As filed with the Securities and Exchange Commission
on ________, 2000
Registration No. __________
=================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM SB-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933
__________________________________
UNITED STATES ANTIMONY CORPORATION
(Name of small business issuer in its charter)
Montana 3339 81-
0305822
(State or other (Primary Standard (I.R.S.
jurisdiction of Industrial Employer
incorporation or Classification Code Number) Identifi-
organization) cation)
P.O. Box 643
1250 Prospect Creek Road
Thompson Falls, Montana 59873
Telephone: (406) 827-3523
(Address and telephone number of principal executive offices)
__________________________________
John C. Lawrence
President and Chairman
United States Antimony Corporation
P.O. Box 643
1250 Prospect Creek Road
Thompson Falls, Montana 59873
Telephone (406) 827-3523
(Name, address, and telephone
number of agent for service)
__________________________________
Approximate date of proposed sale to the public: From time to time
after the effective date of this Registration Statement.
- i -
<PAGE>
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. [ ] ___________________________________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
___________________________________
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
___________________________________
If delivery of the prospectus is expected to be made pursuant to
Rule 434, check the following box. [ ]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
==============================================================================
CALCULATION OF REGISTRATION FEE
------------------------------------------------------------------------------
Proposed Proposed Amount of
Maximum Maximum Registration
Title of Each Dollar Offering Aggregate Fee
Class of Securities Amount to be Price Per Offering
to be Registered Registered(1) Share(2) Price(2)
------------------------------------------------------------------------------
Common Stock, par
value $.01 per share$291,250 $0.29125 $291,250 $76.89
------------------------------------------------------------------------------
</TABLE>
(1) This Registration Statement relates to the
registration of One Million (1,000,000) shares of $.01 par value
common stock ("Common Stock") which we are obligated to register
pursuant to the Registration Rights Agreement. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Financial Condition and Liquidity at June 30, 2000."
(2) Pursuant to Rule 457 under the Securities Act of 1933,
as amended, the price per share is $0.29125, based upon the
conversion price for the shares issuable upon conversion of the
Company's convertible debentures.
=================================================================
The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically
states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until the registration statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a),
may determine.
=================================================================
- ii -
<PAGE>
PROSPECTUS
UNITED STATES ANTIMONY CORPORATION
a Montana corporation
1,000,000 Shares of $0.01 Par Value Common Stock
This Prospectus relates to 1,000,000 shares of our $0.01 par value
common stock ("Shares"), which we are required to register pursuant
to a Registration Rights Agreement with certain purchasers of
Company's debentures (the "Investors"). We are registering these
shares by filing a registration statement with the Securities and
Exchange Commission. These shares are issuable upon conversion of
those debentures and/or upon exercise of related warrants we issued
to the Investors.
Upon conversion of the debentures and/or exercise of the warrants
into our common stock, the Investors may offer all or some portion
of those Shares for sale from time to time. We will receive no
part of the proceeds from any sale of our common stock by the
Investors.
PROSPECTIVE PURCHASERS OF OUR COMMON STOCK SHOULD CAREFULLY REVIEW
THE "RISK FACTORS" SECTION OF THIS PROSPECTUS BEGINNING ON PAGE 4.
Our common stock is currently trading on the Over The Counter (OTC)
Bulletin Board Market under the trading symbol "UAMY". The
Investors may from time to time sell the Shares on OTC Bulletin
Board Market, on any other national securities exchange or
automated quotation system on which our common stock may be listed
or traded, in negotiated transactions or otherwise, at prices then
prevailing or related to the then current market price or at
negotiated prices. The Shares may be sold directly or through
brokers or dealers. On September 7, 2000, the average of the
closing bid and asked prices of our common stock as reported on the
OTC Bulletin Board Market was $______.
The Investors and any broker-dealers participating in the
distribution of Shares may be deemed to be "underwriters" within
the meaning of the Security Act of 1933 ("1993 Act"); and any
commissions or discounts given to any such broker-dealer may be
regarded as underwriting commissions or discounts under the 1933
Act. The Shares have not been registered for sale by the Investors
under the securities laws of any state as of the date of this
Prospectus. Brokers or dealers effecting transactions in the
shares should confirm the registration thereof under the securities
laws of the states in which transactions occur or the existence of
any exemption from registration.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is _________, 2000.
- 1 -
<PAGE>
=================================================================
TABLE OF CONTENTS
Caption Page
------- ----
SUMMARY OF THE OFFERING 3
RISK FACTORS 4
CONDENSED CONSOLIDATED FINANCIAL INFORMATION 7
USE OF PROCEEDS 8
DETERMINATION OF OFFERING PRICE 8
DILUTION 9
SELLING SECURITY HOLDERS 9
PLAN OF DISTRIBUTION 10
DESCRIPTION OF SECURITIES 11
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 13
DESCRIPTION OF BUSINESS 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 16
DESCRIPTION OF PROPERTY 21
DIRECTORS AND EXECUTIVE OFFICERS 22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 24
EXECUTIVE COMPENSATION 25
LEGAL PROCEEDINGS 26
INTEREST OF NAMED EXPERTS AND COUNSEL 26
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT VIOLATIONS 26
FINANCIAL STATEMENTS 27
=================================================================
- 2 -
<PAGE>
SUMMARY OF THE OFFERING
The following summary of certain information contained in this
Prospectus is qualified in its entirety by reference to the more
detailed information appearing elsewhere herein. Prospective
investors are urged to carefully read the entire Prospectus,
including the Financial Statements, before making an investment
decision.
THE COMPANY. United States Antimony Corporation ("USAC", or
"Company") is a Montana corporation. Its principal business is the
production of antimony products including antimony metal, oxides
and sodium antimonate.
The Company's antimony properties, mill and metallurgical plant are
located in Montana. Mining of antimony was suspended in 1983
because antimony can be purchased more economically from foreign
sources. The Company has acquired a 50% interest in United States
Antimony, Mexico S.A. de C.V., which will produce antimony metal
and other products to be delivered to the Company's Montana mill
for processing. In the year ended December 31, 1999 and the six
months ended June 30, 2000, antimony product sales generated
revenues of approximately $4.7 million and $2.4 million,
respectively.
Previous gold mining and milling operations have been suspended or
abandoned due to depressed precious metals prices. Reclamation and
closure activities on the Company's mining properties, located in
Idaho, are nearing completion.
THE DEBENTURES. Effective July 11, 2000, the Company entered into
a financing agreement to issue up to $1,500,000 of 10% convertible
debentures ("Debentures"); and the first tranche of $600,000
principal amount of Debentures has been issued. Proceeds of those
Debentures were applied to the settlement of certain claims,
resulting in an approximately $839,000 reduction of the Company's
stockholders' deficit and improvement of its cash flow.
The $600,000 Debentures issued to date are convertible into
2,060,086 shares of USAC's common stock at the conversion price of
$0.29125 per share. In addition, the Company issued warrants to or
on behalf of the Debenture purchasers ("Investors") for an
aggregate of 1,346,154 shares of USAC's common stock exercisable
for $0.39 per share.
REGISTRATION RIGHTS. Pursuant to a registration rights agreement,
the Company agreed to register (i) the issuance of the shares to be
issued upon conversion of the Debentures and upon exercise of the
warrants, and (ii) the resale of those shares by the Investors.
For the initial $600,000 Debenture tranche, the registration rights
agreement requires that the Company register 4,436,283 shares of
common stock. If the Company issues the remaining $900,000
principal amount of Debentures, the Company will be required by the
registration rights agreement to register a total of 5,212,116
shares of common stock issuable upon conversion of the additional
Debentures (assuming the conversion price remains at $0.29125 per
share) or upon exercise of related warrants. The Company is also
obligated to register 477,972 shares of common stock held by former
holders of Series C Preferred Stock ("Series C Holders") who
converted that preferred stock into common stock.
The Company has insufficient authorized but unissued and unreserved
shares of common stock to meet its obligations to the Investors or
to the former Series C Holders. The Company is registering with
the Securities and Exchange Commission the 1,000,000 authorized
shares available for issuance to the Investors pursuant to the
Debentures and related warrants and has scheduled a meeting of
Company's shareholders to approve an increase in the number of
authorized shares of common stock. If the shareholders do not
approve the increase, the Company will be in default under the
Debentures; and the Investors may demand immediate repayment of the
Debentures. If the shareholders approve the increase in authorized
shares of common stock, we will amend our registration statement to
add the additional shares required by our agreement with the
Investors, as well as twenty percent (20%) of the shares issued to
the former Series C Holders upon conversion of their preferred
stock.
- 3 -
<PAGE>
THE OFFERING.
Securities Offered We are registering 1,000,000 shares of our
authorized but unissued and unreserved common
stock that we will issue upon conversion of the
Debentures and exercise of the related warrants
which are currently issued and outstanding and
held by the Investors and that may be sold from
time to time thereafter by the Investors.
Dividends We have not paid any cash dividends on our
common stock during the last fiscal year.
Payment of dividends is at the sole discretion
of our Board of Directors; and it is unlikely
that holders of our common stock will receive
dividends during the next fiscal year.
Voting Rights Each holder of shares of our common stock is
entitled to one vote for each share on all
matters (other than election of directors) on
which our shareholders are entitled to vote.
Each holder of shares of our common stock is
entitled to cumulate votes in the election of
directors.
Preferred Stock The Company's capitalization includes three
series of Preferred Stock, each of which has
certain cumulative dividend and liquidation
preferences over the common stock. See
Description of Securities. As of June 30,
2000, the liquidation preferences of the
preferred stock aggregated approximately
$1,020,000.
RISK FACTORS
A purchase of our common stock involves risks. You should consider
these risks before making a decision to purchase our common stock.
Prospective purchasers of our common stock must be prepared for the
possible loss of their entire investments. The order in which the
following risk factors are presented is arbitrary; and you should
not conclude, because of the order of presentation, that one risk
factor is more significant than another risk factor.
WE ARE OPERATING AT A LOSS AND HAVE ACCUMULATED A DEFICIT. As
reported by our auditors, DeCoria, Maichel & Teague P.S, in their
December 31, 1999 financial statements, our recent history of
operating losses, negative working capital, and stockholders'
deficit raises substantial doubt about our ability to continue as
a going concern. At June 30, 2000 we had a stockholders' deficit
of $1,343,733 and negative working capital of $1,745,511.
WE USE DEBT FINANCING. Our corporate charter and bylaws do not
contain any limitation on the amount of indebtedness, funded or
otherwise, we might incur. Accordingly, we could become more
highly leveraged, resulting in an increase in debt service that
could adversely affect our ability to pay dividends to our
stockholders and result in an increased risk of default on our
obligations. We are also subject to other risks normally
associated with debt financing. We expect to use indebtedness and
leveraging to finance development and acquisition.
WE NEED SUBSTANTIAL ADDITIONAL CAPITAL. Our future capital
requirements will depend upon many factors, including our ability
to obtain new customers and to execute our business plan. Capital
will be necessary to fund our activities. There can be no
assurance that sufficient financing will be available to us on a
timely basis or on acceptable terms. If we do not have adequate
funds, we may be required to delay, scale back or eliminate our
efforts to expand our activities. Accordingly, our business,
financial condition and results of operations could be materially
and adversely affected. If additional funds are raised by issuing
equity or convertible debt securities, options or warrants, the
ownership interest of our existing stockholders would be diluted.
DEPENDENCE ON KEY PERSONNEL. Our future success will depend in
part on the service of our key personnel and, additionally, our
ability to identify, hire and retain additional qualified
personnel. There is significant competition for qualified
personnel in our areas of activity, and there can be no assurance
that we will be able to continue to attract and retain such
personnel necessary for the development of our business. Because
of the significant competition, there can be no assurance that we
will be successful in adding personnel as needed to satisfy our
staffing requirements. Failure to attract and retain qualified
personnel could have a material adverse effect on us.
- 4 -
<PAGE>
We are dependent on the efforts and abilities of our senior
management. The loss of various members of that management could
have a material adverse effect on our business and prospects. Our
Board of Directors believes that all commercially reasonable
efforts have been made to minimize the risks attendant with the
departure by qualified personnel from the Company. There is no
assurance, however, that upon the departure of qualified personnel
from the Company that replacement personnel will cause us to
operate profitably. As owners of significant portions of our
issued and outstanding common stock, management has every incentive
to remain.
RELIANCE ON MANAGEMENT. All decisions regarding management affairs
will be made exclusively by our officers and directors. The
purchasers of the shares may not participate in our management and,
therefore, are dependent upon the management abilities of our
officers and directors. The only assurances that our shareholders
have that officers and directors will not abuse their discretion in
making decisions with respect to our shares and other business
decisions are the fiduciary obligations and business integrity of
the officers and directors. Accordingly, no person should purchase
shares unless willing to entrust all aspects of management to our
officers and directors, or their successors. Potential purchasers
of the shares should carefully evaluate the personal experience and
business performance of our officers and directors. Our officers
and directors may retain independent contractors to provide
services to us. Those contractors have no fiduciary duty to our
shareholders and may not perform as expected.
RECEIPT OF COMPENSATION REGARDLESS OF PROFITABILITY. Our officers,
directors, and employees are entitled to receive significant
compensation, payments and reimbursements regardless of whether we
operate at a profit or a loss. Any compensation received by
officers, directors, and management personnel will be determined
from time to time by our Board of Directors. Officers, directors,
and management personnel will be reimbursed for any out-of-pocket
expenses incurred on our behalf.
LIMITATION ON LIABILITY OF OFFICERS AND DIRECTORS. Our Articles of
Incorporation include a provision eliminating or limiting the
personal liability of our officers and directors for damages for
breach of fiduciary duty as a director or officer. Accordingly,
our officers and directors may have no liability to our
shareholders for any mistakes or errors of judgment or for any act
or omission, unless such act or omission involves intentional
misconduct, fraud, or a knowing violation of law or results in
unlawful distributions to our shareholders. DISCLOSURE OF POSITION
OF COMMISSION REGARDING INDEMNIFICATION FOR SECURITIES ACT OF 1933
LIABILITIES: INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING
UNDER THE SECURITIES ACT OF 1933 MAY BE PERMITTED TO DIRECTORS,
OFFICERS OR PERSONS CONTROLLING THE COMPANY PURSUANT TO THE
FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED THAT, IN THE
OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, SUCH
INDEMNIFICATION IS CONTRARY TO PUBLIC POLICY AS EXPRESSED IN THE
SECURITIES ACT OF 1933 AND IS THEREFORE UNENFORCEABLE.
COMPLIANCE WITH GOVERNMENT REGULATIONS. We are subject to various
forms of government regulations, including environmental and mine
safety laws and regulations. Any future violation of, and the cost
of compliance with, these laws and regulations could have a
material adverse effect on our business, financial condition and
results of operations.
Although we believe we are in material compliance with all
applicable laws, rules, regulations, and policies, there can be no
assurance that our business, financial condition and results of
operations will not be materially adversely affected by current or
future laws, rules, regulations, and policies or by liability
arising out of any of our past or future conduct.
RISK OF PRODUCT RECALL, PRODUCT RETURNS. Product recalls may be
issued at our discretion or government agencies having regulatory
authority for product sales and may occur due to disputed labeling
claims, manufacturing issues, quality defects or other reasons. No
assurance can be given that product recalls will not occur in the
future. Any product recall could materially adversely affect our
business, financial condition or results of operations. There can
be no assurance that future recalls or returns would not have a
material adverse effect upon our business, financial condition and
results of operations.
FAILURE TO MANAGE GROWTH. We expect to experience significant
growth and expect such growth to continue for the foreseeable
future. Our growth may result in significant pressure on our
management, financial,
- 5 -
<PAGE>
operating and technical resources. Failure to manage this growth
effectively could have a material adverse effect on our financial
condition or results of operations.
LOSS ON DISSOLUTION OF THE COMPANY. In the event of our
dissolution, the proceeds (if any) realized from the liquidation of
our assets will be distributed to our shareholders only after
satisfaction of claims of our creditors. The ability of a
Purchaser of shares to recover all or any portion of the purchase
price for the shares in that event will depend on the amount of
funds realized and the claims to be satisfied therefrom.
FLUCTUATIONS IN OPERATING RESULTS. The results of our operations
may vary from period to period due to a variety of factors,
including the introduction of new products by us or our
competitors, supply interruptions, and the availability and cost of
metals and other raw materials. Antimony metal necessary for the
manufacture of our products comes principally from foreign sources.
Accordingly, there are risks of interruption in procurement from
these sources and/or volatile changes in prices for these materials
that are not controllable by the Company.
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING. To
achieve and maintain competitiveness of our products, we may
require substantial funds. Our forecast of the period of time
through which our financial resources will be adequate to support
our operations is a forward-looking statement that involves risks
and uncertainties, and actual results could vary as a result of a
number of factors, including those described in these Risk Factors
and elsewhere in this Prospectus.
We anticipate that we will require additional cash to develop,
promote, produce and distribute our various products. Such
additional cash may be received from public or private financing
transactions, as well as borrowing and other resources. To the
extent that additional cash is received by the sale of equity or
equity-related securities, the issuance of such securities could
result in dilution to our stockholders. There can be no assurance
that additional funding will be available on favorable terms, if at
all.
GREATER COSTS THAN ANTICIPATED. We have used reasonable efforts to
assess and predict costs and expenses related to our operations.
However, there can be no assurance that implementing our business
plan may require more employees, capital equipment, supplies or
other expenditure items than we have predicted. Similarly, the
cost of compensating additional management, employees and
consultants or other operating costs may be more than our
estimates, which could result in sustained losses.
COMPETITION. Competition in the industry is intense. Many of our
competitors have substantially more experience, financial and
technical resources and production, marketing and development
capabilities than we do.
HAZARDOUS MATERIALS; ENVIRONMENTAL MATTERS. Our research,
development, manufacturing and production processes may involve the
controlled use of hazardous materials, and we may be subject to
various environmental and occupational safety laws and regulations
governing the use, manufacture, storage, handling, and disposal of
such materials and certain waste products. Although we believe
that our safety procedures for handling such materials comply with
the standards prescribed by such laws and regulations, the risk of
accidental contamination or injury from hazardous materials cannot
be completely eliminated. In the event of such an accident, we
could be held liable for any damages that result and any such
liability could exceed our financial resources. We also have three
ongoing environmental reclamation and remediation projects, one at
our current production facility and two at discontinued mining
operations. While we believe that we have currently accrued
adequate reserves on the Company's balance sheet to fulfill our
environmental obligations on these properties, there can be no
assurance that adequate financial resources will be available to
ultimately finish the reclamation activities. In addition, there
can be no assurance that in the future we will not be required to
incur significant costs beyond these reserves in order to comply
with changes in environmental laws and regulations that may occur
and that these changes would not materially and adversely affect
our operations and assets.
LIQUIDITY. The prices of our common stock are quoted in the OTC
Bulletin Board, an electronic quotation service maintained by the
National Quotation Bureau for the National Association of
Securities Dealers, Inc. for securities not traded on a national,
regional or other securities exchange, under the symbol "UAMY."
There is currently a limited public market for our common stock.
The OTC Bulletin Board does not provide the level of liquidity
provided by securities exchanges and the public market may not
develop for our shares. In the event a significant market for our
common stock develops, the market price for our common stock may be
affected by stock
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<PAGE>
market volatility, particularly volatility not necessarily related
to operating performance which characterizes small and emerging
companies. Consequently, the purchase of Shares should be
considered only a long-term investment. Moreover, we may require
additional cash to implement our business strategies, including
cash for (i) payment of increased operating expenses and (ii)
further implementation of those business strategies. No assurance
can be given, however, that we will have access to the capital
markets in the future, or that financing will be available on
acceptable terms to satisfy our cash requirements to implement our
business strategies. Our inability to access the capital markets
or obtain acceptable financing could have material adverse effects
on our results of operations and financial condition.
PENNY STOCK REGULATIONS. The SEC has adopted rules that regulate
broker-dealer practices in connection with transactions in "penny
stocks." Penny stocks generally are equity securities with a price
of less than $5.00 (other than securities registered on certain
national securities exchanges or quoted on the NASDAQ system,
provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or
system). The penny stock rules require a broker-dealer, prior to
a transaction in penny stock not otherwise exempt from those rules,
to deliver a standardized risk disclosure document prepared by the
SEC, which specifies information about penny stocks and the nature
and significance of risks of the penny stock market. The
broker-dealer also must provide the customer with bid and other
quotations for the penny stock, the compensation of the
broker-dealer and its salesperson on the transaction, and monthly
account statements specifying the market value of each penny stock
held in the customer account. In addition, the penny stock rules
require that, prior to a transaction in a penny stock not otherwise
exempt from those rules, the broker-dealer must make a special
written determination that the penny stock is a suitable investment
for the purchaser and receive the purchaser's written agreement to
that transaction. These disclosure requirements may have the
effect of reducing the trading activity in the secondary market for
an equity security (capital stock) that becomes subject to the
penny stock rules. Our common stock is subject to the penny stock
rules, and purchasers of shares may determine that it is quite
difficult to sell their shares.
NO FORESEEABLE DIVIDENDS. We do not anticipate paying dividends on
our common stock in the foreseeable future; but, rather, we plan to
retain earnings, if any, for the operation and expansion of
business.
NO ASSURANCES OF REVENUE OR OPERATING PROFITS. There can be no
assurance that we will be able to develop consistent revenue
sources or that our operations will become profitable.
UNINSURED LOSS; ACTS OF GOD. We may, but are not required to,
obtain comprehensive liability and other business insurance of the
types customarily maintained by similar businesses. However, there
are certain types of extraordinary occurrences which may be either
uninsurable or not economically insurable. For example, in the
event of a major earthquake, our telecommunications and computer
systems could be rendered inoperable for protracted periods of
time, which would adversely affect our financial condition. In the
event of a major civil disturbance, our operations could be
adversely affected. Should such an uninsured loss occur, we could
lose significant revenues and financial opportunities in amounts
which would not be partially or fully compensated by insurance
proceeds.
WE DO NOT HAVE ENVIRONMENTAL LIABILITY INSURANCE. We do not have
environmental liability insurance now, and we may not be able to
obtain such insurance at a reasonable cost. If we decide to become
insured for environmental liability, we will probably carry the
minimum insurance required by regulatory permits. In addition, the
extent of insurance coverage under certain forms of policies has
been the subject in recent years of litigation in which insurance
companies have, in some cases, successfully taken the position that
certain risks are not covered by such policies. If we incur
liability for environmental damages while we are uninsured, it
could have a material adverse effect on the Company and its
financial condition.
SOME OF OUR OFFICERS AND DIRECTORS HAVE CONFLICTS OF INTEREST.
Several of our directors are independently employed and, by
engaging in other business activities, have conflicts of interest
in allocating their time and resources. For a more detailed
account of those existing and potential conflicts of interest, see
the information contained under the heading "Certain Relationships
and Related Transactions" in this Prospectus.
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<PAGE>
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Balance Sheets
<S> <C> <C> <C> <C>
(Unaudited) (Unaudited)
June 30, March 31, December December
2000 2000 31, 1999 31, 1998
---------- -------------------- ----------
Current assets $ 292,128 $ 353,791 $ 337,301 $ 365,619
Noncurrent assets 693,397 607,640 631,491 694,378
---------- -------------------- ----------
Total assets $ 985,525 $ 961,431 $ 968,792 $1,059,997
========== ========== ========== ==========
Current liabilities $2,037,639 $1,442,268 $1,476,675 $1,817,317
Noncurrent liabilities 291,622 1,640,218 1,675,042 1,951,773
---------- -------------------- ----------
Total stockholders'
deficit (1,343,733) (2,121,055)(2,183,195) (2,709,098)
---------- -------------------- ----------
Total liabilities
and Stockholders'
equity $ 985,528 $ 961,431 $ 968,522 $1,059,992
========== ========== ========== ==========
Statements of Operations
(Unaudited) (Unaudited)
June 30, March 31, December December
2000 2000 31, 1999 31, 1998
---------- -------------------- ----------
Sales $2,363,463 $1,173,050 $4,710,278 $3,142,776
---------- -------------------- ----------
Gross profit 275,443 198,820 380,977 394,896
---------- -------------------- ----------
Operating expenses 541,452 315,710 601,299 670,276
Other expenses 125,880 38,970 87,355 193,047
---------- -------------------- ----------
Operating loss (391,889) (155,860) (307,677) (468,427)
---------- -------------------- ----------
Extraordinary item 917,726 0 611,692 0
---------- -------------------- ----------
Net income (loss) $ 525,837 $ (155,860) $ 304,015 $ (468,427)
========== ========== ========== ==========
</TABLE>
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the Shares
of our common stock offered by the Investors.
DETERMINATION OF OFFERING PRICE
The Shares will be issued upon conversion of Debentures at the
conversion price of $0.29125 per share. Shares will also be issued
upon exercise of related warrants at $0.39 per share. The
conversion price and warrant exercise price were determined on
arms-length negotiations between the Company and the purchase of
its Debentures.
- 8 -
<PAGE>
<PAGE>
DILUTION
At the close of business on August 3, 2000, there were 17,860,384
outstanding shares of our $0.01 par value common stock. The number
of outstanding shares of common stock:
(i) includes 35,132 shares which holders of Series C
Preferred Stock were entitled to receive upon conversion of their
preferred stock into Common Stock. These shares were not issued at
the time of conversion because the Company's calculation of the
number of conversion shares inadvertently omitted to account for
the impact of certain antidilution provisions of the Series C
shares, which were triggered by the Company's issuance of Common
Stock for less than the Series C conversion price. These shares
are being issued to the pertinent stockholders prior to the Annual
Meeting retroactively to the date of conversion of their Series C
Preferred Stock, and will be treated as issued and outstanding and
entitled to vote at the Annual Meeting.
(ii) excludes approximately 67,000 shares of Common Stock
representing an unreconciled discrepancy between the Company's
stock ledger and the transfer agent's records.
We are registering 1,000,000 shares of our common stock that we
will issue upon conversion of the Debentures and/or exercise of
related warrants which are currently issued and outstanding and
held by the Investors.
The following table sets forth the difference between the Debenture
conversion price of the Shares of our common stock, the net
tangible book value per share, and the net tangible book value per
share assuming that all 1,000,000 Shares were issued at June 30,
2000 upon conversion of Debentures. Net tangible book value per
share is calculated by dividing total tangible assets less total
liabilities, or ($1,343,733), by the number of shares outstanding,
17,725,252, as of June 30, 2000.
After giving effect to the issuance of 1,000,000 Shares upon
conversion of Debentures and after deducting offering expenses
estimated to be $25,000, our pro forma net tangible book value will
increase to $(1,077,483), or $(0.061) per share, representing an
immediate increase in pro forma net tangible book value of $0.015.
Net tangible book value at June 30, 2000 $(0.076) per share
--------
Net tangible book value after giving effect
to issuance of 1,000,000 Shares at
$0.29125 per Share $(0.061) per share
--------
Per share dilution to Investors
(conversion Shares only) $.3523 per share
------
Percent dilution to Investor 121%
----
SELLING SECURITY HOLDERS
In a transaction described in detail in "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --
Financial and Liquidity at June 30, 2000", Thomson Kernaghan & Co.,
Ltd., a Canadian investment banker acting for itself and as agent
for other possible participants (collectively, "Investors"),
purchased $600,000 in principal amount of the Company's 10%
convertible Debentures and related warrants to purchase Company's
common stock. The Investors are the only holders of our Debentures
and the related warrants. Upon conversion of the Debentures and/or
exercise of those warrants into common stock, the Investors may
offer all or some portion of those Shares of our common stock for
sale from time to time. The Shares which may be offered for sale
by the Investors constitute all of the shares of common stock known
to the Company to be beneficially owned by the Investors. The
Investors are not affiliates of the Company; and none of their
officers or directors are also officers or directors of the
Company.
Pursuant to the agreement by which the Investors acquired the
Debentures and warrants to purchase common stock, we agreed to
prepare and file a registration statement for the issuance of
common stock upon conversion of the
- 9 -
<PAGE>
Debentures and/or exercise of the related warrants and for the
resale of these Shares by the Investors. We also agreed to pay all
expenses, other than underwriting discounts and commissions and
other fees and expenses of investment bankers and other than
brokerage commissions, in connection with the registration and sale
of the Shares of common stock which may be offered for sale by the
Investors following their acquisition of those Shares upon
conversion of the Debentures and/or exercise of the related
warrants.
PLAN OF DISTRIBUTION
The Investors, may, from time to time, sell all or a portion of the
Shares in the OTC Bulletin Board market, or on any national
securities exchange on which our common stock is or becomes listed
or traded. The Shares will not be sold in an underwritten public
offering, but may be sold directly or through brokers or dealers.
The Shares may be sold in a block trade in which the broker or
dealer will attempt to sell the common stock as agent but may buy
and resell a portion of the block as principal to facilitate the
transaction. A broker or dealer may buy the Shares as principal
and resell them or keep them for its own account. The Shares may
also be sold in ordinary brokerage transactions and transactions in
which the broker solicits purchasers, or in privately negotiated
transactions. Brokers and dealers engaged in the sale of Shares
may receive commissions or discounts from the Investors or the
purchaser of the Shares.
Broker-dealers may agree to sell a specified number of Shares at a
stipulated price per share, and to purchase any unsold Shares at
the price required to fulfill the broker-dealer commitment to the
Investors. Broker-dealers who acquire Shares as principal may
thereafter resell the Shares from time to time in crosses and block
transactions and sales to and through other broker-dealers.
The Investors may enter into hedging transactions with
broker-dealers, who may engage in short sales of our common stock.
The Investors may also sell our common stock and redeliver to close
out their short positions. The Investors may also enter into
option or other transactions with broker-dealers which require the
delivery to the broker-dealer of its common stock. The Investors
may also lend or pledge our common stock to a broker-dealer and,
upon default, sell those Shares. In addition to the foregoing, the
Investors may, from time to time, enter into other types of hedging
transactions.
The Investors and any broker-dealers participating in the
distributions of our common stock may be deemed to be
"underwriters" within the meaning of Section 2(11) of the
Securities Act of 1933; and any profit on the sale of our common
stock by the Investors, and any commissions or discounts given to
any such broker-dealer, may be deemed to be underwriting
commissions or discounts pursuant to the Securities Act of 1933.
Our common stock may also be sold pursuant to Rule 144 promulgated
pursuant to the Securities Act of 1933 beginning one year after the
Shares were issued, provided such date is at least 90 days after
the date of this Prospectus.
We have filed the Registration Statement, of which this Prospectus
forms a part, for the issuance of the Shares to the Investors upon
conversion of the Debentures and/or exercise of the related
warrants, for the subsequent sale of the Investors' Shares of our
common stock, and for the resale of a portion of the common stock
held by the former Series C Holders. We will pay all of the
expenses incident to the registration of the Investors' Shares,
other than commissions, discounts and fees of underwriters, dealers
or agents. We can give no assurance that the Investors will sell
any or all of their Shares.
Pursuant to the Securities Exchange Act of 1934, any person engaged
in a distribution of the common stock offered by this Prospectus
may not simultaneously engage in market making activities for our
common stock during the applicable "cooling off" periods prior to
the commencement of such distribution. In addition, the Investors
will be required to comply with all the requirements of the
Securities Exchange Act of 1934.
We have advised the Investors that, during such time as they may be
engaged in a distribution of any of the Shares we are registering
by the Registration Statement, they are required to comply with
Regulation M promulgated under the Securities Exchange Act of 1934.
In general, Regulation M precludes any selling stockholder, any
affiliated
- 10 -
<PAGE>
purchasers and any broker-dealer or other person who participates
in such distribution from bidding for or purchasing, or attempting
to induce any person to bid for or purchase, any security which is
the subject of the distribution until the entire distribution is
complete. Regulation M defines a "distribution" as an offering of
securities that is distinguished from ordinary trading activities
by the magnitude of the offering and the presence of special
selling efforts and selling methods. Regulation M also defines a
"distribution participant" as an underwriter, prospective
underwriter, broker, dealer, or other person who has agreed to
participate or who is participating in a distribution.
Regulation M prohibits any bids or purchases made in order to
stabilize the price of a security in connection with the
distribution of that security, except as specifically permitted by
Rule 104 of Regulation M. These stabilizing transactions may cause
the price of the common stock to be higher than it would otherwise
be in the absence of these transactions. We have advised the
Investors that stabilizing transactions permitted by Regulation M
allow bids to purchase our common stock so long as the stabilizing
bids do not exceed a specified maximum, and that Regulation M
specifically prohibits stabilizing that is the result of
fraudulent, manipulative, or deceptive practices. The Investors
and distribution participants will be required to consult with
their own legal counsel to ensure compliance with Regulation M.
DESCRIPTION OF SECURITIES
Common Stock. We are authorized to issue 20,000,000 shares of
common stock, $0.01 par value, each share of common stock having
equal rights and preferences, including voting privileges. There
were 17,860,384 shares of common stock outstanding at the close of
business on August 3, 2000. In addition, 1,453,433 shares of
common stock were reserved for issuance upon exercise of
outstanding warrants or options to purchase our common stock.
The shares of our common stock constitute equity interests in the
Company entitling each shareholder to a pro rata share of cash
distributions made to common shareholders, including dividend
payments. We had significant losses in our last fiscal year.
Therefore, it is unlikely that we will pay dividends on our common
stock in the next year. We currently intend to retain our future
earnings, if any, for use in our business. Any dividends declared
in the future will be at the discretion of our Board of Directors
and subject to any restrictions that may be imposed by our lenders.
The holders of our common stock are entitled to one vote for each
share of record. Shareholders are entitled to vote cumulatively
with respect to the election of directors of the Company.
Directors are elected by a plurality of the votes cast by the
voting stock entitled to vote at a meeting if a quorum is present.
With respect to matters other than the election of directors, the
holders of more than 50% of the shares voted for the matter. In
the event of liquidation, dissolution or winding up of the Company,
the holders of common stock are entitled to share ratably in all
assets remaining available for distribution to them after payment
of our liabilities and after provision has been made for each class
of stock having preference in relation to our common stock.
Holders of our common stock have no conversion, preemptive or other
subscription rights, and there are no redemption provisions
applicable to our common stock. All of the outstanding shares of
our common stock are duly authorized, validly issued, fully paid
and non-assessable.
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 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 a total liquidation preference equal to $45,000 plus
dividends in arrears. At December 31, 1999, cumulative dividends in
arrears amounted to $60,750, or $13.50 per share. The aggregate
Series A liquidation preference was $108,000 at June 30, 2000.
During 1993, Series B 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
has preference over the Company's common stock and Series A
preferred stock, has
- 11 -
<PAGE>
no voting rights and is entitled to cumulative dividends of $.01
per share per year. In the event of dissolution or liquidation of
the Company, the preferential amount payable to Series B restricted
preferred stockholders is $1.00 per share plus dividends in
arrears. No dividends have been declared or paid with respect to
the Series B preferred stock. In 1995, 916,667 shares of Series B
preferred stock were surrendered to the Company in connection with
the settlement of litigation against Bobby C. Hamilton. At December
31, 1999, cumulative dividends in arrears were $45,000, or $0.06
per share, with 750,000 shares currently outstanding. The
aggregate Series B liquidation preference at June 30, 2000 was
$798,750.
During 1997, the Company issued 2,560,762 shares of Series C
preferred stock in connection with the conversion of certain debts
owed by the Company. The rights, preferences, privileges and
limitations of the Series C preferred shares issued upon conversion
of debt are set forth below:
Designation. The class of Convertible Preferred Stock, Series
C, $0.01 par value per share, shall consist of 2,560,762 shares of
the Company.
Optional Conversion. A holder of Series C preferred 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 preferred shares shall
have the right to that number of votes equal to the number of
shares of common stock issuable upon conversion of such Series C
preferred shares.
Liquidation Preference. In the event of any liquidation or
winding up of the Company, the holders of Series C preferred shares
shall be entitled to receive as a preference over 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 June 30, 2000, the aggregate
Series C liquidation preference was $113,281.
Registration Rights. Twenty percent (20%) of the underlying
common stock issuable upon conversion of the Series C preferred
shares shall be entitled to "piggyback" registration rights when,
and if, the Company files a registration statement for its
securities or the securities of any other stockholder.
Redemption. The Series C preferred 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 is $0.55.
Protective Provisions. The consent of a majority interest of
the holders of Series C preferred 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.
During 1999, holders of 2,354,726 shares of Series C shares
converted their shares into 2,389,858 shares of common stock of
Company. At December 31, 1999 and at June 30, 2000, 205,996 shares
of Series C preferred stock remained outstanding.
- 12 -
<PAGE>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table sets forth the range of high and low bid prices
as reported by the OTC Bulletin Board ("OTCBB") for the periods
indicated. The quotations reflect inter-dealer prices without
retail mark-up, mark-down or commission, and may not necessarily
represent actual transactions. Currently, the stock is traded on
the OTCBB under the symbol "UAMY."
<TABLE>
<CAPTION>
<S> <C> <C>
2000 High Low
---- ---- ---
First Quarter $0.95 $0.22
Second Quarter $0.88 $0.20
1999 High Low
---- ---- ---
First Quarter $0.16 $0.20
Second Quarter 0.17 0.17
Third Quarter 0.31 0.38
Fourth Quarter 0.16 0.16
1998 High Low
---- ---- ---
First Quarter $0.20 $0.16
Second Quarter 0.28 0.16
Third Quarter 0.37 0.16
Fourth Quarter 0.28 0.13
</TABLE>
The approximate number of record holders of the Registrant's common
stock at December 31, 1999 is 2,700.
No dividends have been paid or declared by the Registrant during
the last five years.
DESCRIPTION OF BUSINESS
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.
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" or "the
Company") 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.
The Company has been able to sustain its operations through gross
profit produced from its antimony operations, common stock sales,
and financing from banks and other sources. 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 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.
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<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 mining operations may be reopened in the
future should raw material prices warrant doing so. The Company
now purchases the majority of its raw antimony from China and, to
a lesser degree, Canada.
The Company currently owns 50% of the common stock of United States
Antimony, Mexico S.A. de C.V. ("USAMSA"), which is expected in
future years to produce antimony metal and other products. USAMSA
is pursuing the assignment of mining concessions in the Mexican
states of Zacatecas, Coahuila, Sonora, Queretaro and Oaxaca. These
products would then be sent to the Company's plant near Thompson
Falls, Montana for processing.
During 1999 and 1998, the Company invested capital and surplus
equipment from its Thompson Falls antimony operation in USAMSA,
which is being used for the construction of an antimony processing
plant in Mexico. To date, two antimony processing furnaces and a
warehouse building have been built and limited antimony processing
has taken place. USAMSA anticipates utilizing the processing
facilities as processing opportunities become available and as
antimony prices dictate.
From refined antimony metal, the Company produces four antimony
oxide products of different particle size using proprietary furnace
technology, and several grades of sodium antimonate using hydro
metallurgical 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 computer monitors and television bulbs and as a
flame retardant.
The Company employed two full time sales managers in 1999 and
implemented administrative systems needed to manage sales
accounting and shipping logistics. In connection with these
efforts, the Company negotiated various commission-based sales
agreements with other chemical distribution companies, developed
its own web-site ("usantimony.com") and made substantial
improvements to its analytical and chemical research capabilities.
In 1999, the Company devoted substantial efforts to the research
and development of new antimony products and applications. These
efforts have resulted in advances in the Company's preparation,
packaging and quality of its antimony products. The Company
believes that it will be able to stay competitive in the antimony
business and generate increasing profits because of these advances.
For the year ended December 31, 1999, the Company sold 5,517,443
pounds of antimony products generating approximately $4.7 million
in revenues. During 1998, the Company, through its relationship
with HoltrChem, Inc. ("HoltraChem") and BCS, sold 2,834,186 pounds
of antimony products, which generated approximately $3.1 million in
revenues. During 1999 and 1998, 20% and 19%, respectively, of the
Company's antimony sales were made to one customer.
Gold Division
-------------
Yankee Fork Mining District. Until 1989, the Company mined and
milled and silver in the Yankee Fork Mining District in Custer
County, Idaho. The metals were recovered by gravity and flotation
mill, and the concentrates were leached with cyanide to produce a
bullion product at the Preachers Cove mill, which is located on the
Yankee Fork of the Salmon River. The Preachers Cove mill has been
dismantled and the site is undergoing environmental remediation
pursuant to an Idaho Department of Environmental Quality consent
decree. See "Environmental Matters". The Company owns two
patented lode mining claims in the Yankee Fork District, which are
now idle.
Yellow Jacket Mining District. In 1990, the Company entered into
a mining venture agreement to mine and mill gold and silver ores at
the Yellow Jacket Mine located in the Yellow Jacket Mining District
of Lemhi County, Idaho, approximately 70 miles southwest of
Salmon, Idaho. During the years from 1991 to 1996 the Company
mined, milled and sold gold bullion produced from the mine. In
1996, production at the Yellow Jacket was suspended due to
recurring operating losses and declines in precious metal prices.
The Yellow Jacket property was put on a care and maintenance
status. In 1999, the company abandoned its leasehold interests and
began environmental remediation activity at the Yellow Jacket (see
"Environmental Matters") and began reclamation of the Yellow Jacket
tailings ponds and pit area.
- 14 -
<PAGE>
Environmental Matters. The exploration, development and production
programs conducted 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.
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 cyanide solution. In 1996, the Company signed a consent
decree related to the reclamation and remediation at the Preachers
Cove mill in Idaho as required by the Idaho Department of
Environmental Quality. The Company has been reclaiming the
property; and, as of December 31, 1999, the cyanide solution
discharge was complete, the mill removed, and the cyanide leach
residue disposed of. The Company anticipates substantial
completion of reclamation sometime in 2000.
The Company has environmental remediation obligations at its
antimony processing site near Thompson Falls, Montana ("the
Stibnite Hill Mine Site"). Under the regulatory jurisdiction of
the U.S. Forest Service and subject to the operating permit
requirements of the Montana Department of Environmental Quality,
the Company has performed substantial environmental reclamation
activities during 1999 and 1998.
These activities included installation of a PVC liner and a
geotextile layer on two of the tailings ponds and the removal of
approximately 25,000 yards of tailings material from a third pond.
During 2000, the Company plans to line a storm water pond and store
a slag material pile in a lined residue vault, thus fulfilling the
majority of its environmental responsibilities at the Stibnite Hill
Mine site.
During the second quarter of 1999, the Company began final
reclamation and closure at the Yellow Jacket property. During the
third and fourth quarters of 1999 the Company began disassembly of
the mill and mill buildings and removed tailings waste from the
tailings ponds. The reclamation activity is being overseen by the
U.S. Forest Service and the Idaho Department of Environmental
Quality. The Company hopes to have the majority of its
environmental obligations relating to the Yellow Jacket property
fulfilled by the end of 2000.
The Company has accrued amounts on its balance sheet that it
believes to be representative of future costs required to fully
reclaim these properties.
Marketing. During the first quarter of 1999, and in prior years
dating back to 1991, the Company marketed its antimony products
with HoltraChem and later its successor, BCS, in a 50/50 profit
sharing arrangement. In March 1999, the Company notified BCS that
it was terminating the agreements that HoltraChem had assigned BCS,
and that the Company was going to market and distribute antimony
products independently. As a result the Company took steps to
market its products to existing and prospective customers, and has
been able to do so successfully. The Company employs full time
marketing personnel and has negotiated various commission based
sales agreements with other chemical distribution companies.
Antimony. The operating results of the Company have been and will
continue to be directly related to the market prices of antimony
metal, which have fluctuated widely in recent years. The
volatility of such prices is illustrated by the following table
which sets forth the average prices of antimony metal per pound as
reported by sources deemed reliable by the Company.
- 15 -
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Year Average Price
---- -------------
1999 $0.58
1998 0.63
1997 0.93
1996 1.60
1995 2.20
</TABLE>
The range of sales prices for antimony oxide per pound was as
follows for the periods indicated:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year High Low Average Price
---- ---- --- -------------
1999 $5.52 $0.65 $0.85
1998 5.57 0.83 1.13
1997 5.75 0.98 1.41
1996 4.50 1.53 1.86
1995 3.12 0.89 2.56
</TABLE>
Antimony metal 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, and
industrial and commercial demand. If metal prices decline and
remain depressed, the Company's operations may be adversely
affected.
Until recently, antimony prices have been at a 35 year low.
Beginning in lat June 2000, prices have risen dramatically,
primarily as a result of restrictions by the Chinese government on
exports of antimony metal from China, one of the principal
suppliers of antimony. The Company has a long term supply contract
with an antimony dealer who has contracted to supply antimony to
the Company at a fixed price below current market price. The
dealer, who supplies _____% of the antimony metal used by the
Company as raw materials for its products, has indicated he will
refuse to supply metal at the contracted price. This breach of
contract will negatively impact the Company's ability to profit on
a major long term contract also at a fixed price, and may adversely
effect the Company's financial condition and results of operation.
The Company's USAMSA venture is intended eventually to reduce the
Company's dependence on foreign sources but is not expected to
provide sufficient raw material for several years.
Other. The Company holds no material patents, licenses, franchises
or concessions, but it considers its antimony processing plant
proprietary in nature. The Company uses the trade name "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, Federal and State 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 processing facilities is in material
compliance with environmental regulations and health and safety
standards. See "Environmental Matters."
Employees.
---------
As of March 27, 2000, the Company and its wholly-owned subsidiary
employed 31 people, which number may adjust seasonally. None of
the Company's employees are covered by collective bargaining
agreements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Prospectus includes forward-looking statements that involve
risks and uncertainties.
- 16 -
<PAGE>
"Forward looking statements" can be identified by the use of
forward-looking terminology such as "believes," "could,"
"possibly," "anticipates," "estimates," "projects," "expects,"
"may," "will," or "should." Such statements are subject to certain
risks, uncertainties and assumptions. No assurances can be given
that the future results anticipated by forward looking statements
will be achieved. Our actual results may differ materially from
these forward-looking statements. You should not place undue
reliance on these forward-looking statements, which apply only as
of the date of this Prospectus.
Certain matters discussed are forward-looking statements that
involve risks and uncertainties, including the impact of antimony
prices and production volatility, changing market conditions and
the regulatory environment and other risks. Actual results may
differ materially from those projected. These forward-looking
statements represent the Company's judgment as of the date of this
filing. The Company disclaims, however, any intent or obligation
to update these forward-looking statements.
Results of 1999 Operations. The Company's reported net income of
$304,015 in 1999, or $0.02 per basic share, compared to a net loss
of $468,427 or $0.04 per basic share in 1998. The net income in
1999 is primarily due to an extraordinary gain recognized on the
conversion of certain debts to common stock of $611,692. Without
the effect of the extraordinary gain, the Company would have
experienced a net loss from its operating activities of $307,677
during 1999.
Total revenues during 1999 were $4,710,278 compared to $3,142,776
in 1998. The increase was directly due to the Company's
independent marketing and sale of its antimony products during the
majority of 1999, compared to sharing 50% of antimony product sales
with affiliated sales companies during 1998. Sales of antimony
products in 1999 were $4,710,278 consisting of 5,517,443 pounds
sold at an average sales price of $ 0.85 per pound. Sales of
antimony products in 1998 were $3,130,332, consisting of 2,834,186
pounds sold at an average sales price of $1.10 per pound. Sales
made during 1999 included first quarter sales made with a sales
affiliate who recorded 50% of the quarter's total sales of $690,302
consisting of 684,322 pounds, on their financial statements. Gross
profit from antimony product sales was $380,977 in 1999, or 8% of
sales, compared to $394,896 in 1998, or 12% of sales. Almost all
of the antimony products sold were produced at the Company's plant
near Thompson Falls, Montana.
Combined care and maintenance costs and exploration and evaluation
costs at the Yellow Jacket property totaled $200,867 in 1999
compared to $362,722 in 1998. The decrease is due to the Company's
abandonment of exploration activities at the Yellow Jacket during
1999.
During 1999, the Company made adjustments to accrued reclamation
costs and accounts payable of $70,000 and $16,440, respectively.
The adjustments were made to adjust the balances of these
liabilities to reflect an accurate amount of the Company's
anticipated obligation. No such adjustments were proposed in 1998.
General and administrative expenses increased from $307,554 in 1998
to $400,432 in 1999, an increase of $92,878 or approximately 30%.
The increase in 1999 compared to 1998 was principally due to legal
costs associated with settling the Maguire litigation during 1999.
Interest expense of $185,985 in 1999 decreased compared to interest
expense of $216,317 in 1998 primarily due to the conversion of
certain debts to common stock in 1999. Interest and other income
was $12,190 in 1999 and $23,270 in 1998. The decrease in interest
and other income during 1999 was primarily due to the absence of
other income in 1999 compared to 1998.
In 1999, the Company converted $682,397 of defaulted debenture
principal and interest and $144,339 of principal and interest
related to certain mining lease royalties (judgements payable) into
common stock of the Company. In connection with these conversions
the Company recorded an extraordinary gain of $611,692. No such
conversions or gains took place during 1998.
Financial Condition and Liquidity at December 31, 1999. At
December 31, 1999, Company assets totaled $968,522, and there was
a stockholders' deficit of $2,183,195. The stockholders' deficit
decreased $525,898 from the prior year, primarily due to the
conversion of debts to common stock. In order to continue as a
going concern, the Company is dependent upon (1) profitable
operations from the antimony division, (2) additional equity
financing,
- 17 -
<PAGE>
and (3) continued availability of bank financing. Without
financing and profitable operations, 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 provided by operations during 1999 was $59,986 compared to
$16,598 in 1998. The increase in cash provided by operations in
1999 compared to cash provided by operations in 1998 was primarily
due to the increase in accounts payable and other current
liabilities during 1999.
Investing activities used $76,417 of cash in 1999 compared with
$31,182 in 1998. Cash used in investing activities during both
years related exclusively to purchases of properties, plants and
equipment, for the antimony division and the Company's investment
in USAMSA.
Financing activities provided $16,431 of cash in 1999 and $14,584
in 1998. Cash from financing activities relates principally to
cash received from common stock sales and bank financing in 1998
and primarily bank from bank financing in 1999.
Other significant financial commitments for future periods will
include:
* Servicing notes payable to bank.
* Servicing the note payable to Bobby C. Hamilton.
* Keeping current on property, payroll, and income tax
liabilities and accounts payable.
* Fulfilling responsibilities with environmental, labor
safety and securities regulatory agencies.
During the second quarter of 1999, the Company began to operate its
antimony business independently. Accordingly, the Company should
experience an increase in its overall profitability (if and when
antimony prices return to pre-1999 levels) in the antimony business
as a result of the change. This increase in profitability will
assist the Company in meeting its obligations.
In 1999, the Yellow Jacket leases were terminated and reclamation
and closure activities began. As the Yellow Jacket property is
reclaimed, care-and-maintenance and reclamation costs will
eventually cease and the Company will be able to direct more
resources to funding its operations and paying its obligations.
Financial resources may also be generated from the disposal of
equipment at the Yellow Jacket.
During 1999, the Company negotiated a factoring arrangement with a
company that will allow the Company to sell its accounts receivable
and utilize the funds from these sales to finance operations.
In 1998, 300,000 additional unregistered common stock shares and
common stock purchase warrants were sold to a director and others
for $75,000. The Company plans to offer additional shares of its
common stock for sale to fund operations and reduce liabilities.
Results of Operations for the six-month period ended June 30, 2000.
The Company's operations resulted in a net loss of $391,889 for
the six-month period ended June 30, 2000 compared with a net income
of $12,191 for the six-month period ended June 30, 1999. Net
income for the period ended June 30, 2000, after the extraordinary
gain on settlement of debt (see "Financial Condition and Liquidity
at June 30, 2000"), was $525,837.
Total revenues from antimony product sales for the first six months
of 2000 were $2,363,463 compared with $2,223,922 during the
comparable period in 1999. Sales of antimony products during the
first six months of 2000 consisted of 2,559,961 pounds at an
average sale price of $0.92 per pound. During the first six months
of 1999 sales of antimony products consisted of 2,233,421 pounds at
an average sale price of $1.00 per pound. The decrease in sale
prices of antimony products from the first two quarters of 1999
compared to the first two quarters of 2000 is the result of a
corresponding decrease in antimony metal prices. Gross profit from
antimony sales during the first six months of 2000 was $275,443,
compared with gross profit of $420,814 during the first six months
of
- 18 -
<PAGE>
1999. The decrease in gross profit during the first six months of
2000 compared to the comparable period of 1999 is primarily due to
decreased antimony product sales prices during 2000.
Costs related to the reclamation of Yellow Jacket were $77,906 for
the six-month period ended June 30, 2000, compared with care,
maintenance and reclamation costs of $43,770 during the six-month
period ended June 30, 1999. The increase was primarily due to the
increased reclamation activities during 2000 as compared to 1999.
Costs related to exploration and evaluation at Yellow Jacket were
$45,198 for the six-month period ended June 30, 1999, compared with
no exploration costs during the six-month period ended June 30,
2000.
Sales expense was $194,351 for the six-month period ended June 30,
2000 compared to $63,960 for the same period in 1999. The increase
in sales expense during the first six months of 2000 as compared to
the same period of 1999 was due to the sales department's operation
for only three months of the six month period ended June 30, 1999.
General and administrative expenses increased $125,487 to $269,195
during the first six months of 2000 as compared to $143,708 during
the first six months of 1999. The increase was partially due to
financial consulting expense of $78,000 incurred in connection with
the settlement of debt in the first quarter of 2000 that was not
incurred in 1999.
Interest expense was $81,239 during six-month period ended June 30,
2000, compared to $116,072 for the same period in 1999. The
decrease in interest expense is primarily due to interest costs
relating to inventory purchased from a former sales affiliate
during 1999 that was not incurred in 2000.
Interest income was $4,647 during the six-month period ended June
30, 2000, and was comparable to $4,657 for the same period in 1999.
During the second quarter of 1999 a gain of $16,440, resulting from
the write off of certain accounts payable, was recognized. No such
gain was recognized for the comparable quarter of 2000.
Financial Condition and Liquidity at June 30, 2000. At June 30,
2000, Company assets totaled $985,528; and there was a
stockholders' deficit of $1,343,733. The stockholders' deficit
decreased $839,462 from December 31, 1999, due to the extraordinary
gain on settlement of debt. In order to continue as a going
concern, the Company is dependent upon profitable operations from
the antimony division and continuing short and long-term debt
financing. Without financing and profitable operations, the
Company may not be able to meet its obligations, fund operations
and continue in existence.
Cash provided used by operating activities during the first six
months of 2000 was $316,486 compared with cash provided of $15,263
during the first six months of 1999. The change in cash from
operations for the first six months of 2000 compared to the same
period in 1999 was primarily due to the net loss of $361,889
(before extraordinary gain on the settlement of debt) incurred
during the first two quarters of 2000.
Cash used in investing activities during the first six months of
2000 was $35,079 compared to $45,732 used during the comparable
period of 1999. During both periods, cash used in investing
activities related to the Company's investment in antimony
processing plant and equipment.
Cash provided by financing activities was $351,565 during the first
six months of 2000 compared to $30,469 provided by financing
activities during the comparable period of 1999. The increase in
cash provided from financing activities was principally due to
advances from the Company's President of $70,000, common stock and
warrant sales of $155,000 and the issuance of $600,000 of
convertible debentures during the first six months of 2000. Cash
provided from financing activities during the first six months of
2000 was used to settle an outstanding debt (see below) and fund
operations.
In an effort to improve the Company's financial condition, the
Company's management began negotiations during the second quarter
of 2000 to settle a debt owed the Estate of Bobby C. Hamilton (the
"Estate"). The approximately $1,500,000 debt required minimum
annual payments of principal and interest totaling $200,000,
consuming 4% of the Company's gross revenues from sales. As a
result of management's negotiations, the Company entered into a
Settlement and Release of All Claims Agreement (the "Settlement
Agreement") with the Estate on June 23, 2000.
- 19 -
<PAGE>
The Settlement Agreement extinguished the note payable to the
Estate in exchange for a cash payment of $500,000 and the issuance
of 250,000 shares of the Company's common stock. The cash payment
was financed by the issuance of $600,000 of Debentures pursuant to
a financing agreement with Thomson Kernaghan & Co., Ltd. ("TK"), a
Canadian investment banker, described in detail below. This
settlement and related financing transaction resulted in an
extraordinary gain of approximately $917,726.
The Settlement Agreement mutually released both parties from any
and all obligations between them, and includes the Company's
indemnification of the Estate against any liabilities and claims
that may result from environmental remediation responsibilities on
the Company's Idaho gold properties. The Settlement Agreement also
required the Company to arrange the purchase of 614,000 shares of
the Estate's unrestricted common stock of the Company by a third
party for $90,340.
In connection with the Settlement Agreement between the Company and
the Estate, the Company entered into a financing agreement with TK
effective July 11, 2000. The financing agreement provides, among
other things, for the sale of up to $1,500,000 of the Company's
convertible debentures ("Debentures") to the investment banker and
its affiliates. In addition, TK agreed to purchase, pursuant to
the Settlement Agreement, 614,000 shares of unrestricted common
stock of the Company owned by the Estate for $90,340. The
financing agreement also provides for an initial Debenture purchase
of $600,000, and specifies that the proceeds from the sale be used
to 1) pay the Estate $500,000 and extinguish the note payable owed
it pursuant to the Settlement Agreement, 2) pay the fees and
expenses of TK's counsel not to exceed $15,000, 3) pay TK's fee of
$60,000 relating to the placement of the Debentures, and 4) provide
$25,000 for the Company's working capital purposes.
The Debentures are due June 30, 2002 and accrue interest at 10% to
be paid annually on each anniversary date of the issue. The
Debentures are convertible into shares of the Company's Common
Stock based on a formula determining the conversion price equal to
75% of the average 3 lowest closing bid prices for the Company's
Common Stock as quoted by Bloomburg L.P. in the twenty trading days
immediately preceding (i) the effective date of the financing
agreement (July 11, 2000) or (ii) the conversion date of the
Debentures, whichever is lower. The agreed Debenture conversion
price for the initial $600,000 tranche is $0.29125 per share.
Pursuant to the financing agreement, the Company issued to TK, as
additional consideration for the financing arrangement, warrants to
purchase 961,539 shares of the Company's Common Stock at $0.39 per
share and issued warrants to purchase 384,615 shares of the
Company's common stock at $0.39 per share to the purchasers of the
initial $600,000 of Debentures. The warrants are exercisable for
five years. If additional Debentures are issued under the
financing agreement, the Company will issue additional warrants to
purchase the Company's common stock at $0.39 per share. The number
of shares subject to such additional warrants shall be equal to 25%
of the face amount of the additional Debentures divided by $0.39
per share.
The financing agreement required that the Company execute a
registration rights agreement, binding the Company to prepare and
file a registration statement with the Securities and Exchange
Commission registering the shares of Common Stock issuable upon
exercise of the warrants and upon conversion of the Debentures, and
to increase the number of its authorized but outstanding shares of
Common Stock to accommodate the exercise of the warrants and
conversion of the Debentures.
In connection with the sale of the initial $600,000 tranche of
Debentures pursuant to the TK financing agreement, the Company
contractually committed to reserve for issuance to Debenture
holders and warrant holders and to contingently issue and deliver
to an escrow certificates for 4,436,283 shares of Common Stock
(consisting of 100% of the warrant shares and 150% of the
conversion shares calculated as if the conversion date were July
11, 2000). As of the Record Date, of the Company's 20,000,000
shares of authorized Common Stock, 17,860,384 shares (see
"Dilution") were issued and outstanding, and 1,457,433 shares were
reserved for future issuance upon exercise of outstanding warrants,
options and other rights to acquire Company's Common Stock.
Consequently, the Company currently does not have sufficient
authorized, unissued and unreserved shares of Common Stock to meet
its contractual obligation to TK. If the shareholders do not
authorize the additional shares of Common Stock needed to meet this
contractual commitment, the Debentures will be in default in the
amount of $600,000 plus accrued interest.
- 20 -
<PAGE>
During the first six months of 2000, the Company the took the
following additional actions to minimize its losses, conserve its
cash flow, and improve its financial condition:
* Restructured its sales department, reducing overall
staffing expenses
* Refinanced a long-term note payable with a bank
* Negotiated an abatement of property taxes due an Idaho
county
* Negotiated a reduction in the "holdback" retainage on an
accounts receivable factoring agreement
* Obtained additional advances from the Company's President
in the amount of $71,243
* Increased production from its old Thompson Falls slag
pile to decrease raw material costs
During the third quarter of 2000, the Company plans to hold an
annual meeting of shareholders. At this meeting, management will
propose an amendment to the Company's articles of incorporation
increasing the number of authorized shares of common stock to
satisfy the requirements of the TK financing agreement and to make
available additional shares for sale. Management believes that
this increase in capitalization will be valuable in obtaining
additional convertible debenture financing pursuant to the
financing agreement and generating funds from common stock sales.
In 1996, the Yellow Jacket operation was put on a care-and-
maintenance basis after a long history of operating losses. During
the second quarter of 1999, the Company terminated its exploration
efforts at the Yellow Jacket, and began reclamation activities.
While the Yellow Jacket reclamation currently continues to consume
the Company's resources, management anticipates that additional
financial resources will be available when reclamation activities
are final, sometime in 2001.
While management is optimistic that the Company will be able to
achieve profitable operations and meet its financial obligations,
there can be no assurance of such.
Significant financial commitments for future periods will include:
* Servicing notes payable to bank.
* Keeping current on property, payroll, and income tax
liabilities and accounts payable.
* Fulfilling responsibilities with environmental, labor
safety and securities regulatory agencies.
DESCRIPTION OF PROPERTY
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 covering 192 acres. The lode claims are contiguous within
two groups.
Antimony mining and milling operations were curtailed during 1983
due to continued declines in the price of antimony. The Company is
currently purchasing foreign raw antimony materials and continues
to produce antimony metal, oxide and sodium antimonate from its
antimony processing facility near Thompson Falls, Montana.
- 21 -
<PAGE>
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' former Preachers Cove Mill.
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 nearing final
reclamation.
Yellow Jacket Mining District. The Yellow Jacket property
consisted of 12 patented and various unpatented lode mining claims
located in the Yellow Jacket Mining District of Lemhi County,
Idaho, approximately 70 miles southwest of Salmon, Idaho. In 1996,
Company personnel determined that the existing mineral resource was
not economical to mine without additional operating capital and an
increase in current metals prices. Accordingly, production
operations at the Yellow Jacket property were suspended and the
mine placed on a care-and-maintenance status. Subsequent to 1996,
the Company engaged in underground exploration activities at the
property. During the second quarter of 1999, due to depressed
precious metal prices and the absence of a discovery of mineralized
material that could be economically mined, the company abandoned
its leasehold interests in the Yellow Jacket property and began
final reclamation and closure activities. (See "Environmental
Matters.")
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Affiliation
Name Age with Registrant Expiration of Term
----- --- --------------- ------------------
John C. Lawrence 62 Chairman, President, Annual meeting
Secretary,and Treasurer;
Director
Robert A. Rice 76 Director Annual meeting
Leo Jackson 59 Director Annual meeting
</TABLE>
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. He
is a member of the Society of Mining Engineers and a recipient of
the Uuno Sahinen Silver Medallion Award presented by Butte Tech,
University of Montana.
Robert A. Rice. Mr. Rice is a metallurgist, having been employed
by the Bunker Hill Company, a wholly owned subsidiary of Gulf
Resources and Chemical Corporation at Kellogg, Idaho, as Senior
Metallurgist and Mill Superintendent until his retirement in 1965.
Mr. Rice has been a Director of the Company since 1975.
Leo Jackson. Mr. Jackson is a resident of El Paso, Texas. He is
currently the President of Production Minerals, Inc., and has been
involved in the production and marketing of industrial minerals
such as fluorspar and celestite in the United States and Mexico for
25 years. Mr. Jackson speaks fluent Spanish and has a BBA degree
from the Sul Ross State University in Texas. Mr. Jackson has been
a Director of the Company since February, 1999.
The Company is not aware of any involvement by its directors or
executive officers during the past five years in certain legal
proceedings that are material to an evaluation of the ability or
integrity of such director or executive officer.
- 22 -
<PAGE>
Board Meetings and Committees. The Company's Board of Directors
held twelve (12) regular meetings during the 1999 calendar year.
Each incumbent director attended at least 75% of the meetings held
during the 1999 calendar year, in the aggregate, by the Board and
each committee of the Board of which he was a member. The
Company's Board of Directors does not have a Compensation
Committee, an Audit Committee, or a Nominating Committee.
Board Member Compensation. The Company pays directors' fees in the
form of 6,000 shares of Company's Common Stock per year per
director. Directors are also reimbursed reasonable out-of-pocket
expenses in connection with attending meetings.
Section 16(a) Beneficial Ownership Reporting Compliance. Section
16(a) of the Securities Exchange Act of 1934 requires that the
Company's directors and executive officers and the holders of 10%
or more of the Company's Common Stock, to file reports of ownership
and changes in ownership with the Securities and Exchange
Commission. Officers, directors and stockholders holding more than
10% of 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, Mr. Lawrence timely
filed a Form 4 report upon receipt of annual stock compensation;
Mr. Rice and Mr. Jackson have not timely filed a Form 4 upon
receipt of annual stock compensation.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
A person who directly or indirectly has or shares voting power or
investment power with respect to a security is considered a
beneficial owner of the security. Voting power is the power to
vote or direct the voting of shares and investment power is the
power to dispose of or direct the disposition of shares. Shares as
to which voting power or investment power may be acquired within 60
days are also considered as beneficially owned under the proxy
rules.
The following tables set forth certain information, as of the
Record Date, regarding beneficial ownership of the Company's stock
by (1) each person who is known to the Company to own beneficially
more than 5% of any class of the Company's Voting Stock, and (2)
(a) each director and each nominee for the election as a director
of the Company, (b) each executive officer named in the Summary
Compensation Table set forth above in this Proxy Statement, and (c)
all current directors and current executive officers of the Company
as a group. The information on beneficial ownership in the table
and the footnotes thereto is based upon the Company's records and,
in the case of holders of more than 5% of the Company's stock, the
most recent Schedule 13D or 13F filed by each such person or entity
and information supplied to the Company by such person or entity.
Unless otherwise indicated, each person has sole voting power and
sole investment power with respect to the shares shown.
Security Ownership of Certain Beneficial Owners. As of the close
of business on March 27, 2000, based on information available to
the Company, the following persons own beneficially more than 5% of
the outstanding voting securities of the Company:
- 23 -
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percent
Name and Address of Amount and Nature of of
Title of Class Beneficial owner Beneficial Ownership Class
-------------- ------------------- -------------------- -------
Common stock The Maguire Family 2,825,807 (2) 15.1(1)
and related entities
as a group c/o Walter L. Maguire, Sr.
P.O. Box 129
Keller, VA 23401
Common stock John C. Lawrence 2,930,838 (3) 15.7(1)
and related family
members P.O. Box 643
Thompson Falls, MT 59873
Common stock The Dugan Family 2,360,942 (4) 12.6(1)
c/o A. W. Dugan
1415 Louisiana Street, Suite 3100
Houston, TX 77002
Preferred SeriesA. Gordon Clark, Jr.4,500 (5) 100
A stock 2 Musket Trail
Simsbury, CT 06070
</TABLE>
Security Ownership of Management as of March 27, 2000
-----------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percent
Name and Address of Amount and Nature of of
Title of Class Beneficial owner Beneficial Ownership Class
-------------- ------------------- -------------------- -------
Common stock John C. Lawrence 2,855,838 (6) 15.3
Common stock Robert A. Rice 193,994 (7) 1.0
Common stock Leo Jackson 35,700 Nil
--------- ----
Common stock All Directors and executive
officers as a group 3,085,532 16.3
========= ====
</TABLE>
(1) Percent of ownership is based upon 18,694,608 shares of common
stock and exercisable warrants, 4,500 shares of Series A preferred
stock, and 205,996 shares of Series C preferred stock outstanding
at March 27, 2000. The Company's 750,000 outstanding shares of
nonvoting Series B Preferred Stock are not included in the
calculation of the percentage ownership of Voting Stock.
(2) Includes 410,000 warrants to purchase common stock.
(3) Includes 405,818 warrants to purchase common stock.
(4) Includes 600,000 warrants to purchase common stock.
(5) The outstanding Series A and C preferred shares carry voting
rights for the election of directors.
(6) Includes warrants to purchase 565,810 shares of common stock;
does not include 75,000 shares owned by family members of John C.
Lawrence. Mr. Lawrence has waived the right to exercise warrants
to purchase 317,817 shares of common stock until the Company's
shareholders authorize additional shares.
(7) Includes 3,101 warrants to purchase common stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See transactions described in notes 4, 7, 8, 10 and 13 to the
Company's Financial Statements as of December 31, 1999. The
following related party transactions have occurred since
December 31, 1999:
Stock Issuance
250,000 shares of common stock issued to the Estate of Bobby C.
Hamilton, creditor and shareholder.
125,000 shares of common stock issued to a Company related to Al
Dugan, a major shareholder, for cash of $50,000.
100,000 shares of common stock issued to a Company related to Al
Dugan, a major shareholder, for cash of $25,000 and pursuant to
exercise of previously issued options.
- 24 -
<PAGE>
100,000 shares of common stock issued to a Company related to Al
Dugan, a major shareholder, for cash of ______________.
Warrants
300,000 Warrants issued to a Company related to Al Dugan, a major
shareholder, for consulting services.
48,077 Warrants issued to a Company related to Al Dugan, a major
shareholder, in connection with stock purchase by him.
160,000 Warrants issued to John Lawrence for guarantying debt.
EXECUTIVE COMPENSATION
Summary Compensation Table. The Securities and Exchange Commission
requires the following table setting forth for fiscal years ending
December 31, 1999, 1998 and 1997, the compensation paid by the
Company to its principal executive officer.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Annual Compensation
--------------------------------------------------------------------------------
Other Annual
Name and Principal PositionYearSalary Bonus Compensation (1)
--------------------------------------------------------------------------------
John C. Lawrence, President1999$72,000(2) $4,154
John C. Lawrence, President1998$72,000 $4,154
John C. Lawrence, President1997$72,000 $4,154
<PAGE>
<S> <C> <C> <C> <C>
Long-Term Compensation
--------------------------------------------------------------------------------
Restricted
Options/ UnderlyingAll Other All Other
Name and Principal PositionAwards (3)LTIP SARsPayouts Compensation
--------------------------------------------------------------------------------
John C. Lawrence, President$720 None None None
John C. Lawrence, President$844 None
John C. Lawrence, President$855 None
</TABLE>
(1) Represents earned but unused vacation.
(2) Increased to $96,000 beginning August 1, 2000.
(3) These figures represent the fair values, as of the date of
issuance, of the annual Director's fee payable to Mr. Lawrence in
the form of 6,000 shares of Company's restricted Common Stock.
Warrant Grants in the Last Fiscal Year. The following table sets
forth certain information regarding stock options granted to the
named executive officers during the fiscal year ended December 31,
1999. No stock appreciation rights were granted to these
individuals during such year.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Number of Percent of
Securities Total
Under- Options Exercise
lying Granted to or
Options Employees Base Expiration
Name Granted Fiscal Year Price Date
----- ------- ----------- -------- ----------
John C. Lawrence 250,000 100%
</TABLE>
Directors' Compensation. Our directors do not receive cash
compensation for attending Board of Directors meetings, but each
director receives 6,000 shares of Company's common stock annually.
- 25 -
<PAGE>
LEGAL PROCEEDINGS
There are no material legal proceedings to which we are currently
a party or to which our property is subject.
INTEREST OF NAMED EXPERTS AND COUNSEL
No "expert", as that term is defined pursuant to Regulation Section
228.509(a) of Regulation S-B, or "counsel", as that term is defined
pursuant to Regulation Section 228.509(b) of Regulation S-B, was
hired on a contingent basis, or will receive a direct or indirect
interest in the Company, or was a promoter, underwriter, voting
trustee, director, officer, or employee of the Company, at any time
prior to the filing of this Registration Statement.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT VIOLATIONS
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION,
INDEMNIFICATION FOR LIABILITIES ARISING PURSUANT TO THE SECURITIES
ACT OF 1933 IS CONTRARY TO PUBLIC POLICY AND, THEREFORE,
UNENFORCEABLE.
- 26 -
<PAGE>
FINANCIAL STATEMENTS
The Board of Directors and Stockholders of
United States Antimony Corporation
We have audited the accompanying consolidated balance sheets of
United States Antimony Corporation and subsidiary as of December
31, 1999 and 1998, and the related consolidated statements of
operations, changes in stockholders' deficit and cash flows for the
years then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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, 1999 and 1998, 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.
/S/DECORIA, MAICHEL & TEAGUE P.S.
---------------------------------
Spokane, Washington
March 11, 2000
- 27 -
<PAGE>
United States Antimony Corporation and Subsidiary
Consolidated Balance Sheets
December 31, 1999 and 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998
ASSETS
Current assets:
Restricted cash $ 227 $ 221
Inventories 276,599 365,398
Accounts receivable, less allowance
for doubtful accounts of $50,000 60,205
------------ -----------
Total current assets $ 337,031 $ 365,619
Properties, plants and equipment, net 452,505 515,392
Restricted cash for reclamation bonds 178,986 178,986
------------ -----------
Total assets $ 968,522 $ 1,059,997
============ ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Checks issued and payable $ 45,544 $ 31,089
Accounts payable 467,596 256,373
Accrued payroll and property taxes 263,667 168,482
Accrued payroll and other 97,751 61,999
Judgments payable 40,645 164,084
Accrued interest payable 14,640 348,787
Due to related parties 42,841 37,635
Notes payable to bank, current 160,395 160,017
Note payable to Bobby C. Hamilton, current 87,596 31,398
Debentures payable 335,000
Accrued reclamation costs, current 256,000 222,453
------------- -----------
Total current liabilities $ 1,476,675 $ 1,817,317
Notes payable to bank, noncurrent 165,570 106,793
Note payable to Bobby C. Hamilton, noncurrent 1,450,785 1,564,161
Accrued reclamation costs, noncurrent 58,687 280,819
------------- -----------
Total liabilities $ 3,151,717 $ 3,769,090
------------- -----------
Commitments and contingencies (Notes 1 and 14)
Stockholders' deficit:
Preferred stock, $.01 par value,
10,000,000 shares authorized:
Series A: 4,500 shares issued
and outstanding (liquidation
preference $105,750) 45 45
Series B: 750,000 shares issued
and outstanding (liquidation
preference $795,000) 7,500 7,500
Series C: 205,996 and 2,560,762 shares
issued and outstanding (liquidation
preference $113,281) 2,060 25,608
Common stock, $.01 par value,
20,000,000 shares authorized;
16,900,252 and 13,425,925 shares
issued and outstanding 169,003 134,259
Additional paid-in capital 14,289,947 14,079,260
Accumulated deficit (16,651,750) (16,955,765)
------------ -----------
Total stockholders' deficit (2,183,195) (2,709,093)
------------ -----------
Total liabilities and
stockholders' deficit $ 968,522 $ 1,059,997
============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
-28-
<PAGE>
United States Antimony Corporation and Subsidiary
Consolidated Statements of Operations
December 31, 1999 and 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998
Revenues:
Sales of antimony products and other $ 4,710,278 $ 3,142,776
Cost of antimony production 4,329,301 2,747,880
------------ -----------
Gross profit 380,977 394,896
------------ -----------
Other operating expenses:
Exploration and evaluations 53,985 164,871
Care and maintenance - Yellow Jacket property 146,882 197,851
General and administrative 400,432 307,554
------------ -----------
601,299 670,276
------------ -----------
Other (income) expense:
Gain from accrued reclamation costs adjustment (70,000)
Gain from accounts payable adjustment (16,440)
Interest expense 185,985 216,317
Interest income and other (12,190) (23,270)
------------ -----------
87,355 193,047
------------ -----------
Loss before extraordinary item (307,677) (468,427)
Extraordinary gain on conversion of debts
to common stock 611,692
------------ -----------
Net income (loss) $ 304,015 $ (468,427)
============ ===========
Basic net income (loss) per
share of common stock
Before extraordinary item $ (0.02)
Extraordinary item 0.04
------------
Net income (loss) $ 0.02 $ (0.04)
============ ===========
Diluted net income (loss) per share
of common stock
Before extraordinary item $ (0.02)
Extraordinary item 0.04
------------
Net income (loss) $ 0.02 $ (0.03)
============ ===========
Basic weighted average shares outstanding 14,597,917 13,309,379
============ ===========
Diluted weighted average shares outstanding 14,837,976 15,904,204
============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
-29-
<PAGE>
United States Antimony Corporation and Subsidiary
Consolidated Statements of Cash Flows
for the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1999 1998
Cash flows from operating activities:
Net income (loss) $ 304,015 $ (468,427)
Adjustments to reconcile net income
(loss) to net cash provided by operations:
Depreciation 130,714 157,812
Write off of capitalized start-up costs 8,590
Extraordinary gain on conversion of
debts to common stock (611,692)
Gain from accrued reclamation costs
adjustment (70,000)
Gain from accounts payable adjustment (16,440)
Provision for doubtful accounts 50,000
Issuance of common stock to directors
as compensation 2,160 1,687
Issuance of common stock to employees
as compensation 2,600 3,289
Issuance of common stock for services 10,000
Restricted cash (6) 15,059
Accounts receivable (110,205)
Inventories 88,799 97,884
Prepaid expenses 7,727
Accounts payable 228,863 131,291
Accrued payroll and property taxes 95,185 49,681
Accrued payroll and other 35,752 18,292
Judgments payable 11,780 21,147
Accrued interest payable 13,250 28,500
Payable to related parties 5,206 5,928
Accrued reclamation costs (118,585) (53,272)
------------ -----------
Net cash provided by
operating activities 59,986 16,598
------------ -----------
Cash flows from investing activities:
Purchase of properties, plants
and equipment (76,417) (31,182)
------------ -----------
Net cash used in investing
activities (76,417) (31,182)
------------ -----------
Cash flows from financing activities:
Proceeds from issuance of common
stock and warrants 75,000
Proceeds from new borrowings 259,484 190,050
Payments on notes payable to bank (200,330) (190,588)
Change in checks issued and payable 14,455 (11,295)
Payments on note payable to
Bobby C. Hamilton (57,178) (48,583)
------------ -----------
Net cash provided by
financing activities 16,431 14,584
------------ -----------
Net decrease in cash 0 0
Cash, beginning of year 0 0
------------ -----------
Cash, end of year $ 0 $ 0
============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
-30-
<PAGE>
United States Antimony Corporation and Subsidiary
Consolidated Statements of Cash Flows, Continued:
for the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998
Supplemental disclosures:
Cash paid during the year for interest$ 157,239 $ 187,818
============ ===========
Noncash financing activities:
Common stock issued in exchange
for note receivable $ 5,000
Judgment payable converted to
common stock $ 144,339
Debentures payable converted
to common stock 335,000
Accrued debenture interest
payable converted to common stock 347,397
Series C preferred stock converted
to common stock 23,548
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
-31-
<PAGE>
United States Antimony Corporation and Subsidiary
Consolidated Statements of Changes in Stockholders' Deficit
for the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Preferred Stock
------------------------------------------------------
Series A Series B
------------------------------------------------------
Shares Amount Shares Amount
---------- --------- ---------- ----------
Balances, December
31, 1997 4,500 $ 45 750,000 $ 7,500
Issuance of stock
for cash
Value attributed to
issuance of warrants
Issuance of stock in
exchange for services
Issuance of stock for
note receivable
Issuance of stock to
directors for
compensation
Net loss
---------- --------- ---------- ----------
Balances, December
31, 1998 4,500 $ 45 750,000 $ 7,500
Issuance of stock
for cash purchased
by employees
Issuance of stock in
exchange for services
Issuance of common
stock for conversion
of debts
Issuance of stock to
employee for
compensation
Issuance of stock to
directors for
compensation
Conversion of series
C stock preferred
stock to common
Net Income
---------- --------- ---------- ----------
Balances, December
31, 1999 4,500 $ 45 750,000 $ 7,500
========== ========= ========== ==========
<PAGE>
<S> <C> <C> <C> <C>
Preferred Stock
------------------------
Series C Common Stock
------------------------ ------------------------
Shares Amount Shares Amount
---------- --------- ---------- ----------
Balances, December
31, 1997 2,560,762 $ 25,608 13,065,434 $ 130,654
Issuance of stock
for cash 300,000 3,000
Value attributed to
issuance of warrants
Issuance of stock in
exchange for services 23,491 235
Issuance of stock for
note receivable 25,000 250
Issuance of stock to
directors for
compensation 12,000 120
Net loss
---------- --------- ---------- ----------
Balances, December
31, 1998 2,560,762 $ 25,608 13,425,925 $ 134,259
Issuance of stock
for cash purchased
by employees 4,800 48
Issuance of stock in
exchange for services 40,000 400
Issuance of common
stock for conversion
of debts 1,036,761 10,368
Issuance of stock to
employee for
compensation 20,000 200
Issuance of stock to
directors for
compensation 18,000 180
Conversion of series
C stock preferred
stock to common (2,354,766) (3,548) 2,354,766 23,548
Net Income
---------- --------- ---------- ----------
Balances, December
31, 1999 205,996 $ 2,060 16,900,252 $ 169,003
========== ========= ========== ==========
<PAGE>
<S> <C> <C> <C>
Additional
Paid in Accumulated
Capital Deficit Total
----------- ------------------------
Balances, December 31, 1997 $13,997,889 $(16,487,338)$ (2,325,642)
Issuance of stock for cash 58,500 61,500
Value attributed to issuance
of warrants 13,500 13,500
Issuance of stock in exchange
for services 3,054 3,289
Issuance of stock for note
receivable 4,750 5,000
Issuance of stock to directors
for compensation 1,567 1,687
Net loss (468,427) (468,427)
----------- ------------------------
Balances, December 31, 1998 14,079,260 16,955,765 (2,709,093)
Issuance of stock for cash
purchased by employees 1,152 1,200
Issuance of stock in exchange
for services 9,600 10,000
Issuance of common stock for
conversion of debts 195,555 205,923
Issuance of stock to employee
for compensation 2,400 2,600
Issuance of stock to directors
for compensation 1,980 2,160
Conversion of series C stock
preferred stock to common
Net Income 304,015 304,015
----------- ------------------------
Balances, December 31, 1999 $14,289,947 $(16,651,750)$ (2,183,195)
=========== ========================
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
-32-
<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.
The principal business of the Company has been the production
and sale of antimony products. Up until the first quarter of 1999
the Company sold its products pursuant to a profit sharing
agreement with affiliated chemical sales companies. On March 31,
1999, the company terminated the agreement and started selling its
products independently.
The Company had acquired 50% interest in United States
Antimony, Mexico S.A. de C.V. ("USAMSA") to mine, mill and produce
antimony metal and other related products from certain states in
Mexico. At December 31, 1999, the Company had invested $111,088 in
plant and equipment in Mexico.
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, 1999,
the Company has negative working capital of approximately $1.14
million, an accumulated deficit of approximately $16.7 million and
a total stockholders' deficit of approximately $2.2 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:
* In March 1999, the Company notified its sales affiliate,
Basic Chemical Systems ("BCS"), that it was terminating certain
operating agreements with BCS relating to the marketing and sales
of antimony products. In connection with the cancellation, the
Company began acting independently in the production and sale of
antimony products.
* During 1999 the Company procured financing from an
accounts receivable factoring institution to supplement operating
capital and fund its antimony product sales efforts.
* In 1999 and 1998, the Company devoted substantial efforts
to the research and development of new antimony products and
applications. These efforts have resulted in advances in the
Company's preparation, packaging, and quality of the antimony
products it delivers to customers. The Company believes that it
will be able to stay competitive in the antimony business and
generate increasing profits because of these advances.
* In 1999, the Company converted debts totaling $826,736 in
principal and accrued interest into common stock of the company.
* In 1998, the Company generated $75,000 through sales of
300,000 shares of unregistered common stock and warrants to
existing shareholders. The Company plans to raise additional
equity funding through additional stock sales in 2000. However,
there can be no assurance that the Company will be able to
successfully raise additional capital through the sale of its
stock.
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
- 33 -
<PAGE>
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 purchases the majority of its raw antimony used
in the production of finished antimony products from Chinese
producers through metal brokers. If the supply of antimony from
China is reduced, it is possible that the Company's antimony
product operations could be adversely affected. During the years
ended December 31, 1999 and 1998, 20% and 19%, respectively, of the
Company's revenues from antimony products were from sales to one
customer.
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 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.
3. Summary of Significant Accounting Policies:
Principles of Consolidation
The Company's consolidated financial statements also include
the accounts of United States Antimony Montana ("USAM") a wholly
owned subsidiary. Intercompany balances and transactions are
eliminated in consolidation. The Company accounts for its
investment interest in its 50% foreign-owned entity USAMSA by the
equity method.
Restricted Cash
Restricted cash consists of cash held for investment in USAMSA
and reclamation performance bonds.
Inventories
Inventories at December 31, 1999 and 1998, consisted of
ownership 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 net realizable value of inventories.
Properties, Plants and Equipment
Production facilities and equipment are stated at the lower of
cost or estimated net realizable value and are depreciated using
the straight-line method over their estimated useful lives (five to
fifteen years). Vehicles and office equipment are stated at cost
and are depreciated using the straight-line method over estimated
useful lives of three to five years. Maintenance and repairs are
charged to operations as incurred. Betterments of a major nature
are capitalized. When assets are retired or sold, the costs and
related accumulated depreciation are eliminated from the accounts
and any resulting gain or loss is reflected in operations.
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.
- 34 -
<PAGE>
Management's estimates of metal prices, operating capital
requirements 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 necessitate asset impairment write-downs.
The Company has adopted the provisions of Statement of
Financial Accounting Standards No. 121 ("SFAS No. 121"),
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of." 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.
Reclamation and Remediation
All of 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 as
current or noncurrent based on the expected timing of expenditures.
The Company accrues costs associated with environmental
remediation obligations when it is probable that such costs will be
incurred and they are reasonably estimable. Costs of future
expenditures for environmental remediation are not discounted to
their present value. Such costs are based on management's current
estimate of amounts that are expected to be incurred when the
remediation work is performed within current laws and regulations.
The Company has restricted cash balances that have been provided to
ensure performance of its reclamation obligations.
It is reasonably possible that, due to uncertainties
associated with defining the nature and extent of environmental
contamination, application of laws and regulations by regulatory
authorities, and changes in remediation technology, the ultimate
cost of remediation and reclamation could change in the future. The
Company continually reviews its accrued liabilities for such
remediation and reclamation costs as evidence becomes available
indicating that its remediation and reclamation liability has
changed.
Income Taxes
The Company records deferred income tax liabilities and assets
for the expected future income tax consequences of events that have
been recognized in its financial statements. Deferred income tax
liabilities and assets are determined based on the temporary
differences between the financial statement carrying amounts and
the tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the temporary differences are expected
to reverse.
Revenue Recognition
Sales of antimony products are recorded upon shipment to the
customer.
- 35 -
<PAGE>
Income (Loss) Per Common Share
The Company accounts for its income (loss) per common share
according to the Statement of Financial Accounting Standards No.
128 ("SFAS No. 128,") "Earnings Per Share". Under the provisions
of SFAS No. 128, primary and fully diluted earnings per share are
replaced with basic and diluted earnings per share. Basic earnings
per share is arrived at by dividing net income (loss) available to
common stockholders by the weighted average number of common shares
outstanding, and does not include the impact of any potentially
dilutive common stock equivalents. The diluted earnings per share
calculation is arrived at by dividing net income (loss) by the
weighted average number of shares outstanding, adjusted for the
dilutive effect of outstanding stock options, the conversion impact
of convertible preferred stock, and shares issuable under warrants
and other contracts.
During 1999 and 1998, the Company had outstanding common
stock warrants that were exercisable at prices higher than the
average trading value of the Company's stock and, therefore,
antidilutive. Accordingly, the warrants have no effect on the
calculation of basic or diluted weighted average number of shares.
At December 31, 1999 and 1998, the Company had 205,996 and
2,560,762, shares respectively, of Series C preferred stock that
were outstanding. The Series C preferred stock is convertible into
common stock of the Company and considered in the calculation of
diluted weighted average number of shares outstanding during 1999
and 1998.
Stock-Based Compensation
The Company recognizes compensation expense for employees and
directors awarded stock as compensation based upon the market value
of stock awarded at the time of the award.
Recent Accounting Pronouncements
In June 1998, Statement of Financial Accounting Standards
No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments
and Hedging Activities" was issued. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives), and for
hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet
and measure those instruments at fair value. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after
June 15, 1999, however, earlier application of all of the
provisions of this statement is encouraged as of the beginning on
any fiscal quarter. The Company believes the adoption of this
standard will not have a material impact its financial position or
results of operations.
In April 1998, Statement of Position 98-5 ("SOP 98-5"),
"Reporting on the Costs of Start-up Activities" was issued. SOP
98-5 provides guidance on the financial reporting of start-up costs
and organizational costs. It requires costs of start-up
activities and organizational costs to be expensed as incurred.
During 1999, the Company expensed $8,590 of organizational costs
that had previously been capitalized relating to its investment in
USAMSA. No cumulative effect of a change in accounting principle
was recognized, however, due to the immateriality of the amount.
If a cumulative effect had been recognized, accumulated deficit at
December 31, 1998 would have been increased by $8,590.
4. Sales of Accounts Receivable:
The Company sells the majority of its accounts receivables to
a company pursuant to the terms of a factoring agreement entered
into on March 30, 1999. According to the terms of the agreement
the receivables are sold with full recourse and the Company assumes
all risks of collectibility. The performance of all obligations
and payments to the factoring company is personally guaranteed by
John C. Lawrence, the Company's president and director. As
consideration for Mr. Lawrence's guarantee, the Company granted a
mortgaged security interest to Mr. Lawrence collateralized by the
Company's real and personal property. In addition, Mr. Lawrence
was granted 250,000 warrants to purchase common stock of the
Company exercisable at $0.25 per share (See Note 10).
- 36 -
<PAGE>
The Company maintains an allowance for doubtful accounts
receivable based upon the expected collectibility of all trade
receivables. The allowance for doubtful accounts was $50,000 at
December 31, 1999. The factoring agreement requires that the
Company pay 4% of the face amount of the receivables sold up to
$1,200,000, and 2% of the face amount of receivables sold
thereafter as a financing fee. Financing fees paid by the Company
during the year ended December 31, 1999 totaled $106,742 and were
recorded in the cost of antimony production. At December 31, 1999,
net accounts receivable of $3,909,774 had been sold under the
agreement, and were reflected as reductions of accounts receivable.
Proceeds from the sales were used to fund inventory purchases and
operating expenses. The agreement is for a term of one year with
automatic renewal for additional one-year terms. The Company's
sales of accounts receivable qualify as sales under the provisions
of Statement of Financial Standards No. 125 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities."
5. Properties, Plants and Equipment:
The major components of the Company's properties, plants and
equipment at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998
Gold mill and equipment(1) $ 37,890 $ 37,890
Gold mining equipment(1) 1,265,392 1,265,392
Antimony mining buildings
and equipment(2) 168,746 168,746
Antimony mill and equipment(2) 518,190 518,190
Chemical processing and
office buildings 255,447 225,313
Chemical processing equipment 852,811 837,256
USAMSA(3) plant and equipment 111,088 99,098
Other 76,955 66,807
---------- -----------
3,286,519 3,218,692
Less accumulated depreciation and depletion 2,834,014 (2,703,300)
---------- -----------
$ 452,505 $ 515,392
========== ===========
</TABLE>
(1) The Company has removed the mill at Yankee Fork and some of
the mining and milling equipment as part of the reclamation
process. Substantially all of the remaining assets are fully
depreciated.
(2) At December 31, 1999 and 1998, substantially all of these
assets are fully depreciated and the antimony milling buildings and
equipment are idle.
(3) Amount represents the Company's expenditures for USAMSA plant
and equipment located in Mexico (see Note 1).
6. Judgments Payable:
At December 31, 1999 and 1998, the Company owed the following
judgments payable:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
Internal Revenue Service in collection of former legal counsel's
Bankruptcy estate $ 40,645(1) $ 37,986
Geosearch, Inc. (see Note 10) 126,098
--------- ----------
$ 40,645 $ 164,084
========= ==========
</TABLE>
(1) Includes interest at the Federal Judgment Rate, which
approximated 6-7% during 1999 and 1998. The amount is
collateralized by certain equipment.
- 37 -
<PAGE>
7. Due to Related Parties:
Amounts due to related parties at December 31, 1999 and 1998
were as follows (see Note 13).
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
Entity owned by John C. Lawrence, president
and director $ 788 $ 2,227
John C. Lawrence, president and director 7,340 2,485
Walter L. Maguire, Jr., a former director (1) 34,713 32,923
-------- ---------
$ 42,841 $ 37,635
======== =========
</TABLE>
(1) Interest accrues on the original principal balance
advanced at 10% per annum.
Transactions affecting the payable to Mr. Lawrence during 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
Balance, beginning of year $ 2,485 $ -0-
Equipment rental charges 30,616 38,865
Payments (25,761) (36,380)
-------- ---------
Balance, end of year $ 7,340 $ 2,485
======== =========
</TABLE>
8. Notes Payable to Bank:
Notes payable to First State Bank of Thompson Falls, Montana
("First State Bank") at December 31, 1999 were as follows:
Five-year term note bearing interest at 10.5%;
payable monthly equal to 1.5% of receipts from
all Company sales, up to $5,375 per month; due in
full April 2, 2004; collateralized by certain
equipment and patented and unpatented mining claims
in Sanders County, Montana; personally guaranteed
by John C. Lawrence, (president and director). $210,116
Note payable under a $50,500 revolving line-of-credit
agreement bearing interest at 10.5%; collateralized
by certain equipment and patented and unpatented
mining claims in Sanders County, Montana; principal
and accrued interest due at maturity on April 2, 2000;
personally guaranteed by John C. Lawrence. 34,259
Note payable under a $85,050 revolving line-of-credit
agreement bearing interest at 11%; collateralized
by certain equipment and patented and unpatented
mining claims in Sanders County, Montana; principal
and accrued interest due at maturity on February
15, 2000; personally guaranteed by John C. Lawrence. 71,342
Note payable under a revolving line-of-credit
agreement bearing interest at 11%; collateralized
by certain equipment and patented and unpatented
mining claims in Sanders County, Montana; principal
and interest due at maturity on January 2, 2000;
personally guaranteed by John C. Lawrence. 10,248
--------
Total 325,965
Less current portion 160,395
--------
Noncurrent portion $165,570
========
Based on the interest rates in effect at December 31, 1999,
principal payments on the notes payable to bank are due as follows:
- 38 -
<PAGE>
Year Ending
December 31,
------------
2000 $160,395
2001 49,455
2002 54,905
2003 61,210
--------
$325,965
========
9. Note Payable to Bobby C. Hamilton:
The Company owed Bobby C. Hamilton ("Hamilton"), a
stockholder, an unsecured note payable of $1,538,381 and $1,595,559
at December 31, 1999 and 1998, respectively. The obligation arose
from the settlement of litigation brought against Hamilton by the
Company in 1995. The original terms for repayment of the note
included the payment of principal and interest at 7.5% per annum
equal to 10% of the gross sales of the Company's operations, with
a minimum total annual payment of principal and interest of
$150,000.
In April 1999, the Company renegotiated the repayment terms
such that the note is payable equal to 4% of the gross sales of the
Company's operations with a minimum total annual payment of
principal and interest of $200,000. Based on the minimum annual
payment requirement, principal payments on the Hamilton note
payable are due as follows:
Year Ending
December 31,
------------
2000 $ 87,596
2001 94,396
2002 101,724
2003 109,622
2004 118,132
Thereafter 1,026,911
----------
$1,538,381
==========
Interest expense paid to Hamilton, a stockholder, during the
years ended December 31, 1999 and 1998 was $117,755 and $127,957
respectively.
10. 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.
- 39 -
<PAGE>
Transactions in stock warrants are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of Expiration
Warrants Exercise PricesDate
--------- -------------------------
Balance, December 31, 1997 894,356$0.50-$0.80
Warrants issued in connection with
stock sale 100,000 $0.50 (A)
Warrants issued in connection with
stock sale 100,000 $0.25 (B)
Balance, December 31, 19981,094,356$0.25-$0.80
Warrants issued to John C.
Lawrence, president and director,
in connection with his personal guarantee
of a financing arrangement 250,000$0.25 (C)
Warrants issued to a consultant as
compensation for services 100,000 $0.55 (D)
Warrants expired (225,000)$0.50-$0.70
Balance, December 31, 19991,219,356$0.25-0.80
</TABLE>
(A) Of total warrants issued in these stock sales, 60,000 are
exercisable on or before February 17, 2001, and 40,000 are
exercisable on or before January 12, 2001.
(B) Warrants are exercisable on or before July 28, 2001.
(C) Warrants are exercisable for as long as Mr. Lawrence
personally guarantees certain company financing arrangements.
(D) Warrants are exercisable on or before August 30, 2002.
Issuance of Common Stock to Employees
During 1999, the Company issued 20,000 shares of its
unregistered common stock to employees in recognition of their
service to the Company. The Company accounts for stock issued to
employees as compensation in accordance with Statement of Financial
Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," and accordingly
recognized compensation expense of $2,600 based on upon the fair
value of the unregistered shares issued.
Issuance of Common Stock in Connection with Conversion of Debts
In November 1999, the Company entered into a Settlement
Agreement and Release of all Claims ("the Agreement") with Ronald
Michael Meneo, Trustee of the Walter L. Maguire 1935-1 Trust ("the
Trust") and Walter L. Maguire Sr., beneficiary of the Trust and
stockholder and former director of the Company. The Agreement
settled litigations brought by the Trust against the Company for
default on certain of the Company's debentures held by the Trust
and the resulting counterclaim against the Trust and Mr. Maguire by
the Company. The Agreement called for the issuance of 790,909
shares of the Company's unregistered common stock to the Trust in
exchange for the extinguishment of all indebtedness claimed owing
to the Trust or Mr. Maguire.
- 40 -
<PAGE>
In connection with the issuance, the Company extinguished
$335,000 of debenture principal and $347,397 of related accrued
interest thereon. The Company recorded an extraordinary gain of
$534,101 on the extinguishment based upon the value of the
restricted shares issued at the time.
In October 1999, the Company extinguished a debt due
Geosearch, Inc., a former lessor of a mining interest to the
Company, by issuing 245,852 shares of its unregistered common
stock. The debt extinguished totaled $144,339 of principal and
accrued interest. The Company recorded an extraordinary gain of
$77,591 on the extinguishment based upon the value of the
restricted shares issued at the time.
Issuance of Common Stock for Cash
During 1998, the Company sold 300,000 shares of its
unregistered common stock and warrants for $75,000. Of total stock
sales made during the year ended December 31, 1998, the Company
sold 200,000 shares of its unregistered common stock and warrants
to Walter L. Maguire Sr. and parties related to him for $50,000.
Mr. Maguire is a stockholder and was a director of the Company
until December 31, 1998.
Issuance of Common Stock in Exchange for Services
During 1999, the Company issued 40,000 shares of its
unregistered common stock and 100,000 warrants to purchase shares
of common stock at $0.55 per share until August 3, 2000, to a
consultant in exchange for professional services rendered to the
Company. These shares were valued at 75% of the market value of
the stock at the time they were issued.
During 1999, the Company issued 23,491 shares of its
unregistered common stock to the grandson of Robert L. Rice, a
director and stockholder, in exchange for services rendered to the
Company. The shares were valued at 75% of the market value of the
stock at the time they were issued, which approximated the value of
the services rendered. The Company recognized the issuance during
the year ended December 31, 1998, since the services were provided
to the Company prior to that date.
Issuance of Common Stock for Note Receivable
During 1998, the Company issued Robert L. Rice, a director and
stockholder, 25,000 shares of its unregistered common stock in
exchange for a $5,000 note receivable. The note was satisfied in
1999 when Mr. Rice transferred certain equipment to the company as
payment (See Note 13).
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 a total liquidation preference
equal to $45,000 plus dividends in arrears. At December 31, 1999,
cumulative dividends in arrears amounted to $60,750, or $13.50 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 has preference over the Company's
common stock and Series A preferred stock, has no voting rights and
is entitled to cumulative dividends of $.01 per share per year.
In the event of dissolution or liquidation of the Company, the
preferential amount payable to Series B restricted preferred
stockholders is $1.00 per share plus dividends in arrears. No
dividends have been declared or paid with respect to the Series B
preferred stock. In 1995, 916,667 shares of Series B preferred
stock were surrendered to the Company in connection with the
settlement of litigation against Bobby C. Hamilton. At December 31,
1999, cumulative dividends in arrears were $45,000, or $0.06 per
share.
- 41 -
<PAGE>
During 1997, the Company issued 2,560,762 shares of Series C
preferred stock in connection with the conversion of certain debts
owed by the Company. The rights, preferences, privileges and
limitations of the Series C preferred shares issued upon conversion
of debt are set forth below:
Designation. The class of Convertible Preferred Stock, Series
C, $0.01 par value per share, shall consist of up to 3.8 million
shares of the Company.
Optional Conversion. A holder of Series C preferred 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 preferred shares shall
have the right to that number of votes equal to the number of
shares of common stock issuable upon conversion of such Series C
preferred shares.
Liquidation Preference. In the event of any liquidation or
winding up of the Company, the holders of Series C preferred shares
shall be entitled to receive as a preference over 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.
Registration Rights. Twenty percent (20%) of the underlying
common stock issuable upon conversion of the Series C preferred
shares shall be entitled to "piggyback" registration rights when,
and if, the Company files a registration statement for its
securities or the securities of any other stockholder.
Redemption. The Series C preferred 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 is $0.55.
Protective Provisions. The consent of a majority interest of
the holders of Series C preferred 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.
During 1999, holders of 2,354,766 shares of Series C shares
converted their shares into common stock of Company. At December
31, 1999, 205,996 shares of Series C preferred stock remained
outstanding.
- 42 -
<PAGE>
11. Income Taxes:
The components of the deferred tax assets and liabilities at
December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
Net operating losses $2,560,645 $2,646,065
Properties, plants and equipment 32,996 19,979
Reclamation costs 106,993 171,112
Allowance for doubtful accounts 17,000
---------- ----------
Total deferred tax assets 2,717,634 2,837,156
Less valuation allowance (2,717,634) (2,837,156)
---------- ----------
$ 0 $ 0
========== ==========
</TABLE>
Statement of Financial Accounting 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 the attainment of a consistent level of overall
profitability from operations.
The market, capital and environmental factors associated with
realizing this goal are considerable and uncertain. Therefore,
management believes that a full valuation allowance of the net
deferred tax assets is appropriate at December 31, 1999 and 1998.
However, if estimates of future taxable income change, the
valuation allowance could change in the future.
The change in the valuation allowance for the years ended
December 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Balance, December 31, 1997 $2,597,891
Increase due to non-utilization of net operating loss
carry forward 239,265
----------
Balance, December 31, 1998 2,837,156
Decrease due to utilization of net operating loss
carry forward (119,522)
----------
Balance, December 31, 1999 $2,717,634
==========
</TABLE>
During the year ended December 31, 1999, the Company utilized
approximately $251,000 of net operating losses for federal income
tax purposes.
At December 31, 1999, the Company had the following regular
tax basis net operating loss carryforward.
Expiring in
-----------
2000 $2,220,180
2001 916,998
2002 715,731
2003 866,362
2004 568,416
2005 715,049
2006 512,877
2007 154,235
2011 394,788
2018 466,672
----------
$7,531,308
==========
- 43 -
<PAGE>
At December 31, 1999, the Company had net operating loss
carryforward for alternative minimum tax purposes of approximately
$7.1 million.
12. Loss Per Common Share:
The following table presents a reconciliation of the
numerators and denominators of the basic and diluted earnings per
share ("EPS") computations for the years ended December 31, 1999
and 1998:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999
Per Share
Basic EPS:
Net loss before extraordinary item$(307,677)14,597,917$ 0.02
Effect of Dilutive Securities
Common stock warrants (1)
Series C preferred stock (2) 240,059 Nil
--------- ----------------
Diluted EPS:
-----------
Net loss before extraordinary item$(307,677)14,837,976$(0.02)
===========================
<S> <C> <C> <C>
1998
Per Share
Basic EPS:
Net loss $(468,427)13,309,379$ 0.04
Effect of Dilutive Securities
Common stock warrants (1)
Series C preferred stock (2) 2,594,825 0.01
--------- ----------------
Diluted EPS:
-----------
Net loss $(468,427)15,904,204$(0.03)
===========================
</TABLE>
(1) Common stock warrants totaling 1,219,356 and 1,094,356
outstanding during 1999 and 1998, respectively, were not included
in the computation of diluted EPS at December 31, 1999 or 1998
because the various exercise prices of the warrants were greater
than the average market price of the Company's common stock.
(2) Series C preferred stock is convertible into common stock
of the company on a share-for-share basis. The effect on the
computation of diluted weighted average shares outstanding is based
upon the potential conversion of the shares into common stock for
the period of time the preferred shares were outstanding and the
effect of Series C preferred stock anti-dilution provisions.
- 44 -
<PAGE>
13. Related-Party Transactions:
In addition to transactions described in Notes 4, 7, 9, and
10 during 1999 and 1998, the Company had the following
transactions with related parties:
* During 1999 and 1998, the Company issued 18,000 shares of
its unregistered common stock to certain members of the Board of
Directors for their duties as directors. The issuance represented
an award of 6,000 shares per year per director eligible to receive
the award. The issuances have been recorded in the consolidated
financial statements as if they were issued in the year they were
earned. The stock awards were recorded as compensation expense
(director's fees) based upon the estimated value of the stock at
the date of issuance.
* At December 31, 1999, the Company owed Walter L. Maguire,
Jr., a stockholder and former director, $34,713 for amounts
advanced to the Company by Mr. Maguire. Annual interest expense
related to these notes was $1,790 for both 1999 and 1998. In
1996, a company controlled by Mr. Maguire sold the Company
packaging materials at a cost of $32,066. At December 31, 1999, the
Company owed Mr. Maguire's company $5,497 (included in accounts
payable), representing the unpaid balance on this purchase.
* During 1998, Robert L. Rice, a director and stockholder,
exchanged certain equipment for a $5,000 note receivable due the
Company.
* In February 1999, the Board of Directors nominated Leo
Jackson to serve as a director in the place of Walter L. Maguire,
Sr., who had resigned from the Board on December 31, 1998. Mr.
Jackson is a stockholder of the Company and owns 31.4% of
Production Minerals Inc., a company that has an indirect interest
of 25% in the stock of USAMSA. (See Note 1)
14. 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,
1999, the cyanide solution discharge was complete, the mill
removed, and a majority of the cyanide leach residue disposed of.
In 1996, the Idaho Department of Environmental Quality requested
that the Company sign a consent decree related to completing the
reclamation and remediation at the Preachers Cove mill, which the
Company signed in December 1996. The Company anticipates having
reclamation at the property completed in 2000.
The Company has accrued amounts on its balance sheet that it
believes to be representative of future costs required to fully
reclaim the property.
The Company also has environmental remediation obligations at
its antimony production facility near Thompson Falls, Montana and
its abandoned gold mining property (Yellow Jacket) in Lemhi County,
Idaho. The Company has accrued amounts on its balance sheet that
it estimates will be adequate to fulfill these obligations at
December 31, 1999. During 1999 substantial reclamation work was
performed at both of these sites.
- 45 -
<PAGE>
15. Fair Value of Financial Instruments:
The following disclosure of the estimated fair value of
financial instruments is made in accordance with the requirements
of Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments." The
estimated fair value amounts have been determined using available
market information and appropriate valuation methodologies.
However, considerable judgment is required to interpret market data
and to develop the estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of the
amounts the Company could realize in a current market exchange.
The carrying amounts for cash, restricted cash, accounts
receivable, accounts payable and accrued expenses are a reasonable
estimate of their fair values. The fair value of amounts due to
related parties and judgments payable approximate their carrying
values of $42,841 and $40,645, respectively, at December 31, 1999,
and $37,635 and $164,084, respectively, at December 31, 1998, based
upon the contractual cash flow requirements.
It is not practicable to estimate the fair value of the
$1,538,381 note payable to Bobby C. 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 and the note is not secured with any collateral.
- 46 -
<PAGE>
United States Antimony Corporation and Subsidiary
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(Unaudited)
June 30, December 31,
2000 1999
------------ -----------
ASSETS
Current assets:
Restricted cash $ 230 $ 227
Inventories 220,189 276,599
Accounts receivable, less allowance
for doubtful accounts of $30,000 and $50,000 69,962 60,205
Prepaid expenses 1,757
------------ -----------
Total current assets 292,128 337,031
Properties, plants and equipment, net 421,584 452,505
Restricted cash for reclamation bonds 171,816 178,986
Other assets 100,000
------------ -----------
Total assets $ 985,528 $ 968,522
============ ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Checks issued and payable $ 58,293 $ 45,544
Accounts payable 532,208 467,596
Accrued payroll and property taxes 255,501 263,667
Accrued payroll and other 65,722 97,751
Judgments payable 42,067 40,645
Accrued interest payable 14,640 14,640
Due to related parties 101,632 42,841
Notes payable to bank, current 146,876 160,395
Note payable to Bobby C. Hamilton, current 87,596
Current debentures payable 600,000
Accrued reclamation costs, current 220,700 256,000
------------ -----------
Total current liabilities 2,037,639 1,476,675
Notes payable to bank, noncurrent 232,935 165,570
Note payable to Bobby C. Hamilton, noncurrent 1,450,785
Accrued reclamation costs, noncurrent 58,687 58,687
------------ -----------
Total liabilities $ 2,329,261 $ 3,151,717
------------ -----------
Commitments and contingencies
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
Series C: 205,996 shares issued
and outstanding 2,060 2,060
Common stock, $.01 par value,
20,000,000 shares authorized;
17,725,252 and 16,900,252 shares
issued and outstanding 177,252 169,003
Additional paid-in capital 14,595,323 14,289,947
Accumulated deficit (16,125,913) (16,651,750)
------------ -----------
Total stockholders' deficit (1,343,733) (2,183,195)
------------ -----------
Total liabilities and
stockholders' deficit $ 985,528 $ 968,522
============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
- 47 -
<PAGE>
United States Antimony Corporation and Subsidiary
Consolidated Statements of Operations
for the three and six-month periods ended June 30, 2000 and
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- -----------------------
2000 1999 2000 1999
----------- ---------------------- ----------
Revenues:
Sales of antimony
products and other$ 1,190,413 $ 1,533,620$ 2,363,463 $2,223,922
----------- ---------------------- ----------
Antimony production
costs 995,888 1,089,553 1,844,043 1,076,928
Freight and delivery
costs 142,363 96,180 243,977 96,180
----------- ---------------------- ----------
1,138,251 1,185,733 2,088,020 1,803,108
----------- ---------------------- ----------
Gross profit 52,162 347,887 275,443 420,814
Operating expenses:
Care, maintenance,
and reclamation-
Yellow Jacket 50,105 4,906 77,906 43,770
Exploration and
evaluation-Yellow
Jacket 11,926 45,198
Sales expense 84,286 63,960 194,351 63,960
General and
administrative
expenses 91,351 81,588 269,195 143,708
----------- ---------------------- ----------
225,742 163,380 541,452 296,636
----------- ---------------------- ----------
Other expenses (income):
Gain from accrued
reclamation costs
adjustment (35,000) (35,000)
Gain from accounts
payable adjustment (16,440)
Accounts receivable
factoring expense 24,827 52,012 49,288 52,012
Interest expense 40,129 64,930 81,239 116,072
Interest income (2,507) (2,311) (4,647) (4,657)
----------- ---------------------- ----------
62,449 79,631 125,880 111,987
----------- ---------------------- ----------
Net income (loss)
before extra-
ordinary item (236,029) 105,876 (391,889) 12,191
Extraordinary gain on
settlement of debt 917,726 917,726
----------- ---------------------- ----------
Net income $ 681,697 $ 105,876$ 525,837 $ 12,191
=========== ====================== ==========
Basic net income (loss)
per share of common
stock
Before extra-
ordinary item $ (.01) $ (0.02)
Extraordinary
item 0.05 0.05
----------- ---------------------- ----------
Net income
(loss) $ 0.04 $ 0.01$ 0.03 Nil
=========== ====================== ==========
Diluted net income
(loss) per share of
common stock
Before extra-
ordinary item $ (.01) $ (0.02)
Extraordinary
item 0.05 0.05
----------- ---------------------- ----------
Net income
(loss) $ 0.04 $ 0.01$ 0.03 Nil
=========== ====================== ==========
Basic weighted average
shares outstanding 17,684,126 13,450,725 17,257,572 13,445,076
=========== ====================== ==========
Diluted weighted average
shares outstanding 17,684,126 16,045,550 17,257,572 16,039,901
=========== ====================== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
- 48 -
<PAGE>
United States Antimony Corporation and Subsidiary
Consolidated Statements of Cash Flows
for the six-month periods ended June 30, 2000 and 1999 (Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
June 30, June 30,
2000 1999
------------ -----------
Cash flows from operating activities:
Net income $ 525,837 $ 12,191
Adjustments to reconcile net loss to
net cash provided by (used in) operations:
Depreciation 66,000 62,623
Extraordinary gain on settlement of
debt (917,726)
Provision for doubtful accounts (20,000)
Issuance of common stock for
consulting services 78,000
Issuance of stock to employees as
compensation 1,050
Gain from accrued reclamation costs
adjustment (35,000)
Gain from accounts payable adjustment (16,440)
Chnge in:
Restricted cash , (3) , (1)
Inventories 56,410 (62,979)
Accounts receivable 10,243 (215,409)
Prepaid expenses (1,747)
Other assets (100,000)
Accounts payable 64,612 240,996
Restricted cash for reclamation bonds 7,170
Accrued payroll and property taxes (8,166) 54,709
Accrued payroll and other (32,029) 11,887
Judgments payable 1,422 1,151
Accrued debenture interest payable 13,250
Due to related parties (11,209) (5,228)
Accrued reclamation costs (35,300) (47,537)
------------ -----------
Net cash provided by
(used in) operations (316,486) 15,263
------------ -----------
Cash flows from investing activities:
Purchase of properties, plant
and equipment (35,079) (45,732)
------------ -----------
Net cash used in investing
activities (35,079) (45,732)
------------ -----------
Cash flows from financing activities:
Proceeds from issuance of common
stock and warrants 155,000
Proceeds from sale of convertible debentures 600,000
Advances from related party 70,000
Proceeds from notes payable to bank 3,846 250,000
Payments on notes payable to bank (199,960)
Increase in checks issued and payable 12,749 9,030
Payments on note payable to
Bobby C. Hamilton (540,030) (28,601)
------------ -----------
Net cash provided by
financing activities 351,565 30,469
------------ -----------
Net change in cash 0 0
Cash, beginning of period 0 0
------------ -----------
Cash, end of period $ 0 $ 0
============ ===========
Supplemental disclosures:
Cash paid during the period for interest$ 79,159 $ 86,591
============ ===========
Noncash financing activities:
Common stock issued as settlement for debt$ 80,625
============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
- 49 -
<PAGE>
United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements (UNAUDITED)
1. Basis of Presentation:
The unaudited consolidated financial statements have been
prepared by the Company in accordance with generally accepted
accounting principles for interim financial information, as well as
the instructions to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of the Company's
management, all adjustments (consisting of only normal recurring
accruals) considered necessary for a fair presentation of the
interim financial statements have been included. Operating results
for the six-month period ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the full year
ending December 31, 2000. Certain consolidated financial statement
amounts for the six-month period ended June 30, 1999, have been
reclassified to conform to the 2000 presentation. These
reclassifications had no effect on the net income or accumulated
deficit as previously reported.
During the second quarter of 2000, the Company began
negotiations with the Estate of Bobby C. Hamilton to settle a note
payable owed the Estate (see Financial Condition and Liquidity).
Although the final closing of the settlement agreement did not take
place until July 2000, the Company has adjusted the June 30, 2000
consolidated financial statements to reflect the settlement of
debt, the extraordinary gain on the settlement, and the issuance of
debentures and common stock relating to the settlement.
For further information refer to the financial statements and
footnotes thereto in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1999.
2. 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 believes
the cleanup will be complete sometime by 2001.
3. Income (loss) per common share:
The diluted share base for the six months ended June 30, 2000,
excludes incremental shares relating to outstanding stock purchase
warrants and shares convertible from debentures. These shares are
excluded due to their antidilutive effect as a result of the
Company's loss from continuing operations during the first six
months of 2000.
The following table presents a reconciliation of the
numerators and denominators of the basic and diluted earnings per
share ("EPS") computations for the six-month periods ended June 30,
1999.
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<PAGE>
June 30, 1999
-------------
Per Share
Income Shares Amounts
------- ------ -------
Basic EPS:
Loss $12,191 13,445,076 Nil
Series C preferred stock (1) 2,594,825
------- ---------- -------
Diluted EPS:
Loss $12,191 16,039,901 Nil
======= ========== =======
(1) Series C preferred stock is convertible into common stock of
the company on a share-for-share basis. The effect on the
computation of diluted weighted average shares outstanding is based
upon the potential conversion of the shares into common stock for
the period of time the preferred shares were outstanding and the
antidilutive provisions of the Series C shares.
Management's Discussion and Analysis of Results of Operations
and Financial Condition
General
This report contains both historical and prospective
statements concerning the Company and its operations. Prospective
statements (known as "forward-looking statements") may or may not
prove true with the passage of time because of future risks and
uncertainties. The Company cannot predict what factors might cause
actual results to differ materially from those indicated by
prospective statements.
Results of Operations
For the three-month period ended June 30, 2000
The Company's operations resulted in a net loss of $236,029
for the three-month period ended June 30, 2000 compared with a net
loss of $105,876 for the three-month period ended June 30, 1999.
The increase in the loss for the second quarter of 2000
compared to the same quarter of 1999 is primarily due to the
continuing decrease in antimony product prices during the second
quarter of 2000.
During the second quarter of 2000, the Company settled a debt
obligation owed the Estate of Bobby C. Hamilton (see Financial
Condition and Liquidity). In connection with the settlement, the
Company recorded an extraordinary gain of $917,526 that resulted in
net income after the extraordinary gain of $681,697 for the three-
month period ended June 30, 2000.
Total revenues from antimony product sales for the second
quarter of 2000 were $1,190,413 compared with $1,533,620 for the
comparable quarter of 1999, a decrease of $343,207. The decrease
in revenue from sales during the second quarter of 2000 was the
result of decreasing antimony product prices and increasing metal
prices. Sales of antimony products during the second quarter of
2000 consisted of 1,312,372 pounds at an average sale price of $.90
per pound. During the second quarter of 1999, sales of antimony
products consisted of 1,549,099 pounds at an average sale price of
$0.99 per pound. Gross profit from antimony sales during the
second three-month period of 2000 was $52,162 compared with gross
profit of $347,887 during the second three-month period of 1999.
The decrease in gross profit and sale prices of antimony products
from the second quarter of 2000 to the second quarter of 1999 is
the result of a corresponding decrease in antimony product prices
and increasing metal prices.
In 1996, the Company's Yellow Jacket property was put on a
care and maintenance status and gold production was terminated.
Subsequent to the curtailment of production at Yellow Jacket, the
Company began an underground exploration program and core drilling
activities at Yellow Jacket. During the second quarter of 1999, due
to depressed gold prices and the absence of any discovery of
mineralized material that could be economically mined, the Company
abandoned its exploration program and began final reclamation
- 51 -
<PAGE>
and closure activities. Since the cessation of exploration, the
Company has been engaged exclusively in reclamation activities at
Yellow Jacket.
Costs related to the reclamation of Yellow Jacket were $50,105
for the three-month period ended June 30, 2000, compared with care
and maintenance costs of $4,906 during the three-month period ended
June 30, 1999. The increase in costs was primarily due to
increased reclamation activity during the second quarter of 2000
and the absence of second quarter reversing adjustments made to
care and maintenance costs in 1999. Costs related to exploration
and evaluation at Yellow Jacket were $11,926 for the three-month
period ended June 30, 1999, compared to no exploration costs during
the three-month period ended June 30, 2000, due to the cessation of
exploration activities at the property during the second quarter of
1999.
Sales expense was $84,286 during the second quarter of 2000
compared with $63,960 in the second quarter of 1999. Sales expense
was lower during the second quarter of 1999 as compared to the
second quarter of 2000, as it was the first full quarter the
Company sold its antimony products independently, and its sales
department was in the formation stages.
General and administrative expenses were $91,351 during the
second quarter of 2000 compared to $81,588 during the second
quarter of 1999. The increase in general and administrative
expenses during the second quarter of 2000 was partially related to
costs incurred in settling the Hamilton Estate debt (see Financial
Condition and Liquidity).
During the second quarter of 1999, the Company re-evaluated
its estimate of reclamation costs required to complete reclamation
and remediation at the Company's Preachers Cove mill site pursuant
to the consent decree signed with the Idaho Department of
Environmental Quality in 1996. In connection with this re-
evaluation, the Company recognized a gain of $35,000 during the
second quarter of 1999 from the adjustment of its reclamation
accrual. The Company monitors reclamation costs on all its
properties and adjusts accrued reclamation costs as necessary to
reflect the Company's best estimate of costs required to fulfill
its reclamation responsibilities to federal and state environmental
agencies. No such adjustments were required during the second
quarter of 1999.
Accounts receivable factoring expense was $24,827 during the
second quarter of 2000 compared to $52,012 for the second quarter
of 1999. Factoring expense decreased during 2000 due to the
absence of set up fees that had been charged during 1999.
Interest expense was $40,129 during three-month period ended
June 30, 2000, compared to $64,930 for the same period in 1999. The
decrease in interest expense is primarily due to interest costs on
inventory purchased from a former sales affiliate at the beginning
of the second quarter of 1999 that were not present during 2000.
Interest income was $2,507 for the three-month period ended
June 30, 2000, and was comparable to $2,311 for the same period in
1999.
For the six-month period ended June 30, 1999
The Company's operations resulted in a net loss of $391,889
for the six-month period ended June 30, 2000 compared with a net
income of $12,191 for the six-month period ended June 30, 1999.
Net income for the period ended June 30, 2000, after the
extraordinary gain on settlement of debt, (see Financial Condition
and Liquidity) was $525,837.
Total revenues from antimony product sales for the first six
months of 2000 were $2,363,463 compared with $2,223,922 during the
comparable period in 1999. Sales of antimony products during the
first six months of 2000 consisted of 2,559,961 pounds at an
average sale price of $0.92 per pound. During the first six months
of 1999 sales of antimony products consisted of 2,233,421 pounds at
an average sale price of $1.00 per pound. The decrease in sale
prices of antimony products from the first two quarters of 1999
compared to the first two quarters of 2000 is the result of a
corresponding decrease in antimony metal prices. Gross profit from
antimony sales during the first six months of 2000 was $275,443,
compared with
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<PAGE>
gross profit of $420,814 during the first six months of 1999. The
decrease in gross profit during the first six months of 2000
compared to the comparable period of 1999, is primarily due to
decreased antimony product sales prices during 2000.
Costs related to the reclamation of Yellow Jacket were $77,906
for the six-month period ended June 30, 2000, compared with care,
maintenance and reclamation costs of $43,770 during the six-month
period ended June 30, 1999. The increase was primarily due to the
increased reclamation activities during 2000 as compared to 1999.
Costs related to exploration and evaluation at Yellow Jacket were
$45,198 for the six-month period ended June 30, 1999, compared with
no exploration costs during the six-month period ended June 30,
2000.
Sales expense was $194,351 for the six-month period ended June
30, 2000 compared to $63,960 for the same period in 1999. The
increase in sales expense during the first six months of 2000 as
compared to the same period of 1999 was due to the sales
department's operation for only three months of the six month
period ended June 30, 1999.
General and administrative expenses increased $125,487 to
$269,195 during the first six months of 2000 as compared to
$143,708 during the first six months of 1999. The increase was
partially due to financial consulting expense of $78,000 incurred
in the first quarter of 2000 that was not incurred in 1999.
Interest expense was $81,239 during six-month period ended
June 30, 2000, compared to $116,072 for the same period in 1999.
The decrease in interest expense is primarily due to interest costs
relating to inventory purchased from a former sales affiliate
during 1999 that was not incurred in 2000.
Interest income was $4,647 during the six-month period ended
June 30, 2000, and was comparable to $4,657 for the same period in
1999.
During the second quarter of 1999 a gain of $16,440, resulting
from the write off of certain accounts payable was recognized, no
such gain was recognized for the comparable quarter of 2000.
Financial Condition and Liquidity
At June 30, 2000, Company assets totaled $985,528, and there
was a stockholders' deficit of $1,343,733. The stockholders'
deficit decreased $839,462 from December 31, 1999, due to the
extraordinary gain on settlement of debt. In order to continue as
a going concern, the Company is dependent upon profitable
operations from the antimony division and continuing short and
long-term debt financing. Without financing and profitable
operations, the Company may not be able to meet its obligations,
fund operations and continue in existence.
Cash provided used by operating activities during the first
six months of 2000 was $316,486 compared with cash provided of
$15,263 during the first six months of 1999. The change in cash
from operations for the first six months of 2000 compared to the
same period in 1999 was primarily due to the net loss of $361,889
(before extraordinary gain on the settlement of debt) incurred
during the first two quarters of 2000.
Cash used in investing activities during the first six months
of 2000 was $35,079 compared to $45,732 used during the comparable
period of 1999. During both periods, cash used in investing
activities related to the Company's investment in antimony
processing plant and equipment.
Cash provided by financing activities was $351,565 during the
first six months of 2000 compared to $30,469 provided by financing
activities during the comparable period of 1999. The increase in
cash provided from financing activities was principally due to
advances from the Company's President of $70,000, common stock and
warrant sales of $155,000 and the issuance of $600,000 of
convertible debentures during the first six months of 2000. Cash
provided from financing activities during the first six months of
2000 was used to settle an outstanding debt (see below) and fund
operations.
- 53 -
<PAGE>
In an effort to improve the Company's financial condition, the
Company's management began negotiations during the second quarter
of 2000 to settle a debt owed the Estate of Bobby C. Hamilton (the
"Estate"). The debt of approximately $1,500,000 required minimum
annual payments of principal and interest totaling $200,000 and
consumed 4% of the Company's gross revenues from sales. As a
result of management's negotiations, the Company entered into a
Settlement and Release of All Claims Agreement (the "Settlement
Agreement") with the Estate on June 23, 2000. The Settlement
Agreement extinguished the note payable to the Estate in exchange
for a cash payment of $500,000 and the issuance of 250,000 shares
of the Company's common stock. The cash payment was financed by
the issuance of $600,000 of debentures pursuant to a financing
agreement with Thomson Kernaghan, Ltd. ("TK"), a Canadian
investment banker, described in detail below.
The Settlement Agreement mutually released both parties from
any and all obligations between them, and includes the Company's
indemnification of the Estate against any liabilities and claims
that may result from environmental remediation responsibilities on
the Company's Idaho gold properties. The Settlement Agreement also
required the Company to arrange the purchase of 614,000 shares of
the Estate's unrestricted common stock of the Company by a third
party for $90,340.
In connection with the Settlement Agreement between the
Company and the Estate, the Company entered into a financing
agreement with TK effective July 11, 2000. The financing agreement
provides, among other things, for the sale of up to $1,500,000 of
the Company's convertible debentures to the investment banker and
its affiliates. In addition, TK agreed to purchase, pursuant to
the Settlement Agreement, 614,000 shares of unrestricted common
stock of the Company owned by the Estate for $90,340. The
financing agreement also provides for an initial debenture purchase
of $600,000, and specified that the proceeds from the sale be used
to 1) pay the Estate $500,000 and extinguish the note payable owed
it pursuant to the Settlement Agreement, 2) pay the fees and
expenses of TK's counsel not to exceed $15,000, 3) pay TK's fee of
$60,000 relating to the placement of the convertible debentures,
and 4) provide $25,000 for the Company's working capital purposes.
The debentures are due June 30, 2002 and accrue interest at
10% to be paid annually on each anniversary date of the issue. The
debentures are convertible into shares of the Company's common
stock based on a formula determining the conversion price that
calculates the lower of 75% of the average 3 lowest closing bid
prices for the Company's common stock as quoted by Bloomburg L.P.
in the twenty trading days immediately preceding the effective date
of the financing agreement (July 11, 2000) or the conversion date
of the debentures.
- 54 -
<PAGE>
Pursuant to the financing agreement, the Company issued to TK,
as additional consideration for the financing arrangement, warrants
to purchase 961,539 shares of the Company's common stock at $0.39
per share and issued warrants to purchase 384,615 shares of the
Company's common stock at $0.39 per share to the purchasers of the
initial $600,000 of debentures. The warrants are exercisable for
five years. If additional debentures are issued under the
financing agreement, the Company will issue additional warrants to
purchase the Company's common stock at $0.39 per share. The number
of shares subject to such additional warrants shall be equal to 25%
of the face amount of the additional debentures divided by $0.39
per share.
The financing agreement required that the Company execute a
registration rights agreement, binding the Company to prepare and
file a registration statement with the Securities and Exchange
Commission registering the shares of common stock issuable upon
exercise of the warrants and upon conversion of the debentures, and
to increase the number of its authorized but outstanding shares of
common stock to accommodate the exercise of the warrants and
conversion of the debentures.
During the first six months of 2000, the Company the took the
following additional actions to minimize its losses, conserve its
cash flow, and improve its financial condition:
* Restructured its sales department, reducing overall
staffing expenses
* Refinanced a long-term note payable with a bank
* Negotiated an abatement of property taxes due an
Idaho county
* Negotiated a reduction in the "holdback" retainage
on an accounts receivable factoring agreement
* Obtained additional advances from the Company's
President of $71,243
* Increased production from its old Thompson Falls
mien slag pile to decrease raw material costs
During the third quarter of 2000, the Company plans to hold an
annual meeting of shareholders. At this meeting management will
propose an amendment to the Company's articles of incorporation
increasing the authorized number of common shares to satisfy the
requirements of the financing agreement the Company entered into
and to make available additional shares for sale. Management
believes that this increase in capitalization will be valuable in
obtaining additional convertible debenture financing pursuant to
the financing agreement and generating funds from common stock
sales.
In 1996, the Yellow Jacket operation was put on a care-and-
maintenance basis after a long history of operating losses. During
the second quarter of 1999, the Company terminated its exploration
efforts at the Yellow Jacket, and began reclamation activities.
While the Yellow Jacket reclamation currently continues to consume
the Company's resources, management anticipates that additional
financial resources will be available when reclamation activities
are final, sometime in 2001.
While management is optimistic that the Company will be able
to achieve profitable operations and meet its financial
obligations, there can be no assurance of such.
Significant financial commitments for future periods will
include:
* Servicing notes payable to bank.
* Keeping current on property, payroll, and income tax
liabilities and accounts payable.
* Fulfilling responsibilities with environmental,
labor safety and securities regulatory agencies.
- 55 -
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Bylaws ("Bylaws") of the Company provide that to the full
extent permitted by law, the Company shall indemnify and advance
expenses to any person who is or was a director or officer of the
Company, or was serving at the request of a director, officer,
employee or fiduciary of the Company, against liabilities which may
be incurred by such person by reason of (or arising in part from)
such capacity. The Company shall not indemnify any director or
officer in matters in which he is adjudged to have been derelict in
his duty as an officer or director if the total expense of
settlement substantially exceeds costs of litigation to a
conclusion. Further, the Company shall not indemnify an officer or
director in any action based on Section 16(b) of the Exchange Act
or similar federal or state statute wherein the officer or director
is adjudged to have breached his duty to the Company. The Company
shall indemnify an officer or director in successful defense of a
suit or criminal action; and, prior to conclusion of the suit, the
Company may indemnify an officer or director's expenses of the suit
if the officer or director furnishes an undertaking to the Company
in the event it is determined that the acts of the officer or
director were unauthorized or improper.
Section 35-1-452 of the MBCA authorizes the indemnification of
directors against liability incurred by reason of being a director
and against expenses reasonably incurred in connection with any
action, suit or proceeding seeking to establish such liability, in
the case of third-party claims, if the director acted in good faith
and in a manner he reasonably believed to be in or not opposed to
the best interest of the corporation, and in the case of actions by
or in the right of the corporation, if the director acted in good
faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the corporation, unless, despite
the adjudication of liability, a court otherwise determines.
Indemnification also is authorized with respect to any criminal
action or proceeding where, in addition to the above, the director
has no reasonable cause to believe that his conduct was unlawful.
Section 35-1-453 provides mandatory indemnification against
reasonable expenses of a director who is successful in the defense
of any proceeding to which he was a party because he is or was a
director, unless limited by a corporation's articles.
Section 35-1-457 of the MBCA provides for mandatory indemnification
of officers pursuant to Section 35-1-453 of the MBCA, unless
contrary to the corporation's articles, and provides that officers
are entitled to apply for court-ordered indemnification to the same
extent as a director pursuant to Section 35-1-455 of the MBCA,
together with indemnification against reasonable expenses.
The above discussion of the Company's Bylaws and Sections 35-1-452,
35-1-453, 35-1-455, and 35-1-457 of the MBCA is only a summary and
is qualified in its entirety by the full text of each of the
foregoing.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We will pay all expenses in connection with the registration and
sale of the shares of our common stock specified in this
Prospectus, except any selling commissions or discounts allocable
to sales of that common stock, fees and disbursements of counsel
and other representatives of the Investors, and any stock transfer
taxes payable by reason of any such sale. The estimated expenses
of issuance and distribution are set forth below.
II-1
<PAGE>
Approximately
Registration Fees $ 77.00
Transfer Agent Fees
Costs of Printing and Engraving
Legal Fees $20,000.00
Accounting Fees $15,000.00
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Issuance of Common Stock to Employees
During 1999, the Company issued 20,000 shares of its unregistered
common stock to employees in recognition of their service to the
Company. The Company accounts for stock issued to employees as
compensation in accordance with Statement of Financial Accounting
Standards No. 123 "Accounting for Stock-Based Compensation," and
accordingly recognized compensation expense of $2,600 based on upon
the fair value of the unregistered shares issued.
Issuance of Common Stock in Connection with Conversion of Debts
In November 1999, the Company entered into a Settlement Agreement
and Release of all Claims ("the Agreement") with Ronald Michael
Meneo, Trustee of the Walter L. Maguire 1935-1 Trust ("the Trust")
and Walter L. Maguire Sr., beneficiary of the Trust and stockholder
and former director of the Company. The Agreement settled
litigations brought by the Trust against the Company for default on
certain of the Company's debentures held by the Trust and the
resulting counterclaim against the Trust and Mr. Maguire by the
Company. The Agreement called for the issuance of 790,909 shares
of the Company's unregistered common stock to the Trust in exchange
for the extinguishment of all indebtedness claimed owing to the
Trust or Mr. Maguire.
In connection with the issuance, the Company extinguished $335,000
of debenture principal and $347,397 of related accrued interest
thereon. The Company recorded an extraordinary gain of $534,101 on
the extinguishment based upon the value of the restricted shares
issued at the time.
In October 1999, the Company extinguished a debt due Geosearch,
Inc., a former lessor of a mining interest to the Company, by
issuing 245,852 shares of its unregistered common stock. The debt
extinguished totaled $144,339 of principal and accrued interest.
The Company recorded an extraordinary gain of $77,591 on the
extinguishment based upon the value of the restricted shares issued
at the time.
In June 2000, the Company issued 250,000 shares of common stock to
the Estate of Bobby C. Hamilton in part payment for extinguishment
of indebtedness in the amount of $_________.
Issuance of Common Stock for Cash
During 1998, the Company sold 300,000 shares of its unregistered
common stock and warrants for $75,000. Of total stock sales made
during the year ended December 31, 1998, the Company sold 200,000
II-2
<PAGE>
shares of its unregistered common stock and warrants to Walter L.
Maguire Sr. and parties related to him for $50,000. Mr. Maguire is
a stockholder and was a director of the Company until December 31,
1998.
In 2000, the Company issued 250,000 shares of common stock at $0.40
per share, and 100,000 shares of common stock at $0.25 per share
sold to Al Dugan, a major shareholder.
Issuance of Common Stock in Exchange for Services
During 1999, the Company issued 40,000 shares of its unregistered
common stock and 100,000 warrants to purchase shares of common
stock at $0.55 per share until August 3, 2000, to a consultant in
exchange for professional services rendered to the Company. These
shares were valued at 75% of the market value of the stock at the
time they were issued.
During 1999, the Company issued 23,491 shares of its unregistered
common stock to the grandson of Robert L. Rice, a director and
stockholder, in exchange for services rendered to the Company. The
shares were valued at 75% of the market value of the stock at the
time they were issued, which approximated the value of the services
rendered. The Company recognized the issuance during the year
ended December 31, 1998, since the services were provided to the
Company prior to that date.
In 2000, the Company issued 140,000 shares of common stock at $0.25
per share in payment of consulting fees to two consultants, and
issued 150,000 shares of common stock to an investment banker for
advisory fees.
Issuance of Common Stock for Note Receivable
During 1998, the Company issued Robert L. Rice, a director and
stockholder, 25,000 shares of its unregistered common stock in
exchange for a $5,000 note receivable. The note was satisfied in
1999 when Mr. Rice transferred certain equipment to the company as
payment (See Note 13).
During 1999 and 1998, the Company had the following transactions
with related parties:
Issuance of Common Stock for Directors' Fees
During 2000, 1999 and 1998, the Company issued 24,000 shares of its
unregistered common stock to certain members of the Board of
Directors for their duties as directors. The issuance represented
an award of 6,000 shares per year per director eligible to receive
the award. The issuances have been recorded in the consolidated
financial statements as if they were issued in the year they were
earned. The stock awards were recorded as compensation expense
(director's fees) based upon the estimated value of the stock at
the date of issuance.
ITEM 27. EXHIBITS
The exhibits included as part of this Registration Statement are
listed on the Exhibit Index on page II-6 of this Registration
Statement.
II-3
<PAGE>
ITEM 28. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in
the information set forth in this Registration Statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in
this Registration Statement or any material change to such
information in this Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above
do not apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed by the Registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities being offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of any employee benefit
plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form SB-2 and
has duly caused this Registration Statement to be signed on its
behalf by the undersigned, in Thompson Falls, State of Montana, on
__________, 2000.
UNITED STATES ANTIMONY CORPORATION
By: /s/ John C. Lawrence
_____________________________________
John C. Lawrence
President and Chairman
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Capacity Date
--------- --------- ----
______________________President and Chairman of the Board___________, 2000
John C. Lawrence (Principal Executive and Chief Financial
Officer and Director)
______________________Director ____________, 2000
Robert A. Rice
______________________Director ____________, 2000
Leo Jackson
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
TO
REGISTRATION STATEMENT ON FORM SB-2
Exhibit Number Description Page
-------------- ----------- ----
3.01 Articles of Incorporation of the Company,
filed as an exhibit to the Company's Form 10-KSB
for the fiscal year ended December 31, 1995,
and are incorporated herein by this reference.
5.01 Opinion of Hawley Troxell Ennis & Hawley LLP II-20
10.0 Material Contracts
Documents filed with the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995, and incorporated by reference to
such:
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit No. Item Dated
----------- ---- -----
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 AgreementSeptember 27, 1996
II-6
<PAGE>
10.24 Release of Judgment February 28, 1996
10.25 Covenant Not to Execute July 30, 1990
</TABLE>
Documents filed with the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1996, and incorporated by reference to
such:
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit No. Item Dated
----------- ---- -----
10.26 Warrant Agreements Various
</TABLE>
Item 13. Exhibits and Reports on Form 8-K, Continued:
Documents filed with the Company's Quarterly Report on Form 10-QSB
for the quarter ended September 30, 1997, and its Annual Report on
Form 10-KSB for the year ended December 31, 1997, respectively,
and incorporated by reference to such:
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit No. Item Dated
----------- ---- -----
10.27 Letter from EPA, Region 10 August 21, 1997
10.28 Warrant Agreements Various
</TABLE>
Documents filed with the Company's Quarterly Report on Forms 10-QSB
for the quarters ended June 30, and September 30, 1998, and its
Annual Report on Form 10-KSB for the year ended December 31, 1998,
and incorporated by reference to such:
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit No. Item Dated
----------- ---- -----
10.29 Summons and Verified Complaint April 8, 1998
10.30 Answer, Counterclaim and Third-Party
Complaint October 13, 1998
10.31 Warrant Issue-Al Dugan July 28, 1998
10.32 Amendment Agreement March 31, 1999
</TABLE>
Documents filed with the Company's quarterly report on Form 10-QSB
for the quarter ended March 31, 1999, and incorporated by reference
to such:
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit No. Item Dated
----------- ---- -----
10.33 Warrant Issue-John C. Lawrence March 29, 1999
10.34 PVS Termination Agreement March 31, 1999
</TABLE>
Documents filed as an exhibit to the Company's Form 10-K973 for the
year ended December 31, 1999 and incorporated herein by this
reference:
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit No. Item Dated
----------- ---- -----
10.35 Maguire Settlement Agreement November 5, 1999
10.36 Warrant Issue-Carols Tejade August 30, 1999
II-7
<PAGE>
10.37 Warrant Issue-Al Dugan January 25, 2000
10.38 Memorandum of Understanding with
Geosearch Inc. October 4, 1999
10.39 Factoring Agreement-System
Financial Company March 30, 1999
10.40 Mortgage to John C. Lawrence April 19, 1999
</TABLE>
Documents filed as an exhibit to the Company form 10-KSB for the
quarter ended June 30, 2000 and incorporated herein by this
reference:
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit No. Item Dated
----------- ---- -----
10.42 Agreement between United States Antimony
Corporation and Thomson Kernaghan & Co.,
Ltd. July 11, 2000
10.43 Settlement agreement and release of all
claims between the Estate of Bobby C.
Hamilton and United States Antimony
Corporation June 23, 2000
21.01 Subsidiary of the Company
23.01 Consent of Hawley Troxell Ennis & Hawley LLP
(included in Exhibit 5.01)
23.02 Consent of DeCoria, Maichel & Teague P.S.II-22
</TABLE>
Documents filed as an exhibit to the Company's Form 10-KSB for the
year ended December 31, 1995 and incorporated herein by this
reference:
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit No. Item Dated
----------- ---- -----
44.1 CERCLA Letter from U.S. Forest ServiceFebruary 11, 1994
</TABLE>
II-8
<PAGE>
