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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.
Results of
Operations
For the
three month period ended September 30, 2010 compared to the three month
period ended September 30, 2009.
The
Company's operations resulted in net income of $85,815 for the three-month
period ended September 30, 2010, compared with a net loss of $49,718 for the
same period ended September 30, 2009. The difference in income for the third
quarter of 2010 compared to the similar period of 2009 is primarily due to an
increase in sales volume for both antimony and zeolite.
Antimony
Division:
Total
revenues from antimony product sales for the third quarter of 2010 were
$1,899,469 compared with $801,601 for the comparable quarter of 2009, an
increase of $1,097,868. During the three-month period ended September 30,
2010, 55% of the Company's revenues from antimony product sales were from
sales to two customers (Kohler, Inc, and Polymer Products Corporation). Sales
of antimony products during the third quarter of 2010 consisted of 478,751
pounds at an average sale price of $3.97 per pound.
PART I -
FINANCIAL INFORMATION, CONTINUED:
ITEM 2.
Management's Discussion and Analysis of Results of Operations and
Financial Condition, continued
During the
third quarter of 2009, sales of antimony products consisted of 343,074 pounds
at an average sale price of $2.34 per pound. The significant increase in both
dollars and pounds of antimony sold is primarily due to an increased supply
of raw materials available for production.
The cost
of antimony production was $1,278,840, or $2.67 per pound sold during the
third quarter of 2010 compared to $547,402, or $1.60 per pound sold during
the third quarter of 2009. The increase in cost per pound is primarily due to
an increase in the cost of the raw materials.
Antimony
depreciation for the third quarter of 2010 was $7,937 compared to $27,965 for
the third quarter of 2009. The decrease in depreciation is due to the limited
fixed asset additions during the year.
Antimony
freight and delivery expense for the third quarter of 2010 was $75,887
compared to $30,599 during the third quarter of 2009. The increase in freight
and delivery expense is primarily due to an increase in the amount of freight
delivered.
General
and administrative expenses in the antimony division were $18,247 during the
third quarter of 2010 compared to $20,658 during the same quarter in 2009.
Antimony
sales expenses were $11,250 for the third quarter of 2010 and the same for
the third quarter in 2009.
Zeolite
Division:
Total
revenue from sales of zeolite products during the third quarter of 2010 were
$760,264 at an average sales price of $168.28 per ton, compared with the same
quarter sales in 2009 of $411,369 at an average sales price of $135.41 per
ton.
The cost
of zeolite production was $395,686, or $87.56 per ton sold, for the third
quarter of 2010 compared to $213,344, or $70.23 per ton sold, during the
third quarter of 2009. The increase was due to increased
labor expense during the third quarter of 2010 compared to the third quarter
of 2009.
Zeolite depreciation for the third quarter of 2010 was
$47,885 compared to $50,262 for the third quarter of 2009.
Zeolite freight and delivery for the third quarter of 2010
was $4,817 compared to $12,601 for the third quarter of 2009. The decrease is
due to a decrease in freight expense due to a program of having customers pay
their own freight.
During the third quarter of 2010, the Company incurred
costs totaling $30,932 associated with general and administrative expenses at
Bear River Zeolite Company, compared to $39,473 of such expenses in the comparable
quarter of 2009.
Zeolite royalties expenses were $81,229 during the third
quarter of 2010 compared to $53,208 during the third quarter of 2009. The
increase is due to an increase in tons of zeolite sold during the third
quarter of 2010.
PART I - FINANCIAL INFORMATION, CONTINUED:
ITEM 2. Management's Discussion and Analysis of Results of
Operations and
Financial Condition, continued
Zeolite sales expenses were $17,566 during the third
quarter of 2010 compared to $17,476 during the third quarter of 2009.
Administrative Operations
Mexico start-up costs for the third quarter of 2010 were
$195,013 compared to $0 during the comparable quarter of 2009. The increase
in costs is due primarily to the initiation of Mexican operations.
Mexico depreciation for the third quarter of 2010 was
$46,768 compared to $0 for the third quarter of 2009.
General and administrative expenses for the corporation
were $121,710 during the third quarter of 2010 compared to $101,049 for the
same quarter in 2009.
During the third quarter of 2010, the Company recorded an
impairment loss of $199,302. As described further in Note 8, the Company has
identified a mill site in Mexico that was determined to have no future value.
The Company is in the process of removing equipment from that site and
re-installing it at a separate site in Mexico.
Interest expense of $2,405 was incurred during the third
quarter of 2010 compared to income of $892 during the third quarter of 2009.
Accounts receivable factoring expense was $38,444 during
the third quarter of 2010 compared to $18,878 during the third quarter of
2009. The increase is due to increased sales and accounts receivable.
For the nine month period ended September 30, 2010
compared to the nine month period ended September 30, 2009.
The Company's operations resulted in net income of
$206,281 for the nine-month period ended September 30, 2010, compared with
net loss of $325,903 for the same period ended September 30, 2009. The
difference in income for the first nine months of 2010 compared to the
similar period of 2009 is primarily due to increased sales and a decrease in
production costs relative to revenues.
Antimony Division:
Total revenues from antimony product sales for the first
nine months of 2010 were $4,432,024 compared with $1,857,545 for the
comparable quarters of 2009, an increase of $2,574,479. During the nine-month
period ended September 30, 2010, 37% of the Company's revenues from antimony
product sales were from sales to one customer. Sales of antimony products
during the first nine months of 2010 consisted of 1,238,442 pounds at an
average sale price of $3.58 per pound. During the first nine months of 2009,
sales of antimony products consisted of 841,154 pounds at an average sale
price of $2.21 per pound. The increase in antimony revenues is due to increased
prices for the commodity.
The cost of antimony production was $3,257,222, or $2.63
per pound sold during the first nine months of 2010 compared to $1,289,741 or
$1.53 per pound sold during the first nine months of 2009. The increase in
cost per pound is primarily due to increased prices for the commodity.
Antimony depreciation for the first nine months of 2010
was $20,729 compared to $40,846 for the first nine months of 2009. The
decrease is due to the limited number of new assets acquired during the first
nine months of 2010.
PART I - FINANCIAL INFORMATION, CONTINUED:
ITEM 2. Management's Discussion and Analysis of Results of
Operations and
Financial Condition, continued
Antimony freight and delivery expense for the first nine
months of 2010 was $169,814 compared to $87,151 during the first nine months
of 2009. The increase in freight and delivery expense is primarily due to an
increase in the amount of product delivered.
General and administrative expenses in the antimony
division were $57,408 during the first nine months of 2010 compared to
$60,959 during the same period in 2009.
Antimony sales expenses were $33,750 for the first nine
months of 2010 and $33,750 for the first nine months in 2009.
Zeolite Division:
Total revenue from sales of zeolite products during the
first nine months of 2010 were $1,732,708 at an average sales price of
$153.58 per ton, compared with the same period sales in 2009 of $1,079,869 at
an average sales price of $131.10 per ton. The increase in sales price per
ton is due to increased pricing for the metal.
The cost of zeolite production was $938,066, or $83.14 per
ton sold, for the first nine months of 2010 compared to $591,950, or $71.86
per ton sold, during the first nine months of 2009. The increase was due to
increased maintenance and labor costs in 2010 compared to 2009.
Zeolite depreciation for the first nine months of 2010 was
$140,301 compared to $149,966 for the first nine months of 2009.
Zeolite freight and delivery for the first nine months of
2010 was $11,669 compared to $51,847 for the first nine months of 2009. The
decrease is due to a decrease in freight expense caused by having customers
pay their own freight.
During the first nine months of 2010, the Company incurred
costs totaling $85,315 associated with general and administrative expenses at
Bear River Zeolite Company, compared to $115,925 of such expenses in the
comparable period of 2009. The decrease is primarily due to a decrease in
fines and penalties.
Zeolite royalties expenses were $201,132 during the first
nine months of 2010 compared to $143,446 during the first nine months of
2009. The increase is due to an increase in the tons of zeolite sold during
2010 compared to 2009.
Zeolite sales expenses were $52,188 during the first nine
months of 2010 compared to $53,223 during the first nine months of 2009.
Administrative Operations
Mexico start-up costs for the first nine months of 2010
were $291,951 compared to $0 during the comparable period of 2009. The
increase in costs is due primarily to expansion and initiation of Mexican
operations.
Mexico depreciation for the first nine months of 2010 was
$102,828 compared to $0 for the first nine months of 2009.
PART I - FINANCIAL INFORMATION, CONTINUED:
ITEM 2. Management's Discussion and Analysis of Results of
Operations and
Financial Condition, continued
General and administrative expenses for the corporation
were $319,311 during the first nine months of 2010 compared to $309,547 for
the same period in 2009.
Exploration expense for the first nine months of 2010 was
$1,000 compared to $266,253 during the first nine months of 2009. The
decrease is attributable to the initiation of Mexican operations.
During the third quarter of 2010, the Company recorded an
impairment loss of $199,302. As described further in Note 8, the Company has
identified a mill site in Mexico that was determined to have no future value.
The Company is in the process of removing equipment from that site and
re-installing it at a separate site in Mexico
Interest income of $7,608 was earned during the first nine
months of 2010 compared to $5,983 expensed during the first nine months of
2009. The decrease in expense is due to the conversion of a significant loan
balance to common stock between periods and interest earned on stock
subscriptions receivable.
Accounts receivable factoring expense was $84,073 during
the first nine months of 2010 compared to $62,730 during the first nine
months of 2009. The increase is attributable to increased sales and accounts
receivable.
Financial Condition and Liquidity
At September 30, 2010, Company assets totaled $4,769,507
and total stockholders' equity was $3,627,000. Total stockholders' equity
increased $663,769 from December 31, 2009, primarily because of sales of
common stock, and net income. At September 30, 2010, the Company's total
current liabilities exceeded its total current assets by $58,877. To continue
as a going concern, the Company must continue to generate profits from its
antimony and zeolite sales and/or 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 results. The Company's management is confident, however,
given recent increases in pricing, the expectation of acquiring new
customers, and continued reduction in capital spending, that it will be able
to generate cash from operations and financing sources that will enable it to
meet its obligations over the next twelve months.
Cash (used) provided by operating activities during the
first nine months of 2010 and 2009 was $303,362 and $(424,046), respectively
and resulted primarily from inventory purchases in 2010, an impairment loss
in 2010, and operating losses in 2009, respectively.
Cash used by investing activities during the first nine
months of 2010 and 2009 was $792,351 and $304,864, respectively and primarily
related to the purchase of property, plant and equipment in Mexico.
Net cash provided by financing activities during the first
nine months of 2010 and 2009 was $349,643 and $698,484, respectively and
primarily generated from proceeds from the sale of common stock and exercise
of warrants.
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