations. Any
changes to the Company's reclamation plans as a result of these factors
could have an adverse affect on the Company's operations. The range of
possible losses in excess of the amounts accrued cannot be reasonably
estimated at this time.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts have been determined using available
market information and appropriate valuation methodologies. However,
considerable judgment is required to interpret market data and to develop
the estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts the Company could realize in
a current market exchange.
The carrying amounts for cash, restricted cash, accounts receivable,
accounts payable and other current liabilities are reasonable estimates of
their fair values. The fair value of amounts due to related parties
approximates their carrying values based upon the contractual cash flow
requirements.
The carrying amount of long-term debt is a reasonable estimate of its fair
value. The carrying amount of the convertible note payable is a reasonable
estimate of its fair value.
F-21
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, 2008 and 2007 is as follows:
2008 2007
---------- ----------
Capital expenditures:
Antimony
United States $ -- $ --
Mexico 180,573 202,741
---------- ----------
Subtotal Antimony 180,573 202,741
Zeolite 218,662 674,448
---------- ----------
$ 399,235 $ 877,189
========== ==========
Properties, plants and equipment, net:
Antimony
United States $ 94,137 $ 117,212
Mexico 1,131,053 950,480
---------- ----------
Subtotal Antimony 1,225,190 1,067,692
Zeolite 1,735,434 1,709,424
---------- ----------
$2,960,624 $2,777,116
========== ==========
Total Assets:
Antimony
United States $ 266,746 $ 504,215
Mexico 1,131,053 950,481
---------- ----------
Subtotal Antimony 1,397,799 1,454,696
Zeolite 1,818,867 1,758,830
Corporate 54,448 132,363
---------- ----------
$3,271,114 $3,345,889
=========== ==========
See Note 2 regarding sales to major customers.
19. SUBSEQUENT EVENT
Subsequent to year end the President of the Company converted a $100,000
convertible note into 500,000 shares of common stock. Additionally,
1,000,000 $0.20 per share warrants were exercised and 1,000,000 shares of
common stock were issued. As a result of this exercise, the Company was
forgiven $200,000 of related party debt shown on the December 31, 2008
balance sheet.
F-22