COMMITMENTS AND CONTINGENCIES	6 Months Ended
Jun. 30, 2023
COMMITMENTS AND CONTINGENCIES (NOTE 8)
COMMITMENTS AND CONTINGENCIES	NOTE 8 – COMMITMENTS AND CONTINGENCIES The Company follows U.S. GAAP guidance in determining its accruals and disclosures with respect to loss contingencies and evaluates such accruals and contingencies for each reporting period. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a loss could be incurred, and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred. From time to time, the Company is assessed fines and penalties by the Mine Safety and Health Administration (“MSHA”). Using appropriate regulatory channels, management may contest these proposed assessments. At June 30, 2023 and December 31, 2022, the Company had no accrued liabilities relating to such assessments. The Company pays various royalties on the sale of zeolite products. On a combined basis, royalties generally vary around 8% to 13%. At June 30, 2023 and December 31, 2022, the Company had accrued royalties payable of $45,359 and $435,075, respectively. The decrease in royalties payable in 2023 was primarily due to the Company finalizing its estimates and paying a royalty obligation in 2023 that had been accumulating since 2016. On August 8, 2022, the Company executed a preliminary Purchase Option Agreement (the “Agreement”) with SB Wadley SA de CV (“Wadley”) whereby the Company leases, with an option to acquire, mining claims located in Mexico known as the Wadley Property. Under the Agreement, the Company agreed to pay Wadley eight monthly installments of $10,000 plus VAT for the right to mine and conduct geological and resource studies as due diligence and exploration on the Wadley Property. At the end of such eight-month period, should the Company choose to exercise its option to acquire following due diligence and assessment of geological and resource studies, the Company agreed to pay Wadley $2,230,000 and seven annual payments of $1,160,000. The due diligence period under the Agreement was extended to October 15, 2023. On October 12, 2023, the Company officially notified Wadley that it did not intend to acquire the Wadley Property and terminated this Agreement. During the fourth quarter of 2023, the Company expects to incur a loss on disposal of assets of approximately $140,000 related to the termination of this Agreement. Mexican 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, which is still pending. As of June 30, 2023, the updated SAT assessment was approximately $21.6 million pesos, which was approximately $1,265,000 USD for $350,000 of unpaid income taxes and $915,000 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 tax attorneys located in Mexico, that the more likely than not 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 June 30, 2023 or December 31, 2022 relating to this potential tax liability. There can be no assurance that the Company’s ultimate liability, if any, will not have a material adverse effect on the Company’s results of operations or financial position. If an issue addressed during the SAT audit is resolved in a manner inconsistent with management expectations, the Company will record changes to tax liabilities, recognize penalties in general and administrative expense, interest will be recorded as interest expense and record the tax expense associated with the assessment.

COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2023

COMMITMENTS AND CONTINGENCIES (NOTE 8)

NOTE 8 – COMMITMENTS AND CONTINGENCIES

The Company follows U.S. GAAP guidance in determining its accruals and disclosures with respect to loss contingencies and evaluates such accruals and contingencies for each reporting period. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a loss could be incurred, and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.

From time to time, the Company is assessed fines and penalties by the Mine Safety and Health Administration (“MSHA”). Using appropriate regulatory channels, management may contest these proposed assessments. At June 30, 2023 and December 31, 2022, the Company had no accrued liabilities relating to such assessments.

The Company pays various royalties on the sale of zeolite products. On a combined basis, royalties generally vary around 8% to 13%. At June 30, 2023 and December 31, 2022, the Company had accrued royalties payable of $45,359 and $435,075, respectively. The decrease in royalties payable in 2023 was primarily due to the Company finalizing its estimates and paying a royalty obligation in 2023 that had been accumulating since 2016.

On August 8, 2022, the Company executed a preliminary Purchase Option Agreement (the “Agreement”) with SB Wadley SA de CV (“Wadley”) whereby the Company leases, with an option to acquire, mining claims located in Mexico known as the Wadley Property. Under the Agreement, the Company agreed to pay Wadley eight monthly installments of $10,000 plus VAT for the right to mine and conduct geological and resource studies as due diligence and exploration on the Wadley Property. At the end of such eight-month period, should the Company choose to exercise its option to acquire following due diligence and assessment of geological and resource studies, the Company agreed to pay Wadley $2,230,000 and seven annual payments of $1,160,000. The due diligence period under the Agreement was extended to October 15, 2023. On October 12, 2023, the Company officially notified Wadley that it did not intend to acquire the Wadley Property and terminated this Agreement. During the fourth quarter of 2023, the Company expects to incur a loss on disposal of assets of approximately $140,000 related to the termination of this Agreement.

Mexican 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, which is still pending.

As of June 30, 2023, the updated SAT assessment was approximately $21.6 million pesos, which was approximately $1,265,000 USD for $350,000 of unpaid income taxes and $915,000 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 tax attorneys located in Mexico, that the more likely than not 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 June 30, 2023 or December 31, 2022 relating to this potential tax liability. There can be no assurance that the Company’s ultimate liability, if any, will not have a material adverse effect on the Company’s results of operations or financial position.

If an issue addressed during the SAT audit is resolved in a manner inconsistent with management expectations, the Company will record changes to tax liabilities, recognize penalties in general and administrative expense, interest will be recorded as interest expense and record the tax expense associated with the assessment.