DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

9 Months Ended

Sep. 30, 2024

DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

NOTE 12 – 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 intent to sell its USAMSA subsidiary. 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.

The key components of the income (loss) from discontinued operations for the three and nine months ended September 30, 2024 and 2023 were as follows:

	For the three months ended						For the nine months ended
	September 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
REVENUES	$	151,158		$	249,933		$	1,241,032		$	488,389
COST OF REVENUES		153,097			1,569,413			1,134,808			2,828,794
GROSS PROFIT (LOSS)		(1,939	)		(1,319,480	)		106,224			(2,340,405	)
OPERATING EXPENSES:
General and administrative		22,072			11,032			92,472			49,301
Professional fees		18,563			63,681			72,893			164,625
Other operating expenses		3,404			66,637			118,933			310,985
TOTAL OPERATING EXPENSES		44,039			141,350			284,298			524,911
LOSS FROM OPERATIONS		(45,978	)		(1,460,830	)		(178,074	)		(2,865,316	)
OTHER INCOME (EXPENSE):
Other miscellaneous income (expense)		1,566			1,087			(16,711	)		(8,225	)
TOTAL OTHER INCOME (EXPENSE)		1,566			1,087			(16,711	)		(8,225	)
LOSS FROM DISCONTINUED OPERATIONS, BEFORE TAX		(44,412	)		(1,459,743	)		(194,785	)		(2,873,541	)
Income tax expense		-			-			-			-
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX	$	(44,412)		$	(1,459,743)		$	(194,785)		$	(2,873,541)

Depreciation and amortization expense of USAMSA totaled $nil for the three and nine months ended September 30, 2024, and $155,538 and $466,421 for the three and nine months ended September 30, 2023, respectively.

Capital expenditures of USAMSA were $nil for the three and nine months ended September 30, 2024, and $30,000 and $182,322 for the three and nine months ended September 30, 2023, respectively.

The carrying amounts of major classes of assets and liabilities of USAMSA included in assets and liabilities of discontinued operations were as follows:

	September 30, 2024		December 31, 2023
ASSETS
CURRENT ASSETS
Accounts receivable	$	40,193	$	-
Inventories, net		31,457		366,955
Prepaid expenses and other current assets		2,910		-
Total current assets, discontinued operations		74,560		366,955
Properties, plants and equipment, net		5,689,446		5,689,446
IVA receivable and other assets, net		428,164		491,139
Total assets, discontinued operations	$	6,192,170	$	6,547,540
LIABILITIES
CURRENT LIABILITIES
Accounts payable		133,780		126,788
Accrued liabilities		15,053		24,500
Total current liabilities, discontinued operations		148,833		151,288
Asset retirement obligations		536,466		536,466
Total liabilities, discontinued operations	$	685,299	$	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 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 $865,000 USD as of December 31, 2019. Management reviewed the 2019 assessment notice from SAT and, similar to the earlier assessment, believed the findings have no merit. An appeal was filed by the Company in November 2019 suspending SAT from taking immediate action regarding the assessment. 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, which was subsequently appealed by the Company.

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 believed, based on discussions with its attorneys located in Mexico, that the most likely outcome would be that the Company would be successful in its appeal resulting in no tax due. Management determined that no amount should be accrued at December 31, 2023 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 but left open the possibility for the SAT to re-open their audit. Subsequent to this judgment, the Company requested a final ruling on whether SAT can re-open this matter, on which the appellate court has not ruled. These rulings support the Company’s position on this tax matter and have had no impact on the Company’s financial statements.

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 $973,414 and $1,122,628 at September 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 $601,295 and $687,534 at September 30, 2024 and December 31, 2023, respectively.