10QSB 1 usacq101.txt UNITED STATES ANTIMONY CORPORATION 10QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period ____ to_____ Commission file number 33-00215 UNITED STATES ANTIMONY CORPORATION (Name of small business issuer in its charter) MONTANA 81-0305822 (State or other jurisdiction of incorporation or (I.R.S. Employer organization) Identification No.) P.O. BOX 643, THOMPSON FALLS, MONTANA 59873 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (406) 827-3523 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X No At May 9, 2001, the registrant had outstanding 18,647,064 shares of par value $.01 common stock. PART I-FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) MARCH 31, DECEMBER 31, 2001 2000 ASSETS Current assets: Restricted cash $ 8,990 $ 8,518 Inventories 171,378 221,457 Accounts receivable, less allowance for doubtful accounts of $30,000 65,636 119,568 --------- --------- Total current assets 246,004 349,543 --------- --------- Investment in USAMSA 111,088 111,088 Properties, plants and equipment, net 261,060 246,250 Restricted cash for reclamation bonds 123,250 123,250 Deferred financing charges, net 53,476 63,789 --------- --------- Total assets $ 794,878 $ 893,920 ========= ========= LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Checks issued and payable $ 83,332 $ 107,133 Accounts payable 460,722 429,654 Accrued payroll and property taxes 174,905 241,588 Accrued payroll and other 158,713 89,680 Judgment payable 44,241 43,480 Accrued interest payable 72,899 47,324 Due to related parties 54,523 10,307 Notes payable to bank, current 200,724 150,625 Accrued reclamation costs, current 80,000 80,000 --------- --------- Total current liabilities 1,330,059 1,199,791 Debentures payable, net of discount 1,000,610 997,449 Notes payable to bank, noncurrent 196,212 205,377 Accrued reclamation costs, noncurrent 199,388 199,388 --------- --------- Total liabilities 2,726,269 2,602,005 --------- --------- 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: 177,904 shares issued and outstanding 1,779 1,779 Common stock, $.01 par value, 30,000,000 shares authorized; 18,585,564 and 18,375,564 shares issued and outstanding 185,855 183,755 Additional paid-in capital 14,858,185 14,818,285 Accumulated deficit (16,984,755)(16,719,449) ----------- ---------- Total stockholders' deficit (1,931,391) (1,708,085) ----------- ---------- Total liabilities and stockholders' deficit $ 794,878 $ 893,920 =========== ========== United States Antimony Corporation and Subsidiaries Consolidated Statements of Operations (Unaudited) For the three months ended March 31, March 31, 2001 2000 Revenues: Sales of antimony products and other $ 961,131 $ 1,173,050 Cost of antimony production 802,368 841,791 Freight and delivery 103,614 107,978 --------- ----------- Gross profit 55,149 223,281 --------- ----------- Other operating expenses: Bear River Zeolite 46,243 Care, maintenance, and reclamation-Yellow Jacket 360 27,801 General and administrative 173,687 252,844 Sales expenses 38,496 110,065 --------- ----------- 258,786 390,710 --------- ----------- Other (income) expense: Interest expense 39,886 41,110 Factoring expense 23,264 24,461 Interest income and other (1,481) (2,140) --------- ----------- 61,669 63,431 --------- ----------- Net loss $ 265,306 $ 230,860 ========= =========== Basic net loss per share of common stock $ 0.01 $ 0.01 ========= =========== Basic weighted average shares outstanding 18,467,762 17,046,131 ========== =========== United States Antimony Corporation and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) For the three months ended March 31, March 31, 2001 2000 Cash flows from operating activities: Net loss $ (265,306) $ (230,860) Adjustments to reconcile net loss to net cash used by operations: Depreciation 24,000 33,000 Amortization of deferred financing charges 10,313 Amortization of debenture discount 3,161 Provision for doubtful accounts (20,000) Issuance of common stock for consulting services 153,000 Change In: Restricted cash (472) (1) Accounts receivable 53,932 (21,062) Inventories 50,079 (13,107) Restricted cash for reclamation bond 7,170 Accounts payable 31,068 (4,348) Accrued payroll and property taxes (66,683) (43,797) Accrued payroll and other 69,033 2,641 Judgments payable 761 712 Accrued debenture interest payable 25,575 Payable to related parties (5,784) (8,349) Accrued reclamation costs (19,268) --------- --------- Net cash used by operating activities (70,323) (164,269) --------- --------- Cash flows from investing activities: Purchase of properties, plants and equipment (38,810) (16,319) --------- --------- Net cash used in investing activities (38,810) (16,319) --------- --------- Cash flows from financing activities: Proceeds from issuance of common stock and warrants 42,000 140,000 Proceeds from related party advances 50,000 Proceeds from note payable to bank, net 40,934 5,113 Change in checks issued and payable (23,801) 52,254 Payments on note payable to Bobby C. Hamilton (16,779) --------- --------- Net cash provided by financing activities 109,133 180,588 --------- --------- 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 $ 12,495 $ 39,297 ========= ========= PART I - FINANCIAL INFORMATION, CONTINUED: UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES 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. 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 three-month period ended March 31, 2001 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2001. Certain consolidated financial statement amounts for the three-month period ended March 31, 2000 have been reclassified to conform to the 2001 presentation. These reclassifications had no effect on the net loss or accumulated deficit as previously reported. 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, 2000. 2. LOSS PER COMMON SHARE The Company accounts for its income (loss) per common share according to the Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS No. 128"). Under the provisions of SFAS No. 128, primary and fully diluted earnings per share are replaced with basic and diluted earnings per share. Basic earnings per share is 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. Common stock equivalents, including warrants to purchase the Company's common stock and common stock issuable upon the conversion of debentures are excluded from the calculations when their effect is antidilutive. 3. COMMITMENTS AND CONTINGENCIES: Until 1989, the Company mined, milled and leached gold and silver in the Yankee Fork Mining District in Custer County, Idaho. The metals were recovered by a 150-ton per day gravity and flotation mill, and the concentrates were leached with cyanide to produce a bullion product at the Preachers Cove mill, which is located nine miles north of Sunbeam, Idaho on the Yankee Fork of the Salmon River. In 1994, the U.S. Forest Service, under the provisions of the Comprehensive Environmental Response Liability Act of 1980 (CERCLA), designated the cyanide leach plant as a contaminated site requiring cleanup of the cyanide solution. In 1996, the Company signed a consent decree with the Idaho Department of Environmental Quality relating to completing the reclamation and remediation at the Preachers Cove mill. The Company's management believes that USAC is currently in substantial compliance with environmental regulatory agencies and that its accrued environmental reclamation costs are representative of management's estimate of costs required to fulfill its reclamation obligations. The Company recognizes, however, that in some cases future environmental expenditures cannot be reliably determined due to the uncertainty of specific remediation methods, conflicts between regulating agencies relating to remediation methods and environmental law interpretations, and changes in environmental laws and regulations. Such costs are accrued at the time the expenditure becomes probable and the costs can reasonably be estimated. UNITED STATES ANTIMONY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED: (UNAUDITED) 3. COMMITMENTS AND CONTINGENCIES, CONTINUED: During 2000, the Company issued 150,000 shares of its common stock to Thomson Kernaghan & Co., Ltd., and 150,000 shares of its common stock to Blue Water Partners, Inc. as compensation for fiscal advisory and consulting services to be provided the Company. The shares were issued pursuant to the Company's 2000 Stock Plan, and were believed by the Company to be registered under a Form S-8 registration statement filed in connection with the 2000 Stock Plan. The stock certificates issued to the two companies therefore did not bear a restrictive legend. Subsequent to the issuance of the shares, management was informed by its legal counsel that Form S-8 cannot be used to register stock issued to consultants whose services involve promotion of the Company's stock. In response to this information, management immediately contacted both companies and requested that the unlegended shares of common stock be returned to the Company in exchange for a certificate bearing a restrictive legend. In March of 2001, Thomson Kernaghan & Co., Ltd. returned 150,000 shares to the Company in exchange for 150,000 restricted shares, that the Company agreed to register in conjunction with a Form SB-2 registration statement it is preparing. No response has been received from Blue Water Partners, Inc. As a result of the issuance, the Company may be subject to civil liabilities, including fines and other penalties imposed by federal and state securities agencies. At March 31, 2001, the Company had not recorded any liability associated with the issuance of these shares, as management believes the likelihood of a claim and the ultimate outcome if a claim is asserted cannot be ascertained at this time. 4. SUBSEQUENT EVENT: In July of 2000, the Company entered into a financing agreement with Thomson Kernaghan & Co., Ltd. The financing agreement contained a registration rights agreement in which Company agreed to register the debenture purchasers' resale of the shares of common stock issued upon conversion of the debentures and upon exercise of the related purchasers, and agent's warrants. The registration rights agreement also provides for liquidated damages to be due if the Company fails to have an effective registration statement filed by the registration deadline. The liquidated damages are calculated as two percent (2%) per month of the aggregate value of the principal amount of the debentures outstanding combined with the aggregate exercise prices of the outstanding purchasers' and agent's warrants issued in connection with the convertible debentures, accrued on a daily basis subsequent to the registration deadline. At March 31, 2001, the Company did not have a registration statement yet effective, and the registration deadline had passed. During April of 2001, the Company's management negotiated the payment of the liquidated damages with Thomson Kernaghan & Co., Ltd., by tentantively agreeing to issue $70,000 of its common stock at a per-share price of $0.29125 (for a total of 240,343 shares) and to register the shares in conjunction with a Form SB-2 registration statement it is preparing. The Company has accrued the liability for the issuance of the shares in its March 31, 2001 financial statements. ITEM 2. 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. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, CONTINUED: Results of Operations During the first quarter of 2001 many of the Company's customers dramatically reduced their orders for antimony products due to a general downward trend of economic conditions. The resulting effect of these conditions reduced the Company's sales volume of antimony pounds during the first quarter of 2001 to approximately 75% (on an annualized basis) of the average sales volume of antimony pounds sold during 2000. Sales volume during the first part of the second quarter has shown improvement, however; and management is optimistic that sales orders will increase in the months to come. The Company's operations resulted in a net loss of $265,306 for the three- month period ended March 31, 2001 compared with a net loss of $230,860 for the three-month period ended March 31, 2000. The increase in loss for the first quarter of 2001 compared to the similar quarter of 2000 is primarily due to: 1) decreased antimony product sales and corresponding decreases in gross profit (due to slowing economic conditions and increased fuel and antimony metal prices), 2) late registration penalties and legal and accounting expenses associated with the preparation of a registration statement pursuant to a financing agreement with Thomson Kernaghan & Co., Ltd. ("TK") and, 3) development and start-up costs relating to the Company's newly formed 75% owned subsidiary, Bear River Zeolite. Total revenues from antimony product sales for the first quarter of 2001 were $961,131 compared with $1,173,050 for the comparable quarter of 2000, a decrease of $211,919. Sales of antimony products during the first quarter of 2001 consisted of 945,324 pounds at an average sale price of $1.02 per pound. During the first quarter of 2000 sales of antimony products consisted of 1,247,589 pounds at an average sale price of $0.94 per pound. Management believes that the decrease in the sales of antimony product pounds is the result of a general economic slow down experienced during the first quarter of 2001. The increase in sale prices of antimony products from the first quarter of 2000 to the first quarter of 2001 is the result of a corresponding increase in antimony metal prices. Gross profit from antimony sales during the first three-month period of 2001 was $55,149 compared with gross profit of $223,281 during the first three-month period of 2000. The decrease in gross profit was principally due to increased raw materials costs,due to antimony metal purchases made by the Company's former sales staff during 2000 (that bound the Company to purchase antimony metal from a supplier at costs higher than the then current market price of antimony metal) and increased fuel and energy costs experienced in the first quarter of 2001. During the first quarter of 2001, the Company incurred expenses totaling $46,243 associated with development and start-up costs advanced its newly formed 75% owned subsidiary, Bear River Zeolite. No such costs were incurred during the first quarter of 2000, as the subsidiary did not yet exist. In addition to the first quarter Bear River Zeolite start-up and development expenses, the Company capitalized $38,310 in plant construction costs at the property. To date, the Company has made substantial progress in permitting, plant engineering, and studying the market feasibility of the Zeolite products it plans to produce from the property. The Company has mobilized crushing, mining and processing equipment from its other Montana and Idaho locations to the Bear River property and begun the construction of a processing/shop building. The Company has been able to wisely utilize its existing capital assets and in-house technical expertise in such a manner as to expend only a fraction of the capital resources that would ordinarily be required to develop a similar project. The Company is taking orders for zeolite products and anticipates being in production sometime in the near future. Care, maintenance, and reclamation costs at the Company's Yellow Jacket property decreased from $27,801 during the first quarter of 2000 to $360 during the first quarter of 2001. The decrease was primarily due to decreased reclamation activities at Yellow Jacket during the first quarter of 2001, and the de-mobilization of mining equipment from the Yellow Jacket property for use in the Company's zeolite operations. General and administrative expenses were $173,687 during the first quarter of 2001, compared to $252,844 during the first quarter of 2000. The decrease during the first quarter of 2001 compared to the same quarter of 2000 was partially due to the absence of approximately $150,000 of consulting expenses related to 300,000 shares of common stock issued by the Company to TK and Blue Water Partners, Inc. for financial consulting services that were included in the first quarter of 2000's operations and not in the first quarter of 2001. Included in general and administrative expenses during the first quarter of 2001 were, 1) $70,000 in late registration statement penalties payable to TK, 2) approximately $25,000 in legal and accounting expenses related to the preparation of the TK registration statement and, 3) amortization of deferred debenture offering costs of $10,313. Sales expenses were $38,496 during the first quarter of 2001 compared with $110,065 in the first quarter of 2001, the decrease was due to management's restructuring of its sales staff, with less costly and fewer employees. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, CONTINUED: Results of Operations, Continued: Interest expense was $39,886 during the first quarter of 2001, and was comparable to interest expense of $41,110 incurred during the first quarter of 2000. Included in interest expense during the first quarter of 2001 was $25,575 accrued on debentures payable and $3,161 of amortized debenture discounts. Accounts receivable factoring expense was $23,264 during the first quarter of 2001 and was comparable to $24,461 of factoring expense incurred during the first quarter of 2000. Interest income had decreased from $2,140 during the first quarter of 2000 to $1,481 during the first quarter of 2001. The decrease was the result of decreasing reclamation bonds held during 2001 as compared to 2000. Financial Condition and Liquidity At March 31, 2001, Company assets totaled $794,878, and there was a stockholders' deficit of $1,931,391. The stockholders' deficit increased $223,306 from December 31, 2000, primarily due to the net loss incurred during the first quarter of 2001. At March 31, 2001 the Company's total current liabilities exceeded its total current assets by $1,084,055. Due to the Company's operating losses, negative working capital, and stockholders' deficit, the Company's independent accountants included a paragraph in the Company's 2000 financial statements relating to a going concern uncertainty. To continue as a going concern the Company must generate profits from its antimony sales and to acquire additional capital resources through the sale of its securities or from short and long-term debt financing. Without financing and profitable operations, the Company may not be able to meet its obligations, fund operations and continue in existence. While management is optimistic that the Company will be able to sustain profitable operations and meet its financial obligations, there can be no assurance of such. Cash used by operating activities during the first three months of 2001 was $70,323, and resulted from the first quarter net loss of $265,306 as adjusted principally by decreasing inventories and accounts receivable and the non-cash effects of depreciation and amortization expenses. Cash used in investing activities during the first three months of 2001 was $38,810 and almost exclusively related to the construction of capital assets to be used at the Bear River Zeolite facility. Cash provided by financing activities was $109,133 during the first three months of 2001, and was principally generated by net borrowings from a bank of $40,934, sales of 210,000 shares of unregistered common stock for $42,000 or $0.20 per share, and advances from John C. Lawrence, the Company's president and a director of $50,000. PART II-OTHER INFORMATION ITEMS 1, 2, 3, 4, AND 5 ARE OMITTED FROM THIS REPORT AS INAPPLICABLE. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None. SIGNATURES Pursuant to the requirements of Section 13 or 15(b) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. UNITED STATES ANTIMONY CORPORATION (Registrant) By:/S/ JOHN C. LAWRENCE DATE: MAY 14, 2001 John C. Lawrence, Director and President (Principal Executive, Financial and Accounting Officer)