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DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE | 6 Months Ended
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Jun. 30, 2024
DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE |
DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE | NOTE 11 – DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE As described in Note 1, on March 11, 2024, the Company shut down the operations of USAMSA, which was part of the antimony segment, and announced its plans to sell its USAMSA subsidiary over the next year. The accounting requirements for reporting USAMSA as a discontinued operation were met in the first quarter of 2024. Accordingly, our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, and Condensed Consolidated Statements of Cash Flows report discontinued operations separate from continuing operations for all periods presented. Our Condensed Consolidated Statements of Equity combine the results of continuing and discontinued operations. In addition, the Notes to Condensed Consolidated Financial Statements exclude discontinued operation for all periods presented. Also as described in Note 1, in May 2024, the Company made the decision to sell the personal residence it owns in Idaho that was previously used for management located near its BRZ operation (“BRZ Home”), which is part of the zeolite segment. The Company also signed an agreement with a realtor in May 2024 to assist with the sale of its BRZ Home. An active search for a buyer began after signing the agreement with the realtor and the Company expects the BRZ Home to be sold sometime over the next year. This sale of the BRZ Home did not meet the accounting requirements to report the BRZ Home as a discontinued operation but did meet the criteria to be reported as an asset held for sale in the second quarter of 2024. Accordingly, our Condensed Consolidated Balance Sheets report the $297,873 net book value of the BRZ Home in “Noncurrent assets held for sale” at June 30, 2024, while the prior period in our Condensed Consolidated Balance Sheets does not reflect this reclassification of the BRZ Home to “Noncurrent assets held for sale” at December 31, 2023. There were no other significant assets or liabilities related to the BRZ Home at June 30, 2024. In addition, the BRZ Home continues to be reported with continuing operation in our Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Cash Flows, and Condensed Consolidated Statements of Equity. However, there were no significant amounts in the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows related to the BRZ Home. Also, no gain or loss has been recorded related to the BRZ Home since the decision was made to sell it. The key components of the income (loss) from discontinued operations for the three and six months ended June 30, 2024 and 2023 were as follows:
|  | For the three months ended |  |  | For the six months ended |
|  | June 30, 2024 |  |  | June 30, 2023 |  |  | June 30, 2024 |  |  | June 30, 2023 |
REVENUES |  | $ | 849,197 |  |  | $ | 238,456 |  |  | $ | 1,089,874 |  |  | $ | 238,456 |
COST OF REVENUES |  |  | 507,615 |  |  |  | 329,119 |  |  |  | 981,711 |  |  |  | 1,259,381 |
GROSS PROFIT (LOSS) |  |  | 341,582 |  |  |  | (90,663 | ) |  |  | 108,163 |  |  |  | (1,020,925 | )
OPERATING EXPENSES: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
General and administrative |  |  | 25,508 |  |  |  | 23,946 |  |  |  | 70,400 |  |  |  | 38,269 |
Professional fees |  |  | 19,179 |  |  |  | 62,142 |  |  |  | 54,330 |  |  |  | 100,944 |
Other operating expenses |  |  | 27,283 |  |  |  | 136,003 |  |  |  | 115,529 |  |  |  | 244,348 |
TOTAL OPERATING EXPENSES |  |  | 71,970 |  |  |  | 222,091 |  |  |  | 240,259 |  |  |  | 383,561 |
INCOME (LOSS) FROM OPERATIONS |  |  | 269,612 |  |  |  | (312,754 | ) |  |  | (132,096 | ) |  |  | (1,404,486 | )
OTHER EXPENSE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other miscellaneous expense |  |  | (11,116 | ) |  |  | (679 | ) |  |  | (18,277 | ) |  |  | (9,312 | )
TOTAL OTHER EXPENSE |  |  | (11,116 | ) |  |  | (679 | ) |  |  | (18,277 | ) |  |  | (9,312 | )
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, BEFORE TAX |  |  | 258,496 |  |  |  | (313,433 | ) |  |  | (150,373 | ) |  |  | (1,413,798 | )
Income tax expense |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX |  | $ | 258,496 |  |  | $ | (313,433 | ) |  | $ | (150,373 | ) |  | $ | (1,413,798 | )
Depreciation and amortization expense of USAMSA totaled $nil for the three and six months ended June 30, 2024, and $155,974 and $310,883 for the three and six months ended June 30, 2023, respectively. Capital expenditures of USAMSA were $nil for the three and six months ended June 30, 2024, and $38,754 and $152,322 for the three and six months ended June 30, 2023, respectively. The carrying amounts of major classes of assets and liabilities of USAMSA and BRZ Home included in assets and liabilities of discontinued operations were as follows:
|  | June 30, 2024 |
|  | USAMSA |  |  | BRZ Home |  |  | Total |
ASSETS |  |  |  |  |  |  |  |  |
CURRENT ASSETS |  |  |  |  |  |  |  |  |
Accounts receivable |  | $ | 45,936 |  |  | $ | - |  |  | $ | 45,936 |
Inventories, net |  |  | - |  |  |  | - |  |  |  | - |
Prepaid expenses |  |  | 4,862 |  |  |  | - |  |  | $ | 4,862 |
Total current assets, discontinued operations |  |  | 50,798 |  |  |  | - |  |  |  | 50,798 |
Properties, plants and equipment, net |  |  | 5,689,446 |  |  |  | 297,873 |  |  |  | 5,987,319 |
IVA receivable and other assets, net |  |  | 456,262 |  |  |  | - |  |  |  | 456,262 |
Total assets, discontinued operations |  |  | 6,196,506 |  |  |  | 297,873 |  |  |  | 6,494,379 |
LIABILITIES |  |  |  |  |  |  |  |  |  |  |  |
CURRENT LIABILITIES |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  | $ | 130,807 |  |  | $ | - |  |  | $ | 130,807 |
Accrued liabilities |  |  | 15,123 |  |  |  | - |  |  |  | 15,123 |
Total current liabilities, discontinued operations |  |  | 145,930 |  |  |  | - |  |  |  | 145,930 |
Asset retirement obligations |  |  | 536,466 |  |  |  | - |  |  |  | 536,466 |
Total liabilities, discontinued operations |  | $ | 682,396 |  |  | $ | - |  |  | $ | 682,396 |
|  | December 31, 2023 |
|  | USAMSA |  |  | BRZ Home |  |  | Total |
ASSETS |  |  |  |  |  |  |  |  |
CURRENT ASSETS |  |  |  |  |  |  |  |  |
Inventories, net |  | $ | 366,955 |  |  | $ | - |  |  | $ | 366,955 |
Total current assets, discontinued operations |  |  | 366,955 |  |  |  | - |  |  |  | 366,955 |
Properties, plants and equipment, net |  |  | 5,689,446 |  |  |  | - |  |  |  | 5,689,446 |
IVA receivable and other assets, net |  |  | 491,139 |  |  |  | - |  |  |  | 491,139 |
Total assets, discontinued operations |  | $ | 6,547,540 |  |  | $ | - |  |  | $ | 6,547,540 |
LIABILITIES |  |  |  |  |  |  |  |  |  |  |  |
CURRENT LIABILITIES |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  | $ | 126,788 |  |  | $ | - |  |  | $ | 126,788 |
Accrued liabilities |  |  | 24,500 |  |  |  | - |  |  |  | 24,500 |
Total current liabilities, discontinued operations |  |  | 151,288 |  |  |  | - |  |  |  | 151,288 |
Asset retirement obligations |  |  | 536,466 |  |  |  | - |  |  |  | 536,466 |
Total liabilities, discontinued operations |  | $ | 687,754 |  |  | $ | - |  |  | $ | 687,754 |
Mexico Tax Assessment In 2015, the Mexican tax authority (“SAT”) initiated an audit of the USAMSA’s 2013 income tax return. In October 2016, as a result of its audit, SAT assessed the Company $13.8 million pesos, which was approximately $666,400 in U.S. Dollars (“USD”) as of December 31, 2016. SAT’s assessment was based on the disallowance of specific costs that the Company deducted on the 2013 USAMSA income tax return. The assessment was settled in 2018 with no assessment due from the Company. In early 2019, the Company was notified that SAT re-opened its assessment of USAMSA’s 2013 income tax return and, in November 2019, SAT assessed the Company $16.3 million pesos, which was approximately $795,000 USD as of December 31, 2021. Management reviewed the 2019 assessment notice from SAT and, similar to the earlier assessment, believes the findings have no merit. An appeal was filed by the Company in November 2019 suspending SAT from taking immediate action regarding the assessment. The Company posted a guarantee of the amount in March 2020 as is required under the appeal process. In August 2020, the Company filed a lawsuit against SAT for resolution of the process and, in December 2020, filed closing arguments. In 2022, the Mexican court ruled against the Company in the above matter. The Company subsequently appealed the ruling. As of December 31, 2023, the updated SAT assessment was approximately $22.4 million pesos, or approximately $1,320,000 USD, which includes $352,000 of unpaid income taxes and $968,000 of interest and penalties. Management, along with its legal counsel, assessed the possible outcomes for this tax audit and believes, based on discussions with its attorneys located in Mexico, that the most likely outcome will be that the Company will be successful in its appeal resulting in no tax due. Management determined that no amount should be accrued at December 31, 2023 or December 31, 2022 relating to this potential tax liability. In March 2024, Mexico’s appellate court ruled in favor of the Company with no assessment due related to this audit of USAMSA’s 2013 income tax return by SAT and instructed the lower court to issue a new ruling. In May 2024, Mexico’s lower court issued a final ruling on this matter in favor of the Company releasing any requirement for a guarantee on this matter from the Company but left open the possibility for the SAT to re-open their audit. These rulings support the Company’s position on this tax matter and had no impact on the Company’s financial statements at June 30, 2024. Mexico Value Added Tax USAMSA records a receivable for the Value Added Tax (“VAT” or “IVA”) it pays on certain goods and services representing amounts to be reimbursed from the Mexican government. This receivable balance of $1,053,966 and $1,122,628 at June 30, 2024 and December 31, 2023, respectively, is recorded in “IVA receivable and other assets, net” in USAMSA’s assets held for sale in discontinued operations net of a reserve of $653,749 and $687,534 at June 30, 2024 and December 31, 2023, respectively.

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