SCHEDULE 13E-4
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ISSUER TENDER OFFER STATEMENT
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
UNITED STATES ANTIMONY CORPORATION
(Name of Issuer)
John C. Lawrence, President
United States Antimony Corporation
(Name of Person(s) Filing Statement)
10% Subordinated Convertible Debentures and 10% Convertible Debentures
(Title of Class of Securities)
911549 10 3
(CUSIP Number of Class of Securities*)
* CUSIP Number relates to Common Stock into which the Debentures are
convertible.
John C. Lawrence, President
United States Antimony Corporation
1250 Prospect Creek Road
P.O. Box 643
Thompson Falls, Montana 59873
(406) 827-3523
(Name, Address, Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of the Person(s) Filing Statement)
November 21, 1997
(Date Tender Offer First Published, Sent or Given to Security Holders)
Calculation of Filing Fee:
______________________________________________________________________________
Transaction Amount of Filing Fee
Valuation*
$2,057,642 $411.53
______________________________________________________________________________
________________________________________________________________________________
<PAGE>
*Calculation of Filing Fee: Based on defaulted principle and accrued interest
on outstanding debentures and director loans as of December 31, 1996. All
converted Debentures and director debt will, if tendered in the offer to
purchase, cease to accrue interest as of December 31, 1996.
[ ]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid: N/A
Form or Registration No.: N/A
Filing Party: N/A
Date Filed: N/A
<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) Name and Address of Issuer:
United States Antimony Corporation
1250 Prospect Creek Road
P. O. Box 643
Thompson Falls, Montana 59873
(b)Amount Of Securities Outstanding Being Sought and Consideration
Being Offered:
1. Amount of Securities Outstanding Being Sought:
(i) 10% Subordinated Convertible Debentures in the
principal amount of $300,000 and 10% Convertible Debentures in the principal
amount of $350,000 (collectively, "the Debentures"), with an aggregate of
$1,156,588 in outstanding principal and accrued interest as of December 31,
1996.
(ii) Issuer indebtedness to the Directors in the principal
amount of $609,722, with an aggregate of $901,054 in principal and accrued
interest as of December 31, 1996.
2. Consideration Being Offered: The issuer is offering shares of
Convertible Preferred Stock, Series C ("Series C Shares") in exchange for one
hundred percent (100%) of the principal of ($650,000) and seventy percent
(70%) of the accrued interest on ($354,612) the Debentures. Each $0.55 of
such principal and interest is convertible into one Series C Share, for a
total offering of 1,826,566 Series C Shares. With respect to the remaining
thirty percent (30%) of accrued interest on the Debentures ($151,976), the
issuer is offering each Debenture holder the option of either (i) receiving a
pro rata share of quarterly cash payments pursuant to a $5,000 per month
"sinking fund" to be established by the issuer, and/or (ii) converting all or
a portion of such remaining accrued interest into Series C Shares and
receiving, as additional consideration, a Warrant to purchase one share of
Common Stock of the issuer at an exercise price of $0.70 for each $0.55 of
remaining accrued interest so converted in excess of the 70% threshold for
three years after issuance of such Warrant.
3. Purchase Of Securities From Any Officer or Director:
(i) As of December 31, 1996, the Walter L. Maguire 1935 Trust,
an entity whose beneficiaries include Walter L. Maguire Sr., a Director of the
issuer, held Convertible Debentures in the principal amount of $200,000 and
Subordinated Convertible Debentures in the principal amount of $135,000.
Accrued interest on such Debentures totalled $263,648 as of December 31,
1996. If 100% of the principal and accrued interest on the Maguire Trust
Debentures were converted in the offer, a total of 1,088,451 Series C Shares
and Warrants to purchase 143,808 shares of Common Stock would be issued to the
Maguire Trust.
<PAGE>
(ii) As of December 31, 1996, Messrs. John C. Lawrence, Walter
L. Maguire Sr. and Robert A. Rice, Directors of the issuer, held indebtedness
of the issuer in the principal amounts of $553,954, $27,000 and $28,768,
respectively, with accrued interest at such date of $285,652, $0 and $5,680,
respectively. If 100% of the principal and accrued interest on such debt were
converted in connection with the offer, 1,526,556, 49,091 and 62,643 Series C
Shares would be issued to Messrs. Lawrence, Maguire Sr. and Rice,
respectively, and Warrants to purchase 155,810, 0 and 3,098 shares of Common
Stock would be issued to Messrs. Lawrence, Maguire Sr. and Rice,
respectively. Each of the foregoing Directors has indicated to the issuer
that he intends to convert 100% of his debt (principal and accrued interest)
to Series C Shares and Warrants as described herein.
(c) Established Trading Market:
None. However, the issuer's common stock, into which the Debentures may
be converted, trades on the NASD over-the-counter electronic bulletin board
under the symbol, "UAMY."
(d) Name and Address of Person Filing Statement:
John C. Lawrence
President, United States Antimony Corporation
1250 Prospect Creek Road
P. O. Box 643
Thompson Falls, Montana 59873
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) Amount:
1. The issuer will be authorizing a new class of preferred stock,
Convertible Preferred Stock, Series C, and Common Stock Purchase Warrants to
be issued in exchange for the outstanding Debentures and director
indebtedness.
2.If 100% of the principal amount of outstanding Debentures and 70%
of the accrued interest is converted in the offer, the aggregate remaining
amount of accrued interest on the Debentures, as of December 31, 1996, would
be $151,976 (assuming all Director indebtedness is converted to Series C
Shares and Warrants). The precise amount of funds required by the issuer to
make quarterly payments on the remaining amount of accrued interest, however,
will not be known until 5:00 p.m., Mountain Time, on December 31, 1997, the
expiration date.
Source:
1. The issuer has not arranged financing to fund the payment of such
accrued interest. Management anticipates making quarterly payments on
non-converted accrued interest out of a "sinking fund" of $5,000 per month
contributed from an irrevocable assignment of the issuer's gross revenues that
would be administered by First State Bank, Montana.
(b) Borrowed Funds: N/A
<PAGE>
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER.
Purpose:
On April 15, 1985 and May 2, 1988, respectively, the issuer issued $300,000 of
Ten Percent (10%) Subordinated Convertible Debentures Due April 14, 1993 and
$350,000 of Ten Percent (10%) Convertible Debentures Due April 1, 1991. Both
Debenture issues were unsecured, convertible into Common Stock of the issuer
at any time prior to their maturity date and required semi-annual interest
payments. No interest or principal payments have been made on either
Debenture issue since 1989, and the Debentures are in default.
In part because of the outstanding principal and defaulted interest on the
Debentures and outstanding indebtedness to Directors of the issuer, the
issuer, as of December 31, 1996, had negative working capital of approximately
$2.3 million, an accumulated deficit of approximately $17.2 million and a
total stockholders' deficit of approximately $3.6 million. To improve the
financial condition of the issuer as a going concern, management determined to
convert as much as possible of the issuer's debt into equity, thus retiring
such debt.
On February 21, 1996, a proposal was submitted to the holders of defaulted
Debentures offering to convert their principal and accrued interest into
Common Stock of the issuer. On August 8, 1997, the proposal was revised to
offer Debenture holders conversion rights into Series C Shares, on the terms
and conditions set forth in the offer. In connection with the proposal made
to Debenture holders, proposals with terms identical to the offer were made to
each Director-creditor of the issuer.
The proposals to the Holders and to the Director-creditors were made
contingent upon ratification of the offer by the issuer's stockholders, and
each Holder's review of the issuer's audited financial statements. The offer
was ratified by the stockholders of the issuer at the issuer's Annual Meeting
held October 3, 1997.
All Debentures and director debt tendered in the offer to purchase will
be cancelled by the issuer.
(a) Acquisition of Additional Securities:
Debentureholders and directors who tender in the offer will receive
shares of the issuer's Convertible Preferred Stock, Series C and, if so
elected, Common Stock Purchase Warrants.
(b) Extraordinary Corporate Transaction: N/A
(c) Sale or Transfer of Assets: N/A
(d) Change in Management: N/A
(e) Change in Dividend Rate, Indebtedness or Capitalization:
The information set forth under the captions SELECTED FINANCIAL DATA and
UNAUDITED PRO FORMA FINANCIAL INFORMATION in the Offer to Purchase is
incorporated herein by reference.
<PAGE>
(f)Other Material Changes: N/A
(g)Changes in Organizational Documents: N/A
(h)Delisting of Equity Securities: N/A
(i)Termination of Registration: N/A
(j)Suspension of Reporting Obligations of Issuer: N/A
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
N/A
ITEM 5.CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
N/A
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
N/A
ITEM 7. FINANCIAL INFORMATION.
(a)(1) Audited Financial Statements:
Incorporated by reference from Issuer's Form 10-KSB for the fiscal
year ended December 31, 1996, a copy of which is attached as Exhibit 7-A
hereto.
(a)(2) Unaudited Financial Statements:
Incorporated by reference from Issuer's Form 10-QSB for the period
ended September 30, 1997, a copy of which is attached as Exhibit 7-B hereto.
(a)(3)Ratio of earnings to fixed charges for the two most recent
fiscal years and the interim periods provided under Item 7(a)(2):
The information set forth under the captions SELECTED FINANCIAL DATA and
UNAUDITED PRO FORMA FINANCIAL INFORMATION in the Offer to Purchase is
incorporated herein by reference.
(a)(4)Book value per share as of the most recent fiscal year end and
as of the date of the latest interim balance sheet provided under Item
7(a)(2):
The information set forth under the captions SELECTED FINANCIAL
DATA and UNAUDITED PRO FORMA FINANCIAL INFORMATION in the Offer to Purchase is
incorporated herein by reference.
<PAGE>
(b)(1) Pro forma balance sheet as of the most recent fiscal year
end and the latest interim balance sheet provided under Item 7(a)(2):
The information set forth under the captions SELECTED FINANCIAL DATA and
UNAUDITED PRO FORMA FINANCIAL INFORMATION in the Offer to Purchase is
incorporated herein by reference.
(b)(2) Pro forma statement of income, earnings per share amounts
and ratio of earnings to fixed charges as of the most recent fiscal year end
and the latest interim period provided under Item 7(a)(2):
.The information set forth under the captions SELECTED FINANCIAL DATA and
UNAUDITED PRO FORMA FINANCIAL INFORMATION in the Offer to Purchase is
incorporated herein by reference.
(b)(3)Pro forma book value per share as of the most recent fiscal
year end and as of the latest interim balance sheet date provided under Item
7(a)(2):
The information set forth under the captions SELECTED
FINANCIAL DATA and UNAUDITED PRO FORMA FINANCIAL INFORMATION in the Offer to
Purchase is incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) Proposed Contracts: N/A
(b) Regulatory Requirements: N/A
(c) Applicability of Margin Requirements: N/A
(d) Legal Proceedings: N/A
(e) Other Information: N/A
ITEM 9. ADDITIONAL EXHIBITS.
(a) Tender Offer Material:
Issuer's Offer of Purchase, attached as Exhibit 9-A hereto.
Issuer's Letter of Transmittal, attached as Exhibit 9-B hereto.
(b) Loan Agreement: N/A
(c) Contract Documents: N/A
(d) Legal Opinion: N/A
(e) Prospectus: N/A
(f) Written Instructions In Connection With Any Oral
Solicitation: N/A
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and
correct.
DATE: November 21, 1997
By:/s/ John C. Lawrence
John C. Lawrence, President
EXHIBIT 9-A
UNITED STATES ANTIMONY CORPORATION
Offer to Purchase All of the Issued and Outstanding
Ten Percent (10%) Subordinated Convertible Debentures and
Ten Percent (10%) Convertible Debentures of United States Antimony Corporation
______________________________
SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE, THE
OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., MOUNTAIN TIME, ON
DECEMBER 31, 1997, UNLESS THE OFFER IS EXTENDED IN ACCORDANCE WITH THIS OFFER
TO PURCHASE. (SUCH TIME AND DATE OR THE LATEST EXTENSION THEREOF, IF EXTENDED,
THE "EXPIRATION DATE"). DEBENTURES TENDERED IN THE OFFER MAY BE WITHDRAWN AT
ANY TIME PRIOR TO THE EXPIRATION DATE.
______________________________
United States Antimony Corporation (the "Company") hereby offers to
purchase (the "Offer"), upon the terms and subject to the conditions set forth
in this Offer to Purchase ("Offer to Purchase") and in the accompanying Letter
of Transmittal (the "Letter of Transmittal"), any and all of the outstanding
Ten Percent (10%) Subordinated Convertible Debentures and Ten Percent (10%)
Convertible Debentures (collectively, the "Debentures") of the Company.
Acceptance of the Offer requires conversion of 100% of the defaulted principal
and at least 70% of accrued interest on the Debentures as of December 31,
1996. Each $0.55 of such defaulted principal and accrued interest is
convertible into one share of Series C, Convertible Preferred Stock (the
"Series C Shares"). See "THE OFFER - Terms and Conditions of the Series C
Shares." With respect to the remaining 30% of accrued interest on such
Debentures as of December 31, 1996, each Debenture holder who tenders
Debentures in the Offer will have the option of either (i) receiving a pro
rata share of quarterly cash payments with respect to such accrued interest
pursuant to a $5,000 per month "sinking fund" to be established by the
Company, and/or (ii) converting all or a portion of such remaining accrued
interest into Series C Shares and receiving, as additional consideration
therefor, a Warrant to purchase Common Stock of the Company for each $0.55 of
remaining accrued interest so converted in excess of the 70% threshold. The
Warrants will entitle the holders thereof to purchase one share of Common
Stock of the Company at an exercise price of $0.70 per share, and will expire
three years after issuance. See "THE OFFER - Remaining Accrued Interest
Payment" and "Description of the Warrants."
Unless the Company fails to issue the Series C Shares and/or Warrants
upon surrender of the Debentures, any Debentures properly tendered pursuant to
the Offer and accepted for conversion will cease to accrue interest after
December 31, 1996. Any Debentures not surrendered in the Offer (or
surrendered and withdrawn prior to the Expiration Date) will remain defaulted
obligations of the Company.
HOLDERS OF DEBENTURES HAVE AN ELECTION WHETHER OR NOT TO ACCEPT THE
OFFER. THE COMPANY MAKES NO RECOMMENDATION AS TO WHETHER OR NOT HOLDERS
SHOULD TENDER DEBENTURES PURSUANT TO THE OFFER.
(Continued on following page)
November 21, 1997
Any holder of Debentures (a "Holder") desiring to tender such Holder's
Debentures must comply with the procedures for tendering Debentures set forth
herein in "PROCEDURES FOR TENDERING DEBENTURES," and in the accompanying
Letter of Transmittal. Tenders of Debentures may be withdrawn at any time
prior to the Expiration Date. In the event of a withdrawal of Debentures, the
Debentures so withdrawn will be promptly returned to the Holder.
On November 20, 1997, the closing bid price for the Company's Common
Stock on the NASD electronic bulletin board was $0.18. Such quotation
reflects inter-dealer prices without retail mark-up, mark-down or commission,
and may not necessarily represent actual transactions.
No person has been authorized to give any information or to make any
representations directly related to this Offer other than those contained in
this Offer to Purchase and, if given or made, such information or
representations must not be relied upon as having been authorized. This Offer
to Purchase and related documents do not constitute an offer to buy or the
solicitation of an offer to sell securities in any circumstances in which such
offer or solicitation is unlawful. The delivery of this Offer to Purchase
shall not, under any circumstances, create any implication that the
information contained herein is current as of any time subsequent to the date
of such information.
Any questions or requests for assistance or for additional copies of this
Offer to Purchase or related documents may be directed to the Company at P.O.
Box 643, Thompson Falls, Montana 59873-0643, (406) 827-3523, Attention: John
C. Lawrence, President.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information concerning the Company can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street N.W., Room 1024, Washington, D.C. 20549, and at the
Commission's Regional Office at Seven World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material also can be obtained,
at prescribed rates, from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549.
This Offer to Purchase constitutes a part of an Issuer Tender Offer
Statement on Schedule 13E-4 (the "Schedule 13E-4") filed with the Commission
by the Company pursuant to Section 13(e) of the Exchange Act and the rules and
regulations promulgated thereunder. The Schedule 13E-4 and all exhibits
thereto are incorporated in this Offer to Purchase by reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission under the Exchange Act, are incorporated herein by reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1996.
(b)Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997,
June 30, 1997 and September 30, 1997
All subsequently filed documents by the Company prior to the Expiration
Date pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act shall
be deemed to be incorporated by reference herein and to be a part hereof from
the date any such document is filed. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes hereof to the extent that a
statement contained herein or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part hereof.
The Company will provide without charge to each person to whom this Offer
to Purchase is delivered a copy of the documents incorporated by reference
herein, other than exhibits thereto not specifically incorporated by
reference, upon written or oral request to United States Antimony Corporation,
P.O. Box 643, Thompson Falls, Montana 59873, Attention: John C. Lawrence,
telephone (406) 827-3523.
________________________________________________
TABLE OF CONTENTS
Page
THE OFFER -1-
General -1-
Terms and Conditions of Series C Shares -1-
Remaining Accrued Interest Payment -3-
Description of Warrants -3-
Purpose and Effects of the Offer -4-
Interests of Certain Persons in the Offer -5-
Consequences of Rejection of the Offer -6-
Expiration Date; Extensions; Amendments; Termination -6-
PROCEDURES FOR TENDERING DEBENTURES -6-
Tendering Debentures -6-
Withdrawal Rights -8-
SOURCES AND AMOUNT OF FUNDS -8-
CERTAIN INFORMATION CONCERNING THE COMPANY -8-
RECENT DEVELOPMENTS -9-
MARKET PRICE INFORMATION -9-
SELECTED FINANCIAL DATA -10-
UNAUDITED PRO FORMA FINANCIAL DATA -11-
CERTAIN FEDERAL INCOME TAX CONSEQUENCES -12-
MISCELLANEOUS -12-
THE OFFER
General
Terms of the Offer. The Company hereby offers to purchase, upon the
terms and subject to the conditions set forth in this Offer to Purchase and in
the accompanying Letter of Transmittal, any and all Debentures that are
properly tendered (and not properly withdrawn), pursuant to the terms and
conditions set forth herein, prior to the Expiration Date (December 31,
1997). Acceptance of the Offer requires conversion of 100% of the defaulted
principal and at least 70% of the accrued interest on the Debentures as of
December 31, 1996. At the option of each Holder, more than 70% of such
accrued interest may be converted in the Offer. Each $0.55 of such defaulted
principal and accrued interest is convertible into one share of Convertible
Preferred Stock, Series C (the "Series C Shares"). See "Terms and Conditions
of the Series C Shares," below.
Payment of Remaining Accrued Interest. With respect to the remaining 30%
of accrued interest on such Debentures as of December 31, 1996, each Debenture
holder who tenders Debentures in the Offer will have the option of either (i)
receiving a pro rata portion of quarterly cash payments from a $5,000 monthly
"sinking fund" to be established by the Company, and/or (ii) converting all or
a portion of such accrued interest into Series C Shares and receiving Warrants
to purchase Common Stock of the Company for each $0.55 of accrued interest
which is converted to Series C Shares in excess of the 70% threshold. See
"Remaining Accrued Interest Payment" and "Description of the Warrants," below.
Withdrawal Rights. Tenders of Debentures may be withdrawn at any time
prior to the Expiration Date. In the event of a termination of the Offer, the
Debentures tendered pursuant to the Offer will be returned promptly to the
tendering Holders.
Payment for Debentures. Upon the terms and subject to the conditions of
the Offer (including, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment) and applicable law, the Company
will purchase by accepting for conversion, and will pay for by issuance of
Series C Shares (and Warrants, as applicable), all Debentures validly tendered
(and not properly withdrawn) pursuant to the Offer. Such payment will be made
by the issuance of certificates representing Series C Shares in the ratio of
one Series A Share for each $0.55 of converted defaulted principal and accrued
interest on the Debentures as of December 31, 1996.
No Accrued Interest After December 31, 1996. Unless the Company fails to
issue the Series C Shares and/or Warrants upon surrender of Debentures, any
Debentures properly tendered pursuant to the Offer and accepted for conversion
will cease to accrue interest after December 31, 1996. Any Debentures not
surrendered in the Offer (or surrendered or withdrawn prior to the Expiration
Date) will remain defaulted obligations of the Company.
Terms and Conditions of Series C Shares
The rights, preferences, privileges and limitations of the Series C
Shares to be issued upon conversion of the Debentures are set forth below:
Designation. The class of Convertible Preferred Stock, Series C, $0.1 par
value per share, shall consist of up to 3.8 million shares of the Company.
The Company also has 12,627,434 shares of Common Stock issued and outstanding
as of the date hereof, and 4,500 and 750,000 shares of Series A Preferred
Stock and Series B Preferred Stock, respectively, issued and outstanding.
Optional Conversion. A holder of Series C Shares shall have the right to
convert the Series C Shares, at the option of the holder, at any time within
18 months following issuance, into shares of Common Stock at the ratio of 1:1,
subject to adjustment as provided below.
Voting Rights. The holders of Series C 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 C Shares.
Liquidation Preference. In the event of any liquidation or winding up of the
Company, the holders of Series C Shares shall be entitled to receive in
preference to the holders of Common Stock an amount per share equal to $0.55,
subject to the preferences of the holders of the Company's outstanding Series
A and Series B Preferred Stock. At December 31, 1996, the holders of Series A
Preferred Stock had a liquidation preference equal to $45,000, plus cumulative
dividends in arrears of $47,250, and the holders of Series B Preferred Stock
had a liquidation preference equal to $750,000, plus cumulative dividends in
arrears of $22,500.
Registration Rights. Twenty percent (20%) of the underlying Common Stock
issuable upon conversion of the Series C 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.
Redemption. The Series C Shares are not redeemable by the Company.
Antidilution Provisions. The conversion price of the Series C Shares shall be
subject to adjustments to prevent dilution in the event that the Company
issues additional shares at a purchase price less than the applicable
conversion price (other than shares issued to employees, consultants and
directors pursuant to plans and arrangements approved by the Board of
Directors and securities issued to lending or leasing institutions approved by
the Board of Directors). In such event, the conversion price shall be
adjusted according to a weighted-average formula, provided that a holder of
Series C Shares purchases his pro rata share of the securities being sold in
the dilutive financing. The initial conversion price for the Series C Shares
shall be $0.55.
Protective Provisions. The consent of a majority in interest of the holders
of Series C Shares shall be required for any action which (i) alters or
changes the rights, preferences or privileges of the Series C Shares
materially and adversely; or (ii) creates any new class of shares having
preference over or being on a parity with the Series C Shares.
There is no trading market for the Company's Series C Shares and no
market is expected to develop. The Series C Shares are restricted securities
and may not be sold or transferred absent an effective registration statement
or pursuant to an applicable exemption from such registration requirements.
As noted above, 20% of the shares of Common Stock into which the Series C
Shares are convertible are afforded piggyback registration rights. However,
there can be no assurance that the Company will file a registration statement
for its securities (or the securities of any other stockholder) at any time in
the foreseeable future. In addition, the Company's Common Stock is thinly
traded and may not afford Holders any liquidity, even if such shares are
registered for resale. Finally, the remaining 80% of the shares of Common
Stock issuable upon conversion of the Series C Shares are not afforded
registration rights, and must be sold pursuant to Rule 144 under the
Securities Act of 1933, provided the terms and conditions of such Rule are
met.
During 1997, the Company obtained listing on the over-the-counter
electronic bulletin board and obtained Empire Securities of Spokane as a
registered trader of its Common Stock. However, there can be no assurance
that these measures will generate an active trading market in the Company's
Common Stock or any other securities of the Company.
Remaining Accrued Interest Payment
The conversion of Debentures pursuant to the Offer involves 100% of
defaulted principal and at least 70% of accrued interest as of December 31,
1996. At the option of each Holder, more than 70% of accrued interest may be
converted in the Offer. With respect to the remaining 30% (or less, as
applicable) of accrued interest as of such date, each Holder who tenders
Debentures in the Offer may elect to either:
. Not convert any remaining accrued interest, and receive payment of
such defaulted accrued interest in the form of quarterly cash payments in
proportion to the Holder's relative amount of accrued interest with respect to
total accrued interest (both converted and non-converted interest). Payment
will be made from a "sinking fund" of $5,000 per month contributed from an
irrevocable assignment of Company gross revenues that would be administered by
First State Bank of Thompson Falls, Montana. Those Holders who elect not to
convert their Debentures pursuant to the Offer would participate on a pro rata
basis with respect to these quarterly interest payments.
Any Debentures properly tendered pursuant to the Offer and accepted for
conversion will cease to accrue interest after December 31, 1996. Any
Debentures not surrendered in the Offer (or surrendered and withdrawn prior to
the Expiration Date) will remain defaulted obligations of the Company.
Interest will continue to accrue on such non-converted Debentures, and the
holders thereof will participate on a pro rata basis in quarterly payments
from the sinking fund.
OR
.Convert into Series C Shares all or a portion of remaining accrued
interest in excess of the mandatory 70% threshold, and receive as additional
consideration therefor, one Warrant to purchase Common Stock of the Company
for every $0.55 of remaining accrued interest which is converted in excess of
the 70% of accrued interest as of December 31, 1996. The terms and conditions
of the Warrants are discussed below.
Description of Warrants
Exercise Price and Terms. Each Warrant will entitle the holder thereof
to purchase, at any time after issuance for a period of three years, one share
of Common Stock at a price of $0.70 per share, subject to adjustment in
accordance with the anti-dilution and other provisions referred to below. The
Warrants expire three years after issuance unless extended at the sole option
of the Board of Directors of the Company. The holder of any Warrant may
exercise such Warrant by surrendering the certificate representing the Warrant
to the Company, with the subscription attached to such certificate properly
completed and executed, together with payment of the exercise price. The
Warrants may be exercised in whole or in part at the applicable exercise price
until the date of expiration of the Warrants. No fractional shares will be
issued upon the exercise of the Warrants.
Limitations on Transfer. The Warrants are non-transferable by the
holders thereof during the three-year exercise period.
Antidilution Provisions. The exercise price and the number of shares of
Common Stock issuable upon exercise of the Warrants are subject to adjustment
upon the occurrence of certain events, including stock dividends, stock
splits, combinations or reclassification of Common Stock, or sale by the
Company of shares of its Common Stock (other securities convertible into or
exercisable for Common Stock) at a price per share or share equivalent below
the then-applicable exercise price of the Warrants or the then-current market
price of the Common Stock. Additionally, an adjustment would be made in the
case of a reclassification or exchange of Common Stock, consolidation or
merger of the Company with or into another corporation, or sale of all or
substantially all of the assets of the Company, in order to enable Warrant
holders to acquire the kind and number of shares of stock or other securities
or property receivable in such event by a holder of that number of shares of
Common Stock that would have been issued upon exercise of the Warrant
immediately prior to such event. No adjustment to the exercise price of the
shares subject to the Warrants will be made for dividends (other than stock
dividends), if any, paid on the Common Stock or for securities issued to
employees, consultants or directors pursuant to plans and arrangements
approved by the Board of Directors and securities issued to lending or leasing
institutions approved by the Board of Directors.
Purpose and Effects of the Offer
On April 15, 1985 and May 2, 1988, respectively, the Company issued
$300,000 of Ten Percent (10%) Subordinated Convertible Debentures Due April
14, 1993, and $350,000 of Ten Percent (10%) Convertible Debentures Due April
1, 1991. Both Debenture issues were unsecured, convertible into Common Stock
of the Company at any time prior to their maturity date and required
semi-annual interest payments. No interest or principal payments have been
made on either Debenture issue since 1989, and the Debentures are in default.
The Debenture agreements provide that in the event of default, the principal
amount outstanding can be declared due by not less than 51% of the Debenture
holders. As of the date of this Offer to Purchase, no default on the
Debentures has been declared by the Holders thereof.
At December 31, 1996, there was an aggregate of $1,156,588 in defaulted
principal and accrued interest on the Debentures, and there were 19 Debenture
Holders of record.
In part because of the outstanding principal and defaulted interest on
the Debentures and outstanding indebtedness to Directors of the Company (as
described below), the Company at December 31, 1996 had negative working
capital of approximately $2.3 million, an accumulated deficit of approximately
$17.2 million and a total stockholders' deficit of approximately $3.7
million. To improve the financial condition of the Company as a going
concern, management determined to convert as much as possible of the Company's
debt (represented by the Debentures and the Director indebtedness) into
equity. See "UNAUDITED PRO FORMA FINANCIAL DATA" for an illustration of the
effects the Offer will have on the financial condition of the Company if 100%
of all defaulted principal and accrued interest on Debentures and Director
indebtedness is converted into Series C Shares and Warrants.
On February 21, 1996, a proposal was submitted to the holders of
defaulted Debentures offering to convert their principal and accrued interest
into Common Stock of the Company. On August 8, 1996, the proposal was revised
to offer Debenture holders conversion rights into Series C Shares, on the
terms and conditions set forth in this Offer.
In connection with the proposal made to Debenture holders, proposals with
terms identical to the Offer were made to each Director-creditor of the
Company. At December 31, 1996, directors of the Company were owed an
aggregate of $901,054 in principal and accrued interest.
The proposals to the Holders and to the Director-creditors were made
contingent upon ratification of the Offer by the Company's stockholders, and
each Holder's review of the Company's audited financial statements. The Offer
was ratified by the stockholders of the Company at the Company's Annual
Meeting held October 3, 1997.
In connection with the foregoing proposals to Holders and
Director-creditors, each such person was asked to indicate whether he would be
interested in converting such person's debt to equity upon the terms and
conditions of the Offer. As of December 31, 1996, the following non-binding
indications of interest had been received by the Company:
Balance Outstanding
as of December 31, 1996
Accrued
Principal Interest Total
John C. Lawrence, Director $553,954 $285,652 $839,606
Robert A. Rice, Director 28,768 5,686 ,454
Walt L. Maguire, Sr. Director 27,000 27,000
Convertible Debenture Holders (1) 100,000 67,124 167,124
Subordinated Convertible Debenture
Holders (2) 190,000 146,535 336,535
TOTAL: $899,722 $504,997 $1,404,719
(1) Represents approximately 28.6% of the outstanding principal amount of
defaulted Ten Percent (10%) Convertible Debentures due April 1, 1991. Despite
such expressions of interest, there can be no assurance that such Holders will
elect to convert their Debentures in the Offer.
(2) Represents approximately 63.3% of the outstanding principal amount of
defaulted Ten Percent (10% Subordinated Convertible Debentures due April 14,
1993. Despite such expressions of interest, there can be no assurance that
such Holders will elect to convert their Debentures in the Offer.
Interests of Certain Persons in the Offer
At December 31, 1996, the Walter L. Maguire 1935 Trust, an entity whose
beneficiaries include Walter L. Maguire Sr., a Director of the Company, held
$200,000 in principal amount of Convertible Debentures and $135,000 in
principal amount of Subordinated Convertible Debentures. Accrued interest on
such Debentures totalled $263,648 on such Debentures at December 31, 1996. If
100% of the principal and accrued interest on the Maguire Trust Debentures
were converted in the Offer, a total of 1,088,451 Series C Shares and Warrants
to purchase 143,808 shares of Common Stock would be issued to the Maguire
Trust in the Offer.
At December 31, 1997, Messrs. John C. Lawrence, Walter L. Maguire Sr. and
Robert A. Rice, Directors of the Company, held indebtedness of the Company in
the principal amounts of $553,954, $27,000 and $28,768, respectively, with
accrued interest at such date of $285,652, $0 and $5,680, respectively. If
100% of the principal and accrued interest on such debt were converted in
connection with the Offer, 1,526,556, 49,091 and 62,643 Series C Shares would
be issued to Messrs. Lawrence, Maguire Sr. and Rice, respectively, and
Warrants to purchase 155,810, 0 and 3,098 shares of Common Stock would be
issued to Messrs. Lawrence, Maguire Sr. and Rice, respectively. Each of the
foregoing Directors has indicated to the Company that he intends to convert
100% of his Company debt (principal and accrued interest) to Series C Shares
and Warrants as described herein.
Consequences of Rejection of the Offer
Any Debentures which are not tendered in the Offer (or which are
tendered, but are properly withdrawn prior to the Expiration Date) shall
remain defaulted obligations of the Company. The Holders of such
non-converted Debentures will participate, on a pro rata basis, with quarterly
accrued interest payments from the Company's $5,000 per month sinking fund.
There can be no assurances with respect to, or predictions of, the Company's
ability to pay the defaulted principal on non-converted Debentures following
the Expiration Date.
Expiration Date; Extensions; Amendments; Termination
The Offer will expire on December 31, 1997 (the "Expiration Date"),
unless extended pursuant to the procedures set forth herein. The Offer may be
extended at any time, and from time to time, by resolution of the Board of
Directors of the Company. During any extension of the Offer, all Debentures
previously tendered pursuant to the Offer (and not properly withdrawn) will
remain subject to the Offer and may be accepted for payment by the Company,
subject to the withdrawal rights of Holders.
The Company also expressly reserves the right, subject to the
requirements of applicable law, to amend the terms of the Offer in any
respect. Any extension, termination or amendment of the Offer will be
followed as promptly as practicable by a written notice thereof to Holders.
PROCEDURES FOR TENDERING DEBENTURES
Tendering Debentures
The tender of Debentures pursuant to the procedures set forth in this
Offer to Purchase and in the Letter of Transmittal will constitute a binding
agreement between the tendering Holder and the Company upon the terms and
subject to the conditions of the Offer. The tender of Debentures will
constitute an agreement to deliver good and marketable title to all tendered
Debentures prior to the Expiration Date free and clear of all liens, charges,
claims, encumbrances, interests and restrictions of any kind.
Unless the Debentures being tendered are deposited by the Holder with the
Company prior to the Expiration Date (accompanied by a properly completed and
duly executed Letter of Transmittal), the Company may, at its option, reject
such tender. Issuance of certificates for Series C Shares and Warrants (if
applicable) will be made only against deposit of tendered Debentures and
delivery of all other required documents.
Only record Holders of Debentures are authorized to tender their
Debentures pursuant to the Offer. Accordingly, to properly tender Debentures
or cause Debentures to be tendered for conversion, the following procedures
must be followed:
Letter of Transmittal. Each record Holder who wishes to tender
Debentures for conversion must complete and sign a Letter of Transmittal and
mail or deliver such Letter of Transmittal and any other documents required by
the Letter of Transmittal together with the Debenture certificate(s)
representing all tendered Debentures, to the Company as follows:
By Mail: By Hand Delivery:
United States Antimony Corporation United States Antimony Corporation
P.O. Box 643 1250 Prospect Creek Road
Thompson Falls, Montana 59873 Thompson Falls, Montana 59873
Confirm by Telephone:
(406) 827-3523
(406) 827-3543 (fax)
If a Letter of Transmittal is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, agent, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person
must so indicate when signing and submit proper evidence satisfactory to the
Company of the authority of such person so to act.
No alternative, conditional, irregular or contingent tenders will be
accepted (unless waived). By executing a Letter of Transmittal, each
tendering Holder waives any right to receive any notice of the acceptance for
conversion of its Debentures.
Lost or Missing Debentures. If a record Holder desires to tender
Debentures pursuant to the Offer, but the certificates representing such
Debentures have been mutilated, lost, stolen or destroyed, such Holder should
write to or telephone the Company about procedures for obtaining replacement
Debentures, arranging for indemnification or any other matter which requires
handling by the Company.
Effect of Letter of Transmittal. Subject to, and effective upon the
acceptance for, conversion of Debentures tendered thereby, by executing and
delivering a Letter of Transmittal a tendering Holder (i) irrevocably sells,
assigns, and transfers to the Company, all right, title and interest in and to
all Debentures tendered thereby, (ii) waives any and all rights with respect
to such Debentures (including without limitation any existing or past defaults
and their consequences with respect to such Debentures) and (iii) releases and
discharges the Company from any and all claims such Holder may have now or may
have in the future arising out of, or related to, such Debentures, including
without limitation any claim that such Holder is entitled to receive
additional principal or interest payments with respect to such Debentures or
to participate in any redemption or defeasance of the Debentures or to convert
such Debentures into Common Stock of the Company.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Debentures will be resolved by the
Company, whose determination will be final and binding. the Company reserves
the absolute right to reject any or all tenders that are not in proper form or
the acceptance of which may, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the absolute right to waive any condition
to the Offer and any irregularities or conditions of tender as to particular
Debentures. The Company's interpretation of the terms and conditions of the
Offer (including the instructions in the Letter of Transmittal) will be final
and binding. Unless waived, any irregularities in connection with tenders
must be cured within such time as the Company shall determine. the Company
shall not be under any duty to give notification of defects in such tenders
and shall not incur liabilities for failure to give such notification.
Tenders of Debentures will not be deemed to have been made until such
irregularities have been cured or waived. Any Debentures received by the
Company that are not properly tendered and as to which the irregularities have
not been cured or waived will be returned by the Company to the tendering
Holder, unless otherwise provided in the Letter of Transmittal, as soon as
practicable following the Expiration Date.
The method of delivery of Debentures and Letters of Transmittal, and all
other required documents, is at the election and risk of the persons tendering
and delivering such Letters of Transmittal and, except as otherwise provided
in the Letter of Transmittal, delivery will be deemed made only when actually
received by the Company. If delivery is by mail, it is suggested that the
Holder use properly insured, registered mail with return receipt requested,
and that the mailing be made sufficiently in advance of the Expiration Date to
permit delivery to the Company prior to the Expiration Date.
Withdrawal Rights
Tenders of Debentures may be withdrawn at any time prior to the
Expiration Date. A Holder may withdraw its tender of Debentures, prior to the
Expiration Date, by delivering to the Company by mail, hand delivery or
facsimile transmission a notice of withdrawal. Any such notice of withdrawal
must (i) specify the name of the person who tendered the Debentures to be
withdrawn, (ii) contain a description of the Debentures to be withdrawn and
identify the Debenture number shown on the Debenture and the aggregate
principal amount represented by such Debentures, and (iii) be signed by the
Holder of such Debentures in the same manner as the original signature on the
Letter of Transmittal by which such Debentures were tendered, or be signed by
another person and be accompanied by (x) documents of transfer in form
acceptable to the Company, in its sole discretion, and (y) a properly
completed irrevocable proxy that authorizes such person to effect such
revocation on behalf of such Holder. If the Debentures to be withdrawn have
been delivered or otherwise identified to the Company, a signed notice of
withdrawal is effective immediately upon receipt by the Company even if
physical release is not yet effected. Any Debentures properly withdrawn will
be deemed not to be validly tendered for purposes of the Offer.
SOURCES AND AMOUNT OF FUNDS
The precise amount of funds required by the Company to make quarterly
payments of accrued interest as of December 31, 1996 on non-converted
Debentures will not be known until the Expiration Date. If 100% of the
principal amount of outstanding Debentures and 70% of the accrued interest
were converted in the Offer, the aggregate remaining amount of accrued
interest as of December 31, 1996 would be $151,976 (assuming all Director
indebtedness is converted to Series C Shares and Warrants in connection with
the Offer). The Company has not arranged financing to fund the payment of
such accrued interest. Management anticipates making quarterly payments on
non-converted accrued interest out of a "sinking fund" of $5,000 per month
contributed from an irrevocable assignment of gross revenues that would be
administered by First State Bank, Montana. There can be no assurance that the
Company's operations will generate sufficient revenues to enable the Company
to consistently make $5,000 contributions to the sinking fund such that the
quarterly interest payments are made on the non-converted accrued interest.
CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is an independent exploration and production company
primarily engaged in the exploration for, and mining and production of,
antimony products, and gold and silver properties. AGAU Mines, Inc.,
predecessor to the Company, was incorporated in Delaware in June 1968. The
Company was incorporated in the State of Montana in January 1970. In June
1973, AGAU Mines, Inc. was merged with and into the Company, with the Company
being the surviving corporation in the merger. The Company's executive
offices are located at 1250 Prospect Creek Road, Thompson Falls, Montana
59873, telephone number (406) 827-3523.
RECENT DEVELOPMENTS
Antimony Division. In the Company's Antimony Division, the product line
now includes antimony metal, sodium antimonate, three grades of antimony oxide
(Micropure, High Tint and Low Tint), and antimony oxide/plasticizer
compounds. A large laboratory expansion is complete and additional equipment
has been procured to provide increased quality control, statistical product
control, new product research, and metallurgical analysis. The lab has been
instrumental in identifying recoverable antimony metal from a waste pile at
the Thompson Falls, Montana facility. Other recent plant expansions have
included two new warehouses, several furnaces, dust control equipment and roll
stock. HoltraChem, Inc., a U.S. marketer of the Company's antimony products,
estimates that the Company's 1997 antimony sales nationwide of between
6,000,000 and 7,000,000 pounds. The Company presently has two reduction
furnaces capable of producing up to 4,000 pounds per day (ppd) of metal and
six fuming furnaces that are capable of producing more than 30,000 ppd of
antimony oxide. It is the goal of Management to increase annual sales to
20,000,000 to 25,000,000 pounds.
Pending the finalization of a definitive agreement being signed by the
Company, construction progress is ensuing at the United States Antimony
Mexico, S.A., de C.V., "USAMSA", antimony plant in Mexico. The plant is near
a major highway, rail line, gas line, electric line, and water supply. The
plant is also conveniently located near the two USAMSA antimony properties and
Gulf and Pacific Coast ports. The plant will produce metal for processing at
the Company's facility in Thompson Falls, Montana. Once this is accomplished,
further work will be done to start mining and milling operations at the two
USAMSA properties. The properties appear to have extensive antimony deposits
with significant surface dumps containing antimony. However, no ore reserves
have been established, little metallurgical testing has been performed, and
there is no assurance that these deposits are economic.
Gold Division. At the Yellow Jacket property in central Idaho, the
Number 3 tunnel has been reopened through difficult tunneling conditions for a
distance of approximately 400 feet. The Idaho Bureau of Mines (1953) reported
gold values of 0.2 opt, 7 to 10% lead, and 2 to 3% copper in the No. 3 tunnel
at the Yellow Jacket Mine. The Company also expects silver values to be
present. The mineralization is expected to be sulfide in nature in a fault
offset from the open pit mineralized zone. The existence of this possible
geologic reserve could increase the average recovered value to the $100 to
$140 per ton range utilizing our existing mill. Production could start
immediately at a reduced through put. However, there is no assurance that the
tunnel can be reopened, that the reserve exists, that the sulfides can be
milled due to regulatory restrictions, or that the costs will allow a
profitable operation.
MARKET PRICE INFORMATION
The Company's Common Stock is traded on the NASD over-the-counter
electronic bulletin board under the symbol "UAMY." Prior to 1997, the
Company's Common Stock was traded over-the-counter on the pink sheets and has
had minimal trading activity since 1990. Therefore, the following prices may
not reflect an active market.
High Low
1997
First Quarter . . . . . . . . . . .$0.875 $0.25
Second Quarter . . . . . . . . . . $0.56 $0.28
Third Quarter . . . . . . . . . $0.50 $0.18
1996
First Quarter . . . . . . . . . $0.625 $0.25
Second Quarter . . . . . . . . . $0.50 $0.125
Third Quarter . . . . . . . . . . $0.25v $0.0625
Fourth Quarter . . . . . . . . . $0.50 $0.25
SELECTED FINANCIAL DATA
The following table presents selected historical financial data for the
Company for the periods indicated. The financial data for each of the two
years in the period ended December 31, 1996, have been derived from the
audited financial statements of the Company for such periods. The financial
data for the nine months ended September 30, 1997 and 1996 are unaudited, but
in the opinion of the Company reflect all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of such data.
The data for the nine months ended September 30, 1997 are not necessarily
indicative of results of operations for the entire year. The data should be
read in conjunction with the consolidated financial statements, related notes
and other financial information of the Company incorporated by reference in
this Offer to Purchase. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
SELECTED FINANCIAL DATA, Continued
At and For At and For
Nine months Ended Year Ended
September 30, December 31,
[S] [C] [C] [C] [C]
1997 1996 1996 1995
(in thousands, except per share and ratio data)
Income Statement Data:
Total Revenue $3,387 $4,087 $5,011 $5,916
Net Income (loss) $(18) $(258) $(1,015) $442
Income (loss) per share nil $(0.02) $(0.08) $0.04
Ratio of Earnings to
fixed charges (a) (a) (a) 2.62
Balance Sheet Data:
Total assets $1,431 $2,023 $1,451 $2,034
Long-term debt $1,765 $1,723 $1,892 $1,774
Total liabilities $4,924 $4,969 $5,141 $4,850
Preferred stock Series A (b) (b) (b) (b)
Preferred stock Series B $8 $8 $8 $8
Common stock $131 $126 $126 $121
Additional paid-in capital
and Accumulated
deficit (combined) $(3,631) $(3,080) $(3,824) $(2,945)
Total Stockholders'
Equity $(3,493) $(2,946) $(3,690) $(2,816)
Net book value per
share of Common stock $(.27) $(.23) $(.29) $(.23)
(a) Earnings for the nine months ended September 30, 1997 and 1996, and
for the twelve months ended December 31, 1996 were inadequate
to cover fixed charges.
(b) Series A Preferred stock had a par value of $45 for each of the
periods presented
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following pro forma financial data of the Company consist of unaudited
Pro Forma Condensed Balance Sheet Data as of December 31, 1996 and September
30, 1997 (the "Pro Forma Balance Sheet Data") and unaudited Pro Forma
Condensed Statement of Income (loss) Data for the year ended December 31,
1996 and the nine months ended September 30, 1997 (the "Pro Forma Statement of
Income (loss) Data" and, collectively with the Pro Forma Balance Sheet Data,
the "Pro Forma Information"). The Pro Forma Information gives effect to the
Conversion Offer, assuming that 100% of the defaulted principal and accrued
interest on the Debentures and Director indebtedness are converted into Series
C Shares and Warrants. The Pro Forma Balance Sheet Data are presented as if
the conversion had been consummated on December 31, 1996 and September 30,
1997. The Pro Forma Statement of Income (loss) Data for the twelve month
period ended December 31 1996, and the nine month period ended September 30,
1997, is presented as if the conversion had been consummated on January 1,
1996.
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION, Continued
<TABLE>
At or For At or For
Nine Months Ended Year Ended
September 30, December 31,
1997 1996
(in thousands, except per share and ratio data)
<S> <C> <C>
Income Statement Data:
Total Revenue $3,387 $5,011
Net income (loss) (a) $75 $(891)
Income (loss) per share (b) nil $(0.06)
Ratio of Earnings to fixed charges (c) (c)
Balance Sheet Data:
Total assets $1,431 $1,451
Long-term debt $1,765 $1,892
Total liabilities $2,813 $3,083
Preferred stock Series A (d) (d)
Preferred stock Series B $8 $8
Preferred stock Series C $37 $37
Common stock $131 $126
Additional paid-in capital
and Accumulated deficit (combined) $(2,419) $(2,458)
Total Stockholders' Equity $(2,244) $(2,287)
Net book value per share of Common
and Preferred Series C stock $(.13) $(.14)
</TABLE>
(a) Pro Forma Income (loss) does not include the nonrecurring gain of
approximately $397,000 upon the extinguishment of debt at 1/1/96.
(b) Earnings per share denominator includes convertible Series C
Preferred stock.
(c) Pro Forma earnings for the twelve months ended December 31, 1996 are
inadequate to cover fixed charges.
(d) Series A Preferred stock had a par value of $45 for each of the
periods presented.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following information is for general information only and is based on
the federal income tax law now in effect, which is subject to change, possibly
retroactively. This summary does not discuss all aspects of federal income
taxation which may be relevant to any particular Holder in light of such
Holder's individual investment circumstances or to certain types of Holders
subject to special tax rules (e.g., financial institutions, broker-dealers,
insurance companies, tax-exempt organizations and foreign taxpayers), nor does
it address specific state, local or foreign tax consequences. This summary
assumes that Holders have held their Debentures as "capital assets" under the
Internal Revenue Code of 1986, as amended. Each Holder is urged to consult
such Holder's tax advisors regarding the specific federal, state, local and
foreign income and other tax consequences of the Offer.
The receipt by a Holder of Series C Shares and, if so elected, Warrants
in the Offer in exchange for Debentures, will be a taxable transaction for
federal income tax purposes, and may also be a taxable transaction under
applicable state, local or foreign tax laws, to the extent the Series C Shares
are attributable to interest accrued on the Debentures. The extent to which a
Holder must recognize ordinary income is limited to the lesser of (i) the
amount of accrued interest on the Debentures, and (ii) the value of the Series
C Shares plus any Warrants received by the Holder which are attributable to
accrued interest.
A Holder of Debentures also will recognize ordinary income with respect
to the remaining 30% of accrued interest which is not converted into Series C
Shares. If a Holder elects to receive quarterly cash payments, such payments
will be treated as ordinary income.
MISCELLANEOUS
The Company is not aware of any jurisdiction where the making of the
Offer is not in compliance with the laws of such jurisdiction. If the Company
becomes aware of any jurisdiction where the making of the Offer would not be
in compliance with such laws, the Company will make a good faith effort to
comply with any such laws or seek to have such laws declared inapplicable to
the Offer. If, after such good faith effort, the Company cannot comply with
any such applicable laws, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the Holders residing is such jurisdiction(s).
EXHIBIT 9-B
PLEASE READ CAREFULLY THE INSTRUCTIONS ACCOMPANYING THIS LETTER
LETTER OF TRANSMITTAL
To Accompany
10% Convertible Debentures and 10% Subordinated Convertible
Debentures of
UNITED STATES ANTIMONY CORPORATION
surrendered in connection with THE OFFER TO PURCHASE
Dated November 21, 1997
______________________________
SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THE OFFER TO PURCHASE, THE
OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., MOUNTAIN TIME, ON
DECEMBER 31, 1997, UNLESS THE OFFER IS EXTENDED IN ACCORDANCE WITH THE OFFER
TO PURCHASE (SUCH TIME AND DATE OR THE LATEST EXTENSION THEREOF, IF EXTENDED,
THE "EXPIRATION DATE"). DEBENTURES TENDERED IN THE OFFER MAY BE WITHDRAWN AT
ANY TIME PRIOR TO THE EXPIRATION DATE.
____________________________
Debentures tendered in the Offer should be set to:
By Mail: By Hand:
United States Antimony Corp. United States Antimony Corp.
P.O. Box 643 1250 Prospect Creek Road
Thompson Falls, Montana 59873 Thompson Falls, Montana 59873
Confirm by Telephone:
John C. Lawrence, President
(406) 827-3523
(406) 827-3543 (fax)
Delivery of this instrument to an address other than as set forth above does
not constitute a valid delivery. The instructions contained herein and in the
Offer to Purchase (as defined below) should be read carefully before this
Letter of Transmittal is completed.
By execution hereof, the undersigned acknowledges receipt of the Offer to
Purchase, dated November 21, 1997 (as the same may be amended from time to
time, the "Offer to Purchase"), of United States Antimony Corporation (the
"Company") and this Letter of Transmittal and instructions hereto (the "Letter
of Transmittal"), which together constitute the Company's offer to purchase
(the "Offer") any and all outstanding 10% Convertible Debentures and 10%
Subordinated Convertible Debentures of the Company (collectively, the
"Debentures"), upon the terms and subject to the conditions set forth in the
Offer to Purchase.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE PAYMENT FOR THE DEBENTURES TO
BE PURCHASED PURSUANT TO THE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW)
THEIR DEBENTURES TO THE COMPANY PRIOR TO THE EXPIRATION DATE.
Acceptance of the Offer requires conversion of 100% of the defaulted
principal and at least 70% of accrued interest on the Debentures as of
December 31, 1996. Each $0.55 of such defaulted principal and accrued
interest is convertible into one share of Convertible Preferred Stock, Series
C (the "Series C Shares"). With respect to the remaining 30% of accrued
interest on such Debentures as of December 31, 1996, each Debenture holder who
tenders Debentures in the Offer will have the option of either (i) receiving a
pro rata share of quarterly cash payments with respect to such accrued
interest pursuant to a $5,000 per month "sinking fund" to be established by
the Company, and/or (ii) converting all or a portion of such remaining accrued
interest into Series C Shares and receiving, as additional consideration
therefor, a Common Stock Purchase Warrant ("Warrant") to purchase Common Stock
of the Company for each $0.55 of remaining accrued interest so converted in
excess of the 70% threshold. The Warrants will entitle the holders thereof to
purchase one share of Common Stock of the Company at an exercise price of
$0.70 per share, and will expire three years after issuance. See the
description set forth in "THE OFFER," in the Offer to Purchase.
In order to properly complete this Letter of Transmittal, a holder of
Debentures (a "Holder") must (i) complete Item A "Description of Debentures;"
(ii) complete Item B relating to the election to receive remaining accrued
interest in quarterly cash payments or in shares of Series C Preferred Stock
and Warrants; (iii) if appropriate, check and complete Items C and D relating
to "Special Issuance or Payment Instructions" and "Special Delivery
Instructions"; and (iv) sign this Letter of Transmittal.
A failure to make an election in Item B relating to Payment of Remaining
Accrued Interest will be deemed an election to convert all remaining interest
into Series C Shares and Warrants.
If Holders desire to tender Debentures pursuant to the Offer and (i)
certificates representing such Debentures are not lost but are not immediately
available or time will not permit this Letter of Transmittal, the Debentures
or other required documents to reach the Company prior to the Expiration Date,
or (ii) certificates representing such Debentures are lost, stolen, destroyed
or mutilated, then in either case please contact the Company.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with
respect to the Offer.
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Offer to Purchase.
The Company is not aware of any jurisdiction where the making of the
Offer would not be in compliance with applicable laws. If the Company becomes
aware of any jurisdiction where the making of the Offer would not be in
compliance with such laws, the Company will make a good faith effort to comply
with any such laws or seek to have such laws declared inapplicable to the
Offer. If after such good faith effort, the Company cannot comply with any
such applicable laws, the Offer will not be made to, nor will tenders be
accepted from or on behalf of, Holders residing in such jurisdiction(s).
HOLDERS WHO WISH TO ACCEPT THE OFFER AND TENDER THEIR DEBENTURES
MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<PAGE>Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Offer, the
undersigned hereby tenders to the Company the principal amount of Debentures
described in Item A below, "Description of Debentures."
Subject to and effective upon the acceptance for purchase of and payment
for Debentures tendered hereby, by executing and delivering this Letter of
Transmittal, a tendering Holder (i) irrevocably sells, assigns and transfers
to the Company, all right, title and interest in and to all Debentures
tendered hereby and (ii) waives any and all rights with respect to such
Debentures (including without limitation any existing or past defaults and
their consequences with respect to such Debentures, and (iii) releases and
discharges the Company from any and all claims such Holder may have now, or
may have in the future, arising out of, or related to, such Debentures
including without limitation any claims that such Holder is entitled to
receive additional principal or interest payments with respect to such
Debentures or to participate in any redemption or defeasance of the
Debentures.
The undersigned hereby represents and warrants that the undersigned (i)
owns the Debentures tendered and is entitled to tender such Debentures, and
(ii) has full power and authority to tender, sell, assign and transfer the
Debentures tendered hereby and that when such Debentures are accepted for
purchase and payment by the Company, the Company will acquire good title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim or right.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Debentures tendered hereby. The
undersigned understands that tenders of Debentures may be withdrawn by written
notice of withdrawal received by the Company at any time prior to the
Expiration Date. See Instruction 1.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death or incapacity of the undersigned, and
every obligation of the undersigned under this Letter of Transmittal shall be
binding upon the undersigned's heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy or other legal
representatives.
The undersigned understands and agrees that valid tender of Debentures
pursuant to the procedures described under "Procedures for Tendering
Debentures" in the Offer to Purchase and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company upon
the terms and subject to the conditions of the Offer, including the
undersigned's waiver of any existing or past defaults and their consequences
with respect to the Debentures (including without limitation a default in the
payment of interest).
The undersigned understands that the delivery and surrender of Debentures
is not effective, and the risk of loss of the Debentures does not pass to the
Company, until receipt by the Company of this Letter of Transmittal, or a
facsimile hereof, properly completed and duly executed, together with all
accompanying evidences of authority and any other required documents in form
satisfactory to the Company. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Debentures pursuant to the procedures described in the Offer to
Purchase and the form and validity (including time of receipt of notices of
withdrawal) of all documents will be determined by the Company, in its sole
discretion, which determination will be final and binding on all parties.
Unless otherwise indicated herein in Item C under "Special Issuance or
Payment Instructions," the undersigned hereby requests that any Series C
Shares, Common Stock Purchase Warrants and/or quarterly interest payments, as
applicable, constituting payment for Debentures tendered in the Offer be
issued to the order of the undersigned as set forth in Item A below.
Similarly, unless otherwise indicated herein in Item D under "Special
Delivery Instructions," the undersigned hereby requests that any Series C
Shares, Common Stock Purchase Warrants and/or quarterly interest payments, as
applicable, be delivered to the undersigned at the address(es) shown in Item A
below.
In the event that the "Special Issuance or Payment Instructions" box or
the "Special Delivery Instructions" box, or both, are completed, the
undersigned hereby requests that any certificates representing Series C
Shares, Common Stock Purchase Warrants and/or quarterly interest payments, as
applicable, constituting payments for Debentures tendered in connection with
the Offer be issued in the name(s) of, and be delivered to, the person(s) at
the address(es) so indicated, as applicable. The undersigned recognizes that
the Company has no obligation pursuant to the "Special Issuance or Payment
Instructions" box to transfer any Debentures from the name of the registered
Holder(s) thereof if the Company does not accept for purchase any of the
Debentures so tendered.
PLEASE SIGN BELOW
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
If the signature appearing below is not that of the registered holder of the
Debentures, then the registered Holder(s) must sign a valid power of attorney.
DEBENTURE HOLDERS SIGN HERE
This Letter of Transmittal must be signed by the registered Holder(s) of
Debentures exactly as his (their) name(s) appear(s) on the Debentures or by
person(s) authorized to become registered Holder(s) by endorsements and
documents transmitted with this Letter of Transmittal. If the signature is by
a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person(s)
must set forth his (their) full title below under "Capacity" and submit
evidence satisfactory to the Company of such person(s)' authority to so act.
See Instruction 2.
X_______________________________________________________________________________
_______________________________________
X_______________________________________________________________________________
_______________________________________
Signature(s) of Holder(s) or Authorized Signatory)
Date:___________________________________________________________________________
______________________________________
Name(s):________________________________________________________________________
_______________________________________
________________________________________________________________________________
________________________________________
(Please print)
Capacity:_______________________________________________________________________
________________________________________
________________________________________________________________________________
________________________________________ (See Instruction 2)
Address:________________________________________________________________________
_________________________________________
________________________________________________________________________________
________________________________________
Area Code and Telephone
No._____________________________________________________________________________
________________
<PAGE>ALL TENDERING HOLDERS MUST COMPLETE ITEM A BELOW.
Description of Debentures
List below the Debentures to which this Letter of Transmittal relates.
ACCEPTANCE OF THE OFFER REQUIRES CONVERSION OF 100% OF THE PRINCIPAL OF, AND
AT LEAST 70% OF ACCRUED INTEREST ON, THE DEBENTURES AS OF DECEMBER 31, 1996.
ITEM A.
DESCRIPTION OF DEBENTURES
Name(s) and Address(es) of Holder(s)
(Please fill in, if blank)
Debenture(s) Owned Debenture Aggregate
Principal Amount
Total Principal Amount
Payment of Remaining Accrued Interest
As noted above, the conversion of Debentures pursuant to the Offer involves
100% of defaulted principal and at least 70% of accrued interest as of
December 31, 1996. At the option of each Holder, more than 70% of accrued
interest may be converted in the Offer. With respect to the remaining 30% (or
less, as applicable) of accrued interest as of such date, each Holder who
tenders Debentures in the Offer must make an election pursuant to Item B
below.
ALL TENDERING HOLDERS MUST COMPLETE ITEM B BELOW.
A failure to make an election in Item B below will be deemed an election
to convert all remaining interest into Series C Shares and Warrants.
ITEM B
PAYMENT OF REMAINING ACCRUED INTEREST
[ ] I elect to convert the following percentage of the
remaining accrued interest on my Debentures as of December 31, 1996 into
Series C Shares and Warrants to purchase Common Stock of the Company:
Indicate Percentage Here -____________ %
[ ] I elect not to convert any remaining accrued interest or
only a portion thereof, but to receive a pro rata portion of quarterly
interest from the Company's sinking fund relating to all unconverted accrued
interest as of December 31, 1996.
TENDERING HOLDERS WHO WISH PAYMENT AND/OR DELIVERY TO BE MADE
OTHER THAN AS SET FORTH IN ITEM A ABOVE,
SHOULD COMPLETE ITEM C AND/OR D BELOW.
ITEM C
SPECIAL ISSUANCE OR
PAYMENT INSTRUCTIONS
To be completed ONLY if the Series C Shares, Warrants and/or quarterly
interest payments, as applicable, issued in the name of and sent to someone
other than the registered Holder(s), as named above. See Instructions 2 and 3
accompanying this Letter of Transmittal.
Issue and mail check to:
Name_______________________________________________(Please
Print)
Address________________________________________
_______________________________________________
(Include Zip Code)
_____________________________________________________(Social Security No. or
other Taxpayer Identification No.)
ITEM D
SPECIAL DELIVERY INSTRUCTIONS
To be completed ONLY if the Series C Shares, Warrants and/or quarterly
interest payments, as applicable, are to be sent to the registered Holder(s)
at an address other than that shown above. See Instructions 2 and 3
accompanying this Letter of Transmittal.
Mail check to:
Name________________________________________________
(Please Print)
Address______________________________________________
__________________________________________________________
(Include Zip Code)
__________________________________________________________
(Social Security No. or other Taxpayer Identification No.)
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. General. To tender Debentures in the Offer, the Debentures,
together with a properly completed and duly executed copy (or facsimile) of
this Letter of Transmittal, any other documents required by this Letter of
Transmittal must be received by the Company at its address set forth herein
prior to the Expiration Date. The method of delivery of this Letter of
Transmittal, Debentures and all other required documents to the Company is at
the election and risk of the Holders. If such delivery is to be made by mail,
it is suggested that Holders use properly insured registered mail, return
receipt requested, and that the mailing be made sufficiently in advance of the
Expiration Date to permit delivery to the Company prior to such date. Except
as otherwise provided below, the delivery will be deemed made when actual
received by the Company. THIS LETTER OF TRANSMITTAL AND DEBENTURES SHOULD BE
SENT ONLY TO THE COMPANY.
By executing this Letter of Transmittal (or a facsimile hereof), a
tendering Holder waives any right to receive any notice of the acceptance for
payment of tendered Debentures.
For a full description of the procedures for tendering Debentures, see
"Procedures for Tendering Debentures" in the Offer to Purchase.
If a Holder desires to tender Debentures pursuant to the Offer and (i)
the Debentures are not lost but are not immediately available or time will not
permit this Letter of Transmittal, Debentures or other required documents to
reach the Company on or prior to the Expiration Date, or (ii) the Holder's
Debentures are lost, missing, mutilated or destroyed, please contact the
Company.
Tenders of Debentures may be withdrawn at any time prior to the
Expiration Date pursuant to the procedures described under "Procedures for
Tendering Debentures -- Withdrawal Rights" in the Offer to Purchase.
2. Signatures. If this Letter of Transmittal is signed by the
registered Holder(s) of the Debentures tendered hereby, the signature(s) must
correspond with the name(s) as written on the face of the certificate(s)
without alteration, enlargement or any change whatsoever.
IF THIS LETTER OF TRANSMITTAL IS EXECUTED BY A HOLDER WHO IS NOT THE
REGISTERED HOLDER, THEN THE REGISTERED HOLDER MUST SIGN A VALID POWER OF
ATTORNEY.
If any of the Debentures tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal. If
any tendered Debentures are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many copies
of this Letter of Transmittal and any necessary accompanying documents as
there are different names in which Debentures are held.
If this Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should
so indicate when signing, and submit proper evidence satisfactory to the
Company of their authority so to act with this Letter of Transmittal.
3. Special Issuance or Payment and Special Delivery Instructions.
Tendering Holders should indicate in the applicable box or boxes the name and
address to which Debentures for principal amounts not accepted for purchase,
or Series C Shares, Warrants and/or quarterly interest payments are to be
issued or sent, if different from the name and address of the Holder signing
this Letter of Transmittal.
4. Transfer Taxes. The Company will pay all transfer taxes, if any,
payable on the purchase and transfer of Debentures converted pursuant to the
Offer. It will not be necessary for transfer stamps to be affixed to the
Debentures listed in this Letter of Transmittal.
5. Irregularities. All questions as to the validity, form,
eligibility (including the time of receipt) and acceptance for conversion of
any tenders of Debentures pursuant to the procedures described in the Offer to
Purchase and the form and validity (including the time of receipt of notices
of withdrawal) of all documents will be determined by the Company, in its sole
discretion, which determination shall be final and binding on all parties.
The Company reserves the absolute right to reject any or all tenders
determined by it not to be in proper form or the acceptance of or payment for
which may be unlawful. The Company also reserves the absolute right to waive
any of the conditions of the Offer and any defect or irregularity in the
tender of any particular Debentures. The Company's interpretation of the
terms and conditions of the Offer (including without limitation the
instructions in this Letter of Transmittal) shall be final and binding. No
alternative, conditional or contingent tenders will be accepted. Unless
waived, any irregularities in connection with tenders must be cured within
such time as the Company shall determine. Neither the Company nor any other
person will be under any duty to give notification of any defects or
irregularities in such tenders or will incur any liability to Holders for
failure to give such notification. Tenders of such Debentures shall not be
deemed to have been made until such irregularities have been cured or waived.
6. Requests for Assistance. Questions relating to the procedure for
tendering Debentures and requests for assistance or additional copies of the
Offer to Purchase or this Letter of Transmittal may be directed to, and
additional information about the Offer may be obtained from the Company,
Attention: John C. Lawrence, President, at (406) 827-3523.
EXHIBIT 7-A
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, 1996
[ ]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
- ----------------------------------------------
(State or other jurisdictuion
of incorporation or organization)
81-0305822
- ----------------------------------------------
P.O. Box 643, Thompson Falls,
Montana 59873
- ----------------------------------------------
(Address of principal
executive offices)
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
--- ---
<PAGE>
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not 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 $5,010,913.
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 $2,690,348 as of
March 31, 1997.
At March 31, 1997, the registrant had outstanding 13,003,434 shares of par
value $.01 common stock.
<PAGE>TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Summary
Antimony Division
Gold Division
Environmental Matters
Marketing
Mining Industry and Metal Prices
Other
ITEM 2. DESCRIPTION OF PROPERTIES
Antimony Division
Gold Division
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
ITEM 5.MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
ITEM 7. FINANCIAL STATEMENTS
ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
PART III
ITEM 9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
ITEM 10. EXECUTIVE COMPENSATION
ITEM 11.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
<PAGE>PART I
Item 1. Description of Business
- --------------------------------
SUMMARY
- --------
AGAU Mines, Inc., predecessor of United States Antimony Corporation, was
incorporated in June 1968 as a Delaware Corporation to explore, develop and
mine gold and silver properties. United States Antimony Corporation ("USAC,"
"the Company" or "the Registrant") was incorporated in Montana in January 1970
to mine and produce antimony products. In June 1973, AGAU Mines, Inc. was
merged with and into USAC, with USAC the surviving corporation in the merger.
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
of antimony products and the mining and milling of gold.
In October 1989 and in April 1990, the Company had judicial financial
settlements against it totaling $1,243,316 plus interest and litigation costs.
The judgments consumed all available cash, shut down the Company's gold mining
operation and placed the Company in a near bankruptcy posture. In December
1990, a fire destroyed the Company's corporate headquarters and many of its
financial and administrative records.
In years prior to the fire, the Company had been a reporting entity subject to
the requirements of Section 13 of the Securities Exchange Act of 1934 (the
"Exchange Act"). The Company had timely filed all reports required by the
Exchange Act through September 30, 1990, when it filed its Form 10-Q for that
quarter. Subsequent to that time, due to the destruction of records in
December 1990 and the poor financial condition of the Company, no other
required filings were made until filing of the Company's Form 10-KSB for the
year ended December 31, 1995 and the subsequent Form 10-QSBs for the year
ended December 31, 1996.
The Company has been able to avoid bankruptcy and a termination of operations
through borrowings from stockholders and directors, lack of creditor action
and net income produced from operations in 1994 and 1995. There can be no
assurance, however, that the Company will be able to continue to meet its
obligations and continue in existence as a going concern (see Note 1 to the
consolidated financial statements).
Antimony Division
- -----------------
The Company's antimony properties, mill and metallurgical plant are located in
the Burns Mining District of Sanders County, Montana, approximately 15 miles
west of Thompson Falls. The Company holds 12 patented lode claims, some of
which are contiguous and 2 patented mill sites.
<PAGE>Prior to 1984, the Company 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. The Company's underground antimony operations may be reopened
in the future should raw material prices warrant so. The Company, through a
joint relationship, obtains the majority of its antimony from China and, to a
lesser degree, Canada.
The Company currently is pursuing the acquisition of a 50% interest in United
States Antimony, Mexico S.A. de C.V. ("USAMSA") to mine, mill and produce
antimony metal and other raw materials from the Mexican states of Zacatecas,
Coahuila, Sonora, Queretaro and Oaxaca to be sent to Thompson Falls, Montana
for processing.
From refined antimony metal, the Company produces three antimony oxide
products of different particle size using proprietary furnace technology and
several grades of sodium antimonate using hydrometallurgical techniques.
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. Sodium
antimonate is primarily used as a fining agent for glass in cathode ray tubes
used in computers and televisions and as a flame retardant. On September 1,
1991, the Company entered into an agreement with HoltraChem, Inc.
("HoltraChem") whereby the Company would process raw material purchased by
HoltraChem into finished antimony products. The Company would then deliver the
finished products to HoltraChem for sale, and share in the profits or losses
from sales with HoltraChem on a 50/50 basis.
On July 1, 1995, the Company and HoltraChem terminated the 1991 agreement and
entered into an Inventory and Sales Agreement and a Processing Agreement.
These agreements gave rise to the creation of a wholly owned subsidiary,
United States Antimony Corporation-Montana ("USAM"), that participates with
HoltraChem and its subsidiary, HoltraChem-Montana, Inc. ("HCMI"), in the
processing and sale of antimony products. While the agreements still provide
for the sharing of profits or losses from sales, after deduction of certain
costs, on a 50/50 basis, they also require the Company to fund and own 50% of
the antimony inventory up to $750,000. The Company funded the acquisition of
50% of the antimony inventory through the contribution of 50% of the Company's
share of profits. At December 31, 1996, the Company had fully funded 50% of
the total antimony inventory. USAM also receives a processing fee from
HoltraChem for the finished antimony inventory. In consideration of the
Company's financial participation in carrying raw material and antimony
inventory, HoltraChem agreed to provide additional marketing efforts in an
attempt to increase product sales to 10 million pounds of antimony products
per year. The agreements expire on December 31, 1999.
<PAGE>
For the year ended December 31, 1996, the Company, through its
relationship
with HCMI, sold 2,333,321 pounds of antimony products generating approximately
$4.2 million in revenues. During 1995, the Company, through its relationship
with HCMI, sold 1,966,395 pounds of antimony products, which generated
approximately $4.9 million in revenues. The Company's products are sold to
various customers throughout the United States. During 1996 and 1995, 22% and
21% of the Company's antimony sales were made to one customer.
Gold Division
- -------------
YANKEE FORK MINING DISTRICT
Until 1989, the Company mined, milled and leached gold and silver in the
Yankee Fork Mining District in Custer County, Idaho. The metals were recovered
by a 150-ton per day gravity and flotation mill, and the concentrates were leach
ed with cyanide to produce a bullion product at the Preachers Cove mill, which
is located six miles north of Sunbeam, Idaho on the Yankee Fork of the Salmon
River. The Preachers Cove mill has been dismantled and the site is undergoing
environmental remediation pursuant to a Idaho Department of Environmental
Quality consent decree request. See "Environmental Matters."
The Company owns two patented lode mining claims on Estes Mountain in the
Yankee Fork District, which are now idle.
YELLOW JACKET MINING DISTRICT
The Company holds a mining lease on the Yellow Jacket Mine located in the
Yellow Jacket Mining District of Lemhi County, Idaho, approximately 70 miles
southwest of Salmon, Idaho. On July 8, 1987, the Company and Geosearch, Inc.
("Geosearch"), an Idaho corporation, entered into a mining lease agreement
with Yellow Jacket Mines, Inc. of Palo Alto, California for the lease of the
Yellow Jacket mine. Also on that date, the Company and Geosearch entered into
an operating agreement for the exploration, development and mining of the
Yellow Jacket property. Under the terms of the operating agreement, Geosearch
and the Company would divide equally the net operating proceeds realized from
the Yellow Jacket mine.
On February 19, 1988, the Company obtained an assignment from Geosearch of all
of its rights, title and interest in and to the lease agreement dated July 8,
1987 by and between Yellow Jacket Mines, Inc., the Company and Geosearch. In
consideration of the assignment of the lease, the Company agreed to conduct
certain exploration activities and to provide a preliminary mining plan which,
if justified, would result in applications for permitting and bonding for a
mine and mill with the state of Idaho, the U.S. Forest Service and other
agencies.
<PAGE>The Company also agreed to pay Geosearch a 12.5% net operating profits
interest until the Company has recovered its full investment in the property,
and thereafter, Geosearch would receive a 15% net operating profits interest.
USAC currently pays Geosearch a minimum monthly payment of $1,000 during the
months of January through April of each year, if operations are closed due to
weather, and $2,000 per month for the months of May through December of each
year. After the mill was built at the Yellow Jacket mine in 1990, the Company
paid Geosearch $25,000 per year in staggered installments, with all payments
accumulated and credited against the net operating profits due Geosearch. Net
operating profits and guaranteed minimum payments paid to Geosearch apply to a
$600,000 purchase price after which the Company will not be obligated to make
any further payments to Geosearch.
In March 1994, Geosearch filed an action in the Seventh Judicial District
Court, Custer County, Idaho, alleging breach of the 1988 assignment of lease.
The lawsuit requested recovery of $94,013 in past royalties and accrued
interest thereon. On September 9, 1994, the Company settled the litigation by
agreeing to an amendment to the assignment of lease. The amendment calls for
the payment of past royalties and accrued interest through the assignment of
5% of gross receipts from gold production at the Yellow Jacket mine. In
addition, in 1995 the Company issued 50,000 shares of its unregistered common
stock and 100,000 common stock purchase warrants exercisable at $.35 per share
to Geosearch. The Company also paid $4,000 in legal fees incurred by
Geosearch.
The underlying lease with Yellow Jacket Mines, Inc. requires a minimum payment
of a net smelter royalty of 5% with a minimum annual royalty of $27,500.
On July 7, 1990, the Company entered into a mining venture agreement with
BumbleBee, Inc. ("BumbleBee"), a company controlled by Bobby C. Hamilton
("Hamilton"), a stockholder and creditor of the Company, to explore, develop
and operate the Yellow Jacket property. Pursuant to the agreement, the
Company became the venture manager and had a 60% net profits interest. The
Company contributed the lease on the mining property and the use of its mine
and mill equipment. BumbleBee made an initial contribution of $500,000 for its
40% net profits interest. The operation began the production of gold bullion
by trucking the concentrate to the Preachers Cove cyanide leach plant. Later
in 1993, gold concentrates were shipped to a smelter in British Columbia,
Canada, operated by Cominco Metals, a division of Cominco, Ltd. ("Cominco").
The operation never reached operating capacity due to the problems of storing
tailings and the lack of adequate operating capital. After several years of
continuing losses, the Yellow Jacket mine was put on a care-and-maintenance
status in 1996.
<PAGE>Due to disappointing operating results and low metal prices, the Company
has
determined that without sufficient operating capital, the Yellow Jacket
reserves are not economical to mine. Therefore, during the fourth quarter of
1996, the Company's remaining carrying value of the property of $463,057 was
written off. Also, property with a carrying value of $85,735 was written off.
The Company is continuing an exploration program to identify additional
underground reserves. If ongoing exploration efforts are unsuccessful and a
decision is made to permanently close the property, an accrual for closure
costs will be necessary.
During the year ended December 31, 1996, the Company sold 2,190 ounces of gold
and 1,317 ounces of silver which generated $850,518 of revenues. During 1995,
revenues of $1,026,741 were generated from the sale of 2,636 ounces of gold
and 1,213 ounces of silver.
Subsequent to the curtailment of production at Yellow Jacket, the Company
began an underground exploration program and proceeded in reopening an
abandoned tunnel on the property (the No. 3 Tunnel). In 1953, the Idaho Bureau
of Mines reported gold values of 0.2 ounces per ton, 7% to 10% lead and 2% to
3% copper in the No. 3 tunnel located below the main Yellow Jacket pit. These
values are in a fault offset from the open pit mineralized zone and are
sulfides. The existence of this mineralized resource could increase the
average recovered value to the $100 to $140 per ton range as processed by the
existing mill and could increase mineable reserves. With these values,
production could resume immediately, at a reduced throughput initially.
However, there is no assurance that 1) the tunnel can be successfully
reopened, 2) that an economical ore reserve exists, and 3) that the sulfide
material can be profitably milled due to regulatory restrictions or economic
factors.
Environmental Matters
- ---------------------
The exploration, development and production programs conducted by the Company
in the United States are subject to local, state and federal regulations
regarding environmental protection. Certain of the Company's mining and
production activities are conducted on public lands. The USDA 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 the Company 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. The Company may be required
to prepare and present to such 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 the Company's reclamation and remediation
plans which may be required due to changes in federal regulations could have
an adverse effect on the Company's operations.
<PAGE>In 1994, the U.S. Forest Service, under the provisions of the
Comprehensive
Environmental Response Liability Act of 1980 (CERCLA) designated the Company's
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 the cyanide solution. The Company has
been reclaiming the property and, as of December 31, 1996 the cyanide solution
discharge was complete and the mill has been removed. The Company anticipates
having the cyanide leach residue containment completely finished by 1998. In
1996, the Idaho Department of Environmental Quality requested 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.
On November 15, 1996, the Bureau of Land Management (BLM) notified the Company
that it may be a responsible party as defined under CERCLA for hazardous
substances released from uncontained mining tailings at a mining site near the
Pine Creek Mining District in Idaho. The Company was one of 13 companies that
had received a similar notice.
In response to the notification, the Company informed the BLM that it is
neither a current or former owner of a site, has never been an operator, nor
has it shipped hazardous substances or arranged for the disposal or treatment
of hazardous substances in the Pine Creek area. Accordingly, the Company does
not consider itself a potentially responsible party under CERCLA for the Pine
Creek site. Although no additional notification has been received from the
BLM, the Company believes it does not have a material liability relating to
this site.
Marketing
- ---------
Gold and silver concentrates from the Yellow Jacket mine are marketed directly
to a smelter at Trail, British Columbia operated by Cominco. There are several
other smelters that could process and purchase the concentrates. If the
Company was unable to sell its concentrate to its present vendor, the Company
believes the loss of this vendor would not have a material adverse impact on
the Company's operations.
In 1995, the Company entered into two agreements with HoltraChem to market its
antimony products (see "Description of Business - Antimony Division"). The
Company receives a processing or toll fee for producing antimony products, and
HoltraChem and the Company sell the products to the customers. After
HoltraChem deducts sales costs, the cost of raw materials, freight,
warehousing and administrative costs, the remaining profit or loss is shared
on a 50/50 basis between the Company and HoltraChem. In addition, USAC also
receives 50% of any profits on HoltraChem's sale of foreign produced antimony
product.
<PAGE>Mining Industry and Metals Prices
- ---------------------------------
The operating results of the Company have been and will continue to be
directly related to the market prices of antimony and gold, which have
fluctuated widely in recent years. The volatility of such prices is
illustrated by the following table which sets forth certain high, low and
average prices of antimony per pound and gold per troy ounce as reported by
sources deemed reliable by the Company. Antimony prices reflect New York
dealer quotes, while gold prices are Handy & Harmon quotes as reported in
METALS WEEK for the periods indicated.
Year Average
---- -------
Antimony 1996 $ 1.60
1995 2.28
1994 1.78
1993 0.77
1992 0.79
1991 0.83
Year High Low Average
---- ------- ------- -------
Gold 1996 $ 415.00 $ 367.00 $ 387.70
1995 395.40 371.20 384.00
1994 396.25 369.65 382.95
1993 405.60 326.10 365.85
1992 359.60 330.35 344.98
1991 403.00 344.25 373.63
The range of sales prices for antimony oxide (per pound) was as follows for
the periods indicated:
Year High Low Average
---- ------- ------- -------
1996 $ 4.50 $ 1.53 $ 1.86
1995 3.12 0.89 2.56
1994 2.75 0.98 1.83
1993 1.11 1.02 1.04
1992 1.20 2.09 1.09
1991 1.05 1.19 1.13
Metals prices are determined by a number of variables over which the Company
has no control. These include the availability and price of imported metals;
the quantity of new metal supply, industrial, commercial and investor demand;
the level of, and expectations regarding, interest rates and the rate of
inflation; political considerations; prices of other commodities; and
speculation. If metal prices decline and continue to remain depressed, the
Company's operations would be adversely affected.
<PAGE>Other
- -----
The Company holds no material patents, licenses, franchises or concessions,
but it considers its antimony processing plant as proprietary in nature. The
Company uses the tradename "Montana Brand Antimony Oxide" for the marketing of
its antimony products.
The Company is subject to the requirements of the Federal Mining Safety and
Health Act of 1977, requirements of the state of Montana and the state of
Idaho mining inspection, Health and Safety statutes and Sanders County, Lemhi
County and Custer County health ordinances. Management of the Company believes
that its current discharge of waste materials from its milling, mining and
processing facilities is in material compliance with environmental regulations
and health and safety standards. See "Environmental Matters."
EMPLOYEES
As of March 31, 1997, the Company and its wholly owned subsidiary employed 29
people, which number may adjust seasonally. None of the Company's employees
are covered by collective bargaining agreements.
Item 2. Description of Properties
- ----------------------------------
Antimony Division
- -----------------
The Registrant's principal plant and mine are located in the Burns Mining
District, Sanders County, Montana, approximately 15 miles west of Thompson
Falls, Montana. The Registrant holds 2 patented mill sites and 12 patented
lode mining claims. 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. Through its arrangement with
HoltraChem, the Company is currently purchasing raw antimony materials and
continues to produce antimony metal, oxide and sodium antimonate from its
antimony processing facility in Thompson Falls, Montana.
Gold Division
- -------------
YANKEE FORK MINING DISTRICT
ESTES MOUNTAIN
- --------------
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 the Company's former Preachers Cove Mill.
<PAGE>PREACHERS COVE MILLSITE
- -----------------------
The Company had a 150-ton per day gravity and flotation mill located
approximately 50 miles west of Challis, Idaho and 19 miles northeast of
Stanley, Idaho on the Yankee Fork of the Salmon River at Preachers Cove. The
mill also had a cyanide leach plant for the processing of concentrates into
dore bullion. The plant has been dismantled and the property is being
reclaimed.
YELLOW JACKET MINING DISTRICT
- -----------------------------
The Yellow Jacket properties consist of 12 patented and 60 unpatented lode
mining claims located in the Yellow Jacket Mining District of Lemhi County,
Idaho, approximately 70 miles southwest of Salmon, Idaho. The gold
mineralization is in quartz breccia zones that extend for more than 10,000
feet. The Company has produced 13,420 ounces of gold through December 31, 1996
from the property and is currently exploring underground for additional
reserves.
The Company's mineral resource at the Yellow Jacket mine as determined by
Western Gold Exploration and Mining Company in July 1989 was as follows:
Contained
Diluted Tonnage Diluted Grade Gold Ounces
--------------- ------------- -----------
Drill indicated 238,898 0.1406 33,589
Geologically probable 73,379 0.1048 7,690
------- ------
312,277 41,279
======= ======
In 1996, Company personnel determined that the existing mineral resource was
not economical to mine without additional operating capital and at current
metals prices. Accordingly, production operations at the Yellow Jacket mine
were suspended and the mine placed on a care and maintenance status. In
connection with the suspension of operations, the Company wrote off $463,057
of the unamortized net profits interest purchased in 1995. Additionally,
property with a carrying value of $85,735 was written off.
The Company is currently reopening a tunnel to establish a continuation of the
mineralization below the main Yellow Jacket pit ("Fault Offset"). The Company
renewed its lease on the Continental-Columbia property in October of 1996 and
has identified several mineralized targets for future exploration. The
Continental-Columbia property is contiguous to the Yellow Jacket mine.
<PAGE>Item 3. Legal Proceedings
- --------------------------
Excel-Minerals Co., Inc.
- ------------------------
In June 1987, Lucky Custer Gold, Inc. ("Lucky Custer") filed an action in the
United States District Court for the District of Idaho against Excel-Minerals
Co., Inc. ("Excel") and the Company, in a case entitled LUCKY CUSTER GOLD,
INC. VS. EXCEL-MINERALS CO., INC. AND UNITED STATES ANTIMONY CORPORATION,
CIVIL NO. C87-1129.
In August, 1988, Excel filed an action in the Seventh Judicial District Court
of the State of Idaho entitled EXCEL-MINERALS CO., INC. VS. UNITED STATES
ANTIMONY CORPORATION, CASE NO. 3081. The action claimed, among other things,
that the Company breached a certain sublease contract between the Company and
Excel due to the Company's nonpayment of royalties due Excel and that the
Company did not return all of the metal recovered from ore being processed for
Excel.
On April 24, 1989, the cases described above went to trial. In October 1989, a
judgment was rendered against Lucky Custer for any claims against the Company
and Excel; against the Company for any counterclaims against Lucky Custer and
Excel; and in favor of Excel against the Company. The judgment against the
Company ordered that Excel recover $1,128,461 in damages and interest accrued
thereon, including litigation costs of $80,695. In April 1990, an additional
judgment was declared against the Company for nonpayment of royalties due
Excel. The judgment against the Company ordered that Excel recover $114,855 in
unpaid royalties plus litigation costs to be determined by the court.
On June 26, 1990, the Company and Excel entered into a Covenant not to Execute
("Covenant") the above-described judgments. Pursuant to the Covenant, the
$1,128,461 judgment and related attorneys fees' were payable in entirety in
quarterly installments of $63,850 including interest at 10.5% through December
15, 1994, at which time the entire unpaid judgment amount was payable. In
addition, an additional $51,188 was payable on March 15, 1991, representing inte
rest for the period from April 1, 1990 to December 31, 1990.
Royalty payments equal to 10% of net smelter returns, subject to certain net
profit limitations, for all ore mined from the Estes Mountain property were to
be applied monthly to the judgments payable, including accrued interest above
and beyond the terms described previously, until paid in full. The Company
subsequently defaulted on the payment terms of the Covenant, and Excel
terminated the agreement.
On August 29, 1991, the Company transferred its rights and interests in
certain Estes Mountain patented and unpatented mining claims to Lucky Custer
in exchange for Lucky Custer's 55% interest in the Excel judgment, which had
previously been assigned to Lucky Custer in settlement of litigation between
Excel and Lucky Custer. Concurrently, the Company entered into an agreement
with Bobby C. Hamilton
<PAGE>("Hamilton"), a stockholder, whereby Hamilton would acquire a security
interest in the 55% judgment claim in return for the release of Hamilton's
security interest in the Estes Mountain claims which were transferred to Lucky
Custer. In July 1993, the Company, Excel, Hamilton and BumbleBee entered into
an agreement to settle the Excel judgment.
The settlement agreement provided for the issuance of 1,666,667 shares of
Series B preferred stock to Excel and Hamilton in amounts proportionate to
their respective interests in the judgment. Accordingly, Excel received
750,000 shares of Series B preferred stock and Hamilton received 916,667
shares to be held as collateral for indebtedness due him. The preferred stock
was convertible into common stock at 1:1 on or before December 31, 1995 and
earns an annual dividend of $.01 per share. None of the preferred stock was
converted prior to December 31, 1995.
In addition, the settlement agreement provided for the transfer of two
patented mining claims, the Gold Star and First Southwest Extension, to Excel
and Hamilton in accordance to their respective interests in the judgment
claims and 100% of the Charles Dickens patented claim to Excel. During 1995,
Excel quit-claimed any interest in the Gold Star, First Southwest Extension
and Charles Dickens mining claims back to the Company.
On August 1, 1995, the Company filed a complaint in the United States District
Court of Idaho against Hamilton and BumbleBee. The complaint sought
declaratory and injunctive relief from a judicial determination by the court
of the amounts due and owing Hamilton and BumbleBee and of the effect of
various debt and repayment agreements between the Company and Hamilton.
On November 15, 1995, the action was settled, and Hamilton's obligation was
determined to be $1,800,000, which included $500,000 for the purchase of
Hamilton's 40% net profits interest in the Yellow Jacket mine. The unsecured
debt accrues interest at 7.5%, is payable from 10% of the Company's gross
sales from all operations and requires a minimum payment of $150,000 annually,
including interest. The settlement agreement released all security interests
Hamilton had in the Company's real and personal properties, recovered 916,667
shares of Series B preferred stock and two patented mining claims held by him
as security and terminated the Yellow Jacket venture agreement with BumbleBee.
The settlement agreement also extinguished all previous stock price guarantees
to Hamilton and caused his surrender of 150,000 shares of the Company's common
stock back to the Company. In connection with the settlement, the Company
canceled warrants granted to Hamilton to purchase 500,000 shares of common
stock at $.25 per share and issued Hamilton 500,000 shares of the Company's
unregistered common stock in connection with the purchase of his 40% net
profits interest in the Yellow Jacket property.
<PAGE>Geosearch, Inc.
- ---------------
On February 19, 1988, the Company obtained an assignment from Geosearch of all
of its rights, title and interest in and to the lease agreement dated July 8,
1987 by and between Yellow Jacket Mines, Inc., the Company and Geosearch. In
consideration of the assignment of the lease, the Company agreed to perform
certain exploration and to provide a preliminary mining plan. The Company also
agreed to pay Geosearch a 12.5% net operating profits interest from the Yellow
Jacket mine until the Company has recovered its full investment in the
property, and thereafter, Geosearch would receive a 15% net operating profits
interest. Net operating profits and guaranteed minimum payments paid to
Geosearch apply to a $600,000 purchase price after which the Company will not
be obligated to make any further payments to Geosearch.
In March 1994, Geosearch filed an action in the Seventh Judicial District
Court, Custer County, Idaho, alleging breach of the 1988 assignment of lease.
The lawsuit requested recovery of $94,013 in past royalties and accrued
interest thereon. On September 9, 1994, the Company settled the litigation by
agreeing to an amendment to the assignment of lease. The amendment calls for
the payment of past royalties and accrued interest through the assignment of
5% of gross receipts from gold production at the Yellow Jacket mine. The
unpaid balance accrues interest at 10% per annum until paid in full. In
addition, in 1995 the Company issued 50,000 shares of its unregistered common
stock and 100,000 common stock purchase warrants exercisable at $.35 to
Geosearch. The Company also agreed to pay $4,000 in legal fees incurred by
Geosearch.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
The Company has not had a meeting of security holders since prior to 1990, nor
have any matters been submitted to a vote of security holders.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
- -----------------------------------------------------------------
The following table sets forth the range of high and low bid prices as
reported by NASD trading and market securities 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. Currently,
the stock is traded on the NASD electronic bulletin board under the symbol
"UAMY." Prior to 1997, the Company's stock was traded over-the-counter on the
pink sheets and has had minimal trading activity since 1990. Therefore, the
following prices do not reflect an active market.
<PAGE> High Low
------- --------
1996
First Quarter $0.625 $0.25
Second Quarter 0.50 0.125
Third Quarter 0.25 0.0625
Fourth Quarter 0.50 0.25
1995
First Quarter $0.0625 $0.0625
Second Quarter 0.0625 0.0625
Third Quarter 0.125 0.125
Fourth Quarter 0.125 0.125
The approximate number of record holders of the Registrant's common stock at
December 31, 1996 is 2,799.
No dividends have been paid or declared by the Registrant during the last five
years.
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 gold and 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's operations resulted in a net loss of $1,014,995 or $0.08 per
share in 1996 compared to a net income of $441,593 or $0.04 per share in 1995.
The reduction in net income is primarily due to lower gross profits from the
antimony division, write down of the Yellow Jacket property and equipment and
accrual of related reclamation costs, increased general and administrative
expenses and increased interest expense.
Total revenues during 1996 were $5,010,913 compared to $5,915,611 in 1995. The
decrease of $904,698 is primarily attributable to decreased sales of gold and
lower antimony prices. Sales of antimony products in 1996 were $4,160,395
consisting of 2,333,321 pounds at an average sales price of $1.78 per pound.
Sales of antimony products in 1995 were $4,888,870, consisting of 1,966,395
pounds at an average sales price of $2.49 per pound. Gross profit from
antimony product sales was $503,903 in 1996, or 12% of sales, compared to
$1,204,816 in 1995, or 25% of sales. The decrease in gross profit is primarily
due to the decrease in antimony prices and the Company's inability to recover
its processing costs from HoltraChem.
<PAGE>The Company began 1996 building its antimony inventory in anticipation of
meeting increased sales projections. When sales failed to materialize at the
end of the first quarter of 1996, the Company all but ceased antimony oxide
production in an effort to reduce its inventory. As a result, fixed costs
without production increased the overall cost of antimony inventory. During
the fourth quarter of 1996, HoltraChem reimbursed the Company $50,515 of
production costs it had incurred during the first three quarters of 1996 that
had not previously been included in antimony products inventory. The Company
expects to be reimbursed for additional costs of production for the fourth
quarter of 1996 as that information becomes available. Due to the uncertainty
of the amount or its eventual payment, the Company has not adjusted its 1996
cost of antimony production for the unreimbursed costs.
The Company reports 50% of total antimony sales made by HoltraChem and the
Company. Accordingly, total sales of antimony products by both companies was
$8,320,790 or 4,666,642 pounds in 1996 and $9,777,740 or 3,932,790 pounds in
1995. In both years, almost all of the antimony products sold were produced at
the Company's plant in Thompson Falls, Montana.
Currently, the price of antimony metal has been relatively stable at
approximately $2,100-$2,400 per metric ton. The Company believes that the
gross profit from anticipated sales of antimony products at current antimony
metal prices will enable the Company to operate its antimony division
profitably in 1997.
Sales of gold and silver totaled $850,518 and consisted of 2,190 ounces of
gold and 1,317 ounces of silver in 1996. Sales of gold and silver totaled
$1,026,741 in 1995 and consisted of 2,636 ounces of gold and 1,213 ounces of
silver. The Company realized $383 per ounce of gold sold in 1996 and $386 in
1995. The Yellow Jacket mine continued to operate at a loss due to low
production volumes, high costs of operations and insufficient capital for mine
and mill processing improvements. The operating loss, excluding the allocation
of any general and administrative expenses, was $325,190 and $292,373 during
1996 and 1995, respectively. Continuing annual costs while on a
care-and-maintenance status are estimated to be approximately $136,000,
excluding any revenues from residual gold recoveries.
During 1996, the Company wrote down $548,792 of property and equipment due to
the uncertainty of recovering the unamortized balance of the mineral property
and certain equipment at the Yellow Jacket mine. In connection therewith, the
Company also accrued estimated costs of $82,326 for reclamation at the site. The
Company's exploration efforts are continuing at the site. If these efforts
are unsuccessful and the Company determines that a permanent shutdown of the
property is appropriate, an additional accrual for closure costs will be
necessary.
<PAGE>General and administrative expenses increased from $251,139 in 1995 to
$333,303 in 1996, an increase of $82,164 or approximately 33%. The increase
was principally due to increased salaries and professional fees related to the
Company's efforts to regain compliance with Securities and Exchange Commission
("SEC") reporting regulations.
In 1996 and 1995, the Company recognized a gain on the disposal of fully
depreciated assets of $45,000 and $17,500, respectively. Interest and other
expense increased from $272,815 in 1995 to $284,927 in 1996. Interest income
was $10,680 in 1996 and $7,478 in 1995 and was exclusively generated by the
Company's restricted cash balances.
Financial Condition and Liquidity
- ---------------------------------
At December 31, 1996, Company assets totaled $1,451,298, and there was a
stockholders' deficit of $3,689,829. The stockholders' deficit increased
$873,895 from the prior year, primarily due to the net loss recognized from
the Company's operations which was somewhat offset by the sale of common
stock. In order to continue as a going concern, the Company is dependent upon
(1) the planned conversion of certain debt and accrued interest to equity (see
Note 9 to the consolidated financial statements), (2) profitable operations
from the antimony division, (3) additional equity financing, and (4) continued
availability of bank financing. Without such debt conversions and additional
financing, the Company may not be able to meet its obligations, fund
operations and continue in existence. There can be no assurance that
management will be successful in its plans to improve the financial condition
of the Company.
Cash generated from operations in 1995 was $490,895 compared to cash used in
operations of $211,487 in 1996, which is due primarily to the net loss in
1996. Investing activities used $84,576 of cash in 1996 compared with $237,079
in 1995. Cash used in investing activities related exclusively to purchases of
property, plant and equipment, primarily for the antimony division. Financing
activities used $288,683 in 1995 and generated $290,263 in 1996. The change in
cash from financing activities relates principally to decreased note payments
and increases in cash received from common stock sales and bank financing.
During 1996, the Company borrowed $238,297 pursuant to a five-year note
payable and renewed two line-of-credit agreements totaling $125,000, with a
bank, which are guaranteed by John C. Lawrence, the Company's president. The
borrowings paid certain current obligations of the Company and funded
operating activities. In addition, during 1996, the Company decreased its
operating losses at the Yellow Jacket mine by placing the property on a
care-and-maintenance basis. During the first three quarters of 1996, a limited
amount of gold production partially offset the care-and-maintenance costs and
helped finance the Company's environmental obligation costs at the Preacher's
Cove Millsite. During the fourth quarter of 1996, the Company completely
<PAGE>ceased gold production and wrote off its investment in its net profits
interest in the Yellow Jacket mine. Additionally, the Yankee Fork mill, with a
carrying value of $85,735, was written off during the fourth quarter.
At September 30, 1996, the Company completed its investment in its 50% share
of antimony inventory. Correspondingly, the Company began receiving a greater
percentage of cash flow from antimony sales with HoltraChem. These resources
will be available to meet the Company's obligations and fund operations.
Significant financial commitments for future periods will include:
-Providing $5,000 per month for a "sinking fund" to pay defaulted
debentures, related accrued interest and accrued interest payable to related
parties, which are not ultimately converted (see Note 9 to the consolidated
financial statements). Assuming only 70% of the accrued interest is converted,
the total remaining accrued interest to be paid will be approximately
$243,000.
-Servicing borrowings from the bank (see Note 8 to the consolidated
financial statements).
-Servicing the Hamilton note payable at a minimum of $150,000 annually
(see Note 10 to the consolidated financial statements).
-Keeping current on payroll tax liabilities and accounts payable.
-Fulfilling reclamation responsibilities with regulatory agencies.
-Annual care and maintenance costs of approximately $136,000 at the
Yellow Jacket mine.
-Minimum annual royalty payments of $52,500 to Geosearch and Yellow
Jacket.
-Providing antimony profits to fund the Company's antimony inventory when
the Company's share of antimony inventory amounts to $750,000 or more or when
its share of inventory is less than 50% of total inventory.
The Company plans to address these and other financial requirements by
enhancing the value of its gold properties through an exploration program
begun in 1996. The Company hopes to develop additional reserves from
exploration and generate funds from the sale, joint venture or eventual
production from the property.
During 1995 and 1996, the Company began assembling and later filed reports
required by SEC regulations. It is the Company's intention that as these
reports are available and as the Company regains compliance with SEC
regulations to seek additional financing to expand its business operations and
satisfy its obligations. In 1996, $127,500
<PAGE>was generated through sales of 460,000 shares of unregistered common
stock to
existing stockholders and others to help finance the preparation of financial
information and fund operations. In 1997, 376,000 additional unregistered
common and common stock purchase warrants were sold for $188,000.
Upon re-establishing a market for its common stock, the Company plans to issue
additional shares to investors to help finance the finalization of its
investment in USAMSA and fund production from the Mexican properties.
Item 7. Financial Statements
- ----------------------------
The consolidated financial statements of the registrant are included herein.
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 are as follows:
Affiliation Expiration
Name Age with Registrant of Term
- ------------------------- --- ------------------- ---------------
John C. Lawrence 59 President, Director Annual meeting
Robert A. Rice 72 Director Annual meeting
Walter L. Maguire, Sr. 75 Director Annual meeting
During the year ended December 31, 1996, Walter L. Maguire, Jr. resigned as a
director of the Company. Walter L. Maguire, Sr. is the father of Walter L.
Maguire, Jr.
The Company is not aware of any involvement in certain legal proceedings by
its directors or executive officers during the past five years that are
material to an evaluation of the ability or integrity of such director or
executive officer.
Business Experience of Directors and Executive Officers:
JOHN C. LAWRENCE. Mr. Lawrence has been the President and a Director of the
Company since its inception. Mr. Lawrence was the President and a Director of
AGAU Mines, Inc., the predecessor of the Company, since the inception of AGAU
Mines, Inc., in 1968.
<PAGE>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 affiliated as a Director of
the Registrant since 1975.
WALTER L. MAGUIRE, SR. Mr. Maguire is a resident of Keller, Virginia. He is a
1943 graduate of Yale University and a 1948 graduate of Columbia School of
Business with an MBA degree. His past business experience includes natural
resource exploration and development, securities and underwriting, real estate
development and plastics research. He is the president of the Maguire
Foundation, a private educational foundation and has been a Director of the
Company since February 1989.
The Registrant does not have standing audit, nominating or compensation
committees of the Board of Directors or committees performing similar
functions, but does, however, have a financial committee to monitor the
Company's financial activities.
Compliance with Section 16(a) of the Exchange Act
- -------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's officers and directors and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and stockholders holding more than 10% of the
Company's common stock are required by the regulation to furnish the Company
with copies of all Section 16(a) forms they have filed.
Based on information received by the Company, Messrs. Lawrence, Rice, Maguire,
Sr., and Maguire, Jr., did not timely file a Form 4 upon receipt of annual
stock compensation as directors of the Company.
<PAGE>Item 10. Executive Compensation
- --------------------------------
Summary compensation for the Company's principal executive officer
is as follows:
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
---------------------------------
- ------------------------------------------------
Awards Payouts
---------- -----------------------------------
Securities
Other Restricted Underlying
Name and Annual Stock Options/ LTIP All
Other
Principal Position Year Salary Bonus Compensation(1)
Awards SARs Payouts Compensation
- ------------------- ---- ------- ----- ---------------
- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John C. Lawrence, 1996$ 72,000 $ 4,154None None
None None
President 1995 53,402 3,080
1994 48,000 2,769
</TABLE>
(1) Represents earned but unused vacation.
<PAGE>Item 11. Security Ownership of Certain Beneficial Owners and Management.
- -------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners:
As of the close of business on March 31, 1997, the following persons own
beneficially more than 5% of the outstanding voting securities of the Company:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership Class(1)
- ------------------------------ ---------------------------------
- -------------------- --------
<S> <C> <C> <C>
Common stock The Maguire Family and related
entities as a group 1,853,917(2) 14%
c/o Walter L. Maguire, Sr.
P.O. Box 129
Keller, VA 23401
Common stock John C. Lawrence and related 1,135,461 9
family members
P.O. Box 643
Thompson Falls, MT 59873
Common stock The Dugan Family 1,735,942(3) 13
c/o A. W. Dugan
1415 Louisiana Street, Suite 3100
Houston, TX 77002
Preferred Series A stock A. Gordon Clark, Jr. 4,500(4)
100
2 Musket Trait
Simsbury, CT 06070
</TABLE>
(1)Percent of ownership is based upon 13,604,434 shares of common stock and
exercisable warrants and 4,500 shares of Series A preferred stock outstanding
at March 31, 1997.
(2)Includes 206,000 warrants to purchase common stock.
(3)Includes 200,000 warrants to purchase common stock.
(4)The outstanding preferred shares carry voting rights for the election of
directors.
<PAGE>(b) Security Ownership of Management:
<TABLE>
<CAPTION>
Amount of Percent of
Title of Class Name of Beneficial Owner Beneficial Ownership
Class(1)
- ------------------------------ ----------------------------------
- --------------------- ----------
<S> <C> <C> <C>
Common stock Walter L. Maguire, Sr. 1,634,362(5) 12%
Common stock John C. Lawrence 1,060,461(6) 8
Common stock Robert A. Rice 92,200 1
</TABLE>
(5)Does not include 219,555 shares owned by Walter L. Maguire, Jr., son of
Walter L. Maguire, Sr.
(6)Does not include 75,000 shares owned by family members of John C. Lawrence.
Item 12. Certain Relationships and Related Transactions
- --------------------------------------------------------
See Notes 7, 9, 10, 11, 12 and 14 to the consolidated financial statements
included herein.
<PAGE>Item 13. Exhibits and Reports on Form 8-K
- ------------------------------------------
Documents filed with this report:
Exhibit No. Item Dated
- ----------- ----------------------------------- -------------------
10.26 Warrant Agreements Various
21 List of subsidiaries N/A
27 Financial Data Schedule N/A
Documents filed with the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995:
Exhibit No. Item Dated
- ----------- ----------------------------------- -------------------
3.1 Articles of Incorporation - United
States Antimony Corporation-
Montana August 18, 1995
10.10 Yellow Jacket Venture Agreement July 7, 1990
10.11 Agreement Between Excel-Mineral
Company and Bobby C. Hamilton August 29, 1991
10.12 Letter Agreement September 1, 1991
10.13 Columbia-Continental Lease
Agreement Revision April 3, 1993
10.14 Settlement Agreement with Excel
Mineral Company July 1993
10.15 Memorandum Agreement July 1993
10.16 Termination Agreement September 12, 1993
10.17 Amendment to Assignment of Lease
(Geosearch) September 9, 1994
10.18 Series B Stock Certificate to
Excel-Mineral Company, Inc. December 25, 1993
10.19 Division Order and Purchase and
Sale Agreement March 27, 1995
10.20 Inventory and Sales Agreement January 1, 1995
10.21 Processing Agreement July 1, 1995
10.22 Release and settlement agreement
between Bobby C. Hamilton and
United States Antimony
Corporation November 15, 1995
10.23 Columbia-Continental Lease
Agreement September 27, 1996
10.24 Release of Judgment February 28, 1996
10.25 Covenant Not to Execute July 30, 1990
99.1 CERCLA Letter from U.S. Forest
Service February 11, 1994
There were no reports on Form 8-K filed during the quarter ended December 31,
1996.<PAGE>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
----------------------------------
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 15, 1997
--------------------------------------
John C. Lawrence, Director and
President (Principal Executive,
Financial and Accounting Officer)
By: /s/ Walter L. Maguire, Sr. Date: April 15, 1997
--------------------------------------
Walter L. Maguire, Sr., Director
By: /s/ Robert A. Rice Date: April 15, 1997
--------------------------------------
Robert A. Rice, Director
<PAGE>Supplemental Information to be Furnished with Reports Filed Pursuant to
Section 15(d) of the Exchange Act by Non-Reporting Issuers.
The Company has not sent either an annual report or proxy material to its
security holders.
<PAGE>REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders of
United States Antimony Corporation
We have audited the consolidated balance sheets of United States Antimony
Corporation and subsidiary as of December 31, 1996 and 1995 and the related
consolidated statements of operations, changes in stockholders' deficit and
cash flows for the years then ended. These financial statements are the responsi
bility 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 generally accepted auditing
standards. 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 subsidiary as of
December 31, 1996 and 1995, and the consolidated results of their operations
and their cash flows for the years then ended, in conformity with generally
accepted accounting principles.
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.
As discussed in Note 3 to the consolidated financial statements, the Company
changed its method of accounting for environmental remediation liabilities in
1996.
/s/COOPERS & LYBRAND L.L.P.
Spokane, Washington
April 14, 1997
<PAGE>UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
1996 1995
------------ ------------
ASSETS
Current assets:
Cash $ 5,800
Restricted cash, payroll taxes 4,598
Accounts receivable $ 33,837 110,920
Inventories 556,249 450,501
Prepaid expenses 21,085 10,040
------------ ------------
Total current assets 611,171
581,859
Properties, plants and equipment, net 670,081 1,281,742
Restricted cash, reclamation bonds 170,046 170,046
------------ ------------
Total assets $ 1,451,298 $ 2,033,647
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Checks issued and payable$ 29,491
Accounts payable 306,636 $ 299,446
Accrued payroll and property taxes 93,454 71,772
Accrued payroll and other 39,823 47,285
Judgments payable 131,764 147,865
Accrued interest payable 792,240 672,130
Payable to related parties 644,752 646,347
Notes payable to bank 125,397 114,824
Note payable to Bobby C. Hamilton,
current 20,494 15,771
Debentures payable 650,000 650,000
Accrued reclamation costs, current 100,000 80,000
------------ ------------
Total current liabilities 2,934,051
2,745,440
Note payable to bank, noncurrent 185,607
Note payable to Bobby C. Hamilton,
noncurrent 1,706,257 1,773,948
Accrued reclamation costs, noncurrent 315,212 330,193
------------ ------------
Total liabilities 5,141,127
4,849,581
------------ ------------
Commitments and contingencies (Notes 1,
5 and 15)
<PAGE>UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS, CONTINUED
December 31, 1996 and 1995
1996 1995
------------ ------------
Stockholders' deficit:
Preferred stock, $.01 par value,
10,000,000 shares authorized:
Series A: 4,500 shares issued and
outstanding (liquidation pre-
ference $92,250 and $87,750) $ 45 $ 45
Series B: 750,000 shares issued
and outstanding (liquidation
preference $772,500 and
$765,000) 7,500 7,500
Common stock, $.01 par value,
20,000,000 shares authorized;
12,627,434 and 12,113,434 shares
issued and outstanding 126,274 121,134
Additional paid-in capital 13,326,464 13,190,544
Accumulated deficit (17,150,112) (16,135,157)
------------ ------------
Total stockholders' deficit
(3,689,829) (2,815,934)
------------ ------------
Total liabilities and stock-
holders' deficit $ 1,451,298 $
2,033,647
============ ============
The accompanying notes are an integral part of the consolidated
financial statements.<PAGE>UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31, 1996 and 1995
1996 1995
------------- -------------
Revenues:
Sales of antimony products and other $ 4,160,395 $
4,888,870
Sales of gold and silver 850,518 1,026,741
------------ ------------
5,010,913 5,915,611
------------ ------------
Cost of production:
Cost of antimony production and other 3,656,492
3,684,054
Cost of gold and silver production 1,175,708 1,319,114
------------ ------------
4,832,200 5,003,168
------------ ------------
Gross profit 178,713 912,443
------------ ------------
Other operating expenses:
Write down of mineral property and
equipment 548,792
Provision for Yellow Jacket
reclamation 82,326
General and administrative 333,303 251,139
------------ ------------
964,421 251,139
------------ ------------
Other (income) expense:
Gain on disposal of asset (45,000) (17,500)
Interest expense 284,927 272,815
Interest income and other (10,680) (7,478)
------------ ------------
229,247 247,837
------------ ------------
Income (loss) before extraordinary item (1,014,955) 413,467
Extraordinary gain on settlement of
notes payable to Bobby C. Hamilton 28,126
------------ ------------
Net income (loss) $ (1,014,955) $ 441,593
============ ============
Net income (loss) per common share
before extraordinary item $ (0.08) $ 0.04
Extraordinary item nil
------------ ------------
$ (0.08) $ 0.04
============ ============
Weighted average number of common
shares outstanding 12,299,418 11,735,166
============ ============
The accompanying notes are an integral part of the consolidated
financial statements.<PAGE>UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Preferred Stock
-----------------------------------
Series A Series B Common
Stock Additional Accumu-
--------------- ------------------
- -------------------- Paid-In lated
Shares Amount Shares Amount
Shares Amount Capital Deficit Total
------ ------- --------- ------- ----------
- -------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
Balances, December 31,
1994 4,500 $ 45 1,666,667 $
16,667 11,671,434 $ 116,714 $ 13,120,526 $
(16,576,750) $ (3,322,798)
Issuance of stock
for services
10,000 100 369 469
Issuance of stock
in settlement of
litigation
50,000 500 1,844 2,344
Issuance of stock in
settlement of
litigation
500,000 5,000 88,750 93,750
Retirement of stock
in settlement of
litigation (916,667) (9,167)
(150,000) (1,500) (26,625) (37,292)
Issuance of stock to
directors for
compensation
32,000 320 5,680 6,000
Net
income
441,593 441,593
----- -------- --------- ------- ----------
- -------- ----------- ------------ -----------
Balances, December 31,
1995 4,500 45 750,000 7,500
12,113,434 121,134 13,190,544 (16,135,157)
(2,815,934)
Issuance of stock
for cash 460,000
4,600 92,960 97,560
Value attributed to
issuance of
warrants
30,000 30,000
Issuance of stock to
employee for
ompensation
5,000 50 1,200 1,250
Issuance of stock for
mining lease
25,000 250 6,000 6,250
Issuance of stock to
directors for
compensation
24,000 240 5,760 6,000
Net
loss
(1,014,955) (1,014,955)
----- -------- --------- ------- ----------
- -------- ----------- ------------ -----------
Balances, December 31,
1996 4,500 $ 45 750,000 $ 7,500
12,627,434 $ 126,274 $ 13,326,464 $ (17,150,112)
$ (3,689,829)
===== ======== ========= ======= ==========
======== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.<PAGE>UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996 and 1995
1996 1995
------------ ------------
Cash flows from operating activities:
Net income (loss) $ (1,014,955) $ 441,593
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operations:
Depreciation and amortization 192,445 132,575
Accrued interest converted to
principal 84,584
Write down of mineral property
and equipment 548,792
Provision for Yellow Jacket
reclamation 82,326
Gain on disposal of assets (45,000) (17,500)
Extraordinary gain on settlement
of notes payable to Bobby C.
Hamilton (28,126)
Issuance of common stock to
directors as compensation 6,000 6,000
Issuance of common stock in
settlement of litigation 2,344
Issuance of common stock for
services or compensation 1,250 469
Issuance of common stock for
mineral lease 6,250
Change in:
Restricted cash 4,598 (4,461)
Accounts receivable 77,083 (42,436)
Inventories (105,748) (7,359)
Prepaid expenses (11,045) (10,040)
Accounts payable 7,190 53,548
Accrued payroll and property
taxes 21,682 24,929
Accrued payroll and other (7,462)
(9,341)
Judgments payable (16,101) (59,284)
Accrued interest payable 120,110 118,099
Payable to related parties (1,595)
(55,149)
Notes payable - mineral property
leases (16,094)
Accrued reclamation costs (77,307)
(123,456)
------------ ------------
Net cash provided by
(used in) operating
activities (211,487)
490,895
------------ ------------
<PAGE>UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
for the years ended December 31, 1996 and 1995
1996 1995
------------ ------------
Cash flows from investing activities:
Proceeds from disposal of assets 45,000
Purchase of properties, plant and
equipment (129,576) (237,079)
------------ ------------
Net cash used in investing
activities (84,576) (237,079)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common
stock and warrants 127,560
Proceeds from notes payable to bank 238,297
Payments on notes payable to bank (42,117) (83,017)
Increase in checks issued and payable 29,491
Payments on note payable to Bobby C.
Hamilton (62,968) (205,666)
------------ ------------
Net cash provided by (used
in) financing activities
290,263 (288,683)
------------ ------------
Net decrease in cash (5,800) (34,867)
Cash, beginning of year 5,800 40,667
------------ ------------
Cash, end of year $ 0 $ 5,800
============ ============
Supplemental disclosures:
Cash paid during the year for
interest $ 164,817 $ 70,136
============ ============
Noncash operating, investing and
financing activities:
Acquisition of net profits
interest in Yellow Jacket mine
through issuance of note
payable $ 500,000
Payables to related parties to
finance equipment purchases 27,000
Note payable to finance equipment
purchases 125,000
Common stock issued in settlement
of litigation 56,458
Accrued interest converted to
principal on Bobby C. Hamilton
note payable 354,223
Exchange of fully depreciated
equipment in satisfaction of
payable to related party 17,500
Acquisition of inventory in
exchange for accounts receivable
443,142
The accompanying notes are an integral part of the consolidated
financial statements.<PAGE>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.
On September 1, 1991, the Company entered into an agreement with
HoltraChem, Inc. ("HoltraChem") whereby the Company would process raw material
purchased by HoltraChem into finished antimony products. The Company would
then deliver the finished products to HoltraChem for sale, and share in the
profits or losses from sales with HoltraChem on a 50/50 basis. On July 1,
1995, the Company and HoltraChem terminated the 1991 agreement and entered
into an Inventory and Sales Agreement and a Processing Agreement. The
agreements gave rise to the creation of a wholly owned subsidiary, United
States Antimony Corporation-Montana ("USAM"), that participates with
HoltraChem and its subsidiary, HoltraChem-Montana, Inc. ("HCMI"), in the
processing and sale of antimony products. While the agreements still provide
for the sharing of profits or losses from sales, after deduction of certain
costs, on a 50/50 basis, they also require the Company to fund and own 50% of
the antimony inventory up to $750,000. The Company funds the acquisition of
50% of the antimony inventory through the Company's contribution of 50% of its
share of profits. At December 31, 1996, the Company had fully funded 50% of
the total antimony inventory, but could be obligated to acquire $193,751 of
additional antimony inventory through the payment of future profits under the
agreement if total inventory of $1,500,000 is acquired. USAM also receives a
processing fee from HoltraChem for the finished antimony inventory, which is
included in sales of antimony products. All intercompany profits in the
inventory are eliminated in consolidation. In consideration of the Company's
financial participation in carrying antimony inventory, HoltraChem agreed to
provide additional marketing efforts to increase product sales to 10 million
pounds of antimony products per year. The agreements expire on December 31,
1999.
The principal business of the Company has been the production of antimony
products through USAM in Montana and the mining and milling of gold at the
Yellow Jacket mine in Idaho. The consolidated financial statements of the
Company include the accounts of USAM, a wholly owned subsidiary, and its
proportionate share of the joint activities of the Company and HoltraChem. All
intercompany balances and transactions have been eliminated.
<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
1.BACKGROUND OF COMPANY AND BASIS OF PRESENTATION, CONTINUED:
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, 1996, the Company has negative
working capital of approximately $2.3 million, an accumulated deficit of
approximately $17.2 million and a total stockholders' deficit of approximately
$3.6 million. These factors, among others, indicate that there is substantial
doubt that the Company will be able to meet its obligations and continue in
existence as a going concern. The financial statements do not include any
adjustments that may be necessary should the Company be unable to continue as
a going concern.
To improve the Company's financial condition, the following actions have
been initiated or taken by management:
-The Company submitted a proposal to the holders of defaulted
debentures and certain other creditors to convert their principal and some or
all of their accrued interest to Series C preferred stock.
-In August 1996, the Company placed the Yellow Jacket mine on a
care-and-maintenance basis in order to reduce operating losses and conserve
cash flow.
-In 1996 and 1995, the Company assembled and prepared financial
information necessary to regain compliance with the reporting requirements of
the Securities and Exchange Commission to enhance the marketability of its
stock. During 1996, $127,560 was generated through sales of 460,000 shares of
unregistered common stock to existing stockholders and others. During the
first quarter of 1997, the Company generated $188,000 through sales of 376,000
shares of unregistered common stock and warrants to existing shareholders. Of
these proceeds, $100,000 has been designated for investment in the Company's
Mexican project. The Company plans to raise additional equity funding through
additional stock sales. However, there can be no assurance that the Company
will be able to successfully raise additional capital through the sale of its
stock.
-During 1997, the Company obtained listing on the over-the-counter
electronic bulletin board and obtained Empire Securities of Spokane as a
registered trader of its stock. This process will enhance shareholder
liquidity and increase the Company's ability to obtain additional equity
financing.
-Sales of antimony products increased from 1,282,187 pounds during
the first quarter of 1996 to 1,487,413 pounds during the first quarter of
1997. This increase in sales trend, if it continues, will provide the Company
with increased gross profit from its antimony business.
<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
1.BACKGROUND OF COMPANY AND BASIS OF PRESENTATION, CONTINUED:
The preparation of financial statements in conformity with generally
accepted accounting principles 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. CONCENTRATION OF RISK:
The Company, through its arrangements with HoltraChem, purchases the
majority of its antimony used in the production of finished antimony products
from Chinese producers through metal brokers. All antimony product sales are
made through an arrangement with HCMI (see Note 1). During the years ended
December 31, 1996 and 1995, 22% and 21% of the Company's revenues from
antimony products were from one customer. These antimony sales represented 19%
and 17% of total revenues for the years ended December 31, 1996 and 1995,
respectively. If the sales agreement with HCMI were terminated, management
believes that other chemical distribution companies would be available to
fulfill the Company's needs. However, if the supply of antimony from China is
reduced, it is possible that the Company's antimony product operations could
be adversely affected.
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.
The Company's revenues from gold and 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 accurately predict.
The Company sells all of its gold concentrates to one smelter in Canada,
which is subject to extensive regulations including environmental protection
laws. The Company has no control over the smelter's operations or its
compliance with environmental laws and regulations. If the smelting capacity
available to the Company was significantly reduced, management believes that
other smelters would be available to fulfill the Company's needs. Sales to
this customer represented 19% and 17% of total revenues for the years ended
December 31, 1996 and 1995, respectively.
<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Restricted Cash
---------------
Restricted cash consists of cash held for payment of payroll taxes
and reclamation performance bonds.
Inventories
-----------
Inventories consist of an undivided tenant in common interest with
HCMI in 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 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 Company's operations.
Properties, Plants and Equipment
--------------------------------
The Company's gold-producing property rights are recorded at the
lower of cost or estimated net realizable value. The property rights are
depleted using the units-of-production method. 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. 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 allowances for depreciation and amortization are
eliminated from the accounts and any resulting gain or loss is reflected in
operations. Management's calculations of proven and probable ore reserves are
based on engineering and geological estimates including minerals prices and
operating costs. Changes in the geological and engineering interpretation of var
ious ore bodies, mineral prices and operating costs may change the Company's
estimates of proven and probable reserves. It is reasonably possible that
certain of the Company's estimates of proven and probable reserves will change
in the near term, resulting in a change in amortization and liability accrual
rates in future reporting periods.
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.
<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Properties, Plants and Equipment, Continued
--------------------------------------------
Management's estimates of metal prices, recoverable proven and
probable ore reserves and operating, capital and reclamation costs are subject
to risks and uncertainties of change 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 the need for 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." SFAS No.
121 requires 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. Assets related to the Yellow Jacket mine were
written off prior to January 1, 1993 due to recurring operating losses and the
uncertain recoverability of these assets. During 1995, the Company acquired
the remaining 40% net profits interest in the Yellow Jacket mine for $500,000
(see Note 10). During the fourth quarter of 1996, the Company reviewed the
economic recoverability of the remaining unamortized carrying value of the net
profits interest and related equipment and wrote off the remaining $463,057
carrying value. If ongoing exploration efforts are unsuccessful and a decision
is made to permanently close the property, an accrual for closure costs will
be necessary. Also, other property with a carrying value of $85,735 was
written off.
Some of the Company's gold revenues are generated from unpatented
mining claims. Any adverse changes to the United States government
regulations regarding the availability or cost of mining on government owned
properties could significantly affect the Company's operations.
Reclamation and Remediation
---------------------------
The Company's 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
<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Reclamation and Remediation, Continued
--------------------------------------
as current or noncurrent based on the expected timing of
expenditures. Closure costs are not accrued for mines on a
care-and-maintenance basis until, if and when, a decision to close the mine is
made.
The Company accrues costs associated with environmental remediation
obligations when it is probable that such costs will be incurred and they are
reasonably estimatable. 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.
In October 1996, the American Institute of Certified Public
Accountants issued Statement of Position 96-1, "Environmental Remediation
Liabilities" ("SOP 96-1"). SOP 96-1 provides authoritative guidance with
respect to specific accounting issues that are present in the recognition,
measurement, display and disclosure of environmental remediation liabilities.
The provisions of SOP 96-1 are effective for fiscal years beginning after
December 15, 1996. The Company adopted the provisions of the SOP 96-1 during
1996. The adoption of the provisions of SOP 96-1 had no material effect on the
results of operations or financial condition of the Company.
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.
<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Revenue Recognition
-------------------
Sales of gold concentrates are recorded when received by the
smelter, at estimated metal prices based on estimated contained metal in
concentrates. Recorded values are adjusted periodically and upon final
settlement. Sales of antimony products are recorded upon shipment to the
customer.
Income (Loss) Per Common Share
------------------------------
Income (loss) per common share is based upon the weighted average
number of shares of common stock and common stock equivalents (stock warrants
and convertible securities) outstanding during the reporting periods, except
when they are anti-dilutive. Due to the stock warrants and conversion prices
and the market price per share of common stock during 1995 and the net loss in
1996, the common stock equivalents were anti-dilutive.
4. PROPERTIES, PLANTS AND EQUIPMENT:
The major components of the Company's properties, plants and equipment at
December 31, 1996 and 1995 were as follows:
1996 1995
----------- -----------
Gold mill and equipment(1) $ 37,890 $ 1,250,546
Gold mining equipment(1) 1,262,891 1,522,507
Net profits interest in Yellow
Jacket mine(2) 500,000
Antimony mining buildings and
equipment(3) 168,746 168,746
Antimony mill and equipment(3) 518,190
516,526
Chemical processing buildings 210,116 171,025
Chemical processing equipment 800,518 746,103
Other 47,123 12,718
----------- -----------
3,045,474 4,888,171
Less accumulated depreciation
and depletion (2,375,393) (3,606,429)
----------- -----------
$ 670,081 $ 1,281,742
=========== ===========
<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. PROPERTIES, PLANTS AND EQUIPMENT, EQUIPMENT, CONTINUED:
(1)During 1996, the Company removed the mill at Yankee Fork and some
of the mining and milling equipmentas part of the reclamation process.
Substantially all of the remaining assets are fully depreciated.
(2)In the fourth quarter of 1996, the Company determined that an
adjustment was required to write off the unamortized portion of the net
profits interest in the Yellow Jacket mine. The write off of $463,057 was
based upon the Company's determination that the existing ore reserve was not
economical to mine at current metals prices and without sufficient operating
capital.
(3)At December 31, 1996, substantially all of these assets are fully
depreciated and the antimony mining buildings and equipment are idle.
5. MINERAL PROPERTY LEASES:
Yellow Jacket Mine
------------------
On February 19, 1988, the Company obtained an assignment from
Geosearch, Inc. ("Geosearch") of all of its rights, title and interest in and
to the lease agreement dated July 8, 1987 by and between Yellow Jacket Mines,
Inc., the Company and Geosearch. In consideration of the assignment of the
lease, the Company agreed to conduct certain exploration and to provide a
preliminary mining plan which, if justified, would result in applications for
permitting and bonding purposes with the state of Idaho, the U.S. Forest
Service and other agencies to mine and mill gold. The Company also agreed to
pay Geosearch a 12.5% net operating profits interest until the Company has
recovered its full investment in the property, and thereafter, Geosearch would
receive a 15% net operating profits interest. The Company pays Geosearch a
minimum monthly payment of $1,000 during the months of January through April,
if operations are closed due to weather, and $2,000 per month for the months
of May through December of each year. After the mill was built at the Yellow
Jacket mine in 1990, the Company paid Geosearch $25,000 per year in staggered
installments, with all payments accumulated and credited against the net
operating profits due Geosearch. Net operating profits and guaranteed minimum
payments paid to Geosearch apply to a $600,000 maximum amount.
<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. MINERAL PROPERTY LEASES, CONTINUED:
Yellow Jacket Mine, Continued
-----------------------------
In March 1994, Geosearch filed an action in the Seventh Judicial
District Court, Custer County, Idaho, alleging breach of the 1988 assignment
of lease. The lawsuit requested recovery of $94,013 in past royalties and
accrued interest thereon. On September 9, 1994, the Company settled the
litigation by agreeing to an amendment to the assignment of lease. The
amendment calls for the payment of past royalties and accrued interest through
the assignment of 5% of gross receipts from gold production at the Yellow
Jacket mine. The unpaid balance accrues interest at 10% per annum until paid
in full and is included in judgments payable (see Note 6). In 1995, pursuant
to the settlement agreement, the Company issued 50,000 shares of its
unregistered common stock and 100,000 common stock purchase warrants
exercisable at $.35 to Geosearch (see Note 12). The Company also paid $4,000
in legal fees incurred by Geosearch.
The underlying lease with Yellow Jacket Mines, Inc. requires the
payment of a net smelter royalty of 5% with a minimum annual royalty of
$27,500. During the years ended December 31, 1996 and 1995, the Company
incurred $41,635 and $73,001, respectively, in royalties related to these
agreements.
Continental-Columbia Claims
---------------------------
On March 15, 1989, the Company entered into a lease agreement with
Yellow Jacket Mines, Inc. to lease a group of patented and unpatented mining
claims (the Continental-Columbia claims) in Lemhi County, Idaho. The
Continental-Columbia claims are contiguous to the Company's Yellow Jacket
claims. The initial term of the lease was for 5 years with a right to renew
for an additional 5-year period. In consideration for the lease, the Company
agreed to pay Yellow Jacket Mines, Inc. a production royalty and minimum
royalty payments during the term of the agreement. On April 1, 1993, the lease
agreement was revised to waive the minimum guaranteed royalty due March 1,
1993 of $15,000 in lieu of a commitment from the Company to expend at least
$10,000 in exploration and development work on the Continental-Columbia
claims. The revision also provided for the renewal of the lease on an annual
basis and granted the Company a first right of refusal should the Company
terminate the lease and another party express interest in the property.
The Company did not renew the lease until October 1996, at which
time a new agreement was consummated. Under the new agreement, the Company
issued 25,000 shares of its restricted common stock for the first fiscal year
of the lease. For the second and ensuing years, the Company will pay 1% of
net
<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. MINERAL PROPERTY LEASES, CONTINUED:
Continental-Columbia Claims, Continued
--------------------------------------
smelter royalties from the Yellow Jacket mine with a guaranteed
minimum of $10,000 annually. Also, if the Continental-Columbia claims are
brought into production, the Company will pay 5% of the net smelter royalties
with a guaranteed $10,000 annual minimum and the 1% net smelter royalty from
the Yellow Jacket production will cease. The Company has the right to renew or
cancel the lease on an annual basis.
6. JUDGMENTS PAYABLE:
At December 31, 1996 and 1995, the Company owed the following judgments
payable:
1996 1995
-------- --------
Payable to:
Trustee for former legal counsel's
bankruptcy estate $ 60,772(1) $
66,978
Former legal counsel for unpaid fees
727
Geosearch, Inc. (see Note 5) 70,992(2)
80,160
-------- --------
$ 131,764 $ 147,865
======== ========
(1)Includes interest at the Federal Judgment Rate, which
approximated 6% during 1996 and 1995. The amount is collateralized by certain
equipment.
(2)Includes interest at 10% per annum.
7. PAYABLE TO RELATED PARTIES:
Amounts payable to related parties at December 31, 1996 and 1995 were as
follows (see Note 14):
1996 1995
-------- --------
John C. Lawrence, president and
director $ 553,954 $ 560,479
Walter L. Maguire, Sr., director 27,000
27,000
Walter L. Maguire, Jr., director 29,344
27,555
Robert Rice, director 34,454 31,313
-------- --------
$ 644,752 $ 646,347
======== ========
<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
7. PAYABLE TO RELATED PARTIES, CONTINUED:
Transactions affecting the payable to Mr. Lawrence during 1996 and 1995
were as follows:
1996 1995
-------- --------
Balance, beginning of year $ 560,479 $ 605,916
Equipment rental charges 44,715 56,482
Salary and vacation expense 54,000 52,850
Other advances 4,843 32,948
Payments (110,083) (187,717)
-------- --------
Balance, end of year $ 553,954 $ 560,479
======== ========
Interest is payable on these liabilities, except for Mr. Maguire, Sr., at
10% per annum and is included in the above amounts for Messrs. Maguire, Jr.
and Rice. The payable to Mr. Maguire, Sr. is non-interest bearing.
As described in Note 9, these payables may be converted to Series C
preferred stock.
8. NOTES PAYABLE TO BANK:
Notes payable to First State Bank of Thompson Falls, Montana ("First
State Bank") at December 31, 1996 were as follows:
Five-year term note payable bearing interest
at 2.5% over the bank's daily Adjustable Rate
Mortgage ("ARM"), which was 10.75% at
December 31, 1996. The note is payable monthly
from 5% of receipts from all Company sales up
to $5,155 per month. The note is collateralized
by certain equipment and patented and unpatented
mining claims in Sanders County, Montana. The
note is personally guaranteed by John C.
Lawrence. The note is due on August 1, 2001.
$ 222,035
Note payable under a revolving line-of-credit
agreement bearing interest at 2.5% over the
bank's daily ARM rate, which was 10.75% at
December 31, 1996. The note is collateralized
by certain equipment and patented and unpatented
mining claims in Sanders County, Montana. The
maximum borrowing under the line of credit is
$50,000. Principal and accrued interest is due
at maturity on August 1, 1997 and is personally
guaranteed by John C. Lawrence.
19,391<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. NOTES PAYABLE TO BANK, CONTINUED:
Note payable under a revolving line-of-credit
agreement bearing interest at 2.5% over the
bank's daily ARM rate, which was 10.75% at
December 31, 1996. The note is collateralized
by certain equipment and patented and unpatented
mining claims in Sanders County, Montana. The
maximum borrowing under the line of credit is
$75,000. Principal and accrued interest is due
at maturity on September 1, 1997 and is
personally guaranteed by John C. Lawrence. $
69,578
- -------- 311,004
Less current portion 125,397
--------
Noncurrent portion $ 185,607
========
Based on the interest rates in effect at December 31, 1996, principal
payments on the notes payable are due as follows:
Year Ending
December 31,
------------
1997 $ 125,397
1998 44,035
1999 49,009
2000 54,545
2001 38,018
--------
$ 311,004
========
The note agreements require the Company to maintain certain minimum
insurance coverages. At December 31, 1996, the Company was in compliance with
these requirements.
9. DEBENTURES PAYABLE:
On April 15, 1985 and May 2, 1988, the Company issued $300,000 of
convertible debentures and $350,000 of subordinated convertible debentures,
respectively. Both debenture issues were unsecured, convertible into common
stock of the Company at any time prior to their maturity date and required
semiannual interest payments of 10%. At December 31, 1996 and 1995, the
Company had amounts due the Walter L. Maguire 1935 Trust, an entity whose
beneficiaries include Walter L. Maguire, Sr., and Walter L. Maguire, Jr.,
stockholders of the Company, totaling $335,000 in the form of subordinated
convertible debentures of $135,000 and $200,000 in convertible debentures.
Walter L. Maguire, Sr., is also a director of the Company. The Company also
had $215,000 of subordinated convertible debentures outstanding to other
stockholders and individuals at December 31, 1996 and 1995.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
9. DEBENTURES PAYABLE, CONTINUED:
The convertible and subordinated convertible debentures were scheduled to
mature on April 14, 1991 and April 14, 1993, respectively. No interest or
principal payments have been made on either debenture issue since 1989, and
the debentures are in default. The debenture agreements provided that in the
event of default, the principal could be declared due by not less than 51% of
the debenture holders.
On February 21, 1996, a proposal was submitted to the holders of
defaulted convertible and subordinated convertible debentures and holders of
related-party debt offering an opportunity to convert their debenture
principal and accrued interest into common stock of the Company. On August 8,
1996, the proposal was revised to offer debenture and other debt holders
conversion rights into a Series C preferred stock that would be convertible
into common stock of the Company. The proposal offered to issue one share of
convertible Series C preferred stock for every $.55 of defaulted principal and
accrued interest to December 31, 1996 associated with both classes of
debentures. The preferred stock would have the same voting rights as common
stock and contain the following features:
(i)One-to-one conversion into common stock of the Company for a
period of 18 months.
(ii)A liquidation preference subject to the preferences of the
Company's outstanding Series A and B preferred stocks.
(iii)20% of the underlying common stock shall have registration
rights when, and if, the Company files a registration statement.
The proposal also gave each debt holder agreeing to convert the principal
balance of his or her debt and at least 70% of the accrued interest on or
before January 1, 1997 the option of:
(i)receiving the remaining unconverted portion of accrued interest
in the form of quarterly cash payments in proportion to the holder's relative
amount of accrued interest with respect to total converted accrued interest
from a "sinking fund" of $5,000 per month contributed from an irrevocable
assignment of gross revenues that would be administered by the First State
Bank, or
(ii)receiving one warrant to purchase common stock of the Company
for every $.55 of accrued interest converted to the preferred stock in excess
of 70% of the accrued interest converted on each debenture. Said warrant would
be exercisable at $.70 per share for a period of three years.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
9. DEBENTURES PAYABLE, CONTINUED:
The proposal is contingent upon its ratification by the Company's
stockholders at their annual meeting in 1997 and each debenture holder's
review of the Company's audited financial statements.
In connection with the proposal made to debenture holders, proposals with
identical terms were offered to each creditor/director of the Company by the
other unrelated directors to convert their debts and accrued interest thereon
(described in Notes 7 and 11) into Series C preferred stock. All of the
proposals to convert debt and accrued interest were accompanied by an
acknowledgment indicating the debt holder's intent to convert or not convert
their debts contingent upon review of the Company's audited financial
statements and ratification of the proposal by the Company's stockholders.
As of December 31, 1996, the following acknowledgments had been received
by the Company:
Balance Outstanding
as of December 31, 1996
--------------------------------
Accrued
Principal Interest Total
---------- ---------- --------
John C. Lawrence,
Director $ 553,954 $ 285,652 $ 839,606
Robert A. Rice,
Director 28,768 5,686 34,454
Walter L. Maguire,
Sr., Director 27,000 27,000
Convertible debentures 100,000 67,124
167,124
Subordinated convertible
debentures 190,000 146,535 336,535
---------- ---------- ----------
$ 899,722 $ 504,997 $ 1,404,719
========== ========== ==========
10.NOTE PAYABLE TO BOBBY C. HAMILTON:
On July 7, 1990, the Company entered into a mining venture agreement with
BumbleBee Inc. ("BumbleBee"), a company controlled by Bobby C. Hamilton
("Hamilton"), a stockholder and creditor of the Company, to explore, develop
and operate the Company's Yellow Jacket property. Pursuant to the agreement,
the Company contributed its leasehold interest in the Yellow Jacket property
and the use of certain mining and milling equipment to the venture. Hamilton
contributed $500,000 cash, and in exchange received a 40% net profits interest
in gold production from the mine when it was developed.
<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
10.NOTE PAYABLE TO BOBBY C. HAMILTON, CONTINUED:
The venture developed a mine and mill at the property and began gold
production in 1991. The mine did not operate profitably and Hamilton continued
to advance cash to the Company to maintain operations. In December 1994, the
Company attempted to quantify and clarify amounts due Hamilton as a result of
his advances to the Company and from previous debt and stock price guarantees
without success.
On August 1, 1995, the Company filed a complaint in the United States
District Court of Idaho against Hamilton and BumbleBee. The complaint sought
declaratory and injunctive relief from a judicial determination by the court
of the amounts due and owing Hamilton and BumbleBee and of the effect of
various debt and repayment agreements between the Company and Hamilton.
On November 15, 1995, the action was settled and Hamilton's obligation
was determined to be $1,800,000, which included $500,000 for the purchase of
Hamilton's 40% net profits interest in the Yellow Jacket mine. The unsecured
debt accrues interest at 7.5%, is payable from 10% of the Company's gross
sales from all operations and requires a minimum payment of $150,000 annually,
including interest. The settlement agreement released all security interests
Hamilton had in the Company's real and personal properties, recovered 916,667
shares of Series B preferred stock and two patented mining claims held by him
as security and terminated the Yellow Jacket venture agreement with BumbleBee.
The settlement agreement also extinguished all previous stock price guarantees
to Hamilton and required his surrender of 150,000 shares of the Company's
common stock to the Company. In connection with the settlement, the Company
canceled warrants granted to Hamilton to purchase 500,000 shares of common
stock at $.25 per share and issued Hamilton 500,000 shares of the Company's
unregistered common stock in connection with the purchase of his 40% net
profits interest in the Yellow Jacket property. The Company recorded the net
350,000 unregistered shares of common stock at 75% of the current market value
of the stock for a total value of $65,625. Since there is no market for the
Series B preferred stock, the Company recorded the return of the 916,667
shares at par value of $9,167, which is the same value assigned to the shares
when they were originally issued. The settlement of the debt resulted in an
extraordinary gain of $28,126 in 1995.
<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
10.NOTE PAYABLE TO BOBBY C. HAMILTON, CONTINUED:
Based on the minimum annual payment requirement, principal payments on
the Hamilton note payable are due as follows:
Year Ending
December 31,
------------
1997 $ 20,494
1998 22,031
1999 23,683
2000 25,459
2001 27,369
Thereafter 1,607,715
----------
$1,726,751
==========
11. ACCRUED INTEREST PAYABLE:
Accrued interest payable at December 31, 1996 and 1995 was as follows:
1996 1995
-------- --------
John C. Lawrence(1) $ 285,652 $ 229,930
Debentures payable(2) 506,588 441,588
Bobby C. Hamilton(3) 612
-------- --------
$ 792,240 $ 672,130
======== ========
(1)John C. Lawrence is a director and president of the Company.
(2)Includes accrued interest of $263,648 and $230,148 for 1996 and
1995, respectively, on debentures owned by the Walter L. Maguire 1935 Trust,
of which Walter L. Maguire, Sr. and Walter L. Maguire, Jr., are beneficiaries.
Walter L. Maguire, Sr., is a director of the Company.
(3)Bobby C. Hamilton is a stockholder of the Company.
Interest expense incurred during 1996 and 1995 for related-party
debenture holders and Messrs. Lawrence and Hamilton was $187,901 and $218,176,
respectively.
As described in Note 9, some of the above interest payable may be
converted to Series C preferred stock.
<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
12. STOCKHOLDERS' DEFICIT:
Stock Warrants
--------------
The Company's Board of Directors has the authority to issue
incentive stock warrants for the purchase of common stock to directors and
employees of the Company. The Company has also issued warrants in exchange for
services rendered the Company and in settlement of certain litigation.
Transactions in stock warrants are as follows:
Number of Expiration
Warrants Option Prices Date
--------- ------------- ----------
Balance, December 31,
1994 500,000 $0.25 (A)
Warrants issued for
services 190,000 $0.25 (B)
Geosearch
(see Note 5) 100,000 $0.35 (B)
Returned by Mr.
Hamilton (500,000) $0.25 (A)
--------
Balance, December 31,
1995 290,000 $0.25-$0.35 (B)
Warrants issued to
employees 25,000 $0.50 (C)
Warrants issued in
connection with
stock sale 200,000 $0.70 (D)
Warrants expired (290,000) $0.25-$0.35 (B)
--------
Balance, December 31,
1996 225,000 $0.50-$0.70
========
(A)Warrants expire when the related debt is retired. Due to the
settlement in 1995 (see Note 10), all warrants were returned to the Company.
(B)Warrants were exercisable at December 31, 1995, but expired before being
exercised during 1996.
(C)Warrants are exercisable on or before January 1, 1999.
(D)Warrants are exercisable on or before April 28, 1999.
<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
12. STOCKHOLDERS' DEFICIT, CONTINUED:
Stock Warrants, Continued
-------------------------
Due to the low volume of trading in the Company's common stock and
the financial condition of the Company, the Company has estimated that the
warrants issued to employees during 1996 have minimal value. Accordingly, the
pro forma effect on net loss and net loss per share for the year ended
December 31, 1996 would be immaterial if the Company accounted for
stock warrants in accordance with SFAS No. 123, "Accounting for Stock-Based
Compensation."
Issuance of Common Stock for Cash
---------------------------------
During 1996, the Company sold 460,000 shares of its unregistered
common stock for $127,560. The sales were as follows:
<TABLE>
<CAPTION>
Share Sale Price
Purchaser Shares Price Total
------------------------------ ------- ------------
- ----------
<S> <C> <C> <C>
Houston Resources(1) 150,000 $0.20 $
30,000
Judith and Philip Knoff(2) 75,000 $0.20
15,000
The Maguire Foundation(4) 75,000 $0.20
15,000
Robert A. Rice(3) 25,000 $0.20 5,000
Delaware Royalty Co.(1) 100,000 $0.55
55,000
Yellow Jacket Mines Inc. 10,000 $0.25
2,500
Other 25,000 $0.2024 5,060
------- ----------- ---------
Total 460,000 $0.20-$0.55 $ 127,560
======= =========== =========
</TABLE>
(1)Companies owned or controlled by Al Dugan, an existing
shareholder.
(2)Sister and brother-in-law of John C. Lawrence, director and
president of the Company.
(3)Director of the Company.
(4)A foundation related to Walter L. Maguire, Sr., a shareholder and
director.
Issuance of Common Stock in Exchange for Services
-------------------------------------------------
During 1996, the Company issued 5,000 shares of its unregistered
common stock to a key employee as compensation. The stock was valued at $1,250
based on the estimated fair value of the stock.
<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
12. STOCKHOLDERS' DEFICIT, CONTINUED:
Issuance of Common Stock in Exchange for Services, Continued
------------------------------------------------------------
During 1995, the Company issued 10,000 shares of its restricted
common stock to an individual for services performed on the Company's behalf.
For the years ended December 31, 1996 and 1995, the Company issued shares of
its unregistered common stock to directors of the Company as compensation for
their attendance at Board of Director meetings (see Note 14). The above shares
were valued at 75% of the market value of the stock at the time they were
issued.
Issuance of Common Stock in Settlement of Litigation
----------------------------------------------------
During 1995, the Company issued 50,000 shares of its restricted
common stock to Geosearch in settlement of an action brought against the
Company to collect past due royalties and lease payments (see Note 5). The
common stock was valued at $2,344 based on 75% of the market value of the
stock at the date of issuance. During 1995, the Company issued 500,000 shares
of its restricted common stock to Bobby C. Hamilton in settlement of an action
brought against him (see Note 10). In addition, the Company received and
retired 150,000 shares of common stock held by Bobby C. Hamilton in settlement
of the action brought against him.
Preferred Stock
---------------
The Company's Articles of Incorporation authorize 10,000,000 shares
of $.01 par value preferred stock. Subject to amounts of outstanding preferred
stock, additional shares of preferred stock can be issued with such rights and
preferences, including voting rights, as the Board of Directors shall
determine.
During 1986, Series A restricted preferred stock 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 liquidation preference
equal to $45,000 plus dividends in arrears. At December 31, 1996, cumulative
dividends in arrears amounted to $47,250 or $10.50 per share.
During 1993, Series B restricted preferred stock was established by
the Board of Directors and 1,666,667 shares were issued in connection with the
final settlement of litigation related to the nonpayment of royalties under a
sublease contract. The Series B preferred stock is in preference to the
Company's common stock and Series A preferred stock, has no voting rights and
is entitled to cumulative dividends of $.01 per share when and if 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
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
12. STOCKHOLDERS' DEFICIT, CONTINUED:
Preferred Stock
---------------
stockholders is $1.00 per share plus all dividends in
arrears. The Series B preferred stock was convertible into common
stock of the Company prior to December 31, 1995. No dividends have been
declared or paid to the Series B shareholders. In 1995, 916,667 shares of
Series B stock were surrendered to the Company in connection with the
settlement of litigation against Bobby C. Hamilton (see Note 10). At December
31, 1996, no Series B shares had been converted into common stock of the
Company. Cumulative dividends in arrears were $22,500 at December 31, 1996.
13. INCOME TAXES:
The components of the deferred tax assets and liabilities at
December 31, 1996 and 1995 are as follows:
1996 1995
------------ ------------
Net operating losses $ 2,315,343 $ 2,156,848
Properties, plants and equipment 185,937
(652)
------------ ------------
Total deferred tax assets 2,501,280
2,156,196
Less valuation allowance (2,501,280)
(2,156,196)
------------ ------------
$ 0 $ 0
============ ============
Statement of Financial Standards No. 109, "Accounting for Income Taxes,"
requires that a valuation allowance be provided if it is more likely than not
that some portion or all of a deferred tax asset will not be realized.
Although the Company has significant deferred tax assets, principally in the
form of net operating loss carryforwards, its ability to generate future
taxable income to realize the benefit of these assets will depend primarily on
curtailing losses at the Yellow Jacket mine and operating its antimony
division profitably. The market, capital and environmental uncertainties
associated with this requirement are considerable and uncertain. Therefore,
management believes that a full valuation allowance of the net deferred tax
assets is appropriate at December 31, 1996 and 1995. However, if estimates of
future taxable income change, the valuation allowance could change in the
future.
<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
13. INCOME TAXES, CONTINUED:
The change in the valuation allowance for the years ended December 31,
1996 and 1995 is as follows:
Balance, December 31, 1994 $ 2,332,607
Decrease due to utilization
of net operating loss
carryforwards (176,411)
------------
Balance, December 31, 1995 2,156,196
Increase due to nonutilization
of net operating loss
carryforwards 345,084
------------
Balance, December 31, 1996 $ 2,501,280
============
During the year ended December 31, 1995, the Company utilized
approximately $516,000 of net operating losses for federal income tax
purposes.
At December 31, 1996, the Company had the following regular tax basis net
operating losses:
Expiring in
2000 $1,894,002
2001 916,998
2002 715,731
2003 866,362
2004 568,416
2005 715,049
2006 512,877
2007 154,235
2011 466,163
----------
$6,809,833
==========
At December 31, 1996, the Company has net operating loss carryforwards
for alternative minimum tax purposes of approximately $6,900,000.
<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
14.RELATED-PARTY TRANSACTIONS:
In addition to transactions described in Notes 7, 9, 10, 11 and 12, during
1996 and 1995, the Company had the following transactions with related
parties:
-In 1995, Walter L. Maguire, Sr., a stockholder and director, sold
the Company $30,000 of laboratory and mining equipment. In connection with the
sale, the Company paid Mr. Maguire $3,000 and recorded a note payable for the
unpaid balance of $27,000 (see Note 7).
-During 1996, the Company issued 24,000 shares of its common stock to
each member of the Board of Directors for their attendance at Board of
Director meetings since 1990. The issuance was pursuant to a decision by the
Board to forego the award of stock warrants to directors for the years
1990-1995. The issuance, which totaled 192,000 shares, represented an award of
8,000 shares per year per director. The issuances have been recorded in the
consolidated financial statements as if they were issued in the year they were
earned. The restricted stock awards were recorded as compensation expense
based upon their estimated value at the date of issuance.
-At December 31, 1995, the Company owed Walter L. Maguire, Jr., a
stockholder and former director, $27,555 for amounts advanced to the Company
by Mr. Maguire. Annual interest expense related to these notes of $1,790 was
incurred in each of 1996 and 1995. In 1996, a company controlled by Walter L.
Maguire, Jr., a stockholder and former director, sold the Company packaging
materials for $32,066. At December 31, 1996, the Company owed Mr. Maguire's
company $9,747, representing the unpaid balance including late payment charges
of $1,445.
-During 1995, Robert A. Rice, a stockholder and director, exchanged
$17,500 of the amount due him for certain fully depreciated mining equipment.
Accordingly, the Company recognized a $17,500 gain on the disposal of the
equipment. Annual interest expense related to balances payable to Mr. Rice was
$3,223 and $2,555 in 1996 and 1995, respectively.
-After the Company's office building was destroyed by fire in 1990,
the Company's president provided office space to the Company at no charge
through 1996.
-During 1995, the Company acquired equipment from Mr. Hamilton
through the issuance of a $125,000 note payable. The note bore interest at 10%
and was paid in full prior to
December 31, 1995.
<PAGE>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
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. The metals were recovered
by a 150-ton per day gravity and flotation mill, and the concentrates were
leached with cyanide to produce a bullion product at the Preachers Cove mill,
which was located six miles north of Sunbeam, Idaho on the Yankee Fork of the
Salmon River. 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. The Company has been reclaiming the property and as of
December 31, 1996, the cyanide solution discharge was complete and the mill
has been removed. The Company anticipates having the cyanide leach residue
containment completely finished by 1998. In 1996, the Idaho Department of
Environmental Quality requested 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. Estimated costs to reclaim this property
have been accrued at December 31, 1996 and 1995. At December 31, 1996, the
liability for the remaining estimated costs to complete remediation at the
site was $135,198.
On November 15, 1996, the Bureau of Land Management (BLM) notified the
Company that it may be a responsible party as defined under CERCLA for
hazardous substances released from uncontained mining tailings at a mining
site near Pine Creek, Idaho. The Company was one of 13 companies that had
received a similar notice.
In response to the notification, the Company informed the BLM that it is
neither a current or former owner of the site, has never been an operator, nor
has it shipped hazardous substances or arranged for the disposal or treatment
of hazardous substances in the Pine Creek area. Accordingly, the Company does
not consider itself a potentially responsible party under CERCLA for the Pine
Creek site. Although no additional notification has been received from the
BLM, the Company believes it does not have a material liability relating to
this site.
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 SFAS 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.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
16. FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED:
The carrying amounts for cash, restricted cash, accounts receivable,
accounts payable and accrued expenses are a reasonable estimate of their fair
values. The fair value of amounts payable to related parties and judgments
payable approximate their carrying values of $644,752 and $131,764,
respectively, at December 31, 1996 and $646,347 and $147,865, respectively, at
December 31, 1995, based upon the contractual cash flow requirements.
It is not practicable to estimate the fair value of the $1.7 million note
payable to Hamilton. The payments are based upon future revenues, which are
uncertain. There are no similar financial instruments in the market to which
the value can be compared. It is also not practicable to estimate the fair
value of the $650,000 debentures which are in default. However, management
believes that the fair value of these debentures is signficantly lower than
their carrying value.
EXHIBIT 7-B
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (fee required)
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (no fee required)
For the transition period_____ to_____
UNITED STATES ANTIMONY CORPORATION
(Name of small business issuer in its charter)
Montana
(State or other jurisdiction of incorporation or organization)
81-0305822
(I.R.S. Employer 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
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
----- -----
At November 10, 1997, the registrant had outstanding 13,065,434 shares of par
value $.01 common stock.
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements and Supplementary Data
United States Antimony Corporation and Subsidiary
Consolidated Balance Sheets
<TABLE>
(Unaudited)
September 30, December 31,
1997 1996
<S> <C> <C>
Current assets:
Restricted cash $35,078
Accounts Receivable 1,000 $33,837
Inventories 564,752 556,249
Prepaid expenses 10,937 21,085
Total current assets 611,767 611,171
------- -------
Properties, plants
and equipment, net 640,469 670,081
Restricted cash, reclamation bonds 178,486 170,046
------- -------
Total assets $1,430,722 $1,451,298
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Checks issued and outstanding $33,416 $29,491
Reserve for production costs 43,000
Accounts payable 122,029 306,636
Accrued payroll and property taxes 83,944 93,454
Accrued payroll and other 37,517 39,823
Judgments payable 142,924 131,764
Accrued interest payable 882,887 792,240
Payable to related parties 608,630 644,752
Notes payable to bank, current 178,205 125,397
Note payable to Bobby C. Hamilton,
current 21,648 20,494
Debentures payable 650,000 650,000
Accrued reclamation costs, current 100,000 100,000
------- -------
Total current liabilities 2,904,200 2,934,051
--------- ---------
Notes payable to bank, noncurrent 118,556 185,607
Note payable to Bobby C. Hamilton,
noncurrent 1,646,566 1,706,257
Accrued reclamation costs,
noncurrent 254,311 215,212
--------- ----------
Total liabilities $4,923,633 $5,141,127
---------- ----------
</TABLE>
Commitments and contingencies
See Notes to Consolidated Financial Statements
<PAGE>
ITEM 1. Financial Statements and Supplementary Data, Continued
United States Antimony Corporation and Subsidiary
Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
1997 1996
<TABLE>
<S> <C> <C>
Stockholders' deficit:
Preferred stock, $.01 par value,
10,000,000 shares authorized:
Series A: 4,500 shares issued and
outstanding $45 $45
Series B: 750,000 shares issued and
outstanding 7,500 7,500
Common stock, $.01 par value,
20,000,000 shares authorized;
13,065,434 and 12,627,434
shares issued and outstanding 130,654 126,274
Additional paid-in capital 13,537,147 13,326,464
Accumulated deficit (17,168,257) (17,150,112)
Total stockholders' deficit (3,492,911) (3,689,829)
------------ ------------
Total liabilities and
stockholders' deficit $1,430,722 $1,451,298
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
United States Antimony Corporation and Subsidiary
Consolidated Statements of Operations for the three and nine-month
periods ended September 30, 1997 and September 30, 1996
<TABLE>
<CAPTION>
Unaudited
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Sales of antimony products $1,083,361 $1,101,688 $3,386,667 $3,420,520
Sales of gold and silver 234,034 666,685
--------- ---------- ---------- ----------
Total Revenues 1,083,361 1,335,722 3,386,667 4,087,205
--------- ---------- ---------- ----------
Cost of Production:
Cost of antimony production 801,041 1,040,662 2,737,414 3,013,025
Cost of gold and
silver production 285,308 935,048
--------- ---------- --------- ----------
Total Cost of Production 801,041 1,325,970 2,737,414 3,948,073
--------- ---------- --------- ----------
Gross Profit 282,320 9,752 649,253 139,132
--------- ---------- --------- ----------
Other operating expenses:
Care and maintenance
Yellow Jacket 48,336 157,949
Exploration and evaluation 44,961 123,253
General and administrative 77,621 74,277 223,789 251,944
------- ------ ------- -------
170,918 74,277 504,991 251,944
------- ------ ------- -------
Other expenses (income):
Gain on disposal of asset (45,000)
Gain from accounts
payable adjustment (37,386)
Interest expense 79,251 57,504 227,980 197,451
Interest income (1,520) (2,725) (10,238) (7,175)
Other (17,949) (17,949)
59,782 54,779 162,407 145,276
--------- -------- ---------- ---------
Net income (loss) $51,620 $(119,304) $(18,145) $(258,088)
======== ========= ======== ========
Net Income (loss)
per share Nil $(.01) Nil $(.03)
======== ========= ======== ========
Weighted average common
shares outstanding 13,065,434 12,543,399 12,952,997 12,281,496
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
United States Antimony Corporation and Subsidiary
Consolidated Statement of Cash Flows
for the three and nine-month periods ended
September 30, 1997 and September 30,1996
<TABLE>
<CAPTION>
Unaudited
September 30, September 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $(18,145) $(258,088)
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 122,331 155,626
Gain on disposal of equipment (45,000)
Issuance of common stock to
directors as compensation 5,063
Gain on adjustment to
accounts payable (37,386)
Reservation for production costs 43,000
Change in:
Restricted cash (43,518) 4,598
Accounts receivable 32,837 39,038
Inventories (8,503) (109,788)
Prepaid expenses 10,148 (6,578)
Accounts payable (184,607) 7,973
Accrued payroll and property
taxes (9,510) (25,884)
Accrued payroll and other (2,306) (5,178)
Judgments payable 11,160 (11,214)
Accrued interest payable 90,647 80,160
Payable to related parties (36,122) 2,319
Accrued reclamation costs (60,901) (70,607)
--------- ---------
Net cash used in operating activities (48,426) (242,623)
--------- ---------
Cash flows from investing activities:
Purchase of properties, plant and
equipment (92,719) (116,012)
Sale of property 45,000
--------- ---------
Net cash used in investing activities (92,719) (71,012)
--------- ---------
Cash flows from financing activities:
Payments on notes payable
to bank (net) (58,057) (51,289)
Proceeds from note payable
to bank, current 43,814
Proceeds from long-term bank debt 238,297
Payments to Bobby C. Hamilton (58,537) (49,922)
Proceeds from sale of common stock 210,000 127,560
Advances from bank overdraft 3,925 43,189
--------- ---------
Net cash provided by financing
activities 141,145 307,835
--------- ---------
Net decrease in cash -0- (5,800)
Cash, beginning of period -0- 5,800
--------- ---------
Cash, end of period $ -0- $ -0-
========= =========
Supplemental disclosures:
Cash paid during the nine-month
period for interest $137,333 $117,291
-------- --------
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
PART I - FINANCIAL INFORMATION (Continued)
UNITED STATES ANTIMONY CORPORATION and SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Notes to December 31, 1996 consolidated financial statements:
The notes to the consolidated financial statements as of December 31, 1996, as
set forth in the Company's 1996 Annual Report on Form 10-KSB, substantially
apply to these interim consolidated financial statements and are not repeated
here.
2. Adjustments to financial statements:
The financial statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the interim
periods reported. All such adjustments are of a normal recurring nature. All
financial statements presented herein are unaudited. However, the balance
sheet as of December 31, 1996, was derived from the audited consolidated
balance sheet referred to in Note 1 above.
3. Commitments and contingencies
Until 1989, the Company mined, milled and leached gold and silver in
the Yankee Fork Mining District in Custer County, Idaho. The metals were
recovered by a 150-ton per day gravity and flotation mill, and the
concentrates were leached with cyanide to produce a bullion product at the
Preachers Cove mill, which is located nine miles north of Sunbeam, Idaho on
the Yankee Fork of the Salmon River. 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 Company signed a
consent decree with the Idaho Department of Environmental Quality relating to
completing the reclamation and remediation at the Preachers Cove mill. The
Company anticipates having the cleanup complete sometime in 1998.
On November 15, 1996, the Bureau of Land Management (BLM) notified the Company
that it may be a responsible party as defined under CERCLA for hazardous
substance release from uncontained mining tailings at a mining site near Pine
Creek, Idaho. The Company was one of 13 companies that had received a similar
notice.
In response to the notification the Company informed the BLM that it is
neither a current or former owner of a site, has never been an operator, nor
has it shipped hazardous substances or arranged for the disposal or treatment
of hazardous substances in the Pine Creek area. Accordingly, the Company does
not consider itself a potentially responsible party under CERCLA for the Pine
Creek site.
On August 21, 1997, the Company received correspondence from the United
States Environmental Protection Agency, Region 10, informing the Company that
it will not recommend that the Company be added to the litigation involving
contamination at the Pine Creek site.
ITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
General
Section 21E of the Securities Exchange Act of 1934 provides a "Safe Harbor"
for forward-looking statements. Certain information included herein contains
statements regarding management's expectations about future production and
development activities as well as other capital spending, financing sources
and effects of regulation. Such forward-looking information involves
important risks and uncertainties that could significantly affect anticipated
results in the future and, accordingly, such results may differ from those
expressed in any forward-looking statements made herein. These risks and
uncertainties include, but are not limited to, those relating to the market
price of metals, production rates, production costs, availability of continued
financing, and the Company's ability to remain a going concern. The Company
cautions readers not to place undue reliance on any forward-looking
statements, and such statements speak only as of the date made.
The Company's business is subject to various risk factors, some of which are
discussed in the Company's report on Form 10KSB for the year ended December
31, 1996, in "Item 1. Description of Business" and in Notes to Consolidated
Financial Statements, "2. Concentration of Risk:"
Results of Operations, comparison of the nine and three-month periods
ended September 30, 1997 and September 30, 1996
The Company's operations resulted in a net loss of $18,145 for the nine-month
period and net income of $51,620 for the three-month period ended September
30, 1997, compared to net losses of $258,088 and $119,304 for the same
respective periods in 1996. The increase in income is primarily due to
increased gross profit in the antimony division and decreased general and
administrative expenses.
Total revenues for the first nine months of 1997 were $3,386,667 compared with
$4,087,205 for the comparable period in 1996, a decrease of $700,538. Total
revenues during the third quarter of 1997 were $1,083,361 compared with
$1,335,722 during the third quarter of 1996, a decrease of $252,361. The
decrease in revenues during 1997 compared to 1996 was due to the absence of
gold sales in 1997. Sales of antimony products during the first nine months of
1997 were $3,386,667 consisting of 2,346,336 pounds at an average sale price
of $1.44 per pound. During the third quarter of 1997 sales of antimony
products were $1,083,361 consisting of 774,829 pounds at an average sale
price of $1.40 per pound. Sales of antimony products during the first nine
months of 1996 were $3,420,520 consisting of 1,802,402 pounds at an average
sale price of $1.90 per pound. During the third quarter of 1996 sales of
antimony products were $1,101,688 consisting of 678,340 pounds at an average
sale price of $1.62 per pound. The decrease in sale prices of antimony
products from the comparable nine and three month periods in 1996 to those
of 1997 is the result of a corresponding decrease in antimony metal prices.
Gross profit from antimony sales during the first nine months of 1997 was
$649,253, and $282,320 during the third quarter of 1997, compared with gross
profit of $407,495 during the first nine months of 1996 and $61,026 during
the third quarter of 1996. The increases in gross profit for the nine and
three month periods ended September 30, 1997, compared to the same periods of
1996 are principally due to lower costs of antimony metal and increasing
sales of antimony products with greater gross margins.
The Company reports 50% of total antimony sales made by HoltraChem and the
Company. Accordingly, total sales of antimony products by both companies was
$6,773,334 or 4,693,463 pounds during the first nine months of 1997 and
1,549,657 pounds during the third quarter of 1997. Substantially all of the
antimony products sold were produced at the Company's plant in
Thompson Falls, Montana.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition (Continued):
Sales of gold and silver totaled $666,685 during the first nine months of 1996
and $234,034 during the third quarter of 1996. Ounces of gold sold during the
nine and three month periods ended September 30, 1996, were 1,726 and 631,
respectively. Gross losses from the gold division were $268,363 and $51,274
for the nine and three month periods ended September 30, 1996, respectively.
In August of 1996 the Company discontinued mining operations at Yellow Jacket
due to recurring operating losses, and placed the property on a
care and maintenance basis. Concurrently, the Company began an underground
exploration program in an effort to discover mineralized material that could
be economically mined and processed. Costs related to the care and
maintenance of Yellow Jacket were $157,949 and $48,336 for the nine and three
month periods ended September 30, 1997, respectively. Costs related to
exploration and evaluation were $123,253 and $44,961 for the nine and three
month periods ended September 30, 1997, respectively.
General and administrative expenses decreased $28,155 during the first nine
months of 1997 compared to the first nine months of 1996. The decrease in
general and administrative costs n 1996 compared to 1997 was principally due
to legal fees relating to the Company's USAMSA negotiations and increased
professional and accounting fees related to the Company's annual audit of it's
financial statements and efforts to regain compliance with the Securities and
Exchange Commission incurred in 1996.
During the first nine months of 1996 the Company recognized a gain on the
disposal of property of $45,000. There were no gains or losses on disposition
of assets for the comparable period in 1997.
Interest expense was $227,980 and $79,251 for the nine and three month periods
ended September 30, 1997, respectively, compared to $197,451 and $57,504 for
the same periods in 1997. The increase was due to a increased borrowings from
a bank in 1997.
Interest income was $10,238 and $1,520 for the nine and three month periods
ended September 30, 1997, respectively, compared to $7,175 and $2,725 for the
same periods in 1996. The increase in interest income was attributable to a
corresponding increase in restricted cash held for reclamation purposes and
restricted cash held for USAMSA development.
During the nine month period ended September 30, 1997 the Company realized a
gain from an accounts payable adjustment of $37,386, there was no such gain
during the comparable period of 1996. In addition,
the Company realized other income of $17,949 during the three and nine month
periods ended September 30, 1997. The other income was principally composed
of proceeds from the sale of residual gold contained in carbon from the
Preachers Cove mill, there were no similar sources of other income during the
comparable periods of 1996.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition (Continued):
Financial Condition and Liquidity
At September 30, 1997, Company assets totaled $1,430,722, and there was a
stockholders' deficit of $3,492,911. The accumulated deficit increased
$18,145 from December 31, 1996 due to the net loss recognized from the
Company's operations during the first nine months of 1997. In order to
continue as a going concern, the Company is dependent upon (1) the planned
conversion of certain debt and accrued interest to equity (2) profitable
operations from the antimony division, (3) additional equity financing, and
(4) continued availability of bank financing. Without such debt conversions
and additional financing, the Company may not be able to meet its obligations,
fund operations and continue in existence. There can be no assurance that
management will be successful in its plans to improve the financial condition
of the Company.
Cash consumed by operating activities during the first nine months of 1997 was
$48,426 compared to $242,623 during the same period in 1996. The decrease
related primarily to decreased operating losses during 1997 as compared to
the same period in 1996. Investing activities consumed $92,719 during the
first nine months of 1997 and resulted from the Company's investment in
domestic and Mexican (USAMSA) antimony processing equipment and buildings.
Cash provided by investing activities during the nine months ended September
30, 1996, consisted of $45,000 from the disposal of property. Purchases of
property plant and equipment in the antimony division consumed $116,012 of
cash during the first nine months of 1996.
Proceeds of $210,000 were generated through stock sales during the first
nine months of 1997 compared with $127,560 from sales of common stock during
the comparable period of 1996.
Borrowings of $238,297 pursuant to a five-year note payable provided
additional cash during the third quarter of 1996, similar short term
borrowings from a bank provided $43,814 during the third quarter of 1997.
Cash used by financing activities totaled $116,594 during the first nine
months of 1997 compared with $101,211 during the comparable period of 1996.
In both periods cash used by financing activities consisted of payments on
notes to a bank and Bobby C. Hamilton. Advances in the form of bank
overdrafts was $3,925 during the first nine months of 1997 and $43,189 during
the nine-month period ended September 30, 1996.
Significant financial commitments for future periods will include:
Providing $5,000 per month for a "sinking fund" to pay defaulted
debentures and accrued interest, which are not ultimately converted.
Servicing borrowings from the bank.
Servicing the Hamilton note payable at a minimum of $150,000 annually.
Keeping current on payroll tax liabilities and accounts payable.
Fulfilling its responsibilities with environmental regulatory and
financial reporting agencies.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition (Continued):
Annual care and maintenance costs at the Yellow Jacket mine.
Minimum annual royalty payments of $52,500 to Geosearch and Yellow
Jacket mines.
Providing antimony profits to fund its antimony inventory.
The Company plans to address these and other financial requirements by
enhancing the value of its gold properties through an exploration program
begun in 1996. The Company hopes to develop additional reserves from
exploration and generate funds from the sale, joint venture or eventual
production from the property.
In 1997, $210,000 was generated through sales of shares of unregistered common
stock to existing stockholders, directors, and others to help finance
operations and develop the Company's interests in USAMSA. In the fourth
quarter of 1996, the Company sought and obtained sponsorship to list the
Company's stock on NASD's Electronic Bulletin Board trading exchange.
While the Company has yet to sign a definitive agreement relating to its
investment in USAMSA, it continues to expend cash in the development of
Mexican antimony operations. The Company hopes that additional financial
resources will be available from these operations once the finalization of the
Company's interest is complete and antimony production from USAMSA begins.
On October 3rd, 1997, the Company held its first annual shareholders' meeting
since 1989. During this meeting the Company's directors were elected to
serve for another annual term and a proposal to convert certain director and
debenture holder debt into convertible Series C Preferred Stock was approved.
The Company's managementintends to proceed with the proposal to debt holders
to convert their debts into Series C Preferred Stock and improve the
financial position of the Company.
<PAGE>
PART I I - OTHER INFORMATION
Items 1, 2, 3, 4, and 5 are omitted from this report as inapplicable.
ITEM 6. Exhibits and Reports on Form 8-K
Exhibit No. Item Dated
10.27 Letter from Environmental August 21, 1997
Protection Agency, Region 10
<PAGE>
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: November 12, 1997
John C. Lawrence, Director and President
(Principal Executive, Financial and Accounting
Officer)
<PAGE>
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
REGION 10
1200 Sixth Avenue
Seattle, Washington 98101
August 21, 1997
In Reply
Refer to: ORC-158
John C. Lawrence
for United States Antimony Corp.
1250 Prospect Creek Road
Thompson Falls, Montana 59873
Dear Mr. Lawrence:
Earlier this summer, the U.S. Environmental Protection Agency sent you a
request for information pursuant to its authority under Section 104(e) of the
Comprehensive Environmental Response, Compensation and Liability Act of
1980,42 U.S.C. 9604(e). EPA sent similar requests to a number of companies
associated with mining activities in the Coeur d'Alene River Basin. We needed
this information in order to identify parties who contributed substantially to
environmental contamination in the Coeur d'Alene River Basin. Parties who
have contributed substantially to this contamination may be added to
litigation originally filed on March 22, 1996, U.S. v. ASARCO, et al., No.
96-0122-N-EJL.
After reviewing the information contained in your response and provided
by other sources, EPA has determined that it will not recommend adding United
States Antimony Corp. to this litigation. In providing this notice, EPA
reserves its right to take separate actions if such action is later
warranted. For now, however, we wanted to advise you of our determination
based on available information.
Your efforts, and those of the others responding to the information
requests, have helped the EPA make fair decisions in this massive undertaking
to ensure the future protection of human health and the environment in the
Coeur d'Alene River Basin.
If you have any questions concerning this letter or related issues,
please call Tom Swegle of the Department of Justice at (202) 514-3143.
Sincerely,
By:/s/Charles E. Findley
Date:August 21, 1997
Charles E. Findley
Deputy Regional Administrator
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