UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period to
Commission file number 33-00215
UNITED STATES ANTIMONY CORPORATION
(Name of small business issuer in its charter)
Montana 81-0305822
(State or other jurisdiction (I.R.S. Employer
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-B contained in this form and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The registrant's revenues for its most recent fiscal year were $3,473,897.
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 $3,624,516 as of
March 27, 2003.
At March 27, 2003, the registrant had 27,027,959 outstanding shares of par value
$0.01 common stock.
TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS 1
General. . . . . . . . . . . . . . . . . . 1
History.. . . . . . . . . . . . . . . . . . 1
Overview-2002. .. . . . . . . . . . . . . . 1
Risk Factors. . . . . . . . . . . . . . . . 1
Antimony Division.. . . . . . . . . . . . . 3
Zeolite Division . . . . . . . . . . . . . 5
Gold Division. . . . . . . . . . . . . . . 6
Environmental Matters.. . . . . . . . . . . 6
Employees. . . . . . . . . . . . . . . . . 9
Other. . . . . . . . . . . . . . . . . . . 9
ITEM 2. DESCRIPTION OF PROPERTIES 9
Antimony Division. . .. . . . . . . . . . . 9
Gold Division . . . . . . . . . . . . . . . 9
Zeolite Division .. . . . . . . . . . . . . 9
ITEM 3. LEGAL PROCEEDINGS 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 10
PART II
ITEM 5.. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. . 10
ITEM 6.. . MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS . 10
ITEM 7. FINANCIAL STATEMENTS 12
ITEM 8.. . CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 12
PART III
ITEM 9.. . DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT.. . . . . . . . . . . . . 12
ITEM 10. EXECUTIVE COMPENSATION 13
ITEM 11. .SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 14
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 15
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 16
ITEM 14. CONTROLS AND PROCEDURES 19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 20
CERTIFICATIONS . . . . . . . . . . . . . . . . . . . . . 21
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . F1-F21
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Explanatory Note: As used in this report, the terms "we," "us" and "our" are
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used to refer to United States Antimony Corporation and, as the context
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requires, its management.
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Some of the information in this Form 10-KSB contains forward-looking statements
that involve substantial risks and uncertainties. You can identify these
statements by forward-looking words as "may," "will," "expect," "anticipate,"
"believe," "estimate" and "continue," or similar words. You should read
statements that contain these words carefully because they:
- discuss our future expectations;
- contain projections of our future results of operations or of our
financial condition; and
- state other "forward-looking" information.
HISTORY
United States Antimony Corporation was incorporated in Montana in January 1970
to mine and produce antimony products. In December 1983, we suspended antimony
mining operations but continued to produce antimony products from domestic and
foreign sources. Bear River Zeolite Company ("BRZ") was incorporated in 2000,
and it mines and produces zeolite in southeastern Idaho. Our principal business
is the production and sale of antimony and zeolite products.
OVERVIEW-2002
Antimony Sales
During 2002, sales of our antimony products decreased approximately 4%. The
decrease was primarily due to general economic conditions. We believe that as
economic conditions improve our antimony sales will return to higher levels.
Two other domestic antimony producers have left the country leaving only us and
one other producer.
Bear River Zeolite Company
During 2002, significant costs were incurred by BRZ to expand the plant, repair
equipment, and market the product. We are optimistic that our zeolite
subsidiary will play an important role in our future business operations.
Yellow Jacket Reclamation
We almost fully completed our reclamation activities at our Yellow Jacket
property during 2002, with only minor tasks left to perform during the 2003
field season. Yellow Jacket reclamation has been a cash drain on our resources
since our abandonment of the operation in 1999.
Yankee Fork Mill Site Reclamation
During 2002, we began Phase II reclamation activities at the Yankee Fork Mill
Site and most of the northern half of the tailings pond area and old ore storage
buildings, crusher, and metaline plant were reclaimed.
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.
1
Our liabilities substantially exceed our assets. If we were liquidated before
our stockholders' deficit is eliminated, our common shareholders would lose part
or all of their investment.
In the event of our dissolution, the proceeds (if any) realized from the
liquidation of our assets will be distributed to our shareholders only after
satisfaction of claims of our creditors and preferred shareholders. The ability
of a purchaser of shares to recover all or any portion of the purchase price for
the shares in that event will depend on the amount of funds realized and the
claims to be satisfied by those funds.
We have a negative net worth, have incurred significant losses, and may incur
losses in the future.
We have not generated an operating profit for several years. Instead we have
been able to continue operations from gross profit from our antimony operations,
sales of common stock and borrowings from banks and others. As of December 31,
2002, we had a stockholders' deficit of $1,346,603; and we may incur net losses
for the foreseeable future unless and until we are able to establish profitable
business operations and reduce cash outflows from general and administrative
expenses and property reclamation costs. As of December 31, 2002, we had total
current assets of $230,278 and total current liabilities of $1,820,442, or
negative working capital of approximately $1,590,164.
We received an opinion from our auditors as of March 21, 2003 which raises doubt
about our ability to continue as a going concern.
Our audited financial statements for the year ended December 31, 2002, which are
included in this report, indicate that there was doubt as of March 21, 2003
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, 2002, we are delinquent on the payment of several current
liabilities including payroll and property taxes of approximately $260,000,
accounts payable of approximately $475,000, judgments payable in the amount of
$49,780 and accrued interest payable in the amount of $18,663. In the absence
of payment arrangements, creditors could individually or collectively demand
immediate payment and jeopardize our ability to fund operations and
correspondingly damage our business. Creditors who are owed taxes have the
power to seize our assets for payment of amounts past due and close down our
operations.
Capital to meet our future needs may be unavailable on acceptable terms, for
antimony and zeolite production.
To fund future needs, we may seek to obtain additional capital from public or
private financing transactions, as well as borrowing and other resources.
However, we have a limited amount of authorized but unissued or unreserved
shares of common stock available for issuance; and we therefore may not be able
to meet our capital needs with equity funding unless and until our shareholders
authorize additional common stock. If additional shares are authorized in the
future, the issuance of equity or equity-related securities to raise additional
cash would result in dilution to our present stockholders. Further, additional
debt funding may not be available on favorable terms, if at all.
Our existing debt is secured by pledges to the bank and to our President, John
C. Lawrence, of substantially all of our assets. Therefore, a default in the
payment of the secured debt could result in a loss of the related assets and our
ability to continue operations.
As of December 31, 2002, our bank debt in the amount of $611,922 is secured by a
collateral pledge of substantially all of our mining equipment as well as our
patented and unpatented mining claims in Sanders County, Montana. Our
President, John C. Lawrence, has also guaranteed repayment of all our bank debt
and has a secured interest in our assets as well. In the event we are unable to
pay the bank debt as it matures, there is a risk the bank may foreclose its
security interest and we would lose all or a portion of our equipment as well as
our patented and unpatented mining claims.
We may be subject to civil liabilities, including fines and other penalties
imposed by federal and state security agencies, for issuing shares of stock
without a restrictive legend or for selling unregistered securities without an
available exemption.
During the first quarter of 2000, the Company issued 150,000 shares of common
stock to Bluewater Partners, Inc. as compensation for fiscal advisory and
consulting services. The stock certificate was issued without a restrictive
legend.
2
Management was subsequently informed by legal counsel that the
certificate should have born a restrictive legend. We undertook to retrieve the
share certificate from Bluewater Partners, Inc.; however, we were unsuccessful.
In addition, we have sold stock in transactions which may not qualify for
exemption from the registration requirements of the Securities Act of 1933. The
proceeds of these sales aggregated not more than $66,800 through December 2001.
As a result, we may be subject to civil liabilities, including liability to the
purchasers to rescind the stock sales, as well as fines and penalties imposed by
federal and state securities agencies. The likelihood of a claim and the
ultimate outcome if a claim is asserted cannot be determined at this time. A
rescission claim may be brought by a purchaser up to three years after the stock
sale. In the event a claim is made, and the Company is unable to pay it may not
be able to fund its present level of operations which may result in a reduction
in the stock price and result in an adverse effect on new shareholders. The
Company does not presently have cash available to rescind these stock sales.
Our current and former operations expose us to risks of environmental
liabilities.
Our research, development, manufacturing and production processes may involve
the controlled use of hazardous materials, and we may be subject to various
environmental and occupational safety laws and regulations governing the use,
manufacture, storage, handling, and disposal of hazardous materials and some
waste products. The risk of accidental contamination or injury from hazardous
materials cannot be completely eliminated. In the event of an accident, we
could be held liable for any damages that result and any liability could exceed
our financial resources. We also have three ongoing environmental reclamation
and remediation projects, one at our current production facility in Montana and
two at discontinued mining operations in Idaho. Adequate financial resources
may not be available to ultimately finish the reclamation activities if changes
in environmental laws and regulations occur; and these changes could adversely
affect our cash flow and profitability. We do not have environmental liability
insurance now; and we do not expect to be able to obtain insurance at a
reasonable cost. If we incur liability for environmental damages while we are
uninsured, it could have a harmful effect on us and our financial condition. The
range of reasonably possible losses from our exposure to environmental
liabilities in excess of amounts accrued to date cannot be reasonably estimated
at this time.
Our accruals for environmental obligations are current liabilities.
We have accruals totaling $196,615 on our balance sheet at December 31, 2002,
for our environmental reclamation responsibilities, $44,565 of which are
classified as current. If we are not able to adequately perform our reclamation
activities on a timely basis, we could be subject to fines and penalties from
regulatory agencies.
ANTIMONY DIVISION
Our antimony mining properties, mill and metallurgical plant are located in the
Burns Mining District of Sanders County, Montana, approximately 15 miles west of
Thompson Falls. We hold 12 patented lode claims, some of which are contiguous,
and 2 patented mill sites. We have no "proven reserves" or "probable reserves"
of antimony, as these terms are defined by the Securities and Exchange
Commission.
Prior to 1984, we mined antimony ore underground by driving drifts and using
slushers in room and pillar type stopes. Mining was suspended in December 1983,
because antimony could be purchased more economically from foreign sources. Our
underground antimony mining operations may be reopened in the future should raw
material prices warrant doing so. We now purchase the majority of our raw
antimony from China (approximately 70%) and, to a lesser degree, Canada
(approximately 25%). Antimony metal from Chinese sources has been obtained
primarily through brokers.
Because we depend on foreign sources for raw materials, there are risks of
interruption in procurement from these sources and/or volatile changes in world
market prices for these materials that are not controllable by us. Changes in
antimony metal export policy by the Chinese government could impair availability
of antimony metal and/or could increase antimony metal prices, which could
result in curtailed production, decreased profits, operating result fluctuations
or breach of contractual obligations to provide antimony products to our
customers.
3
We currently own 50% of the common stock of United States Antimony, Mexico S.A.
de C.V. ("USAMSA"), which was formed in April 1998. During 1998 and 1999, we
invested capital and surplus equipment from our Thompson Falls antimony
operation in USAMSA, which was used for the construction of an antimony
processing plant in Mexico. During the later part of 2000 we finalized our 50%
investment in USAMSA. To date, two antimony processing furnaces and a warehouse
building have been built and limited antimony processing has taken place.
During 2002 and 2001, USAMSA was idle and had no production activities due to
volatile antimony prices and the lack of operating and development capital.
During 2002, we adjusted our investment in USAMSA to recognize an impairment of
its value. The adjustment reduced our carrying value in USAMSA to equal 50% of
its net equity, or $18,625. USAMSA is pursuing the assignment of mining
concessions in the Mexican states of Zacatecas, Coahuila, Sonora, Queretaro and
Oaxaca. We hope USAMSA will begin in future years to produce antimony metal and
other products as processing opportunities become available and as antimony
prices dictate, although there can be no assurance USAMSA will be profitable.
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 5% to 6%. We have
only one principal domestic competitor. The balance of domestic sales are
foreign imports (primarily from Chinese and Belgian suppliers).
In recent years we made substantial improvements to our analytical and chemical
research capabilities. Since March 1998, we have employed a Chief Chemist who
has devoted approximately 50% of his working time to research and development
activities. We have continued to pursue research and development activities
that have resulted in advances in our preparation, packaging and quality of our
antimony products. We believe that our ability to meet customer product
specifications gives us a competitive advantage. We believe that we will be
able to stay competitive in the antimony business because of these advances.
However, many of our competitors in the antimony industry have substantially
more capital resources and market share than us. Therefore, our ability to
maintain market share can be significantly affected by factors outside of our
control.
For the year ended December 31, 2002, we sold 3,499,394 pounds of antimony
products generating approximately $3.25 million in revenues. During 2001, we
sold 3,607,139 pounds of antimony products generating approximately $3.3 million
in revenues. During 2002 and 2001, approximately 40% and 34%, respectively, of
our antimony sales were made to one customer. In addition, during 2001, 12% of
our revenues were generated by antimony product sales to a second individual
customer. The loss of our "key" customer could adversely affect business.
Marketing During the first quarter of 1999, and in prior years dating back to
1991, we marketed our antimony products with HoltraChem, Inc. and later its
successor, BCS, in a 50/50 profit sharing arrangement. In March 1999, we
notified BCS that we were terminating the agreements that HoltraChem had
assigned BCS, and that we would market and distribute antimony products
independently. As a result, we took steps to market our products to existing
and prospective customers, and have been able to do so successfully. We employ
full-time marketing personnel and have negotiated various commission based sales
agreements with other chemical distribution companies.
4
Antimony Price Fluctuations Our operating results have been, and will continue
to be, directly related to the market prices of antimony metal, which have
fluctuated widely in recent years. The volatility of prices is illustrated by
the following table which sets forth the average prices of antimony metal per
pound as reported by sources deemed reliable by us.
YEAR AVERAGE PRICE
---- --------------
2002 $ 0.88
2001 0.58
2000 0.67
1999 0.58
1998 0.63
The range of sales prices for antimony oxide per pound was as follows for the
periods indicated:
YEAR HIGH LOW AVERAGE PRICE
---- ----- ----- --------------
2002 $5.25 $0.71 $ 0.99
2001 5.99 0.66 0.93
2000 5.88 0.65 0.99
1999 5.52 0.65 0.85
1998 5.57 0.83 1.13
Antimony metal prices are determined by a number of variables over which we have
no control. These include the availability and price of imported metals, the
quantity of new metal supply, and industrial and commercial demand. If metal
prices decline and remain depressed, our revenues and profitability may be
adversely affected.
We use various antimony raw materials to produce our products. We obtain
antimony raw material from sources in China, Canada and the U.S. Purchases from
Canadian and U.S. sources have been made at world market prices, as established
by the London Metals Bulletin from time to time. Our USAMSA venture is intended
eventually to reduce our dependence on foreign sources; but during 2002 and
2001, USAMSA was idle and it is not expected to provide sufficient raw material
for several years.
We believe that adverse economic conditions were primarily responsible for 4%
decrease in the sales volume for 2002 compared to 2001 the decrease in customer
orders; we are confident that as economic conditions improve our customers'
orders will increase.
ZEOLITE DIVISION
We own 100% of Bear River Zeolite Company, an Idaho corporation incorporated on
June 1, 2000. BRZ has a lease with Webster Farm, L.L.C. The lease entitles BRZ
to surface mine and process zeolite on property located near Preston, Idaho in
exchange for a royalty payment. The royalty is a percentage of the ore sale
price which varies between 8%-13%. The minimum annual royalty during the first
five years is $1,000. During 2002, we sold additional royalty interests in BRZ
to a company controlled by Al Dugan, a majority shareholder and, as such, an
affiliate. The royalties granted Mr. Dugan's company a payment equal to 3% of
all gross sales on zeolite products. BRZ has constructed a processing plant on
the property and is currently improving its productive capacity. We have
incurred development and start-up costs of $467,695. We are currently taking
orders for our zeolite products and are optimistic that orders will continue and
increase during 2003.
We have no "proven reserves" or "probable reserves" of zeolite, as these terms
are defined by the Securities and Exchange Commission.
"Zeolite" refers to a group of minerals that consist of hydrated
aluminosilicates that hold cations such as calcium, sodium, ammonium and
potassium in their crystal lattice. Water is loosely held in cavities in the
lattice. BRZ's zeolite deposits have characteristics which make the mineral
useful for a variety of purposes including:
- Soil Amendment and Fertilizer. Zeolite has been successfully used to
fertilize golf courses, sports fields, parks and common areas, and high
value crops, including corn, potatoes, soybeans, red beets, acorn squash,
green beans,sorghum sudangrass, brussel sprouts, cabbage, carrots,
tomatoes, cauliflower, radishes, strawberries, wheat, lettuce and
broccoli.
5
- Water Filtration. Zeolite is used for particulate heavy metal and
ammonium removal in swimming pools, municipal water systems,
fisheries, fish farms, and aquariums.
- Sewage Treatment. Zeolite is used in sewage treatment plants to remove
nitrogen from waste streams and to deodorize methane gas.
- Nuclear Waste and Other Environmental Cleanup. Zeolite has shown a strong
ability to selectively remove strontium, cesium and various other
radioactive isotopes from solution. Zeolite can also be used for the
cleanup of soluble metals such as mercury, chromium, copper, lead,
zinc, arsenic, molybdenum, nickel, cobalt, antimony, calcium, silver
and uranium.
- Odor Control. A major cause of odor around cattle, hog, and poultry feed
lots is the generation of the ammonium in urea and manure. The
ability of zeolite to absorb ammonium prevents the formation of ammonia
gas which generates the odor.
- Gas Separation. Zeolite has been used for some time to separate gases, to
re-oxygenate of downstream water from sewage plants, smelters, pulp and
paper plants, and fish ponds and tanks, and to remove carbon dioxide,
sulfur dioxide and hydrogen sulfide from methane generators as
organic waste, sanitary landfills, municipal sewage systems and
animal waste treatment facilities.
- Animal Nutrition. Feeding up to 2% zeolite increases growth rates,
decreases conversion rates, prevents worms, and increases longevity.
- Miscellaneous Uses. Other uses include catalysts, petroleum refining,
building applications, solar energy and heat exchange, desiccants,
pellet binding, horse and kitty litter, floor cleaner and carriers for
insecticides, pesticides and herbicides.
GOLD DIVISION
Yankee Fork Mining District. Until 1989, we mined and milled gold and silver in
the Yankee Fork Mining District in Custer County, Idaho. The site is currently
undergoing environmental remediation pursuant to an Idaho Department of
Environmental Quality consent decree. See "Environmental Matters." We own two
patented lode mining claims in the Yankee Fork District, which are now idle.
Yellow Jacket Mining District. During the years from 1991 to 1996 we mined,
milled and sold gold bullion produced from the Yellow Jacket mine. The Yellow
Jacket property was put on a care and maintenance status. In 1999, we abandoned
our leasehold interests and began environmental remediation activity at the
Yellow Jacket (see "Environmental Matters") and began reclamation of the Yellow
Jacket tailings ponds and pit area.
We have no "proven reserves" or "probable reserves" of gold, as these terms are
defined by the Securities and Exchange Commission.
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.
6
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. In 1994, the U.S. Forest Service, under the
provisions of the Comprehensive Environmental Response Liability Act of 1980,
designated our cyanide leach plant at the Preachers Cove mill, which is located
six miles north of Sunbeam, Idaho on the Yankee Fork of the Salmon River, as a
contaminated site requiring cleanup of cyanide solution. In 1996, we signed a
consent decree related to the reclamation and remediation at the Preachers Cove
mill in Idaho as required by the Idaho Department of Environmental Quality, and
continued substantial reclamation activities as required by the decree. During
1999, we updated and presented a Phase II reclamation plan to the U.S. Forest
Service detailing plans for the final reclamation of the Yankee Fork Mill site.
Based upon our analysis of costs required to implement the specific tasks in the
Phase II plan, we adjusted the Yankee Fork reclamation accrual to reflect our
current estimate of costs required to complete reclamation tasks. By December
31, 2000, the cyanide solution discharge was complete, the mill had been
removed, and most of the cyanide leach residue was disposed of.
During 2001, reclamation activities were at a standstill pending the completion
of a biological assessment to be submitted to the National Marine Fisheries
Service and the U.S. Fish and Wildlife Service. In 2001, the Idaho Department
of Environmental Quality advised us that the ground water monitoring
requirements would be extended by an additional two years and we accordingly
increased our reclamation accrual at the property by $11,000. During 2002, we
were given clearance from the U.S. Forest Service to commence the Phase II
reclamation work. During 2002, most of the northern half of the tailings pond
area and old ore storage buildings, crusher, and metaline plant were reclaimed.
We expended $39,096 during 2002 on reclamation activities, primarily due to
unexpected and substantial equipment repair expense. Accordingly, we increased
our reclamation accrual by $22,068 based on our revised estimate of costs to
reclaim the property at December 31, 2002.
Antimony Processing Site. We have environmental remediation obligations at
our antimony processing site near Thompson Falls, Montana ("the Stibnite Hill
Mine Site"). Under the regulatory jurisdiction of the U.S. Forest Service and
subject to the operating permit requirements of the Montana Department of
Environmental Quality, we performed substantial environmental reclamation
activities during 1999 and 2000. These activities included installation of a
PVC liner and a geotextile layer on two of the tailings ponds and the removal of
approximately 25,000 yards of tailings material from a third pond. We made
adjustments increasing our reclamation accruals by $25,615 in 2000, based upon
management's revised estimates of costs to comply with regulatory requirements
then in effect. The regulatory agencies require that we line a storm water pond
and construct a water treatment facility and thus fulfill the majority of our
environmental responsibilities at the Stibnite Hill Mine site.
In November of 2001, the Environmental Protection Agency ("EPA") listed two
by-products of our antimony oxide manufacturing process as hazardous wastes.
Antimony slag and antimony bag house filters are now subject to comprehensive
management and treatment standards under subtitle C of the Resource Conservation
and Recover Act ("RCRA") and emergency notification requirements for releases to
the environment under the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"). The rule became effective on May 20, 2002. The new
rule will undoubtedly affect our costs of producing antimony products. At
December 31, 2002, we had approximately 135 tons of antimony slag material at
our site near Thompson Falls, MT. During 2002, we were notified by the Montana
Department of Environmental Quality ("DEQ") of a hazardous waste release
violation that had occurred at our antimony processing facility. In response to
the notification we removed a substantial portion of the antimony materials from
our property (reducing our reclamation accrual by $6,960) and took measures to
curtail any future releases.
7
Yellow Jacket Mine.
During the third and fourth quarters of 1999 we began disassembly of the mill
and mill buildings and removed tailings from the tailings ponds. In 2000, we
evaluated progress on Yellow Jacket's closure and reclamation and continued to
adjust the reclamation liability for costs as incurred (a total of $86,960)
based upon labor and equipment cost experience in 1999 and our estimate of costs
related to specific tasks yet-to-complete at year end. The reclamation activity
is being overseen by the U.S. Forest Service and the Idaho Department of
Environmental Quality. During 2001, reclamation work continued on the clean-up
of non-cyanide tailings material at the property; and at the end of 2001 the
project was substantially complete. During 2002, we received notification
from the U.S. Forest Service outlining only minor tasks to be performed during
the 2003 field season. The Forest Service complimented our to-date reclamation
efforts, characterizing the site as a potential "showcase for the mining
industry." We reduced our Yellow Jacket reclamation accrual by $4,565 during
2002, based on 2002 reclamation activities and our estimate of costs remaining
to complete the project.
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.
General.
Reclamation activities at the Yellow Jacket Mine and the Stibnite Hill Mine Site
have proceeded informally under supervision of the U.S. Forest Service and
applicable State Departments of Environmental Quality. We have complied with
regulators' requirements and do not expect the imposition of substantial
additional requirements.
We have posted cash performance bonds with a bank and the U.S. Forest Service in
connection with our reclamation activities. In 2002 and 2001, the U.S. Forest
Service released a substantial portion of the environmental bonding funds that
had been deposited for remediation of the Yellow Jacket Mine. Upon completion
of reclamation activities at the Yellow Jacket Mine and other sites, the bonds
will be terminated and the applicable regulatory authorities may release to us
up to $91,186.
We believe we have accrued adequate reserves to fulfill our environmental
remediation responsibilities as of December 31, 2002. We have made significant
reclamation and remediation progress on all our properties over the past three
years and have complied with regulatory requirements in our environmental
remediation efforts. The change in amounts accrued for environmental remediation
activities in 2000, 2001 and as of December 31, 2002 is as follows:
YANKEE FORK THOMPSON FALLS YELLOW JACKET BEAR RIVER
MILL SITE ANTIMONY PLANT MINE ZEOLITE TOTAL
Balance December 31, 1999 $ 46,028 $ 153,614 $ 115,044 $314,686
Less: Reclamation work. . 0 (60,913) (86,960) (147,873)
Adjustment of Accrued
Remediation Costs . . . . 0 25,615 86,960 112,575
------------- ---------------- --------------- ------------ --------
Balance December 31, 2000 $ 46,028 $ 118,316 $ 115,044 $279,388
Less: Reclamation work. . 0 (2,806) (89,757) (92,563)
Adjustment of Accrued
Remediation Costs . . . . 11,000 36,000 (16,162) $ 7,500 38,338
------------- ---------------- --------------- ------------ --------
Balance December 31, 2001 $ 57,028 $ 151,510 $ 9,125 $ 7,500 $225,163
Less: Reclamation Costs . (39,096) (6,960) (4,560) (50,616)
Adjustment of Accrued
Remediation Costs . . . . 22,068 22,068
------------- ----------------
Balance December 31, 2002 $ 40,000 $ 144,550 $ 4,565 $ 7,500 $196,615
============= ================ =============== ============ ========
8
EMPLOYEES
As of December 31, 2002, we employed 20 full-time employees. The number of
full-time employees may vary seasonally. None of our employees are covered by
any collective bargaining agreement.
OTHER
We hold no material patents, licenses, franchises or concessions; but we
consider our antimony processing plant proprietary in nature. We use the trade
name "Montana Brand Antimony Oxide" for marketing our antimony products.
We are subject to the requirements of the Federal Mining Safety and Health Act
of 1977, the Occupational Safety and Health Administration's regulations,
requirements of the state of Montana and the state of Idaho, federal and state
health and safety statutes and Sanders County, Lemhi County and Custer County
health ordinances.
ITEM 2. DESCRIPTION OF PROPERTIES
ANTIMONY DIVISION
Our principal plant and mine are located in the Burns Mining District, Sanders
County, Montana, approximately 15 miles west of Thompson Falls, Montana. We
hold 2 patented mill sites and 12 patented lode mining claims covering 192
acres. The lode claims are contiguous within two groups.
Antimony mining and milling operations were curtailed during 1983 due to
continued declines in the price of antimony. We are currently purchasing
foreign raw antimony materials and continue to produce antimony metal, oxide and
sodium antimonate from our antimony processing facility near Thompson Falls,
Montana.
GOLD DIVISION
Yankee Fork Mining District.
The Estes Mountain properties consist of 2 patented lode mining claims in the
Yankee Fork Mining District of Custer County, Idaho. These claims are located
approximately 12 miles from our former Preachers Cove Mill. The mill has been
dismantled and the property is nearing final reclamation. (See "Description of
Business-Environmental Matters.")
Yellow Jacket Mining District.
The Yellow Jacket property consisted of a lease on 12 patented and various
unpatented lode mining claims located in the Yellow Jacket Mining District of
Lemhi County, Idaho, approximately 70 miles southwest of Salmon, Idaho. During
the second quarter of 1999, due to depressed precious metal prices and the
absence of a discovery of mineralized material that could be economically mined,
we abandoned our leasehold interests in the Yellow Jacket property and began
final reclamation and closure activities. (See "Description of
Business-Environmental Matters.")
ZEOLITE DIVISION
We own 100% of Bear River Zeolite Company ("BRZ"), an Idaho corporation
incorporated on June 1, 2000. BRZ has entered into a mining lease with Webster
Farm, L.L.C. The lease entitles BRZ to surface mine and process zeolite on
property located in Preston, Idaho in exchange for a royalty payment. The
royalty is a percentage of the unprocessed ore sale price which varies between
8%-13%. The minimum annual royalty during the first five years is $1,000. The
royalty is also payable on zeolite mined on adjacent Bureau of Land Management
("BLM"), ground on which BRZ has located five additional BLM claims, if BRZ
accesses those claims across the leased property. We are also subject to a 3%
royalty on all gross zeolite sales, payable to a company controlled by Al Dugan,
a major shareholder and an affiliate. BRZ has constructed a processing plant on
the property.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any pending legal proceeding.
9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our security holders during the fourth
quarter of 2002, and we did not hold an annual meeting of shareholders during
2002.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Currently, our common stock is traded on the Over the Counter Bulletin Board
("OTCBB") under the symbol "UAMY." The following table sets forth the range of
high and low bid prices as reported by the OTCBB for the periods indicated. The
quotations reflect inter-dealer prices without retail mark-up, mark-down or
commission, and may not necessarily represent actual transactions.
2002 HIGH . . . . LOW
-------------- -----
First Quarter. $0.29 $0.12
Second Quarter 0.23 0.12
Third Quarter. 0.23 0.15
Fourth Quarter 0.22 0.15
2001 HIGH . . . . LOW
-------------- -----
First Quarter. $0.41 $0.17
Second Quarter 0.53 0.24
Third Quarter. 0.32 0.17
Fourth Quarter 0.31 0.16
The approximate number of record holders of our common stock at March 27, 2003
is 2,642.
We have not declared or paid any dividends to our stockholders during the last
five years and do not anticipate paying dividends on our common stock in the
foreseeable future. Instead, we expect to retain earnings for the operation and
expansion of our business.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Certain matters discussed are forward-looking statements that involve risks and
uncertainties, including the impact of antimony prices and production
volatility, changing market conditions and the regulatory environment and other
risks. Actual results may differ materially from those projected. These
forward-looking statements represent the Company's judgment as of the date of
this filing. The Company disclaims, however, any intent or obligation to update
these forward-looking statements.
RESULTS OF OPERATIONS
The Company reported a net loss of $360,389 during 2002 compared to net loss of
$976,837 in 2001.
Total revenues from antimony product sales for the year ended December 31, 2002,
were $3,274,007 compared with $3,421,136 for the comparable period of 2001, a
decrease of $147,129. Sales of antimony products during the year ended December
31, 2002 consisted of 3,479,394 pounds at an average sale price of $0.94 per
pound. During the year ended December 31, 2001, sales of antimony products
consisted of 3,607,139 pounds at an average sale price of $0.95 per pound.
Combined costs of antimony production and freight and delivery were $2,873,096
or $0.83 per pound sold, for the year ended December 31, 2002, as compared to
costs of antimony production and freight and delivery of $3,040,215, or $0.84
per pound sold for the year ended December 31, 2001. Depreciation expense in
the Antimony division was $42,991 during 2002 compared to $51,908 during 2001.
The decrease in depreciation expense was due to depreciable antimony processing
equipment nearing the end of its useful lives.
10
During the year ended December 31, 2002, the Company incurred general and
administrative expenses totaling $86,658 associated with BRZ compared to $76,014
during 2001. Sales of zeolite products were $199,890, with associated cost of
sales including freight and delivery costs of $265,390 during the year ended
December 31, 2002, compared to sales of $15,428 and cost of sales of $4,877
during 2001. Depreciation expense was $41,071 for BRZ during 2002, compared to
$22,172 during 2001. The increase in depreciation expense during 2002 was due
to more depreciable assets placed in service during 2002.
Reclamation costs at the Company's Yellow Jacket property decreased to zero
during the year ended December 31, 2002, compared to $10,822 during the year
ended December 31, 2001, as reclamation at Yellow Jacket is essentially
complete. Antimony reclamation was $30,838 during 2001, compared to zero for
2002. Antimony reclamation expense was incurred in 2001 upon the listing of
certain of the Company's antimony wastes as hazardous materials. Yankee Fork
Mill Site reclamation was $22,068 in 2002, compared to zero during 2001. The
increase in expense during 2002, was based upon adjustments to the reclamation
accrual based on reclamation work performed during 2002 and management's
estimate of costs to complete reclamation. The Company incurred $305,023 of
start-up and development costs associated with BRZ in 2001, no such costs were
incurred during 2002, as BRZ had developed past the start-up stage.
Antimony general and administrative expenses were $327,936 during the year ended
December 31, 2002, compared to $494,950 during the year ended December 31, 2001.
The decrease in general and administrative expenses from 2001 to 2002 is
partially due to the absence of late registration statement penalties and
product warranty expense incurred during 2002 that were not incurred during
2001.
Bear River Zeolite sales expenses increased from $10,413 in 2001 to $62,654 in
2002, the increase was due to increased production and marketing of Zeolite in
2002. Antimony sales expenses were $80,397 during the year ended December 31,
2002, compared to $128,259 during the year ended December 31, 2001. The
decrease in antimony sales expenses during 2002 was primarily related to fewer
sales commissions paid to independent brokers for our products during 2002.
Interest expense was $80,462 during the year ended December 31, 2002, compared
to interest expense of $152,070 incurred during the year ended December 31,
2001. The decrease in interest expense during 2002 as compared to 2001 was due
to the conversion of interest bearing debentures into common stock during 2001.
During 2002, we adjusted our investment in USAMSA to recognize an impairment of
its value. The adjustment reduced our carrying value in USAMSA by $60,526 no
such adjustment was made during 2001.
Accounts receivable factoring expense was $94,765 during the year ended December
31, 2002 and was comparable to factoring expense incurred during the year ended
December 31, 2001 of $91,069. Interest income decreased from $5,229 during the
year ended December 31, 2001, to $3,728 during the same period of 2002 due to a
corresponding decrease in interest bearing reclamation bonds held during 2002.
During 2002, the sale of a 3% gross sales royalty in Bear River Zeolite to a
Company controlled by Al Dugan resulted in revenue of $200,000. No similar
royalty sales occurred in 2001.
FINANCIAL CONDITION AND LIQUIDITY
At December 31, 2002, Company assets totaled $971,527, and there was a
stockholders' deficit of $1,346,603. In addition, at December 31, 2002, the
Company's total current liabilities exceeded its total current assets by
$1,590,164. Due to the Company's operating losses, negative working capital, and
stockholders' deficit, the Company's independent accountants included a
paragraph in our 2002 financial statements relating to a going concern
uncertainty. To continue as a going concern the Company must generate profits
from its antimony and zeolite sales and acquire additional capital resources
through the sale of its securities or from short and long-term debt financing.
Without financing and profitable operations, the Company may not be able to meet
its obligations, fund operations and continue in existence. While management is
optimistic, there can be no assurance that the Company will be able to sustain
profitable operations and meet its financial obligations.
Other significant financial commitments for future periods will include:
- Servicing notes payable to bank.
11
- Paying delinquent property and payroll tax liabilities and accounts
payable.
- Fulfilling responsibilities with environmental, labor safety and
securities regulatory agencies.
Cash used by operating activities during 2002 was $44,491, and resulted
primarily from the twelve month loss of $360,389 as adjusted by decreasing
inventories, increasing accounts payable, the non-cash effects of depreciation
and amortization, an adjustment recognizing the impairment of USAMSA and changes
in other current assets and liabilities.
Cash used by investing activities during the year ended December 31, 2002 was
$305,745, of which all related to construction of capital assets used at the
Bear River Zeolite facility.
During 2001 debenture holders converted $1,022,992 of debenture principal,
accrued interest of $131,510, and $70,000 of accrued late registration penalties
into 6,012,846 shares of our common stock at the rate of $0.20 per share. The
conversions have relieved a major portion of our long-term obligations and,
significantly reduced our total liabilities.
The Company was able to fund its operating loss and its acquisition of plant and
equipment during the year ended December 31, 2002, from net cash provided from
financing activities of $350,236; including a net increase in bank debt of
$150,646 and $207,070 generated from sales of 871,000 shares of unregistered
common stock and warrants, and stock subscriptions. In addition, John C.
Lawrence, the Company's president and a director, advanced the Company a net
amount of $13,022 during the year ended December 31, 2002 and personally
guaranteed the Company's bank debt.
The Company hopes that it will have additional financial resources from
increasing gross profits from its antimony business and sales of zeolite from
BRZ.
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements of the registrant are included herein on
pages F1-F21.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT
Identification of Directors and Executive Officers at December 31, 2002, are as
follows:
Affiliation
Name Age with us Expiration of Term
----------- ----- -------------- ------------------
John C. Lawrence. . . . . . 64 Chairman, President, Secretary, Annual meeting
and Treasurer; Director
Robert A. Rice. . . . . . . 78 Director Annual meeting
Leo Jackson . . . . . . . . 61 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.
12
ROBERT A. RICE. Mr. Rice is a metallurgist, having been employed by the Bunker
Hill Company, a wholly-owned subsidiary of Gulf Resources and Chemical
Corporation at Kellogg, Idaho, as Senior Metallurgist and Mill Superintendent
until his retirement in 1965. Mr. Rice has been a Director since 1975.
LEO JACKSON. Mr. Jackson is a resident of El Paso, Texas. For the past 15
years, he has been a principal owner and the President of Production Minerals,
Inc., a company which has an indirect 25% interest in the stock of USAMSA. Mr.
Jackson is one of the principal owners of Minera de Roja, S.A. de C.V., and has
been involved in the production and marketing of industrial minerals such as
fluorspar and celestite in the United States and Mexico for 25 years. Mr.
Jackson speaks fluent Spanish and has a BBA degree from the Sul Ross State
University in Texas. Mr. Jackson has been a Director since February 1999.
We are not aware of any involvement by our directors or executive officers
during the past five years in legal proceedings that are material to an
evaluation of the ability or integrity of any director or executive officer.
Board Meetings and Committees. Our Board of Directors held twelve (12) regular
meetings during the 2002 calendar year. Each incumbent director attended at
least 75% of the meetings held during the 2002 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 of the Board of Directors not involved in our day-to-day financial
management.
Board Member Compensation. We paid directors' fees in the form of 24,000 shares
of our Series D Preferred Stock per director during 2002.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of the
Securities Exchange Act of 1934 requires our directors and executive officers
and the holders of 10% or more of our common stock to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. Officers,
directors and stockholders holding more than 10% of our common stock are
required by the regulation to furnish us with copies of all Section 16(a) forms
they have filed.
Based solely on our review of copies of Forms 3, 4, and 5 furnished to us, Mr.
Lawrence timely filed Form 4 reports during 2002. We do not know if Mr. Rice
and Mr. Jackson timely filed Form 4 or Form 5 reports during 2002. We do not
know if A.W. Dugan, a shareholder who became a 10% beneficial owner during 2000,
timely filed Form 3, or Form 4, or Form 5 reports during 2002.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Securities and Exchange Commission requires the following table setting
forth for fiscal years ending December 31, 2002, 2001 and 2000, the compensation
paid by USAC to its principal executive officer.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS PAYOUTS
------------ ----------
Restricted Securities
Name and Other Annual Options/ Underlying All Other All Other
Principal Position Year Salary Bonus Compensation(1) Awards(2) LTIP SARs Payouts Compensation
------------------ ---- ------- ----- ---------------- ------------ ---------- --------- ------------
John C. Lawrence,
President 2002 $96,000 N/A $ 5,538 $ 2,400 None None None
------------------ ---- ------- ----- ---------------- ------------ ---------- --------- ------------
John C. Lawrence,
President 2001 $96,000 N/A $ 5,538 $ 0 None None None
------------------ ---- ------- ----- ---------------- ------------ ---------- --------- ------------
John C. Lawrence,
President 2000 $81,000 N/A $ 4,673 $ 3,250 None None None
------------------ ---- ------- ----- ---------------- ------------ ---------- --------- ------------
(1) Represents earned but unused vacation.
(2) These figures represent the fair values, as of the date of issuance, of
the annual Director's fee payable to Mr. Lawrence in the form of
shares of USAC's Series D Preferred stock or restricted Common
Stock.
13
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of our
common stock as of March 27, 2003, by 1) each person who is known by us to
beneficially own more than 5% of our Series A, Series C or common stock; (ii)
each of our executive officers and directors; and (iii) all of our executive
officers and directors as a group. Unless otherwise stated, each person's
address is c/o United States Antimony Corporation, P.O. Box 643, 1250 Prospect
Creek Road, Thompson Falls, Montana 59873.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS . . . . . . . . . . . . . BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP CLASS(1)
---------------------------------------- ----------------------------- --------------------- -----------
Common stock . . . . . . . . . . . . . . The Maguire Family and 1,401,898(2) 5.2
related entities as a group
c/o Walter L. Maguire, Sr.
P.O. Box 129
Keller, VA 23401
Common stock . . . . . . . . . . . . . . The Dugan Family 5,520,116(4) 19.0
c/o A. W. Dugan
1415 Louisiana Street, Suite 3100
Houston, TX 77002
Preferred Series A . . . . . . . . . . . A. Gordon Clark, Jr. 4,500(7) 100.0
stock. . . . . . . . . . . . . . . . . . 2 Musket Trail
Simsbury, CT 06070
Preferred Series C . . . . . . . . . . . Walter L. Maguire, Sr. 49,091(7) 27.6
stock. . . . . . . . . . . . . . . . . . P.O. Box 129
Keller, VA 23401
Preferred Series C . . . . . . . . . . . Richard A. Woods 48,305(7) 27.2
stock. . . . . . . . . . . . . . . . . . 59 Penn Circle West
Penn Plaza Apts.
Pittsburgh, PA 15206
Preferred Series C . . . . . . . . . . . Dr. Warren A. Evans 48,305(7) 27.2
stock. . . . . . . . . . . . . . . . . . 69 Ponfret Landing Road
Brooklyn, CT 06234
Preferred Series C . . . . . . . . . . . Edward Robinson 32,203(7) 18.1
stock. . . . . . . . . . . . . . . . . . 1007 Spruce Street 1st Floor
Philadelphia, PA 19107
Preferred Series D . . . . . . . . . . . Gary D. Babbitt 274,000(5) (7) 79.2
877 W. Main Street, Suite 1000
Boise, ID 83702
----------------------------------------
Common stock . . . . . . . . . . . . . . John C. Lawrence 3,725,311(3) 13.8
Common stock . . . . . . . . . . . . . . Robert A. Rice 217,762 Nil
Common stock . . . . . . . . . . . . . . Leo Jackson 60,700 Nil
Preferred Series D . . . . . . . . . . . John C. Lawrence 925,213(6) (7) 92.8
Preferred Series D . . . . . . . . . . . Robert A. Rice 24,000 25.0
Preferred Series D . . . . . . . . . . . Leo Jackson 24,000 25.0
---------------------------------------- ----------------------------- --------------------- -----------
Common stock and
Series D Preferred Stock . . . . . . . . All Directors and executive
officers as a group
(3 persons). . . . . . . . . . . . 4,976,986 17.8
-----------------------------
(1) Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options or
warrants currently exercisable or convertible, or exercisable or convertible
within 60 days of March 27, 2003 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 27,027,959 shares of common stock, 4,500 shares of Series A
Preferred Stock, 177,904 shares of Series C Preferred Stock, and 96,000 shares
of Series D Preferred Stock outstanding on March 27, 2003, and the shares
issuable upon the exercise of options and warrants exercisable on or within 60
days of March 27, 2003, as described below.
14
(2) Includes 1,007,843 shares owned by the Maguire Foundation; 129,000
shares owned by Walter L. Maguire, Sr.; 45,500 shares owned by Walter L.
Maguire, Trustee; and 219,555 shares owned by Walter L. Maguire, Jr. Excludes
1,003,409 shares owned by the 1934 Maguire Trust.
(3) Excludes 75,000 shares owned by Mr. Lawrence's sister, as to which Mr.
Lawrence disclaims beneficial ownership.
(4) Includes 1,918,767 shares owned by A.W. Dugan; and 1,580,940 shares, in
the aggregate, owned by companies owned and controlled by A.W. Dugan; and
warrants issued to Mr. Dugan and companies controlled by him to purchase
2,020,409 shares of common stock. Excludes 183,333 shares owned by Lydia Dugan
as to which Mr. Dugan disclaims beneficial ownership.
(5) Includes warrants to purchase 250,000 shares of Series D Preferred
Stock.
(6) Includes warrants to purchase 901,213 shares of Series D Preferred
Stock.
(7) The outstanding Series A, Series C and Series D preferred shares carry
voting rights.
ITEM 12 . CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Described below are transactions during the last two years to which we are a
party and in which any director, executive officer or beneficial owner of five
percent (5%) or more of any class of our voting securities or relatives of our
directors, executive officers or five percent (5%) beneficial owners has a
direct or indirect material interest. See also transactions described in notes
4, 7, 9, 10, 12, and 14 to our Financial Statements as of December 31, 2002.
- Leo Jackson, a director, is a principal owner and president of Production
Minerals, Inc., a company which indirectly owns 25% of the stock of USAMSA. We
own 50% of the stock of USAMSA.
- We reimburse John C. Lawrence, a director and Chief Executive Officer, for
operational and maintenance expenses incurred in connection with our use of
equipment owned by Mr. Lawrence, including welding trucks, backhoes, and an
aircraft. Reimbursements for 2002 and 2001 totaled $56,481 and $50,765,
respectively, in addition, we accrued interest of $13,688 and $5,495 on net
advances due Mr. Lawrence, for the years ended December 31, 2002 and 2001,
respectively (See Note 9 to our 2002 Financial Statements).
- During 2002, we issued 750,000 Series D Preferred Stock warrants to our
President, John C. Lawrence in consideration of his advances made to the
Company. The warrants expire in September of 2007, and are exercisable at $0.20
per share.
- On March 20, 2002 we sold A.W. Dugan, a shareholder and an accredited
investor, 50,000 shares of our common stock and agreed to issue warrants to
purchase 50,000 shares of common stock, for $0.20 per share or $10,000. The
warrants are exercisable at $0.30 per share.
- During the fourth quarter of 2002, the Company issued each of its three
directors, 24,000 shares of Series D Preferred Stock for their services as
directors.
- On February 12, 2002 we sold A.W. Dugan, a shareholder and an accredited
investor, 250,000 shares of our common stock and agreed to issue warrants to
purchase 250,000 shares of common stock, for $0.20 per share or $50,000. The
warrants are exercisable at $0.30 per share.
- At December 31, 2002, we owed legal fees in the amount of $140,018 to our
outside law firm in which Gary D. Babbitt, formerly a director, is a partner.
- On December 26, 2001, we sold A.W. Dugan, a shareholder and an accredited
investor, 125,000 shares of our common stock and issued warrants to purchase
125,000 shares of common stock, for $0.20 per share or $25,000. The warrants
are exercisable at $0.29 per share and expire on December 26, 2004.
15
- In late December 2001, we issued 1,938,261 shares of our common stock to
John C. Lawrence (a director, Chief Executive Officer and a shareholder) and
A.W. Dugan, a shareholder and an accredited investor, upon conversion of
$347,992 principal amount of debentures and $39,660 accrued interest thereon at
$0.20 per share.
- On December 11, 2001, we sold A.W. Dugan, a shareholder and an accredited
investor, 275,000 shares of our common stock and issued warrants to purchase
150,000 shares of common stock, for $0.20 per share or $55,000. The warrants
are exercisable at $0.29 per share and expire December 11, 2004.
- Effective December 12, 2000, we issued our 10% convertible debenture in
the principal amount of $100,000 due December 12, 2003 to John C. Lawrence, a
director, president and shareholder. During the fourth quarter of 2000, we
issued our 10% convertible debenture in the principal amount of $50,000 due
December 2003 to A.W. Dugan, a shareholder of the company and an accredited
investor. On December 5, 2000 we issued our 10% convertible debenture due
December 31, 2003 to John C. Lawrence, a director, president and shareholder of
the company, in the principal amount of $147,992. We also issued related
warrants to Mr. Lawrence and Mr. Dugan for 151,213 shares and 60,974 shares,
respectively, of our common stock exercisable for five years at $0.41 per share.
In December 2001, the debentures including both principal and accrued interest
thereon were converted into 1,938,261 shares of our common stock at $0.20 per
share.
- On July 11, 2001, we sold Gary D. Babbitt, then a director, 45,000 shares
of our common stock and issued warrants to purchase 22,500 shares of common
stock, for $0.20 per share or $9,000. The warrants are exercisable at $0.35 per
share and expire July 11, 2004.
- On June 27, 2001, we sold Delaware Royalty, which is an affiliate of A.W.
Dugan, a stockholder and an accredited investor, 100,000 shares of our common
stock and issued warrants to purchase 100,000 shares of common stock, for $0.20
per share or $20,000. The warrants are exercisable at $0.35 per share and
expire June 26, 2004.
- On May 25, 2001, we sold Delaware Royalty, which is an affiliate of A.W.
Dugan, a stockholder and an accredited investor, 200,000 shares of our common
stock and issued warrants to purchase 100,000 shares of common stock, for $0.20
per share or $40,000. The warrants are exercisable at $0.35 per share and
expire May 25, 2004.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT NUMBER DESCRIPTION
---------------- -----------
3.01 Articles of Incorporation of USAC, filed as an exhibit to USAC's
Form 10-KSB for the fiscal year ended December 31, 1995 (File No.001-
08675), are incorporated herein by this reference.
3.02 Amended and Restated Bylaws of USAC, filed as an exhibit to amendment
No. 2 to USAC's Form SB-2 Registration Statement (Reg. No.333-
45508) are incorporated herein by this reference.
3.03 Articles of Correction of Restated Articles of Incorporation of USAC.
3.04 Articles of Amendment to the Articles of Incorporation of United
States Antimony Corporation, filed as an exhibit to USAC's Form 10-QSB
for the quarter ended September 30, 2002 (File No. 001-08675), are
incorporated herein by this reference.
4.01 Key Employees 2000 Stock Plan, filed as an exhibit to USAC's
Form S-8 Registration Statement filed on March 10, 2000 (File
No. 333-32216) is incorporated herein by this reference.
16
Documents filed with USAC's Annual Report on Form 10-KSB for the year ended
December 31, 1995 (File No. 001-08675), are incorporated herein by this
reference:
10.10 Yellow Jacket Venture Agreement
10.11 Agreement Between Excel-Mineral USAC and Bobby C. Hamilton
10.12 Letter Agreement
10.13 Columbia-Continental Lease Agreement Revision
10.14 Settlement Agreement with Excel Mineral Company
10.15 Memorandum Agreement
10.16 Termination Agreement
10.17 Amendment to Assignment of Lease (Geosearch)
10.18 Series B Stock Certificate to Excel-Mineral Company, Inc.
10.19 Division Order and Purchase and Sale Agreement
10.20 Inventory and Sales Agreement
10.21 Processing Agreement
10.22 Release and settlement agreement between Bobby C. Hamilton
and United States Antimony Corporation
10.23 Columbia-Continental Lease Agreement
10.24 Release of Judgment
10.25 Covenant Not to Execute
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-A.W. Dugan
10.32 Amendment Agreement
17
Documents filed with USAC's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1999 (File No. 001-08675) are incorporated herein by this
reference:
10.33 Warrant Issue-John C. Lawrence
10.34 PVS Termination Agreement
Documents filed as an exhibit to USAC's Form 10-KSB for the year ended December
31, 1999 (File No. 001-08675) are incorporated herein by this reference:
10.35 Maguire Settlement Agreement
10.36 Warrant Issue-Carols Tejada
10.37 Warrant Issue-Al W. Dugan
10.38 Memorandum of Understanding with Geosearch Inc.
10.39 Factoring Agreement-Systran Financial Services Company
10.40 Mortgage to John C. Lawrence
10.41 Warrant Issue-Al W. Dugan filed as an exhibit to USAC's
Quarterly Report on Form 10-QSB for the quarter ended March 31,
2000 (File No.001-08675) is incorporated herein by this
reference
10.42 Agreement between United States Antimony Corporation and
Thomson Kernaghan & Co., Ltd. filed as an exhibit to USAC form
10-QSB for the quarter ended June 30, 2000 (File No. 001-08675)
are incorporated herein by this reference.
10.43 Settlement agreement and release of all claims between the
Estate of Bobby C. Hamilton and United States Antimony Corporation
filed as an exhibit to USAC form 10-QSB for the quarter ended
June 30, 2000 (File No.001-08675) are incorporated herein by
this reference.
10.44 Supply Contracts with Fortune America Trading Ltd. filed as an
exhibit to USAC form 10-QSB for the quarter ended June 30, 2000
(File No.001-08675) are incorporated herein by this reference.
10.45 Amended and Restated Agreements with Thomson Kernaghan & Co. Ltd,
filed as an exhibit to amendment No. 3 to USAC's Form SB-2
Registration Statement (Reg. No. 333-45508), are incorporated
herein by this reference.
10.46 Purchase Order from Kohler Company, filed as an exhibit to
amendment No. 4 to USAC's Form SB-2 Registration Statement
(Reg. No. 333-45508) are incorporated herein by this reference.
Documents filed as an exhibit to USAC's Form 10-QSB for the quarter ended June
30, 2002 (File No. 001-08675) are incorporated herein by this reference.
10.47 Bear River Zeolite Company Royalty Agreement, dated May 29, 2002
10.48 Grant of Production Royalty, dated June 1, 2002
10.49 Assignment of Common Stock of Bear River Zeolite Company, dated
May 29, 2002
10.50 Agreement to Issue Warrants of USA, dated May 29, 2002
21.01 Subsidiary of USAC*
18
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
There were no reports on Form 8-K filed during the quarter ended December 31,
2002.
EXHIBIT 21.01
SUBSIDIARY OF REGISTRANT, AS OF DECEMBER 31, 2002
Bear River Zeolite Company
c/o Box 643
Thompson Falls, MT 59873
ITEM 14. CONTROLS AND PROCEDURES
The Registrant's President has evaluated the Registrant's disclosure controls
and procedures within 90 days of the filing date of this annual report. Based
upon this evaluation, the Registrant's President concluded that the Registrant's
disclosure controls and procedures are effective in ensuring that material
information required to be disclosed is included in the reports that it files
with the Securities and Exchange Commission.
There were no significant changes in the Registrant's internal controls or, to
the knowledge of the management of the Registrant, in other factors that could
significantly affect these controls subsequent to the evaluation date.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(b) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
UNITED STATES ANTIMONY CORPORATION
(Registrant)
By:/s/ John C. Lawrence Date: April 14, 2003
-----------------------------------------
John C. Lawrence, President, Director
and Principal Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
By:/s/ John C. Lawrence Date: April 14, 2003
-----------------------------------------
John C. Lawrence, Director and President
(Principal Executive, Financial and Accounting
Officer)
By:/s/ Leo Jackson Date: April 14, 2003
------------------------------------
Leo Jackson, Director
By:/s/ Robert A. Rice Date: April 14, 2003
----------------------------------------
Robert A. Rice, Director
20
CERTIFICATION
I, John C. Lawrence, certify that:
1. I have reviewed this annual report on Form 10-KSB of United States
Antimony Corporation
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of and for the periods presented in this annual report.
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
Registrant and have:
a. designed such disclosure controls and procedures to ensure that material
information relating to the Registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b. evaluated the effectiveness of the Registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c. presented in this annual report our conclusions about the effectiveness
of disclosure controls and procedures based on our evaluation as of the
Evaluation Dates'
5. I have disclosed, based on our most recent evaluation, to the
Registrant's auditors and the audit committee of the Registrant's board of
directors (or persons performing the equivalent functions);
a) all significant deficiencies in the design or operations of internal
controls which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the
Registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal controls; and
6. I have indicated in this annual report whether there were significant
changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: April 13, 2003
/s/: John C. Lawrence
John C. Lawrence
President and Director
21
CERTIFICATION PURSUANT TO THE SARBANES-OXLEY ACT
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
I, John C. Lawrence, director and president of United States Antimony
Corporation (the "Registrant") do hereby certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to my knowledge:
1. This Annual Report on Form 10-KSB of the Registrant for the fiscal year
ended December 31, 2002, as filed with the Securities and Exchange Commission
(the "report"), fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
Date: April 13, 2003
/s/: John C. Lawrence
John C. Lawrence
President and Director
22
DeCoria,
Maichel
& Teague PS
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
United States Antimony Corporation
We have audited the accompanying consolidated balance sheets of United States
Antimony Corporation and its subsidiary as of December 31, 2002 and 2001, and
the related consolidated statements of operations, changes in stockholders'
deficit and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of United States
Antimony Corporation and its subsidiary as of December 31, 2002 and 2001, and
the consolidated results of their operations and their cash flows for the years
then ended, in conformity with accounting principles generally accepted in the
United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has negative working capital, an accumulated
deficit and total stockholders' deficit that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/: DeCoria, Maichel & Teague P.S.
DeCoria, Maichel & Teague P.S.
Spokane, Washington
March 21, 2003
F-1
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 2002 and 2001
ASSETS
2002 2001
Current assets:
Accounts receivable, less allowance
for doubtful accounts of $30,000 . . . . . . . . . . . . . . . . . $ 106,971 $ 105,084
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,307 126,075
--------------- -------------
Total current assets . . . . . . . . . . . 230,278 231,159
Investment in USAMSA, net. . . . . . . . . . . . . . . . . . . . . . . . 18,625 95,734
Properties, plants and equipment, net. . . . . . . . . . . . . . . . . . 529,416 307,373
Restricted cash for bank note payable. . . . . . . . . . . . . . . . . . 102,022 3,803
Restricted cash for reclamation bonds. . . . . . . . . . . . . . . . . . 91,186 87,550
--------------- -------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 971,527 $ 725,619
=============== =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Checks issued and payable. . . . . . . . . . . . . . . . . . . . . . . $ 53,641 $ 61,121
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 783,799 624,588
Accrued payroll and property taxes . . . . . . . . . . . . . . . . . . 280,247 256,320
Accrued payroll and other. . . . . . . . . . . . . . . . . . . . . . . 85,838 82,790
Judgment payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,780 46,523
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . 18,663 14,640
Payable to related parties . . . . . . . . . . . . . . . . . . . . . . 202,625 121,082
Stock subscriptions payable. . . . . . . . . . . . . . . . . . . . . . 35,000
Notes payable to bank, current . . . . . . . . . . . . . . . . . . . . 266,284 119,431
Accrued reclamation costs, current . . . . . . . . . . . . . . . . . . 44,565 137,639
--------------- -------------
Total current liabilities. . . . . . . . . . . . . . . . . . . 1,820,442 1,464,134
Notes payable to bank, noncurrent. . . . . . . . . . . . . . . . . . . . 345,638 341,845
Accrued reclamation costs, noncurrent. . . . . . . . . . . . . . . . . . 152,050 87,524
--------------- -------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . 2,318,130 1,893,503
--------------- -------------
Commitments and contingencies (Notes 1 and 15)
Stockholders' deficit:
Preferred stock, $0.01 par value, 10,000,000 shares authorized:
Series A: 4,500 shares issued and outstanding
(liquidation preference $119,250). . . . . . . . . . . . . . . . 45 45
Series B: 750,000 shares issued and outstanding
(liquidation preference $817,500). . . . . . . . . . . . . . . . 7,500 7,500
Series C: 177,904 shares issued and outstanding
(liquidation preference $97,847) . . . . . . . . . . . . . . . . 1,779 1,779
Series D: 96,000 shares issued and outstanding
(liquidation preference $240,000). . . . . . . . . . . . . . . . 960
Common stock, $0.01 par value, 30,000,000 shares
authorized; 27,027,959 and 26,156,959 shares issued and outstanding. 270,279 261,569
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . 16,963,610 16,791,610
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . (18,590,776) (18,230,387)
--------------- -------------
Total stockholders' deficit. . . . . . . . . . . . . . . . . . (1,346,603) (1,167,884)
--------------- -------------
Total liabilities and stockholders' deficit. . . . . . . . . . $ 971,527 $ 725,619
=============== =============
The accompanying notes are an integral part of these financial statements.
F-2
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2002 and 2001
2002 2001
Revenues:
Sales of antimony products and other. . . . . $ 3,274,007 $ 3,421,136
Sales of zeolite products . . . . . . . . . . 199,890 15,428
------------ ------------
3,473,897 3,436,564
------------ ------------
Cost of sales:
Cost of antimony production . . . . . . . . . 2,541,657 2,673,250
Cost of zeolite production. . . . . . . . . . 242,961 3,587
Antimony depreciation . . . . . . . . . . . . 42,991 51,908
Zeolite depreciation. . . . . . . . . . . . . 41,071 22,172
Antimony freight and delivery . . . . . . . . 331,439 366,965
Zeolite freight and delivery. . . . . . . . . 22,429 1,290
------------ ------------
3,222,548 3,119,172
------------ ------------
Gross profit. . . . . . . . . . . . . . . . . . 251,349 317,392
------------ ------------
Other operating expenses:
Yellow Jacket reclamation . . . . . . . . . . 10,822
Antimony reclamation. . . . . . . . . . . . . 30,838
Yankee Fork Mill site reclamation . . . . . . 22,068
Bear River Zeolite start-up and development . 305,023
Bear River Zeolite general and administrative 86,658 76,014
Antimony general and administrative . . . . . 327,936 494,950
Bear River Zeolite sales expenses . . . . . . 62,654 10,413
Antimony sales expenses . . . . . . . . . . . 80,397 128,259
------------ ------------
579,713 1,056,319
------------ ------------
Other (income) expense:
Interest expense. . . . . . . . . . . . . . . 80,462 152,070
USAMSA impairment adjustment. . . . . . . . . 60,526
Factoring expense . . . . . . . . . . . . . . 94,765 91,069
Interest income and other . . . . . . . . . . (3,728) (5,229)
Bear River Zeolite royalty sale . . . . . . . (200,000)
------------
32,025 237,910
------------ ------------
Net loss. . . . . . . . . . . . . . . . . . . . $ (360,389) $ (976,837)
============ ============
Net loss per share of common stock. . . . . . . $ (0.01) $ (0.05)
============ ============
Basic weighted average shares outstanding . . . 26,907,102 19,336,088
============ ============
The accompanying notes are an integral part of these financial statements.
F-3
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
for the years ended December 31, 2002 and 2001
TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL PAID ACCUMULATED
SHARES AMOUNT SHARES AMOUNT IN CAPITAL DEFICIT TOTAL
------ ------ ------ ------ ----------- ------- --------
Balances, December 31, 2000. . . 932,404 $ 9,324 18,375,564 $ 183,755 $15,352,386 $(17,253,550) $(1,708,085)
Issuance of common stock and
warrants for cash. . . . . . . . 1,704,000 17,040 323,760 340,800
Issuance of common stock for
convertible debenture principal
and accrued interest . . 5,772,503 57,725 1,047,867 1,105,592
Issuance of common stock in
satisfaction of liquated damages
for late registration. . . . . . 240,343 2,403 67,597 70,000
Reconciliation of outstanding
common shares to transfer
agent's records. . . . . . . . . 64,549 646 646
Net loss . . . . . . . . . . . . (976,837) (976,837)
-------- ------- ---------- --------- --------- - ---------- ----------
Balances, December 31, 2001. . . 932,404 9,324 26,156,959 261,569 16,791,610 (18,230,387) (1,167,884)
Issuance of common stock and
warrants for cash. . . . . . . . 871,000 8,710 163,360 172,070
Issuance of Series D preferred
stock to directors for services. 96,000 960 8,640 9,600
Net loss . . . . . . . . . . . . (360,389) (360,389)
--------- ---------- ---------- ---------- ----------- ----------- ------------
Balances, December 31, 2002. . . 1,028,404 $ 10,284 27,027,959 $ 270,279 $16,963,610 $(18,590,776) $(1,346,603)
========== ========== ========== ========== =========== ============ ============
The accompanying notes are an integral part of these financial statements.
F-4
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 2002 and 2001
2002 2001
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . $(360,389) $(976,837)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . 97,084 137,084
Series D preferred stock issued for director services. . 9,600
USAMSA impairment adjustment . . . . . . . . . . . . . . 60,526
Loss from unconsolidated investment. . . . . . . . . . . 3,200 6,221
Reconciliation of outstanding common shares to transfer
agent's records. . . . . . . . . . . . . . . . . . . . 646
Issuance of common stock in satisfaction of debenture
accrued interest . . . . . . . . . . . . . . . . . . . 131,510
Issuance of common stock in satisfaction of liquidated
damages for late registration. . . . . . . . . . . . . 70,000
Change in:
Accounts receivable. . . . . . . . . . . . . . . . . . (1,887) 14,484
Inventories. . . . . . . . . . . . . . . . . . . . . . 2,768 95,382
Restricted cash for bank note payable. . . . . . . . . (98,219) 4,716
Restricted cash for reclamation bonds. . . . . . . . . (3,636) 35,700
Accounts payable . . . . . . . . . . . . . . . . . . . 159,211 194,934
Accrued payroll and property taxes . . . . . . . . . . 23,927 14,732
Accrued payroll and other. . . . . . . . . . . . . . . 3,048 (6,890)
Judgment payable . . . . . . . . . . . . . . . . . . . 3,257 3,043
Accrued interest payable . . . . . . . . . . . . . . . 4,023 (32,684)
Payable to related parties . . . . . . . . . . . . . . 81,543 110,775
Accrued reclamation costs. . . . . . . . . . . . . . . (28,548) (54,225)
---------- ----------
Net cash used by operating activities. . . . . . . . (44,491) (251,409)
---------- ----------
Cash flows from investing activities:
Purchase of properties, plants and equipment . . . . . . . . (305,745) (148,653)
---------- ----------
Net cash used by investing activities. . . . . . . . (305,745) (148,653)
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock and warrants. . . . . 172,070 340,800
Proceeds from issuance of common stock subscriptions payable 35,000
Proceeds from notes payable to bank, net . . . . . . . . . . 150,646 105,274
Change in checks issued and payable. . . . . . . . . . . . . (7,480) (46,012)
---------- ----------
Net cash provided by financing activities. . . . . . 350,236 400,062
---------- ----------
Net decrease in cash . . . . . . . . . . . . . . . . . . . . . 0 0
Cash, beginning of year. . . . . . . . . . . . . . . . . . . . 0 0
---------- ----------
Cash, end of year. . . . . . . . . . . . . . . . . . . . . . . $ 0 $ 0
========== ==========
The accompanying notes are an integral part of these financial statements.
F-5
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED:
for the years ended December 31, 2002 and 2001
2002 2001
Supplemental disclosures:
Cash paid during the year for interest . . . . . . . . . . . . . . . $ 62,599 $38,695
========== =======
Noncash financing activities:
Debenture principal and accrued interest converted to common stock $1,154,502
===========
The accompanying notes are an integral part of these financial statements.
F-6
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BACKGROUND OF COMPANY AND BASIS OF PRESENTATION:
AGAU Mines, Inc., predecessor of United States Antimony Corporation ("USAC" or
"the Company"), was incorporated in June 1968 as a Delaware corporation to mine
gold and silver. USAC was incorporated in Montana in January 1970 to mine and
produce antimony products. In June 1973, AGAU Mines, Inc. was merged into USAC.
In December 1983, the Company suspended its antimony mining operations when it
became possible to purchase antimony raw materials more economically from
foreign sources. The principal business of the Company has been the production
and sale of antimony products.
During 2000, the Company formed a 75% owned subsidiary, Bear River Zeolite
Company ("BRZ"), to mine and market zeolite and zeolite products from a mineral
deposit in southeastern Idaho. In 2001, an operating plant was constructed at
the zeolite site and zeolite production and sales commenced. During 2002, the
Company acquired 100% of BRZ and continued to produce and sell zeolite products.
The financial statements have been prepared on a going concern basis, which
assumes realization of assets and liquidation of liabilities in the normal
course of business. At December 31, 2002, the Company had negative working
capital of approximately $1.6 million, an accumulated deficit of approximately
$18.6 million, and a total stockholders' deficit of approximately $1.3 million.
Additionally, the Company is delinquent on the payment of several current
liabilities including payroll and property taxes totaling approximately
$260,000, accounts payable totaling approximately $475,000 including
approximately $240,000 payable to law firms for legal fees incurred principally
in preparing a registration statement during 2000 and 2001, a judgment payable
totaling approximately $50,000, and accrued interest payable totaling
approximately $19,000. These factors, among others, indicate that there is
substantial doubt that the Company will be able to meet its obligations and
continue in existence as a going concern. The financial statements do not
include any adjustments that may be necessary should the Company be unable to
continue as a going concern.
To improve the Company's financial condition, the following actions have been
initiated or taken by management:
- In 2001, the Company converted debentures and other debt obligations of
$1,154,502 of principal and accrued interest into common stock of the
Company. The conversion decreased the Company's total liabilities.
- During 2002, the Company made progress in developing its zeolite
production capabilities, and broadened its zeolite product line. The
Company has been developing a sales and marketing force and
attracting new zeolite customers.
- In 2002 and 2001, the Company generated $172,070 and $340,800,
respectively, through sales of its unregistered common stock and warrants.
The Company plans to raise equity funding through additional stock sales
in 2003, providing it is successful in amending its Articles of
Incorporation to authorize additional shares of its unregistered common
stock for sale. The Company intends to solicit proxy votes to authorize
more shares of its common stock for issue and sale from its shareholders
during an annual meeting of shareholders planned for 2003. There can be
no assurance, however, that the Company will be able to successfully raise
additional capital through the sale of its stock.
F-7
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BACKGROUND OF COMPANY AND BASIS OF PRESENTATION, CONTINUED:
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.
2. SEGMENT INFORMATION AND CONCENTRATION OF RISK:
The Company purchases most of the raw antimony used in the production of its
finished antimony products from Chinese producers through metal brokers. If the
supply of antimony from China is reduced, it is possible that the Company's
antimony product operations could be adversely affected. During the years ended
December 31, 2002 and 2001, 40% and 34%, respectively, of the Company's antimony
revenues were generated by sales to one customer.
During 2002, 55% of the Company's revenues generated from zeolite product sales
were to an individual customer. The loss of the Company's "key" customers could
adversely affect its business. In addition, during 2001, 12% of our revenues
were generated by antimony product sales to a second individual customer.
The Company's revenues from antimony sales are strongly influenced by world
prices for such commodities, which fluctuate and are affected by numerous
factors beyond the Company's control, including inflation and worldwide forces
of supply and demand. The aggregate effect of these factors is not possible to
predict accurately.
Many of the Company's competitors in the antimony industry have substantially
more capital resources and market share than the Company. Therefore, the
Company's ability to maintain its market share can be significantly affected by
factors outside of the Company's control.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The Company's consolidated financial statements include the accounts of Bear
River Zeolite Company, a wholly-owned subsidiary. Intercompany balances and
transactions are eliminated in consolidation. The Company accounts for its
investment interest in its 50% owned foreign entity, USAMSA, by the equity
method.
RESTRICTED CASH
Restricted cash consists primarily of cash held for payment of delinquent
payroll taxes, reclamation performance bonds, and security for a bank note
payable.
RECLASSIFICATIONS
Certain reclassifications have been made to the 2001 financial statements in
order to conform to the 2002 presentation. These reclassifications have no
effect on net loss, total assets or stockholders' deficit as previously
reported.
F-8
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
INVENTORIES
Inventories at December 31, 2002 and 2001, primarily consisted of antimony
metal, metal in process and finished goods that are stated at the lower of
first-in, first-out cost or estimated net realizable value. Since the Company's
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.
The Company's BRZ zeolite inventory consisted principally of finished
zeolite products available for sale.
PROPERTIES, PLANTS AND EQUIPMENT
Production facilities and equipment are stated at the lower of cost or estimated
net realizable value and are depreciated using the straight-line method over
their estimated useful lives (five to fifteen years). Vehicles and office
equipment are stated at cost and are depreciated using the straight-line method
over estimated useful lives of three to five years. Maintenance and repairs are
charged to operations as incurred. Betterments of a major nature are
capitalized. When assets are retired or sold, the costs and related accumulated
depreciation are eliminated from the accounts and any resulting gain or loss is
reflected in operations.
Management of the Company periodically reviews the net carrying value of all of
its properties on a property-by-property basis. These reviews consider the net
realizable value of each property to determine whether a permanent impairment in
value has occurred and the need for any asset write-down. The Company considers
current metal prices, cost of production, proven and probable reserves and
salvage value of the property and equipment in its valuation.
Management's estimates of metal prices, operating capital requirements and
reclamation costs are subject to risks and uncertainties of changes affecting
the recoverability of the Company's investment in its properties, plants and
equipment. Although management has made its best estimate of these factors based
on current conditions, it is reasonably possible that changes could occur in the
near term which could adversely affect management's estimate of net cash flows
expected to be generated from its properties, and necessitate asset impairment
write-downs.
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 121, ("SFAS No. 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." The provisions
of SFAS No. 121 require that an impairment loss be recognized when the estimated
future cash flows (undiscounted and without interest) expected to result from
the use of an asset are less than the carrying amount of the asset. Measurement
of an impairment loss is based on the estimated fair value of the asset if the
asset is expected to be held and used.
RECLAMATION AND REMEDIATION
All of the Company's mining operations are subject to reclamation and closure
requirements. Minimum standards for mine reclamation have been established by
various governmental agencies. Costs are estimated based primarily upon
environmental and regulatory requirements and are accrued and charged to expense
over the expected economic life of the operation using the units-of-production
method. The liability for reclamation is classified as current or noncurrent
based on the expected timing of expenditures.
F-9
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
RECLAMATION AND REMEDIATION, 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 due to uncertainties associated with defining the
nature and extent of environmental contamination, application of laws and
regulations by regulatory authorities, and changes in remediation technology,
the ultimate cost of remediation and reclamation could change in the future. The
Company continually reviews its accrued liabilities for such remediation and
reclamation costs as evidence becomes available indicating that its remediation
and reclamation liability has changed.
INCOME TAXES
The Company records deferred income tax liabilities and assets for the expected
future income tax consequences of events that have been recognized in its
financial statements. Deferred income tax liabilities and assets are determined
based on the temporary differences between the financial statement carrying
amounts and the tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the temporary differences are expected to reverse.
REVENUE RECOGNITION
Sales of antimony and zeolite products are recorded upon shipment to the
customer.
INCOME (LOSS) PER COMMON SHARE
The Company accounts for its income (loss) per common share according to
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
No. 128"). Under the provisions of SFAS No. 128, primary and fully diluted
earnings per share are replaced with basic and diluted earnings per share.
Basic earnings per share is calculated by dividing net income (loss) available
to common stockholders by the weighted average number of common shares
outstanding, and does not include the impact of any potentially dilutive common
stock equivalents. Common stock equivalents, including warrants to purchase the
Company's common stock and common stock issuable upon the conversion of
debentures, are excluded from the calculations when their effect is
antidilutive.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), requires companies to recognize stock-based
expense based on the estimated fair value of employee stock options.
Alternatively, SFAS No. 123 allows companies to retain the current approach set
forth in APB Opinion 25, "Accounting for Stock Issued to Employees," provided
that expanded footnote disclosure is presented. The Company has not adopted the
fair value method of accounting for stock-based compensation under SFAS No. 123,
but provides the pro forma disclosure required when appropriate.
F-10
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141, "Business Combinations," ("SFAS No.
141"). SFAS No. 141 addresses financial accounting and reporting for business
combinations. SFAS No. 141 generally requires business combinations to be
accounted for using the purchase method. The pronouncement is effective for
business combinations occurring after June 30, 2001. Concurrent with the
issuance of SFAS No. 141, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 142 sets forth financial accounting and reporting
for acquired goodwill and other intangible assets. The provisions of SFAS No.
142 are effective December 31, 2001. The Company has not had any business
combinations in the periods reported on, does not have any recorded goodwill and
does not anticipate that adoption of these pronouncements will result in any
impact on its reported financial position or results of operations.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The provisions of SFAS No. 143 are effective
for fiscal years beginning after June 15, 2002. The Company presently does not
have any asset retirement obligations and does not anticipate that adoption of
this pronouncement will result in any impact on its reported financial position
or results of operations.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and discontinued
operations. The provisions of SFAS No. 144 are generally effective for fiscal
years beginning after December 15, 2001. The Company adopted SFAS No. 144 as of
January 1, 2002.
In April 2002, the FASB issued SFAS No. 145, "Rescission of SFAS Statements No.
4, 44, and 64, Amendment of SFAS No. 13, and Technical Corrections." This
statement culminates the current requirements that gains and losses on debt
extinguishment must be classified as extraordinary items in the income
statement. Instead, such gains and losses will be classified as extraordinary
items only if they are deemed to be unusual and infrequent, in accordance with
the current GAAP criteria for extraordinary classifications. In addition, SFAS
No. 145 eliminates an inconsistency in lease accounting by requiring that
modifications of capital leases that result in reclassification as operating
leases be accounted for consistent with sales-leaseback accounting rules. The
statement also contains other nonsubstantive corrections to authoritative
accounting literature. The rescission of SFAS No. 4 is effective in fiscal years
beginning after May 15, 2002. The amendment and technical corrections of SFAS
No. 13 are effective for transactions occurring after May 15, 2002. All other
provisions of SFAS No. 145 are effective for financial statements issued on or
after May 15, 2002. The Company believes that the adoption of SFAS No. 145 will
not have a material impact on its reported financial position or results of
operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which addresses accounting for restructuring
and similar costs. SFAS No. 146 supersedes previous accounting guidance,
principally Emerging Issues Task Force Issue No. 94-3. SFAS No. 146 requires
that the liability for costs associated with an exit or disposal activity be
recognized when the liability is incurred. SFAS No. 146 also establishes that
the liability should initially be measured and recorded at fair value.
Accordingly SFAS No. 146 may affect the timing of recognizing future
restructuring costs as well as the amount recognized. The provisions of SFAS 146
are effective for exit or disposal activities that are initiated after December
31, 2002. The Company believes that the adoption of SFAS No. 146 will not have
a material impact on its reported financial position or results of operations.
F-11
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. SALES OF ACCOUNTS RECEIVABLE:
The Company sells its accounts receivable to a financing company pursuant to the
terms of a factoring agreement. According to the terms of the agreement, the
receivables are sold with full recourse and the Company assumes all risks of
collectibility. Accordingly, an allowance for doubtful accounts receivable is
based upon the expected collectibility of all trade receivables. The
performance of all obligations and payments to the factoring company is
personally guaranteed by John C. Lawrence, the Company's president and a
director. As consideration for Mr. Lawrence's guarantee, the Company granted a
mortgaged security interest to Mr. Lawrence collateralized by the Company's real
and personal property.
The factoring agreement requires that the Company pay a financing fee equal to
2% of the face amount of receivables sold. Financing fees paid by the Company
during the years ended December 31, 2002 and 2001 totaled $94,765 and $91,069,
respectively. For the years ended December 31, 2002 and 2001, net accounts
receivable of approximately $3.3 million and $3.4 million, respectively, were
sold under the agreement. Proceeds from the sales were used to fund inventory
purchases and operating expenses. The agreement is for a term of one year with
automatic renewal for additional one-year terms. The Company's sales of
accounts receivable qualify as sales under the provisions of Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities."
5. INVENTORIES:
The major components of the Company's inventories at December 31, 2002 and
2001, were as follows:
2002 2001
Antimony Metal. . $ 7,406 $ 1,066
Antimony Oxide. . 93,456 76,239
Sodium Antimonate 2,388 31,053
Zeolite . . . . . 20,057 17,717
-------- --------
$123,307 $126,075
======== ========
At December 31, 2002 and 2001, antimony metal consisted principally of recast
metal from antimony-based compounds and metals purchased from foreign suppliers,
respectively. Antimony oxide inventory consisted of finished product oxide held
at the Company's plant or in independent warehouses throughout the United
States. Sodium antimonite inventory consisted of dry finished product and wet
raw materials, the majority of which were stored at the Company's antimony plant
near Thompson Falls, Montana. The Company's zeolite inventory consists of
salable zeolite material held at BRZ's mining and production facility.
F-12
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. PROPERTIES, PLANTS AND EQUIPMENT:
The major components of the Company's properties, plants and equipment at
December 31, 2002 and 2001 were as follows:
2002 2001
Mining equipment (1). . . . . . . . . . . $ 945,137 $ 945,137
Chemical processing and office buildings. 144,727 144,727
Chemical processing equipment . . . . . . 921,065 921,065
BRZ plant . . . . . . . . . . . . . . . . 426,640 120,895
Other . . . . . . . . . . . . . . . . . . 151,268 151,268
---------- ----------
2,588,837 2,283,092
Less accumulated depreciation . . . . . . 2,059,421 1,975,719
---------- ----------
$ 529,416 $ 307,373
========== ==========
(1) Substantially all of the Company's mining equipment is fully
depreciated. At December 31, 2002 and 2001, mining equipment with an original
cost of approximately $670,000, was in use at BRZ.
7. INVESTMENT IN USAMSA:
The Company has a 50% investment in United States Antimony, Mexico S.A. de C.V.
("USAMSA"). The Company accounts for its investment in USAMSA by the equity
method and translates the foreign currency financial statements of USAMSA in
accordance with the requirements of SFAS No. 52, "Foreign Currency Translation."
Assets and liabilities are translated at current exchange rates, related
revenues and expenses are translated at average exchange rates in effect during
the period, and the effects of exchange rate changes are reflected in
stockholders' equity. Unaudited condensed financial information for USAMSA at
December 31, 2002 and 2001 is as follows:
2002 2001
ASSETS
Current assets . . . . . . . . . . . . . . . $16,292 $ 18,550
Noncurrent assets. . . . . . . . . . . . . . 73,102 83,233
------- --------
Total assets . . . . . . . . . . . . . . . $89,394 $101,783
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
2002 2001
Current liabilities. . . . . . . . . . . . . $52,144 $ 52,556
Stockholders' equity . . . . . . . . . . . . 37,250 49,227
------- --------
Total liabilities and stockholders' equity $89,394 $101,783
======= ========
RESULTS OF OPERATIONS
01
Revenues:
Administrative and other costs . . . . . $ 6,401 $ 12,411
------- --------
Net loss . . . . . . . . . . . . . . . . $ 6,401 $ 12,411
======= ========
F-13
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. INVESTMENT IN USAMSA, CONTINUED:
USAMSA was idle during 2002 and 2001 due to unstable antimony metal prices and
the absence of sufficient operating capital. During 2002, the Company reviewed
the carrying value of its investment in USAMSA and wrote down its net investment
to equal 50% of USAMSA's net book value. The effect of the adjustment reduced
the Company's carrying value in USAMSA by $60,526.
8. JUDGMENT PAYABLE:
At December 31, 2002 and 2001, the Company owed $49,780 and $46,523,
respectively, to the Internal Revenue Service, in connection with a default
judgment in a bankruptcy proceeding.
The default judgment was originally entered against the Company by the United
States Bankruptcy Court in 1992 in favor of the bankruptcy estate of a former
legal counsel of the Company. In 1998, the Trustee of the estate assigned the
interest in the judgment to the Internal Revenue Service. The judgment accrues
interest at the Federal Judgment Interest Rate, which has approximated 6-7%, and
is due in monthly installments of $3,000. During 2002 and 2001, the Company
made no payments on this judgment payable.
9. DUE TO RELATED PARTIES:
Amounts due to related parties at December 31, 2002 and 2001 were as follows
(see also Note 14):
2002 2001
Entity owned by John C. Lawrence,
president and director. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,568 $ 4,721
John C. Lawrence, president and director(1) . . . . . . . . . . . . . . . . . . . . . . . 194,057 116,361
-------- --------
$202,625 $121,082
======== ========
Transactions affecting the payable to Mr. Lawrence during 2002 and 2001 were as follows:
2002 2001
Balance, beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $116,361 $ 10,810
Equipment rental charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,481 50,765
Advances, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,215 54,786
-------- --------
Balance, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $194,057 $116,361
======== ========
(1) Includes accrued interest at 10% per annum of $13,688 and $5,495 for the
years ended December 31, 2002 and 2001, respectively. During the years ended
December 31, 2002 and 2001, Mr. Lawrence's advances (net of accrued interest
expense), were $13,022 and $49,291, respectively.
F-14
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. NOTES PAYABLE TO BANK:
Notes payable to First State Bank of Thompson Falls, Montana ("First State
Bank") at December 31, 2002, were as follows:
Term note payable, bearing interest at 9.5% through August 2004, then
prime plus 3% through maturity; payable in monthly installments
of $5,123; maturing August 2012. . . . . . . . . . . . . . . . . . . $ 371,672
Note payable under $150,000 revolving line-of-credit, bearing interest
at 7.0%; outstanding principal and accrued interest due June 2003. . 150,100
Term note payable, bearing interest at 9.5%; outstanding principal and
accrued interest due March 2003. . . . . . . . . . . . . . . . . . . 40,100
Note payable under $50,000 revolving line-of-credit, bearing interest
at 9.5%; outstanding principal and accrued interest due April 2003 . 50,050
---------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 611,922
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . (266,284)
---------------
Noncurrent portion . . . . . . . . . . . . . . . . . . . . . . . . . . $ 345,638
================
At December 31, 2002, principal payments on the notes payable to bank are
due as follows:
YEAR ENDING
DECEMBER 31,
------------
2003. . . . . . . $ 266,284
2004. . . . . . . 28,618
2005. . . . . . . 31,458
2006. . . . . . . 34,580
2007. . . . . . . 38,012
Thereafter. 212,970
-------------
$ 611,922
=============
Each of the notes payable described above are collateralized by accounts
receivable, inventory, certain equipment, patented and unpatented claims in
Sanders County, Montana and are personally guaranteed by John C. Lawrence, the
company's president and a director. The note payable under a $150,000 revolving
line-of-credit is also collateralized by a certificate of deposit. The notes
also contain certain restrictive covenants, including paying payroll and
property taxes, as they are due. At December 31, 2002, the Company was not in
compliance with certain of the covenants. The Company has obtained a waiver
relating to these covenants, which applies at December 31, 2002 and through
December 31, 2003.
11. 2000 STOCK PLAN
In January of 2000, the Company's Board of Directors resolved to create the
United States Antimony Corporation 2000 Stock Plan ("the Plan"). The purpose of
the Plan is to attract and retain the best available personnel for positions of
substantial responsibility and to provide additional incentive to employees,
directors and consultants of the Company to promote the success of the Company's
business. The maximum number of shares of common stock or options to purchase
common stock that may be issued pursuant to the Plan is 500,000. At December
31, 2002 and 2001, 300,000 shares of the Company's common stock had been issued
under the Plan.
F-15
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCKHOLDERS' DEFICIT:
STOCK WARRANTS
The Company's Board of Directors has the authority to issue incentive stock
warrants for the purchase of preferred or common stock to directors and
employees of the Company. The Company has also issued warrants in exchange for
services rendered the Company and in connection with sales of its unregistered
common stock.
Transactions in stock warrants are as follows:
NUMBER OF EXERCISE EXPIRATION
WARRANTS PRICES DATES
-------- ------ -----
Balance December 31, 2000 . . . . . . . . . . . 2,404,314(1) $0.25-$0.41
Warrants issued in connection with
stock sales . . . . . . . . . . . . . . . . . . 1,602,400 $0.29-$0.35 (A)
Warrants expired. . . . . . . . . . . . . . . . (100,000) $ 0.50
---------- -----------
Balance December 31, 2001 . . . . . . . . . . . 3,906,714
Warrants issued in connection with stock sales. 871,000 $ 0.30 (B)
Warrants issued for consulting services . . . . 600,000 $ 0.30 (B)
Warrants issued in connection with BRZ purchase 50,000 $ 0.45 (C)
Warrants exchanged for Series D warrants. . . . (151,213)
Warrants expired. . . . . . . . . . . . . . . . (100,000) $ 0.55
----------
Balance, December 31, 2002. . . . . . . . . . . 5,176,501
==========
(1) Includes 961,358 warrants to purchase the Company's common stock at
$0.39 per share held by Al Dugan, a major shareholder and an affiliate, to
which Mr. Dugan has waived exercise of until USAC increases its authorized
common stock for issue and enough shares are available to cover the warrants'
exercise.
In addition to warrants to purchase common stock, the Company also issued
1,151,213 warrants to purchase shares of Series D preferred stock during 2002.
Of the Series D warrants issued, 750,000 were issued to John C. Lawrence, the
Company's president and a director, in consideration for advances made by him to
the Company; 250,000 were issued to Gary D. Babbitt, the Company's attorney and
a former director, for services rendered; and an additional 151,213 were issued
to Mr. Lawrence in exchange for his warrants to purchase 151,213 shares of the
Company's common stock. The warrants are exercisable at $0.20 per share and
expire in 2005 and 2007. The Company recognized no expense relating to the
issues, as the fair value of the Series D warrants or the consideration
exchanged for them was not determinable.
(A) Warrants are exercisable on or before January and December of 2004.
(B) Warrants are exercisable on or before September and November of 2005.
(C) Warrants are exercisable on or before May of 2005.
F-16
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCKHOLDERS' DEFICIT, CONTINUED:
ISSUANCE OF COMMON STOCK IN CONNECTION WITH CONVERSION OF DEBTS AND
DEBENTURES
During 2001, holders of outstanding convertible debentures converted $1,022,992
of debenture principal, accrued interest of $131,510, and $70,000 of accrued
late registration penalties into 6,012,846 shares of the Company's common stock.
ISSUANCE OF COMMON STOCK FOR CASH
During 2002, the Company sold an aggregate of 871,000 shares of its unregistered
common stock, plus warrants to purchase 871,000 shares of common stock
exercisable at $0.30 per share, to existing shareholders and other parties for
cash of $172,070. In connection with the stock sales during 2002, 600,000
warrants, exercisable at $0.30 and expiring in November 2005, were issued to a
stockholder and consultant for his services.
At December 31, 2002, the Company had stock subscriptions payable of $35,000
outstanding relating to its commitment to sell 175,000 shares of common stock
exercisable at $0.30 per share on or before November of 2005. At December 31,
2002, neither the shares or the warrants had yet been issued.
During 2001, the Company sold an aggregate of 700,000 shares of its unregistered
common stock, plus warrants to purchase 470,000 shares of common stock
exercisable at prices ranging between $0.29 to $0.35 per share, to Al Dugan and
entities affiliated with him, for cash totaling $140,000. Mr. Dugan is a
significant shareholder and an affiliate of the Company.
During 2001, the Company also sold an aggregate of 1,004,000 shares of its
unregistered common stock, plus warrants to purchase 1,132,400 shares of common
stock exercisable at prices ranging between $0.29 and $0.35 per share, to
existing shareholders and other parties for cash of $200,800.
PREFERRED STOCK
The Company's Articles of Incorporation authorize 10,000,000 shares of $0.01 par
value preferred stock available for issuance with such rights and preferences,
including liquidation, dividend, conversion and voting rights, as the Board of
Directors may determine.
Series A
---------
During 1986, Series A preferred stock, consisting of 4,500 shares, was
established by the Board of Directors. These shares are nonconvertible,
nonredeemable and are entitled to a $1.00 per share per year cumulative
dividend. Series A preferred stockholders have voting rights for directors only
and a total liquidation preference equal to $45,000 plus dividends in arrears.
At December 31, 2002, 4,500 shares of Series A preferred stock were outstanding;
and cumulative dividends in arrears including the liquidation preference
amounted to $119,250, or $26.50 per share.
F-17
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCKHOLDERS' DEFICIT, CONTINUED:
Series B
---------
During 1993, Series B preferred stock, consisting of 1,666,667 shares, was
established by the Board of Directors and 1,666,667 shares were issued in
connection with a final settlement of litigation. The Series B preferred stock
has preference over the Company's common stock and Series A preferred stock, has
no voting rights (absent default in payment of declared dividends) and is
entitled to cumulative dividends of $0.01 per share per year payable if and when
declared by the Board of Directors. In the event of dissolution or liquidation
of the Company, the preferential amount payable to Series B restricted preferred
stockholders is $1.00 per share plus dividends in arrears. No dividends have
been declared or paid with respect to the Series B preferred stock. In 1995,
916,667 shares of Series B preferred stock were surrendered to the Company and
cancelled in connection with the settlement of litigation against Bobby C.
Hamilton. At December 31, 2002, cumulative dividends in arrears on the 750,000
outstanding Series B shares were $67,500, or $0.09 per share.
Series C
---------
During 1997, the Company issued 2,560,762 shares of Series C preferred stock in
connection with the conversion of certain debts owed by the Company. During
1999, holders of 2,354,766 shares of Series C stock converted their shares into
common stock of the Company. The Series C shares have voting rights, are
non-redeemable and have a $0.55 per share liquidation preference. At December
31, 2002 and 2001, 177,904 shares of Series C preferred stock remained
outstanding and unconverted.
Series D
---------
During 2002, the Company established its Series D preferred stock. The series D
shares are 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, subject to
adjustment based upon anti-dilution provisions.
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 into.
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. These shares are
included in a registration statement on file with the Securities and Exchange
Commission.
F-18
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCKHOLDERS' DEFICIT, CONTINUED:
DIVIDEND. 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, 2002, the Company had 96,000 shares of Series D preferred stock
outstanding (See Note 14).
13. INCOME TAXES:
The Company had no income tax provision or benefit for the years ended
December 31, 2002 and 2001.
At December 31, 2002 and 2001, the Company had net deferred tax assets of
approximately $1,600,000 and $1,700,000, respectively. The deferred tax assets
principally arose from net operating loss carryforwards for income tax purposes.
As management of the Company cannot determine if it is more likely than not that
the Company will realize the benefit of its deferred tax assets, a valuation
allowance equal to the net deferred tax assets at both December 31, 2002 and
2001 has been established.
At December 31, 2002 and 2001, the Company had un-expired regular tax net
operating loss carryforwards of approximately $4,700,000 and $5,100,000,
respectively, which expire in the years 2003 through 2022. At December 31,
2002, the Company had net operating loss carryforwards for alternative minimum
tax purposes of approximately $4,500,000.
14. RELATED-PARTY TRANSACTIONS:
In addition to transactions described in Notes 9 and 12, during 2002 and 2001,
the Company had the following transactions with related parties:
- During 2002, the Company issued 96,000 shares of its Series D preferred
stock to three members of the Board of Directors and Gary D. Babbit, a former
director and the Company's legal counsel, for their duties as directors. The
stock awards were recorded as compensation expense (director's fees) based upon
the estimated value of the stock at the date of issuance.
- Leo Jackson, a director and stockholder of the Company, owns 31.4% of
Production Minerals Inc., which has an indirect interest of 25% in the stock of
USAMSA (see Note 7).
- In December 2001, John C. Lawrence, the Company's president and a
director, and Al Dugan, a significant shareholder and an affiliate, converted
debenture principal totaling $347,992, and $39,660 of accrued interest thereon,
into 1,938,261 shares of the Company's restricted common stock.
- During 2001, the Company incurred legal expenses of approximately $54,000
to a law firm affiliated with Gary D. Babbitt, a director of the Company until
his resignation during the fourth quarter of 2001. During 2001, Mr. Babbitt
purchased 45,000 shares of the Company's restricted common stock, and 22,500
stock purchase warrants exercisable at $0.35 per share, for $9,000, or $0.20 per
share.
F-19
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. COMMITMENTS AND CONTINGENCIES:
Until 1989, the Company mined, milled and leached gold and silver in the Yankee
Fork Mining District in Custer County, Idaho. In 1994, the U.S. Forest Service,
under the provisions of the Comprehensive Environmental Response Liability Act
of 1980 ("CERCLA"), designated the cyanide leach plant as a contaminated site
requiring cleanup of the cyanide solution. In 1996, the Idaho Department of
Environmental Quality requested that the Company sign a consent decree related
to completing the reclamation and remediation at the Preachers Cove mill, which
the Company signed in December 1996. The Company has been reclaiming the
property and, as of December 31, 2002, the cyanide solution cleanup was
complete, the mill removed, and a majority of the cyanide leach residue disposed
of.
In November of 2001, the Environmental Protection Agency ("EPA") listed two
by-products of the Company's antimony oxide manufacturing process as hazardous
wastes. Antimony slag and antimony bag house filters are now subject to
comprehensive management and treatment standards under subtitle C of the
Resource Conservation and Recovery Act ("RCRA"), and emergency notification
requirements for releases to the environment under CERCLA. On November 26,
2002, the Company received a notice of violation from the Montana Department of
Environmental Quality ("Montana DEQ"). The notice related to a hazardous waste
discharge that was discovered during a hazardous waste compliance evaluation
inspection conducted at the Company's Thompson Falls antimony facility. In
response to the notice, the Company removed certain antimony materials from its
production area and agreed to ensure the Montana DEQ that future releases of
hazardous waste would not occur. At December 31, 2002, management believes that
no additional liability will result from the violation.
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.
During 2001, the Company issued a number of shares in transactions that may not
qualify for exemption from the Securities Act registration requirements and may
be in violation of Section 5 of the Securities Act of 1933. As a result the
Company may be subject to liabilities associated with the rescission rights of
the purchasers of these shares and fines and penalties from securities
regulators. At December 31, 2002 and 2001, the Company had not recorded any
liability associated with the issuance of these shares, as management believes
the likelihood of a claim, and the ultimate outcome if a claim is asserted,
cannot be ascertained at this time.
F-20
UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments." The
estimated fair value amounts have been determined using available market
information and appropriate valuation methodologies. However, considerable
judgment is required to interpret market data and to develop the estimates of
fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts the Company could realize in a current market
exchange.
The carrying amounts for cash, restricted cash, accounts receivable, accounts
payable and accrued expenses are reasonable estimates of their fair values. The
fair value of amounts due to related parties approximates their carrying values
of $202,625 and $121,082, respectively, at December 31, 2002 and December 31,
2001, based upon the contractual cash flow requirements.
Judgments payable of $49,780 and $46,523, at December 31, 2002 and 2001,
respectively, approximate their carrying value
F-21