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 (fee required)
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (no fee required)
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 organization) (I.R.S. Employer Identification No.)
P.O. Box 643, Thompson Falls, Montana 59873
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (406) 827-3523
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES _X_ No
At August 8, 1998, the registrant had outstanding 13,390,434 shares of par
value $.01 common stock.
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements and Supplementary Data
United States Antimony Corporation and Subsidiary
Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
1998 1997
ASSETS
Current assets:
Restricted cash $ 96 $ 15,280
Inventories 464,048 463,282
Prepaid expenses 7,487 7,727
------- -------
Total current assets 471,631 486,289
Properties, plants and equipment, net 582,481 637,022
Restricted cash, reclamation bonds 178,986 178,986
------- -------
Total assets $ 1,233,098 $ 1,302,297
========= ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Checks issued and payable $ 32,723 $ 42,384
Accounts payable 134,320 125,082
Accrued payroll and property taxes 138,593 118,801
Accrued payroll and other 69,882 43,707
Judgments payable 145,304 142,937
Accrued debenture interest payable 337,037 320,287
Due to related parties 38,553 31,707
Notes payable to bank, current 131,908 177,079
Note payable to Bobby C. Hamilton,
current 28,699 27,626
Debentures payable 335,000 335,000
Accrued reclamation costs, current 216,700 216,700
------- -------
Total current liabilities 1,608,719 1,581,310
Notes payable to bank, noncurrent 170,295 90,269
Note payable to Bobby C. Hamilton,
noncurrent 1,595,653 1,616,516
Accrued reclamation costs, noncurrent 339,844 339,844
------- -------
Total liabilities 3,714,511 3,627,939
--------- ---------
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $.01 par value,
10,000,000 shares authorized:
Series A: 4,500 shares issued and outstanding
(liquidation preference $96,750) 45 45
Series B: 750,000 shares issued and
outstanding (liquidation preference
$780,000) 7,500 7,500
Series C: 2,560,762 shares issued and
outstanding(liquidation preference
$1,408,419) 25,608 25,608
Common stock, $.01 par value,
20,000,000 shares authorized;
13,290,434 and 13,065,434 shares
issued and outstanding 132,904 130,654
Additional paid-in capital 14,050,639 13,997,889
Note receivable from shareholder (5,000)
Accumulated deficit (16,693,109) (16,487,338)
----------- -----------
Total stockholders' deficit (2,481,413) (2,325,642) Total
----------- -----------
liabilities and stockholders' deficit $ 1,233,098 $ 1,302,297
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
United States Antimony Corporation and Subsidiary
Consolidated Statements of Operations
for the three and six-month periods ended June 30, 1998 and June 30, 1997
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenues:
Sales of antimony products $886,936 $1,100,425 $1,806,660 $2,213,835
Cost of antimony production 752,077 866,115 1,581,973 1,846,902
-------- --------- --------- ---------
Gross Profit 134,859 234,310 224,687 366,933
Operating expenses:
Care and maintenance
-Yellow Jacket 54,345 33,121 128,647 109,613
Exploration and evaluation 33,326 42,043 63,434 78,292
General and administrative
expenses 98,138 71,465 156,157 146,168
-------- -------- -------- -------
185,809 146,629 348,238 334,073
-------- -------- -------- -------
Other expenses (income):
Gain from accounts payable
adjustment (37,386) (37,386)
Interest expense 52,263 76,863 100,550 148,729
Interest income and other (15,807) (2,906) (18,330) (8,718)
-------- -------- -------- --------
36,456 36,571 82,220 102,625
-------- -------- -------- --------
Net income (loss) $ (87,406) $ 51,110 $(205,771) $(69,765)
======== ======== ======== ========
Basic net income (loss)
per common share $ (0.01) $ Nil $ (0.02) $ (0.01)
======== ======== ======== ========
Diluted net income (loss)
per common share $ (0.01) $ Nil $ (0.01) $ (0.01)
======== ======== ======== ========
Basic weighted average
shares outstanding 13,290,434 13,055,434 13,225,883 12,896,478
========== ========== ========== ==========
Diluted weighted average
shares outstanding 15,851,196 13,055,434 15,786,645 12,896,478
========== ========== ========== ==========
The accompanying notes are an integral part of the consolidated financial
statements
United States Antimony Corporation and Subsidiary
Consolidated Statements of Cash Flows
for the six-month periods ended June 30, 1998 and 1997
(Unaudited) June 30,
1998 1997
Cash flows from operating activities:
Net loss $ (205,771) $ (69,765)
Adjustments to reconcile net loss
to net cash used in operations:
Depreciation 78,224 81,533
Issuance of stock to directors
as compensation 5,063
Reserve for production costs 50,000
Gain on adjustment to accounts payable (37,386)
Change in:
Restricted cash 15,184 (73,000)
Accounts receivable 33,837
Inventories (766) 111,197
Prepaid expenses 240 16,236
Accounts payable 9,238 (146,620)
Accrued payroll and property taxes 19,792 (47,326)
Accrued payroll and other 26,174 (7,336)
Judgments payable 2,367 7,306
Accrued interest payable 16,750 60,073
Due to related parties 6,846 (31,379)
Accrued reclamation (24,271)
-------- --------
Net cash used in operating activities (31,722) (71,838)
-------- --------
Cash flows from investing activities:
Purchase of properties, plant and equipment (23,683) (60,505)
-------- --------
Net cash used in investing activities (23,683) (60,505)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common
stock and warrants 50,000 210,000
Proceeds from bank borrowings 190,050
Payments on notes payable to bank (155,194) (89,585)
Change in checks issued and payable (9,661) 57,719
Payments on note payable to Bobby C. Hamilton (19,790) (45,791)
-------- --------
Net cash provided by financing activities 55,405 132,343
-------- --------
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 $ 83,800 $ 88,656
======== ========
Noncash financing activities:
Common stock issued in exchange for note receivable $ 5,000
========
The accompanying notes are an integral part of the consolidated financial
statements
PART I - FINANCIAL INFORMATION (Continued)
UNITED STATES ANTIMONY CORPORATION and SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Notes to December 31, 1997 consolidated financial statements:
The notes to the consolidated financial statements as of December 31, 1997, as
set forth in the Company's 1997 Annual Report on Form 10-KSB, substantially
apply to these interim consolidated financial statements and are not repeated
here.
2. Adjustments to financial statements:
The financial statements reflect all adjustments which, in the opinion of
management, are necessary to a fair statement of the results for the interim
periods reported. All such adjustments are of a normal recurring nature. All
financial statements presented herein are unaudited. However, the balance
sheet as of December 31, 1997, was derived from the audited consolidated
balance sheet referred to in Note 1 above. Certain consolidated financial
statement amounts for the six-month period ended June 30, 1997, have been
reclassified to conform to the 1998 presentation. These reclassifications had
no effect on the net loss or accumulated deficit as previously reported.
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. 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 mill
site. The Company is currently working on the reclamation and remediation, and
expects to have the process completed during 1999. The Company believes that
it has accrued reclamation costs that are sufficient to represent the ultimate
costs of completing the reclamation and remediation.
During the second quarter of 1998, an action was filed against the
Company seeking recovery of certain debentures payable, accrued interest, and
legal costs (See Part II,Item 1. Legal Proceedings). Although the Company
has filed a counter claim in response to this action, its ultimate outcome
may have an adverse impact on the financial condition of the Company.
4. Significant accounting policies:
Loss Per Common Share
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share," which became effective for reporting periods ending
after December 15, 1997. Under the provisions of SFAS No. 128, primary and
fully-diluted earnings per share were 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; it does not include the impact of any potentially
dilutive common stock equivalents.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. Significant accounting policies, Continued:
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 any of outstanding stock options, the conversion
impact of convertible preferred stock, and shares issuable under warrants or
other contracts.
During 1998 and 1997 the Company had outstanding common stock warrants
that were exercisable at prices higher than the 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. In
1998, the Company had 2,560,762 shares of Series C preferred stock that were
outstanding during the period. The Series C preferred stock is convertible
into common stock of the Company and thus considered in the calculation of
diluted weighted-average number of shares outstanding.
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, 1998 and 1997.
Net Weighted Average Per Share
Loss Shares Amounts
Basic EPS $(205,771) 13,225,883 $(0.02)
Common stock warrants (1)
Series C preferred stock (2) 2,560,762
---------- ---------- ------
Diluted EPS $(205,771) 15,786,645 $(0.01)
=========== ========== ======
June 30, 1997
Net Weighted Average Per Share
Loss Shares Amounts
Basic EPS $(69,795) 12,896,478 $(0.01)
Common stock warrants (1)
Series C preferred stock (2)
---------- ---------- ------
Diluted EPS $(69,795) 12,896,478 $(0.01)
========== ========== ======
(1) Common stock warrants outstanding during 1998 and 1997
were not included in the computation of diluted EPS at June 30, 1998 or
1997 because the various exercise prices of the warrants exceeded the
average market price of the Company's common stock, thus making them
antidilutive.
(2) Series C preferred stock, which was issued in November 1997, 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. Significant accounting policies, Continued
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income." This statement establishes standards for
reporting thecomponents of comprehensive income prominently within the
financial statements. Comprehensive income includes net income plus certain
transactions that are reported directly within stockholders' equity. The
statement is effective in 1998 and its adoption will have no material impact
on the financial condition or results of operations of the Company.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." This
statement requires the disclosure of financial information about a company's
operating segments in interim and annual financial statements. The definition
of operating segments is to be based upon internal management practices of the
company. The statement is effective in 1998 and its adoption will have no
material impact on the financial condition or results of operations of the
Company.
In February 1998, the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." This statement standardizes disclosure for retiree benefits and
eliminates certain disclosures that are no longer useful. The statement is
effective for fiscal years beginning after December 15, 1997, and its adoption
will have no material impact on the financial condition or results of
operations of the Company.
ITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
General
Certain matters discussed are forward-looking statements that involve risks
and uncertainties, including the impact of antimony and gold prices and
production volatility, changing market conditions, the regulatory environment
and other risks. Actual results may differ materially from those projected.
These forward-looking statements represent the Company's judgment as of the
date of this filing. The Company disclaims, however, any intent or obligation
to update these forward-looking statements.
Results of Operations
The Company's operations resulted in a net loss of $205,771 for the six-month
period and a net loss of $87,406 for the three-month period ended June 30,
1998, compared with a net loss of $69,765 for the six-month period and net
income of $51,110 for the three-month period ended June 30, 1997.
Total revenues from antimony product sales for the six and three-month periods
ended June 30, 1998, were $1,806,660 and $886,936, respectively, compared with
$2,213,835 and $1,100,425 for the comparable respective periods in 1997. The
decrease in revenues during 1998 was due to a decrease in antimony product
prices in the first and second quarters of 1998 compared to the first and
second quarters of 1997. Sales of antimony products during the first six
months of 1998 consisted of 1,571,532 pounds at an average sales price of
$1.15 per pound. During the first six months of 1997 sales of antimony
products consisted of 1,571,953 pounds at an average sales price of $1.41 per
pound. The decrease in sales prices of antimony products from 1998 to 1997
is the result of a corresponding market decrease in antimony metal prices.
Gross profit from antimony sales during the first six and current three month
periods of 1998 was $224,687 and $134,859, respectively, compared with gross
profit of $366,933 and $234,310 for the same respective periods in 1997.
ITEM 2.Management's Discussion and Analysis of Results of
Operations and Financial Condition, Continued
The decrease in gross profit during 1998 compared to 1997, is again primarily
due to decreased antimony product sales prices.
The Company reports 50% of total antimony sales made by HoltraChem and the
Company. Total sales of antimony products by both companies amounted to
$3,613,319, or 3,143,064, pounds during the first six months of 1998.
Substantially all of the antimony products sold were produced at the Company's
plant near Thompson Falls, Montana.
In August 1996, the Company discontinued mining operations at its Yellow
Jacket property due to recurring operating losses, and placed the property on
a care-and-maintenance basis. Concurrently, the Company began an underground
exploration program in an effort to discover additional mineralized material
that could be economically mined and processed.
Costs related to the care-and-maintenance of Yellow Jacket were $128,647 and
$54,345 for the six and three-month periods ended June 30, 1998,
respectively, compared with $109,613 and $33,121 during the same respective
periods of 1997. The increase in care-and-maintenance costs during 1998 is
primarily due to increased equipment repairs incurred during the second
quarter of 1998. Costs related to exploration and evaluation at Yellow Jacket
were $63,434 and $33,326 for the six and three-month periods ended June 30,
1998, respectively, compared with $78,292 and $42,043 during the same
respective periods of 1997. The costs reflect a comparable level of ongoing
activity.
General and administrative expenses increased $9,989 during the first six
months of 1998 and $26,673 during the second quarter of 1998 from the
comparable periods of 1997. The increase in general and administrative
expense in 1998 is primarily due to attorneys fees incurred during the second
quarter of 1998 related to the Maguire Trust litigation (see Part II, Item 1.
Legal Proceedings).
Interest expense was $100,550 and $52,263 for the six and three-month periods
ended June 30, 1998, respectively, compared with $148,729 and $76,863 during
the same respective periods of 1997. The reduction in interest expense during
the six and three-month periods in 1998 compared to the same periods of 1997
was due to a decrease in outstanding debenture and director debts payable that
were converted into Series C preferred stock during the fourth quarter of
1997.
Interest and other income was $18,330 and $15,807 for the six and
three-month periods ended June 30, 1998, respectively, compared with $8,718
and $2,906 during the same respective periods of 1997. The increase in
interest and other income during 1998 was primarily attributable to other
income of $12,000 received from equipment rental during the second quarter of
1998.
Financial Condition and Liquidity
At June 30, 1998, the Company's assets totaled $1,233,098, and there was a
stockholders' deficit of $2,481,413. The stockholders' deficit increased
$155,771 from December 31, 1997, primarily due to the net loss recognized from
the Company's operations during the first six months of 1998.
Cash used by operating activities during the first six months of 1998 was
$31,722 compared with $71,838 during the first six months of 1997. During
both six month periods of 1998 and 1997, the Company's net loss from
operations contributed to cash used by operations. Cash used in investing
activities was $23,683 during the first six months of 1998 and $60,505 during
the first six months of 1997.
ITEM 2.Management's Discussion and Analysis of Results of
Operations and Financial Condition, Continued
During both six month periods in 1998 and 1997, cash consumed by
investing activities related to purchases of antimony plant and equipment.
Cash provided by financing activities totaled $55,405 during the six month
period ended June 30, 1998 compared to $132,343 during the comparable period
of 1997. During both 1998 and 1997, proceeds from the issuance of common
stock and warrants and bank borrowings contributed most of the cash provided
from financing activities.
At June 30, 1998, the Company completed its investment in its 50% share of
antimony inventory. Correspondingly, the Company began receiving a greater
percentage of profits from antimony sales with HoltraChem. These resources
will be available to meet the Company's obligations and fund operations.
The Company has been able to avoid bankruptcy and a termination of operations
through borrowings from stockholders and directors, common stock sales, lack
of creditor action and net income produced from operations in 1994 and 1995.
There can be no assurance, however, that the Company will be able to continue
to meet its obligations and continue in existence as a going concern.
To continue as a going concern the company must continue to generate cash from
operations and financing activities sufficient to address the following
financial commitments.
. Providing $5,000 per month for a "sinking fund" to pay
accrued interest related to debentures converted in 1997.
. Servicing borrowings from the bank.
. Servicing the Hamilton note payable at a minimum of
$150,000 in principal and interest annually.
. Keeping current on property, payroll, and income tax
liabilities and accounts payable.
. Fulfilling responsibilities with environmental, labor
safety and securities regulatory agencies.
. Paying annual care-and-maintenance costs at the Yellow
Jacket mine, to the extent the Company continues to retain the property.
. Funding minimum annual royalty payments to Geosearch and
Yellow Jacket, Inc.
. Providing funding of the Company's antimony inventory
from antimony profits when the Company's share of antimony
inventory amounts to $750,000 or more or when its share of
inventory is less than 50% of total inventory.
. Funding legal fees and other costs incurred relating to litigation
brought against the Company in 1998 (See Part II, Item 1. Legal Proceedings).
PART II-OTHER INFORMATION
ITEM 1. Legal Proceedings
On April 8, 1998, Ronald Michael Meneo, Trustee of the Walter L. Maguire
1935-1 Trust ("The Trust"), filed an action in the Twentieth Judicial District
Court of Sanders County, Montana against the Company. The action seeks to
recover principal amounts totaling $335,000 due on defaulted convertible and
subordinated convertible debentures held by The Trust. The action also seeks
to recover accrued interest on the principal amounts of the debentures at the
rate of ten percent per annum that was due on the maturity dates of the
debentures, interest at ten percent on all principal and interest due on the
debentures accruing from the dates of maturity to the present, and all amounts
relating to The Trust's legal fees incurred in bringing the action.
On June 26, 1998, the Company filed an Answer, Counterclaim, and request for
Jury Trial in the Montana Twentieth Judicial District Court, Sanders County,
in response to the action filed on April 8, 1998. In the filing the Company
denied the Trust's complaint and alleged a counterclaim against the
Trust, citing breach of contract and breach of implied covenant of good faith
and fair dealing.
On July 15, 1998, the Company filed an action in the Montana Twentieth
Judicial District Court, Sanders County, against Walter L. Maguire, Sr., a
director and shareholder. The complaint alleges damages suffered by the
Company as a result of Mr. Maguire's actions described in three counts, 1)
Breach of Director Duties 2) Conspiracy, and 3) Constructive Fraud.The
allegations set forth in the complaint describe Mr. Maguire's alleged
representations that he controlled the Walter L. Maguire 1935-1 Trust, and led
the Company and other shareholders to detrimentally believe that certain
defaulted debentures held by the Trust would be converted to Series C
Preferred Stock in accordance with an Offer to Purchase dated November 21,
1997, that was submitted to the Trust and other debt holders. The complaint
seeks damages of $1,500,000 and a further amount to be proven at trial.
ITEMS 2, 3, 4, and 5 are omitted from this report as inapplicable.
PART II- OTHER INFORMATION, CONTINUED
ITEM 6. Exhibits and Reports on Form 8-K
The Company reporter Other Events-"Action filed against Walter L. Maguire, Sr.
a director on Current Form 8-K filed July 21, 1998.
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: August 14, 1998
John C. Lawrence, Director and President
(Principal Executive, Financial and Accounting Officer)