UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20172018
☐
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period _____ to _____to______
Commission file number 001-08675
UNITED STATES ANTIMONY CORPORATION
(Exact name of registrant as specified in its charter)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
Indicate by check mark 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. YESYes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YESYes ☑ No ☐
Indicate by check mark whether the registrant is a shell company as defined by Rule 12b-2 of the Exchange Act. YES ☐ No ☑
At November 14, 2017, the registrant had outstanding 67,488,153 shares of par value $0.01 common stock.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer”, “small reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
| | Accelerated filerFiler ☐ | Accelerated Filer ☐ |
Non-accelerated filerNon-Accelerated Filer ☐ | | Smaller reporting company ☑ |
| | | | (Do not check if a smaller reporting company) | | Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company as defined by Rule 12b-2 of the Exchange Act. Yes ☑ No ☐
At August 14, 2018, the registrant had outstanding 68,227,171 shares of par value $0.01 common stock.
UNITED STATES ANTIMONY CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD
ENDED SEPTEMBERJUNE 30, 20172018
(UNAUDITED)
TABLE OF CONTENTS
| Page |
PART I – FINANCIAL INFORMATION | |
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Item 1: Financial Statements (unaudited) | 1-121-14 |
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Item 2: Management’s Discussion and Analysis of Results of Operations and Financial Condition | 12-17 14-18 |
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Item 3: Quantitative and Qualitative Disclosure about Market Risk | 1718 |
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Item 4: Controls and Procedures | 1819 |
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PART II – OTHER INFORMATION | |
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Item 1: Legal Proceedings | 1920 |
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Item 2: Unregistered Sales of Equity Securities and Use of Proceeds | 1920 |
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Item 3: Defaults upon Senior Securities | 1920 |
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Item 4: Mine Safety Disclosures | 1920 |
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Item 5: Other Information | 1920 |
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Item 6: Exhibits and Reports on Form 8-K | 1920 |
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SIGNATURE | 20 |
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CERTIFICATIONS | |
[The balance of this page has been intentionally left blank.]
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements
United States Antimony Corporation and Subsidiaries
Consolidated Balance Sheets
| | |
| | | | |
ASSETS | | | |
| | | |
Current assets: | | |
Cash and cash equivalents | $27,576 | $10,057 | $15,878 | $27,987 |
Certificates of deposit | 252,298 | 251,641 | 252,954 | 252,298 |
Accounts receivable, net | 496,397 | 552,119 | 461,291 | 362,579 |
Inventories | 939,880 | 855,637 | 712,696 | 914,709 |
Other current assets | 23,890 | 23,101 | - | 4,697 |
Total current assets | 1,740,041 | 1,692,555 | 1,442,819 | 1,562,270 |
| | |
Properties, plants and equipment, net | 15,338,206 | 15,695,966 | 14,854,626 | 15,132,897 |
Restricted cash for reclamation bonds | 63,275 | 63,274 | 63,345 |
Foreign value added tax refund receivable | 365,120 | 276,500 | |
Other assets | 32,520 | 37,703 | |
IVA receivable and other assets | | 384,677 | 372,742 |
Total assets | $17,539,162 | $17,765,998 | $16,745,467 | $17,131,254 |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | LIABILITIES AND STOCKHOLDERS' EQUITY |
Current liabilities: | | |
Checks issued and payable | $48,408 | $35,682 | $110,578 | $28,248 |
Accounts payable | 2,199,458 | 1,797,251 | 2,367,656 | 2,276,357 |
Due to factor | 163,737 | 150,399 | 5,440 | 10,880 |
Accrued payroll, taxes and interest | 162,833 | 213,695 | 211,703 | 185,283 |
Other accrued liabilities | 153,273 | 122,968 | 205,412 | 168,578 |
Payables to related parties | 16,322 | 14,525 | 22,678 | 22,668 |
Deferred revenue | 78,730 | 32,400 | 60,049 |
Notes payable to bank | 103,026 | 167,317 | 191,009 | 192,565 |
Income taxes payable (Note 11) | 459,510 | 410,510 | 430,358 | 443,110 |
Long-term debt, current portion, net of discount | 495,134 | 391,046 | 632,655 | 546,988 |
Total current liabilities | 3,880,431 | 3,382,123 | 4,209,889 | 3,934,726 |
| | |
Long-term debt, net of discount and current portion | 1,282,981 | 1,472,869 | 1,084,827 | 1,239,126 |
Hillgrove advances payable (Note 8) | 1,134,196 | 1,134,221 | |
Hillgrove advances payable | | 1,134,221 |
Common stock payable to directors for services | 131,250 | 168,750 | 87,500 | 175,000 |
Asset retirement obligations and accrued reclamation costs | 270,124 | 265,782 | 274,646 | 271,572 |
Total liabilities | 6,698,982 | 6,423,745 | 6,791,083 | 6,754,645 |
Commitments and contingencies (Note 5 and 11) | | |
Commitments and contingencies (Note 7 and 11) | | |
| | |
Stockholders' equity: | | |
Preferred stock $0.01 par value, 10,000,000 shares authorized: | | |
Series A: -0- shares issued and outstanding | - | - |
Series B: 750,000 shares issued and outstanding | | |
(liquidation preference $909,375 and $907,500 | | |
respectively) | 7,500 | 7,500 |
Series C: 177,904 shares issued and outstanding | | |
(liquidation preference $97,847) | 1,779 | |
(liquidation preference $97,847 both years) | | 1,779 |
Series D: 1,751,005 shares issued and outstanding | | |
(liquidation preference $5,014,692 and $4,920,178 | | |
respectively) | 17,509 | 17,509 |
Common stock, $0.01 par value, 90,000,000 shares authorized; | | |
67,488,153 and 67,066,278 shares issued and outstanding, respectively | 674,881 | 670,662 | |
68,227,171 and 67,488,063 shares issued and outstanding, respectively | | 682,271 | 674,881 |
Additional paid-in capital | 36,239,264 | 36,074,733 | 36,406,874 | 36,239,264 |
Accumulated deficit | (26,100,753) | (25,429,930) | (27,161,549) | (26,564,324) |
Total stockholders' equity | 10,840,180 | 11,342,253 | 9,954,384 | 10,376,609 |
Total liabilities and stockholders' equity | $17,539,162 | $17,765,998 | $16,745,467 | $17,131,254 |
| | |
The accompanying notes are an integral part of the consolidated financial statements.
United States Antimony Corporation and Subsidiaries
Consolidated Statements of Operations (Unaudited)
United States Antimony Corporation and Subsidiaries | | |
Consolidated Statements of Operations (Unaudited) | | |
| | |
| | |
| For the three months ended | For the nine months ended | For the three months ended | |
| | | | | | | | |
| | |
REVENUES | $2,369,714 | $2,846,699 | $7,827,525 | $9,166,628 | $2,256,347 | $2,838,480 | $4,689,276 | $5,457,811 |
| | |
COST OF REVENUES | 2,315,646 | 2,888,660 | 7,381,020 | 8,811,663 | 2,114,999 | 2,535,587 | 4,603,016 | 5,065,374 |
| | |
GROSS PROFIT (LOSS) | 54,068 | (41,961) | 446,505 | 354,965 | |
GROSS PROFIT | | 141,348 | 302,893 | 86,260 | 392,437 |
| | |
OPERATING EXPENSES: | | |
General and administrative | 228,185 | 309,832 | 762,745 | 850,255 | 186,411 | 138,995 | 337,242 | 343,559 |
Salaries and benefits | | 96,427 | 97,487 | 187,873 | 191,001 |
Professional fees | 53,045 | 29,004 | 190,965 | 252,469 | 18,563 | 34,582 | 120,967 | 137,920 |
Hillgrove advance - earned credit (Note 8) | - | (32,813) | - | (109,392) | |
TOTAL OPERATING EXPENSES | 281,230 | 306,023 | 953,710 | 993,332 | 301,401 | 271,064 | 646,082 | 672,480 |
| | |
INCOME (LOSS) FROM OPERATIONS | (227,162) | (347,984) | (507,205) | (638,367) | (160,053) | 31,829 | (559,822) | (280,043) |
| | |
OTHER INCOME (EXPENSE): | | |
Interest income | 19 | 857 | 1,421 | 268 | 267 | 830 | 838 |
Interest expense | (25,960) | (28,343) | (80,764) | (57,203) | (24,814) | (27,154) | (48,647) | (54,804) |
Foreign exchange gain (loss) | 2,642 | - | (49,000) | - | 62,752 | (10,191) | 12,752 | (51,642) |
Factoring expense | (12,104) | (9,259) | (34,711) | (24,694) | (938) | (11,706) | (2,338) | (22,607) |
TOTAL OTHER INCOME (EXPENSE) | (35,403) | (37,583) | (163,618) | (80,476) | 37,268 | (48,784) | (37,403) | (128,215) |
| | |
INCOME (LOSS) BEFORE INCOME TAXES | (262,565) | (385,567) | (670,823) | (718,843) | |
| | |
Provision for income tax (Note 12) | - | (411,490) | - | (423,490) | |
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NET INCOME (LOSS) | (262,565) | (797,057) | (670,823) | (1,142,333) | (122,785) | (16,955) | (597,225) | (408,258) |
Preferred dividends | (12,162) | (36,487) | (12,162) | (24,325) |
| | |
Net income (loss) available to common stockholders | $(274,727) | $(809,219) | $(707,310) | $(1,178,820) | $(134,947) | $(29,117) | $(621,550) | $(432,583) |
| | |
Net income (loss) per share of common stock: | | |
Basic | | $(0.01) | $(0.02) | | $(0.01) |
Diluted | | $(0.01) | $(0.02) | | $(0.01) |
| | |
Weighted average shares outstanding: | | |
Basic | 67,488,153 | 66,866,278 | 67,387,337 | 66,687,981 | 67,959,175 | 67,488,153 | 67,724,965 | 67,336,651 |
Diluted | 67,488,153 | 66,866,278 | 67,387,337 | 66,687,981 | 67,959,175 | 67,488,153 | 67,724,965 | 67,336,651 |
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| | |
The accompanying notes are an integral part of the consolidated financial statements.
United States Antimony Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
United States Antimony Corporation and Subsidiaries | | United States Antimony Corporation and Subsidiaries |
Consolidated Statements of Cash Flows (Unaudited) | | Consolidated Statements of Cash Flows (Unaudited) |
| | |
| For the nine months ended | |
| | | | |
Cash Flows From Operating Activities: | | |
Net income (loss) | $(670,823) | $(1,142,333) | $(597,225) | $(408,258) |
Adjustments to reconcile net income (loss) to net cash | | |
provided (used) by operating activities: | | |
Depreciation and amortization expense | 637,225 | 652,375 | |
Hillgrove deferred revenue | - | (109,392) | |
Amortization of loan discount | 70,242 | 73,058 | |
Depreciation and amortization | | 452,659 | 430,050 |
Amortization of debt discount | | 42,240 | 46,828 |
Accretion of asset retirement obligation | 4,342 | 4,091 | 3,074 | 2,895 |
Common stock payable for director fees | 131,250 | 112,500 | |
Foreign exchange loss | 49,000 | - | |
Other non-cash items | (682) | | |
Common stock payable for directors' fees | | 87,500 |
Foreign exchange loss (gain) | | (12,752) | 51,642 |
Other non cash items | | (656) | (677) |
Change in: | | |
Accounts receivable, net | 55,722 | (97,444) | (98,712) | 10,835 |
Inventories | (84,243) | 356,120 | 202,013 | 49,196 |
Other current assets | (790) | 70,774 | 4,697 | (7,647) |
Other assets | (83,437) | (14,990) | (11,935) | (83,437) |
Accounts payable | 402,207 | 26,728 | 91,299 | 67,164 |
Accrued payroll, taxes and interest | (50,862) | 4,016 | 26,420 | (40,362) |
Deferred revenues | | (27,649) | - |
Other accrued liabilities | 30,305 | 42,889 | 36,834 | 31,691 |
Foreign income tax payable | - | 423,490 | |
Payables to related parties | 1,797 | 10,280 | 10 | 2,234 |
Net cash provided by operating activities | 491,253 | 412,162 | 197,817 | 239,654 |
| | |
Cash Flows From Investing Activities: | | |
Purchase of properties, plants and equipment | (279,465) | (459,969) | |
Purchases of properties, plants and equipment | | (174,388) | (151,244) |
Net cash used by investing activities | (279,465) | (459,969) | (174,388) | (151,244) |
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Cash Flows From Financing Activities: | | |
Net proceeds from (payments to) factor | 13,338 | 119,111 | |
Checks issued and payable | 12,726 | - | |
Principal payments on notes payable to bank (see Note 7) | (64,291) | (30,672) | |
Change in checks issued and payable | | 82,330 | (12,776) |
Net proceeds from factor | | (5,440) | 20,471 |
Advances from related party | | 75,000 | - |
Payment on advances from related party | | (75,000) | - |
Proceeds from notes payable to bank | | - | 24,827 |
Principal paid notes payable to bank, net | | (1,556) | - |
Principal payments on long-term debt | (156,042) | (130,857) | (110,872) | (106,439) |
Net cash provided (used) by financing activities | (194,269) | (42,418) | (35,538) | (73,917) |
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 17,519 | (90,225) | (12,109) | 14,493 |
Cash and cash equivalents at beginning of period | 10,057 | 133,543 | |
Cash and cash equivalents at end of period | $27,576 | $43,318 | |
Cash and cash equivalents and restricted cash at beginning of period | | 91,332 | 73,331 |
Cash and cash equivalents and restricted cash at end of period | | $79,223 | $87,824 |
| | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | | |
Noncash investing and financing activities: | | |
Properties, plants and equipment acquired with long-term debt | | $41,648 | |
Common stock payable issued to directors | $168,750 | $137,500 | $175,000 | $168,750 |
The accompanying notes are an integral part of the consolidated financial statements.
PART I - FINANCIAL INFORMATION, CONTINUED:
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
1.
Basis of Presentation:Presentation
The unaudited consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information, as well as the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the interim financial statements have been included. Operating results for the three and ninesix month periods ended SeptemberJune 30, 20172018 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2017.2018.
For further information refer to the financial statements and footnotes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
Certain consolidated financial statement amounts for the three and nine month periods ended September 30, 2016, have been reclassified to conform to the 2017 presentation. These reclassifications had no effect on the net income (loss) or cash flows or accumulated deficit as previously reported.2017.
Going Concern Consideration
At SeptemberJune 30, 2017, our2018, the Company’s consolidated financial statements show that we have a negative working capital of approximately $2.14$2.8 million and an accumulated deficit of approximately $26.1$27.2 million. In addition, we have incurred losses for the prior three years.Company had recurring net losses. These factors indicate that there may be doubt regarding ourthe ability to continue as a going concern for the next twelve months.
DuringThe continuing losses are principally a result of the past twelve months,Company’s antimony operations and in particular to the price of antimony has increased from a low of $3.07 per pound for the third quarter of 2016 to an average price of $4.25 for the third quarter of 2017. We have gross profit and a positive cash flow from our U.S. operations at this price. Our operationsproduction costs incurred in Mexico are still in a transitional phase since the loss of our raw material supply from Hillgrove of Australia. We are focusing our production at our Wadley mine to increase grade and output, and we have recently seen ore from there assaying 50% antimony. We are also trying new production techniques, and have found that we can process direct shipping ore successfully at our Madero smelter which will result in a reduction in our operating costs in Mexico going forward.Mexico.
Regarding the antimony division, prices improved during 2017 with an average sale price of $4.01 per pound. Through June 30, 2018, the average sale price for antimony is approximately $4.28 per pound. Additionally, in November 2017, the Company renegotiated its domestic sodium antimonite supply agreement resulting in a lower cost per antimony per pound of approximately $0.44. During the first six months of 2018, we endured supply interruptions from our North American supplier, and they have notified us that, due to a lack of raw material, they will be suspending shipments to us from September 17, 2018 to November 5, 2018. We anticipate that normal supply quantities will resume for the remainder of 2018 after November 5. We have reduced costs atbeen able to continue with operations due to our Mexico locations, most notably a reduced monthly lease payment of $11,600 for the Wadley mine from $23,200 for June 2016,Mexican raw material, and we have alsowill be directing our resources to increasing that supply source. The new supply agreement with our North American supplier has helped us with our cash flow in 2018 from our antimony division.
In 2017, we reduced the costcosts for labor at the same mine.Mexico locations which has resulted in a lower overall production costs in Mexico which has continued into 2018. In the fourth quarter 2017, we adjusted operating approaches at Madero that has resulted decreased operating costs for fuel, natural gas, electricity, and reagents for 2018. Although total production activity in Mexico decreased in 2017 due to the lack of Hillgrove concentrates, the Company’s 2018 plan involves ramping up production at its own antimony properties in Mexico. We have reduced administrative costs by approximately $81,000 fromare anticipating agreements that will provide us with operating capital to achieve this (See Note 14). In addition, a new leach circuit expected to come on line during 2018 in Mexico will result in more extraction of precious metals. The portion of the prior year third quarterprecious metals recovery system at the Madero smelter is complete and the cyanide leach circuit being built at the Puerto Blanco plant is expected to be completed this fall.
In 2017, management implemented wage and other cost reductions at the corporate level. Our capital outlay should be minimallevel that has kept administrative costs stable in the near future; and we completed2018. The Company expects to continue paying a low cost for the Los Juarez mining concessionspropane in 2016Montana through 2018, which werein years past has been a major outlay in prior years.
Our zeolite operations continue to operate profitably and provide cash to our operations. We are aggressively seeking new markets for our zeolite products, and we now have an outside sales staff that is working to obtain new customers and have had some success.
We believe that the combination of the above will enable us to stay in operation and meet our financial obligations for the next twelve months and further.operating cost.
PART I - FINANCIAL INFORMATION, CONTINUED:
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited),
1.
Basis of Presentation, Continued:
Over the past several years, the Company has been able to make required principal payments on its debt from cash generated from operations without the need for additional borrowings or selling shares of its common stock. The Company plans to continue keeping current on its debt payments in 2018 through cash flows from operations while using the additional operating capital to continue with the expansion of our Mexican operation and to improve our working capital. Management believes that the actions taken to increase production and reduce costs, along with the expected additional operating capital, will enable the Company meet its obligations for the next twelve months.
2.
Developments in Accounting Pronouncements
Accounting Standard Updates Adopted
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09 Revenue Recognition, replacing guidance currently codified in Subtopic 605-10 Revenue Recognition-Overall. The new ASU establishes a new five step principles-based framework in an effort to significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. In August 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. ASU No. 2015-14 deferred the effective date of ASU No. 2014-09 until annual and interim reporting periods beginning after December 15, 2017. We adopted ASU No. 2014-09 as of January 1, 2018 using the modified-retrospective transition approach. There was no impact of adoption of the update to our consolidated financial statements for the three and six months ended June 30, 2018.
We performed an assessment of the impact of implementation of ASU No. 2014-09, and concluded it does not change the timing of revenue recognition or amounts of revenue recognized compared to how we recognize revenue under our current policies. Adoption of ASU No. 2014-09 involves additional disclosures, where applicable, on (i) contracts with customers, (ii) significant judgments and changes in judgments in determining the timing of satisfaction of performance obligations and the transaction price, and (iii) assets recognized for costs to obtain or fulfill contracts. See Note 4 for information on our sales of products.
In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on classification for cash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. We adopted this update as of January 1, 2018.
In November 2016, the FASB issued ASU No. 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash. The update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. We adopted this update as of January 1, 2018. Cash, cash equivalents, and restricted cash on the consolidated statements of cash flows includes restricted cash of $63,345 as of June 30, 2018 and December 31, 2017 and $63,274 as of June 30, 2017 and December 31, 2016, as well as amounts previously reported for cash and cash equivalents.
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
2.
Developments in Accounting Pronouncements, Continued:
Accounting Standards Updates to Become Effective in Future Periods
In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). The update modifies the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We are currently reviewing our leases and compiling the information required to implement the new guidance. We are currently evaluating the potential impact of implementing this update on our consolidated financial statements.
3.
Income (Loss) Per Common Share:Share
Basic earnings per share is calculated by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated based on the weighted average number of common shares outstanding during the period plus the effect of potentially dilutive common stock equivalents, including warrants to purchase the Company's common stock and convertible preferred stock. Management has determined that the calculation of diluted earnings per share for the threequarter and ninesix month periods ended SeptemberJune 30, 20172018 and June 30, 2016,2017, is not applicable since any additions to outstanding shares related to common stock equivalents would be anti-dilutive.
As of SeptemberJune 30, 20172018 and 2016,2017, the potentially dilutive common stock equivalents not included in the calculation of diluted earnings per share as their effect would have been anti-dilutive are as follows:
| | | | |
Warrants | 250,000 | 250,000 |
Convertible preferred stock | 1,751,005 | 1,751,005 |
Total possible dilution | 2,001,005 | 2,001,005 |
3.4.
Inventories:Revenue Recognition
Our products consist of the following:
●
Antimony: includes antimony oxide, sodium antimonate, and antimony metal
●
Zeolite: includes course and fine zeolite crushed in various sizes.
●
Precious Metals: includes refined gold and silver
For our antimony and zeolite products, revenue is recognized upon the completion of the performance obligation which is met when the transaction price can be reasonably estimated and revenue is recognized generally at the time when risk is transferred. We have determined the performance obligation is met and title is transferred either upon shipment from our warehouse locations or upon receipt by the customer as specified in individual sales orders. The performance obligation is met because at that time, 1) legal title is transferred to the customer, 2) the customer has accepted the product and obtained the ability to realize all of the benefits from the product, 3) the customer has the significant risks and rewards of ownership to it, 4) it is very unlikely product will be rejected by the customer upon physical receipt, and 5) we have the right to payment for the product. Shipping costs related to the sales of antimony and zeolite products are recorded to cost of sales as incurred. For zeolite products, royalty expense due a third party by the Company is also recorded to cost of sales upon sale in accordance with terms of underlying royalty agreements.
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
4.
Revenue Recognition, Continued
For sales of precious metals, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of control of the agreed-upon metal quantities to the customer. Refining and shipping costs related to sales of precious metals are recorded to cost of sales as incurred.
Sales of products for the three and six month periods ended June 30, 2018 and 2017 were as follows:
| | |
| | |
| | | | |
Antimony | $1,492,520 | $2,077,300 | $3,174,333 | $4,063,808 |
Zeolite | 682,534 | 616,414 | 1,373,240 | 1,228,426 |
Precious metals | 81,293 | 144,766 | 141,703 | 165,577 |
| $2,256,347 | $2,838,480 | $4,689,276 | $5,457,811 |
The following is sales information by geographic area based on the location of customers for the three and six month periods ended June 30, 2018 and 2017:
| | |
| | |
| | | | |
United States | $1,878,244 | $2,653,227 | $4,125,935 | $4,950,282 |
Canada | 378,103 | 185,253 | 563,341 | 507,529 |
| $2,256,347 | $2,838,480 | $4,689,276 | $5,457,811 |
Sales of products to significant customers were as follows for the three and six month periods ended June 30, 2018 and 2017:
| For the Three Months Ended | |
| | | | |
Mexichem Speciality Compounds | $669,103 | $769,998 | $1,397,681 | $1,556,423 |
East Penn Manufacturing Inc. | - | 363,979 | - | 512,621 |
Kohler Corporation | 334,778 | 501,320 | 651,550 | 946,498 |
Ampacet Corporation | 146,118 | - | 330,260 | - |
ZEO, Inc. | 185,730 | - | 306,701 | - |
| $1,335,729 | $1,635,297 | $2,686,192 | $3,015,542 |
% of Total Revenues | 59.20% | 57.60% | 57.30% | 55.30% |
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
4.
Revenue Recognition, Continued:
Accounts receivable from largest customers were as follows for June 30, 2018 and December 31, 2017:
| | |
Nutreco Canada, Inc. | $- | $25,657 |
Ralco Mix Products | - | 16,000 |
Mexichem Speciality Compounds | 148,211 | - |
Axens North America, Inc. | 38,404 | - |
Teck American, Inc. | 82,733 | 241,627 |
| $269,348 | $283,284 |
% of Total Receivables | 58.40% | 78.10% |
Our trade accounts receivable balance related to contracts with customers was $461,291 at June 30, 2018 and $362,579 at December 31, 2017. Our products do not involve any warranty agreements and product returns are not typical.
We have determined our contracts do not include a significant financing component. For antimony and zeolite sales contracts, we may factor certain receivables and receive final payment within 30 days of the performance obligation being met. For antimony and zeolite receivables not factored, we typically receive payment within 10 days. For precious metals sales, a provisional payment of 75% is typically received within 45 days of the date the product is delivered to the customer. After an exchange of assays, a final payment is normally received within 90 days of product delivery.
Inventories at SeptemberJune 30, 20172018 and December 31, 20162017 consisted primarily of finished antimony products, antimony metal, antimony ore, and finished zeolite products that are stated at the lower of first-in, first-out cost or estimated net realizable value. Finished antimony products, antimony metal and finished zeolite products costs include raw materials, direct labor and processing facility overhead costs and freight. Inventory at SeptemberJune 30, 20172018 and December 31, 2016,2017 is as follows:
| | |
| | |
Antimony Metal | $- | $112,300 |
Antimony Oxide | 452,871 | 326,126 |
Antimony Concentrates | 19,017 | 30,815 |
Antimony Ore | 151,841 | 181,815 |
Total antimony | 623,729 | 651,056 |
Zeolite | 316,151 | 204,581 |
| $939,880 | $855,637 |
| | |
| | |
Sodium antimonate | $56,091 | $- |
Antimony oxide | 225,099 | 408,217 |
Antimony with precious metal content | 23,474 | 35,554 |
Antimony ore | 165,280 | 187,133 |
Total antimony | 469,944 | 630,904 |
Zeolite | 242,752 | 283,805 |
| $712,696 | $914,709 |
PART I - FINANCIAL INFORMATION, CONTINUED:
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
4.6.
Accounts Receivable and Due to Factor:Factor
The Company factors designated trade receivables pursuant to a factoring agreement with LSQ Funding Group L.C., an unrelated factor (the “Factor”). The agreement specifies that eligible trade receivables are factored with recourse. We submit selected trade receivables to the factor, and receive 83% of the face value of the receivable by wire transfer. The Factor withholds 15% as retainage, and 2% as a servicing fee. Upon payment by the customer, we receive the remainder of the amount due from the factor. The 2% servicing fee is recorded on the consolidated statement of operations in the period of sale to the factor. John Lawrence, CEO, is a personal guarantor of the amount due to Factor.
Trade receivables assigned to the Factor are carried at the original invoice amount less an estimate made for doubtful accounts. Under the terms of the recourse provision, the Company is required to reimburse the Factor, upon demand, for factored receivables that are not paid on time. Accordingly, these receivables are accounted for as a secured financing arrangement and not as a sale of financial assets. The allowance for doubtful accounts (if any) is based on management’s regular evaluation of individual customer’s receivables and consideration of a customer’s financial condition and credit history. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. Interest is not charged on past due accounts.
We present the receivables, net of allowances, as current assets and we present the amount potentially due to the Factor as a secured financing in current liabilities.
Accounts Receivble | | | | |
Accounts receivable - non factored | $332,660 | $401,720 | $455,851 | $351,699 |
Accounts receivable - factored with recourse | 163,737 | 150,399 | 5,440 | 10,880 |
Accounts receivable - net | $496,397 | $552,119 | $461,291 | $362,579 |
5.7.
Commitments and Contingencies:Contingencies
In June of 2013, the Company entered into a lease to mine antimony ore from concessions located in the Wadley Mining district in Mexico. The lease calls for a mandatory term of one year and, and as of SeptemberJune 30, 2017,2018, requires payments of $10,000 plus a tax of $1,600$1,700, per month. The lease is renewable each year with a 15 day notice to the lessor, and agreement of terms. The next lease is scheduled for renewal in June 2018.2019.
PART I - FINANCIAL INFORMATION, CONTINUED:At June 30, 2018 and December 31, 2017, the Company had the following notes payable to bank:
| | |
| | |
Promissory note payable to First Security Bank of Missoula, | | |
bearing interest at 3.150%, payable on demand, collateralized | | |
by a lien on Certificate of Deposit | $99,999 | $98,863 |
| | |
Promissory note payable to First Security Bank of Missoula, | | |
bearing interest at 3.150%, payable on demand, collateralized | | |
by a lien on Certificate of Deposit | 91,010 | 93,702 |
Total notes payable to the bank | $191,009 | $192,565 |
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
6.8.
Notes Payable to Bank:Bank, Continued:
At September 30, 2017 and December 31, 2016, the Company had the following notes payable to bank:
| | |
| | |
Promissory note payable to First Security Bank of Missoula, | | |
bearing interest at 3.150%, payable on demand, collateralized | | |
by a lien on Certificate of Deposit | $3,027 | $76,350 |
| | |
Promissory note payable to First Security Bank of Missoula, | | |
bearing interest at 3.150%, payable on demand, collateralized | | |
by a lien on Certificate of Deposit | 99,999 | 90,967 |
| | |
Total notes payable to the bank | $103,026 | $167,317 |
These notes are personally guaranteed by John C. Lawrence the Company’s PresidentChief Executive Officer and Chairman of the Board of Directors. The maximum amount available for borrowing under each note is $99,999.
7. 9.
Long – Term Debt:Debt
Long-Term debt at September 30, 2017 and December 31, 2016, is as follows: | | | |
Long-Term debt at June 30, 2018 and December 31, 2017, is as follows: | | | |
| | | | |
Note payable to First Security Bank, bearing interest at 6%; | | |
payable in monthly installments of $917; maturing | | |
September 2018; collateralized by equipment. | $10,660 | $18,246 | $2,725 | $8,054 |
Note payable to Cat Financial Services, bearing interest at 6%; | | |
payable in monthly installments of $1,300; maturing | | |
August 2019; collateralized by equipment. | 30,545 | 40,556 | 21,243 | 27,096 |
Note payable to Wells Fargo Bank, bearing interest at 4%; | | |
payable in monthly installments of $477; maturing | | |
December 2016; collateralized by equipment. | - | 473 | |
Note payable to Cat Financial Services, bearing interest at 6%; | | |
payable in monthly installments of $778; maturing | | |
December 2022; collateralized by equipment. | | 37,972 | 40,278 |
Note payable to De Lage Landen Financial Services, | | |
bearing interest at 3.51%; payable in monthly installments of $655; | | |
maturing September 2019; collateralized by equipment. | 14,567 | 20,581 | 9,630 | 13,344 |
Note payable to De Lage Landen Financial Services, | | |
bearing interest at 3.51%; payable in monthly installments of $655; | | |
maturing December 2019; collateralized by equipment. | 16,985 | 22,944 | 12,106 | 15,776 |
Note payable to Phyllis Rice, bearing interest | | |
at 1%; payable in monthly installments of $2,000; maturing | | |
March 2015; collateralized by equipment. | 14,146 | 14,146 |
Obligation payable for Soyatal Mine, non-interest bearing, | | |
annual payments of $100,000 or $200,000 through 2019, net of discount. | 731,862 | 776,319 | 682,229 | 715,709 |
Obligation payable for Guadalupe Mine, non-interest bearing, | | |
annual payments from $60,000 to $149,078 through 2026, net of discount. | 959,350 | 970,651 | 937,431 | 951,711 |
| 1,778,115 | 1,863,916 | 1,717,482 | 1,786,114 |
Less current portion | (495,134) | (391,046) | (632,655) | (546,988) |
Long-term portion | $1,282,981 | $1,472,870 | $1,084,827 | $1,239,126 |
At June 30, 2018, principal payments on debt are due as follows:
12 Months Ending June 30, | | |
| | | |
2019 | 710,481 | (77,826) | 632,655 |
2020 | 320,163 | (62,435) | 257,728 |
2021 | 207,185 | (48,238) | 158,947 |
2022 | 157,601 | (39,188) | 118,413 |
2023 | 155,499 | (32,594) | 122,905 |
Thereafter | 483,069 | (56,235) | 426,834 |
| $2,033,998 | $(316,516) | $1,717,482 |
PART I - FINANCIAL INFORMATION, CONTINUED:
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
7.
Long – Term Debt, Continued:
Year Ending September 30, | | |
2018 | 495,134 | |
2019 | 307,810 | |
2020 | 215,795 | |
2021 | 128,742 | |
2022 | 111,467 | |
Thereafter | 519,167 | |
| $1,778,115 | |
8.
Hillgrove Advances Payable
On November 7, 2014, the Company entered into a loan and processing agreement with Hillgrove Mines Pty Ltd of Australia (Hillgrove) by which Hillgrove will advance the Company funds to be used to expand their smelter in Madero, Mexico, and in Thompson Falls, Montana, so that they may process antimony and gold concentrates produced by Hillgrove’s mine in Australia. The agreement requires that the Company construct equipment so that it can process approximately 200 metric tons of concentrate initially shipped by Hillgrove, with a provision so that the Company may expand to process more than that. The parties agreed that the equipment will be owned by USAC and USAMSA. The final terms of when the repayment takes place have not yet been agreed on. The agreement called for the Company to sell the final product for Hillgrove, and Hillgrove to have approval rights of the customers for their products. The agreement allows the Company to recover its operating costs as approved by Hillgrove, and to charge a 7.5% processing fee and a 2.0% sales commission. The initial term of the agreement is five years; however, Hillgrove may suspend or terminate the agreement at its discretion. The Company may terminate the agreement and begin using the furnaces for their own production if Hillgrove fails to recommence shipments within 365 days of a suspension notice. At September 30, 2017, the net amount due to Hillgrove for advances was $1,134,196. As of September 30, 2107, repayment of the advances is not expected to occur within the next twelve months so the balance is classified as a long term liability.
PART I - FINANCIAL INFORMATION, CONTINUED:
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
9. Concentrations of Risk:
| For the Three Months Ended | For the Nine Months Ended |
Sales to Three | | | | |
Largest Customers | | | | |
Ampacet Corporation | $150,234 | $- | $- | $- |
Mexichem Specialty Compounds Inc. | 909,965 | 414,157 | 2,466,388 | 1,524,253 |
Kohler Corporation | 512,451 | 362,770 | 1,458,949 | 972,083 |
East Penn Corporation | - | 245,514 | 512,641 | 965,564 |
| $1,572,650 | $1,022,441 | $4,437,978 | $3,461,900 |
% of Total Revenues | 66% | 36% | 57% | 38% |
| | | | |
| | | | |
Three Largest Accounts Receivable | | | | |
Kohler Corporation | $169,991 | $133,705 | | |
Earth Innovations Inc. | 31,522 | 33,150 | | |
Axens North America, Inc. | 31,237 | - | | |
East Penn Corporation | - | 135,828 | | |
| $232,750 | $302,683 | | |
% of Total Receivables | 47.00% | 58.20% | | |
10.
Related Party Transactions:Transactions
During the three and ninesix months ended SeptemberJune 30, 20172018 and 2016,2017, the Chairman of the audit committee and compensation committee received $4,500 and $9,000, and $4,500, and $18,000, respectively, for services performed. See Note 12 for shares of common stock issued to directors.
During the three and ninesix months ended SeptemberJune 30, 20172018 and 2016,2017, the Company paid $2,715$2,461 and $8,989,$4,555, and $2,480 and $11,310,$5,054, respectively, to John Lawrence, our President and Chief Executive Officer, as reimbursement for equipment used by the Company. Mr. Lawrence advanced the Company $75,000 for ongoing operating expenses during the six months ended June 30, 2018, which has been repaid as of June 30, 2018.
During the ninethree and six months ended SeptemberJune 30, 20172018, and the year ended December 31, 2016,2017, the Company determined that a valuation allowance equal to 100% of any deferred tax asset was appropriate, as management of the Company cannot determine that it is more likely than not the Company will realize the benefit of a net deferred tax asset. The net effect is that the deferred tax asset as of December 31, 2016, and any deferred tax assets that may have been incurred since then, areis fully reserved for at SeptemberJune 30, 2018 and December 31, 2017.
Management estimates the effective tax rate at 0% for the current year.
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. Approximately $285,000 USD of the total assessment is interest and penalties. SAT’s assessment is based on the disallowance of specific costs that the Company deducted on the 2013 USAMSA income tax return. These disallowed costs were incurred by the Company for USAMSA’s business operations. SAT claims that the costs were not deductible or were not supported by appropriate documentation. At SeptemberJune 30, 2017,2018, the assessed amount is $746,000$694,752 in U.S dollars.
PART I - FINANCIAL INFORMATION, CONTINUED:
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
11.
Income Taxes, Continued:
Management has reviewed the assessment notice from SAT and believes numerous findings have no merit. The Company has engaged accountants and tax attorneys in Mexico to defend its position. An appeal has been filed.
At December 31, 2016, management estimated possible outcomes for this assessment and believes it will ultimately pay an amount ranging from 30% of the total assessment to the total assessed amount. The Company’s agreement with the tax professionals is that the professionals will receive 30% of the amount of tax relief they are able to achieve.
At December 31, 2016, the Company accrued a potential liability of $410,510 USD of which $285,048 was for unpaid income taxes, $75,510 was for interest expense, and $49,952 was for penalties. The amount accrued represents management’s best estimate of the amount that will ultimately be paid. The outcome could vary from this estimate. At SeptemberFor the three and six months ended June 30, 2017,2018, the Company recognized a $49,000 increase$62,752 and $12,752 decrease, respectively, and for the three and six months ended June 30, 2017, recognized a $51,642 and $10,191 decrease, respectively, due to the change in exchange rate.rates. Fluctuation in exchange rates has an ongoing impact on the amount the Company will pay in U.S. dollars.
If an issue addressed during the SAT audit is resolved in a manner inconsistent with management expectations, the Company will adjust its net operating loss carryforward, or accrue any additional penalties, interest, and tax associated with the audit. The Company’s tax professionals in Mexico have reviewed and filed tax returns with the SAT for 2014, 2015, and 2016,other tax years and have advised the Company that they do not expect the Company to have a tax liability for those years relating to similar issues.
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
12.
Stockholder’s Equity:Equity
Issuance of Common Stock for Payable to Board of Directors
During the nine monthssix month period ended SeptemberJune 30, 2017, the Board of Directors was issued a total of 421,875 shares of common stock for $168,750 in directors’ fees that were payable at December 31, 2016. In addition during the three and six months ended June 30, 2017, the Company accrued $131,250$43,750 and $87,500, respectively, in directors’ fees payable as of September 30, 2017, that will be paid in common stock.
During the nine months ended September 30, 2016,On May 3, 2018, the Board of Directors was issued a total of 550,000739,018 shares of common stock for $137,500$175,000 in directors’ fees that were payable at December 31, 2015.2017. In addition during the quarter and six months ended June 30, 2018, the Company accrued $112,500$43,750 and $87,500, respectively, in directors’ fees payable as of September 30, 2016, that will be paid in common stock.
13.
Business Segments:Segments
The Company is currently organized and managed by four segments, which represent our operating units: United States antimony operations, Mexican antimony operations, precious metals recovery and United States zeolite operations.
The Madero smelter and Puerto Blanco mill at the Company’s Mexico operation brings antimony up to an intermediate stage, which is typicallymay be sold directly or shipped to the United States operation for finishing and sales at the Thompson Falls, Montana plant. The precious metals recovery plant is operated in conjunction with the antimony processing plant at Thompson Falls, Montana. The Zeolitezeolite operation produces Zeolitezeolite near Preston, Idaho. Almost all of the sales of products from the United States antimony and Zeolitezeolite operations are to customers in the United States.
Segment disclosure regarding sales to major customers is located in Note 4.
PART I - FINANCIAL INFORMATION, CONTINUED:Properties, plants | | |
and equipment, net: | | |
Antimony | | |
United States | $1,661,616 | $1,687,997 |
Mexico | 11,266,118 | 11,452,507 |
Subtotal Antimony | 12,927,734 | 13,140,504 |
Precious metals | 649,741 | 642,774 |
Zeolite | 1,277,151 | 1,349,619 |
Total | $14,854,626 | $15,132,897 |
Total Assets: | | |
Antimony | | |
United States | $2,317,937 | $2,510,323 |
Mexico | 11,950,342 | 12,073,219 |
Subtotal Antimony | 14,268,279 | 14,583,542 |
Precious metals | 649,741 | 642,774 |
Zeolite | 1,827,447 | 1,904,938 |
Total | $16,745,467 | $17,131,254 |
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
13.
Business Segments, Continued:
Disclosure of the activity relating to our precious metals recovery requires that it be reported as a separate business segment. The prior period comparative information has been reclassified to reflect this change.
Segment disclosure regarding sales to major customers is located in Note 9.
| For the three months ended | For the nine months ended |
| | | | |
Capital expenditures: | | | | |
Antimony | | | | |
United States | $22,241 | $- | $22,241 | $1,040 |
Mexico | 45,326 | 26,130 | 121,042 | 201,882 |
Subtotal Antimony | 67,567 | 26,130 | 143,283 | 202,922 |
Precious Metals | 24,798 | 85,804 | 84,379 | 247,500 |
Zeolite | 35,856 | 61,284 | 51,803 | 123,075 |
Total | $128,221 | $173,218 | $279,465 | $573,497 |
Properties, plants and equipment, net: | | |
Antimony | | |
United States | $1,697,360 | $1,694,331 |
Mexico | 11,677,840 | 11,984,467 |
Subtotal Antimony | 13,375,200 | 13,678,798 |
Precious metals | 588,650 | 544,615 |
Zeolite | 1,374,356 | 1,472,553 |
Total | $15,338,206 | $15,695,966 |
| | |
Total Assets: | | | |
| | For the Three Months Ended | |
| | | | | |
Capital expenditures: | | |
Antimony | | |
United States | $2,543,350 | $2,495,842 | $- |
Mexico | 12,338,179 | 12,681,109 | 70,892 | 47,033 | 110,977 | 75,716 |
Subtotal Antimony | 14,881,529 | 15,176,951 | 70,892 | 47,033 | 110,977 | 75,716 |
Precious metals | 588,650 | 544,615 | |
Precious Metals | | - | 16,582 | 40,988 | 59,582 |
Zeolite | 2,020,575 | 2,044,432 | 8,691 | 8,030 | 22,423 | 15,946 |
Total | $17,490,754 | $17,765,998 | $79,583 | $71,645 | $174,388 | $151,244 |
Segment Operations for the three months ended June 30, 2018 | | | | | | |
| | | | | | |
Total revenues | $1,492,520 | $- | $1,492,520 | $81,293 | $682,534 | $2,256,347 |
| | | | | | |
Depreciation and amortization | $13,170 | $97,844 | $111,014 | $17,011 | $47,072 | $175,097 |
| | | | | | |
Income (loss) from operations | 391,895 | (808,575) | (416,680) | 114,801 | 141,826 | (160,053) |
| | | | | | |
Other income (expense): | (1,938) | 41,630 | 39,692 | - | (2,424) | 37,268 |
| | | | | | |
NET INCOME (LOSS) | $389,957 | $(766,945) | $(376,988) | $114,801 | $139,402 | $(122,785) |
PART I - FINANCIAL INFORMATION, CONTINUED:Segment Operations for the three months ended June 30, 2017 | | | | | | |
| | | | | | |
Total revenues | $2,077,300 | $- | $2,077,300 | $144,766 | $616,414 | $2,838,480 |
| | | | | | |
Depreciation and amortization | $18,700 | $145,875 | $164,575 | $- | $49,800 | $214,375 |
| | | | | | |
Income (loss) from operations | 844,257 | (1,089,834) | (245,577) | 144,766 | 132,640 | 31,829 |
| | | | | | |
Other income (expense): | (11,965) | (33,605) | (45,570) | - | (3,214) | (48,784) |
| | | | | | |
NET INCOME (LOSS) | $832,292 | $(1,123,439) | $(291,147) | $144,766 | $129,426 | $(16,955) |
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
13.
Business Segments, Continued:
Segment Operations for the three | | | | |
months ended September 30, 2017 | | | | | | |
Segment Operations for the six months ended June 30, 2018 | | | | | | | |
| | |
Total revenues | $1,796,775 | $- | $78,245 | $494,694 | $2,369,714 | $3,174,333 | $- | $3,174,333 | $141,703 | $1,373,240 | $4,689,276 |
| | |
Depreciation and amortization | 14,200 | 127,675 | 15,100 | 50,200 | 207,175 | $26,380 | $297,366 | $323,746 | $34,021 | $94,892 | $452,659 |
| | |
Income (loss) from operations | 435,497 | (861,683) | 63,145 | 135,879 | (227,162) | 589,934 | (1,551,357) | (961,423) | 107,682 | 293,919 | (559,822) |
| | |
Other income (expense): | (11,611) | (20,772) | - | (3,020) | (35,403) | (2,716) | (29,488) | (32,204) | - | (5,199) | (37,403) |
| | |
NET INCOME (LOSS) | $423,886 | $(882,455) | $63,145 | $132,859 | $(262,565) | $587,218 | $(1,580,845) | $(993,627) | $107,682 | $288,720 | $(597,225) |
Segment Operations for the three | | | | |
months ended September 30, 2016 | | | | | | |
Segment Operations for the six months ended June 30, 2017 | | | | | | | |
| | |
Total revenues | $2,025,755 | $3,557 | $240,238 | $577,149 | $2,846,699 | $4,046,026 | $17,782 | $4,063,808 | $165,577 | $1,228,426 | $5,457,811 |
| | |
Depreciation and amortization | 20,000 | 136,875 | - | 53,400 | 210,275 | $38,200 | $292,050 | $330,250 | | $99,800 | $430,050 |
| | |
Income (loss) from operations | 723,628 | (1,421,013) | 240,238 | 109,163 | (347,984) | 1,173,160 | (1,841,012) | (667,852) | 165,577 | 222,232 | (280,043) |
| | |
Income tax expense | - | (411,490) | - | (411,490) | |
| | |
Other income (expense): | (9,406) | (24,617) | - | (3,560) | (37,583) | (23,044) | (98,569) | (121,613) | - | (6,602) | (128,215) |
| | |
NET INCOME (LOSS) | $714,222 | $(1,857,120) | $240,238 | $105,604 | $(797,057) | $1,150,116 | $(1,939,581) | $(789,465) | $165,577 | $215,630 | $(408,258) |
| | |
Segment Operations for the nine | | | | | |
months ended September 30, 2017 | | | | | |
| | | | | |
Total revenues | $5,842,801 | $17,782 | $243,822 | $1,723,120 | $7,827,525 |
| | | | | |
Depreciation and amortization | 42,900 | 397,325 | 47,000 | 150,000 | 637,225 |
| | | | | |
Income (loss) from operations | 1,618,156 | (2,680,293) | 196,821 | 358,110 | (507,206) |
| | | | | |
Other income (expense): | (34,654) | (119,341) | - | (9,622) | (163,617) |
| | | | | |
NET INCOME (LOSS) | $1,583,502 | $(2,799,634) | $196,821 | $348,488 | $(670,823) |
Segment Operations for the nine | | | | | |
months ended September 30, 2016 | | | | | |
| | | | | |
Total revenues | $6,621,732 | $3,557 | $564,581 | $1,976,758 | $9,166,628 |
| | | | | |
Depreciation and amortization | 60,400 | 431,975 | | 160,000 | 652,375 |
| | | | | |
Income (loss) from operations | 2,582,390 | (4,028,767) | 564,581 | 243,429 | (638,367) |
| | | | | |
Income tax expense | - | (423,490) | - | - | (423,490) |
| | | | | |
Other income (expense): | (23,837) | (49,122) | - | (7,517) | (80,476) |
| | | | | |
NET INCOME (LOSS) | $2,558,553 | $(4,501,379) | $564,581 | $235,912 | $(1,142,333) |
On July 31, 2018, the Company entered into a Member Interest and Share Capital Purchase Agreement (the “Agreement”) with Great Lakes Chemical Corporation and Lanxess Holding Company US Inc., as the sellers, and the Company as the buyer. The transaction is expected to close on August 31, 2018. Under the Agreement, the Company will acquire a subsidiary of the sellers which includes an antimony plant, equipment and land located in Reynosa, Mexico. The Company plans to disassemble, salvage and transport the antimony plant and equipment for use in its existing operations in both Mexico and the United States. The project will involve moving heavy equipment and could take up to a year.
PART I - FINANCIAL INFORMATION, CONTINUED:
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
ITEM 2.
Management’s Discussion and Analysis of Results of Operations and Financial ConditionFinancialCondition
General
Certain matters discussed are forward-looking statements that involve risks and uncertainties, including the impact of antimony prices and production volatility, changing market conditions and the regulatory environment and other risks. Actual results may differ materially from those projected. These forward-looking statements represent our judgment as of the date of this filing. We disclaim, however, any intent or obligation to update these forward-looking statements.
Results of Operations by Division | | | | |
| | | | |
Antimony and Precious Metals | | | | |
Combined USA and Mexico | | | | |
Lbs of Antimony Metal USA | 298,472 | 247,505 | 1,102,290 | 1,027,501 |
Lbs of Antimony Metal Mexico | 123,919 | 411,410 | 372,307 | 1,277,058 |
Total Lbs of Antimony Metal Sold | 422,391 | 658,915 | 1,474,597 | 2,304,559 |
Sales Price/Lb Metal | $4.25 | $3.07 | $3.97 | $2.87 |
Net income (loss)/Lb Metal | $(0.94) | $(1.37) | $(0.69) | $(0.60) |
| | | | |
Gross antimony revenue - net of discount | $1,796,775 | $2,025,755 | $5,860,583 | $6,625,289 |
Precious metals revenue | 78,244 | 240,238 | 243,821 | 564,581 |
Production and shipping costs | (1,759,347) | (2,135,052) | (5,360,925) | (6,135,067) |
Mexico non-production costs | (51,310) | (156,489) | (215,762) | (514,400) |
General and administrative - non-production | (280,801) | (315,361) | (935,355) | (1,060,261) |
Other miscellaneous income(loss) | 2,642 | 32,813 | (49,000) | 109,392 |
Net interest and gain on sale of asset | (24,652) | (26,200) | (75,448) | (51,914) |
EBITDA | (238,449) | (334,296) | (532,086) | (462,380) |
Income tax expense | - | (411,490) | - | (423,490) |
Depreciation & amortization | (156,975) | (156,875) | (487,225) | (492,375) |
Net income (loss) - antimony and precious metals | $(395,424) | $(902,661) | $(1,019,311) | $(1,378,245) |
| | | | |
Zeolite | | | | |
Tons sold | 2,671 | 3,375 | 9,446 | 10,690 |
Sales Price/Ton | $185.21 | $171.01 | $182.42 | $184.92 |
Net income /Ton | $49.74 | $31.29 | $36.89 | $22.07 |
| | | | |
Gross zeolite revenue | $494,694 | $577,150 | $1,723,120 | $1,976,759 |
Production costs, royalties, and shipping costs | (297,815) | (386,844) | (1,167,108) | (1,509,822) |
General and administrative - non-production | (12,532) | (29,178) | (53,065) | (67,157) |
Net interest | (1,288) | (2,124) | (4,459) | (3,868) |
EBITDA | 183,059 | 159,004 | 498,488 | 395,912 |
Depreciation | (50,200) | (53,400) | (150,000) | (160,000) |
Net income - zeolite | $132,859 | $105,604 | $348,488 | $235,912 |
| | | | |
Company-wide | | | | |
Gross revenue | $2,369,713 | $2,846,699 | $7,827,524 | $9,166,628 |
Production costs, royalties, and shipping costs | (2,108,472) | (2,681,941) | (6,743,795) | (8,159,288) |
General, administrative, and other non-production costs | (293,333) | (344,539) | (988,420) | (1,127,418) |
Other miscellaneous income | 2,642 | 32,813 | (49,000) | 109,392 |
Net interest and gain on sale of asset | (25,940) | (28,324) | (79,907) | (55,782) |
EBITDA | (55,390) | (175,292) | (33,598) | (66,468) |
Income tax expense | - | (411,490) | - | (423,490) |
Depreciation & amortization | (207,175) | (210,275) | (637,225) | (652,375) |
Net income (loss) | $(262,565) | $(797,057) | $(670,823) | $(1,142,333) |
Antimony - Combined USA | | | | |
and Mexico | | | | |
Lbs of Antimony Metal USA | 161,044 | 345,152 | 424,664 | 804,818 |
Lbs of Antimony Metal Mexico: | 165,214 | 160,204 | 317,558 | 248,388 |
Total Lbs of Antimony Metal Sold | 326,258 | 505,356 | 742,222 | 1,053,206 |
Average Sales Price/Lb Metal | $4.57 | $4.11 | $4.28 | $3.86 |
Net loss/Lb Metal | $(1.16) | $(0.58) | $(1.34) | $(0.75) |
| | | | |
Gross antimony revenue | $1,492,520 | $2,077,300 | $3,174,333 | $4,063,808 |
| | | | |
Cost of sales - domestic | (834,627) | (1,009,940) | (2,024,663) | (2,309,821) |
Cost of sales - Mexico | (795,125) | (1,055,002) | (1,511,093) | (1,786,460) |
Operating expenses | (279,448) | (257,935) | (600,000) | (635,379) |
Non-operating expenses | 39,692 | (45,570) | (32,204) | (121,613) |
| (1,869,508) | (2,368,447) | (4,167,960) | (4,853,273) |
| | | | |
Net loss - antimony | (376,988) | (291,147) | (993,627) | (789,465) |
Depreciation,& amortization | 111,014 | 164,575 | 323,746 | 330,250 |
EBITDA - antimony | $(265,974) | $(126,572) | $(669,881) | $(459,215) |
| | | | |
Precious Metals | | | | |
Ounces sold | | | | |
Gold | 15 | 51 | 29 | 133 |
Silver | 4,960 | 8,639 | 9,841 | 17,552 |
| | | | |
Gross precious metals revenue | $81,293 | $144,766 | $141,703 | $165,577 |
Production costs, royalties, and shipping costs | 33,508 | - | (34,021) | - |
Net income - precious metals | 114,801 | 144,766 | 107,682 | 165,577 |
Depreciation | 17,011 | - | 34,021 | - |
EBITDA - precious metals | $131,812 | $144,766 | $141,703 | $165,577 |
| | | | |
Zeolite | | | | |
Tons sold | 3,578 | 3,422 | 7,331 | 6,775 |
Average Sales Price/Ton | $190.76 | $180.13 | $187.32 | $181.32 |
Net income (Loss)/Ton | $38.96 | $37.82 | $39.38 | $31.83 |
| | | | |
Gross zeolite revenue | $682,534 | $616,414 | $1,373,240 | $1,228,426 |
Cost of sales | (518,757) | (470,646) | (1,033,239) | (972,524) |
Operating expenses | (21,951) | (13,128) | (46,082) | (33,670) |
Non-operating expenses | (2,424) | (3,214) | (5,199) | (6,602) |
Net income - zeolite | 139,402 | 129,426 | 288,720 | 215,630 |
Depreciation | 47,072 | 49,800 | 94,892 | 99,800 |
EBITDA - zeolite | $186,474 | $179,226 | $383,612 | $315,430 |
| | | | |
Company-wide | | | | |
Gross revenue | $2,256,347 | $2,838,480 | $4,689,276 | $5,457,811 |
Production costs | (2,114,999) | (2,535,588) | (4,603,016) | (5,068,805) |
Operating expenses | (301,401) | (271,063) | (646,082) | (669,049) |
Non-operating expenses | 37,268 | (48,784) | (37,403) | (128,215) |
Net income (loss) | (122,785) | (16,955) | (597,225) | (408,258) |
Depreciation,& amortization | 175,097 | 214,375 | 452,659 | 430,050 |
EBITDA | $52,312 | $197,420 | $(144,566) | $21,792 |
PART I - FINANCIAL INFORMATION, CONTINUED:
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition, continued:
The Mexico non-production costs for the three and nine months ending September 30, 2017, are primarily due to holding costs from inactivity at the Los Juarez, Guadalupe, and Soyatal mines and the Puerto Blanco mill. The loss of production at the Madero smelter from transitioning to Mexican raw material due to the closing of the Hillgrove mine in Australia and the subsequent loss of Hillgrove raw material contributed to non-production costs during the nine months ending September 30, 2017.
Company-Wide
For the thirdsecond quarter of 2017,2018, we recognized a net loss of $262,565$122,785, on sales of $2,369,713,$2,256,347, compared to a net loss of $797,057$16,955 in the thirdsecond quarter of 20162017 on sales of $2,846,699. This is$2,838,480. The loss in the second quarter of 2018 was primarily due to a decrease in the loss for the period of 67%, and is significant progress in a corporate turnaround. For the nine month period ending September 30, 2017, we incurred a net loss of $670,823 on sales of $7,827,525, compared to a net loss of $1,142,333 for the same period in 2016, a decrease of 41%.raw materials received from our North American supplier. The loss in the thirdfirst quarter of 2017 and the nine months then ended was primarily due to the loss of raw material from Hillgrove Mines of Australia. We also recognized approximately $124,732 of settlement costs related to our precious metals production duringDuring the first quartersix months of 2017,2018, we endured supply interruptions from our North American supplier, and we incurredhave been notified that due to a foreign exchange losslack of $49,000raw material, they will not be able to supply us with raw material from September 17, 2018 through nine months related toNovember 5, 2018. We anticipate that normal supply quantities from our Mexican tax liability. Hillgrove has given us permission to use the furnaces financed by them and that were dedicated to processing Hillgrove concentrates.
Depreciation and amortizationNorth American supplier will resume for the quarter and nine months ending September 30, 2017, was $207,175 and $637,225, respectively.
The loss for the third quarterremainder of 2017 included $51,310 in non-production costs in Mexico (holding costs for non-producing Mexican properties), compared2018. We will be directing our resources during that time to $156,489 for the same period in 2016.increasing our supply of raw material from Mexico.
For the third quarter of 2017,three and six months ended June 30, 2018, EBITDA was a negative $55,390,$52,312 and $(144,566), compared to a negative EBITDA of $175,292$197,420 and $21,792 for the same periodperiods of 2016.2017.
Net non-cash expense items totaled $287,780 and for the three months ended June 30, 2018 and included $175,097 for depreciation and amortization, $21,120 for amortization of debt discount, $43,750 for director compensation and $47,813 for other items. Net non-cash expense items totaled $572,065 for the six months ended June 30, 2018 and included $452,659 for depreciation and amortization, $42,240 of debt discount, $87,500 for director compensation and $(10,334) for other items.
Net non-cash expense items totaled $282,985 for the three months ended June 30, 2017 and included $214,375 for depreciation and amortization, $23,413 for amortization of debt discount, $43,750 for director compensation and $1,447 for other items. Net non-cash expense items totaled $618,238 for the six months ended June 30, 2017 and included $430,050 for depreciation and amortization, $46,828 of debt discount, $87,500 for director compensation and $53,860 for other items.
For the third quarter of 2017, thethree and six months ended June 30, 2018, general and administrative expenses were $228,185$186,411 and 337,242, respectively compared to $309,832$138,995 and $343,559 for the same period of 2016.periods in 2017.
Antimony
We beganFor the miningthree and processing of ore from our own Mexican mines during Q1of 2017. Producing from our own Mexican mines will allow the Company to benefit from 100% of the price increases rather than a processing feesix months ended June 30, 2018, we sold 326,258 and a small percent of the price increases.
1.
The sale742,222 pounds of antimony during Q3 2017 was 422,391 pounds compared to 658,915 pounds during the same period in 2016.
2.
The sale of antimony during the first nine months of 2017 was 1,474,597 pounds compared to sales of 2,304,559505,356 and 1,053,206 pounds for the same periodthree and six months ended June 30, 2017. The raw material received from our North American supplier decreased by approximately 184,000 pounds. We did not see an increase in raw material from Mexico for the second quarter of 2016.
2018, but we did see an increase of approximately 69,000 pounds for the six months ended June 30, 2018.3.
The average sales price of antimony during Q3 2017the three and six months ended June 30, 2018 was $4.25$4.57 and $4.28 per pound compared to $3.07$4.11 and $3.86 during the same periodperiods in 2016, an increase of 38%.
4.
The average sale price of antimony during the first nine months of 2017 was $3.97 compared to $2.87 for the same period of 2016, an increase of 38%.
5.
The decrease in production was offset by higher sales prices and better margins on production from our own mined ore.
PART I - FINANCIAL INFORMATION, CONTINUED:
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial, continued:2017.
The metallurgical problems withcyanide leach circuit at Puerto Blanco has been permitted, and construction of the Los Juarez ore have been solved,leach circuit is underway, and we expect to start testing during the fourth quarter of 2018. The largest project is the construction of the tailings pond, and we are anticipating it will be ready for a liner by the end of September 2018. Construction of the equipment is underway in Montana, and the leach plant floor with a containment lip has been completed. The equipment will be placed directly on the floor, and we do not believe that a building will be necessary. During the construction phase, our metallurgical lab in Montana has been busy testing and confirming the metallurgy. Three technical discoveries were made that will increase recovery, expedite processing, the ore presently in inventory. As soon as we are permitted, we will complete construction of our leach circuit at the Puerto Blanco mill.and cut costs.
At the Wadley mine, production is being increased with more miners.miners and load haul equipment. The use of pneumatic hammers is planned in lieu of explosives. Wadley is our main producer of Mexican ore with some 90 men underground. The tonnage and grade is being increased, and some of the ore contains up to 50 percent antimony.
Powder magazines are being built at the Soyatal mine. We will use the Los Juarez explosives license to mine direct shipping ore for smelter feed at Madero.
The access road to Guadalupe is being repaired to re-start production.
A 400 ton mill test of Los Juarez ore has indicated the necessity of a cyanide leach circuit for the mill tailings. With the leach circuit, the estimated gross value of the ore will be approximately $125.00 at current precious metal prices.
Production changes at the Madero smelter have cut the costs and increased recovery.
Precious Metals
The caustic leach of flotation concentrates from Los Juarez was successful, and 400 metric tons were run during the second quarterpilot production of 2017 that indicate that athe Los Juarez gold, silver, and antimony will commence with the completion of the cyanide leach circuit is necessaryplant at Puerto Blanco.
For the three and six months ended June 30, 2018, EBITDA for precious metals was $131,812 and $141,703, compared to increase$144,766 and $165,577 for the recoveriessame periods of 2017.
The estimated recovery of precious metals from mill tailings.per metric ton, after the caustic leach and cyanide leach circuits, is as follows:
Precious Metals Sales | | | | |
Silver/Gold | | |
Montana | | | | |
Ounces Gold Shipped (Au) | 64.77 | 89.12 | 108.10 | 88.62 |
Ounces Silver Shipped (Ag) | 29,480.22 | 30,420.75 | 38,123.46 | 22,107.93 |
Revenues | $461,083 | $491,426 | $556,650 | $352,165 |
Mexico | | | | |
Ounces Gold Shipped (Au) | | | | |
Ounces Silver Shipped (Ag) | | | | |
Revenues | | | | |
Australian - Hillgrove | | | | |
Ounces Gold Shipped (Au) | | | 496.65 | 79.54 |
Revenues - Gross | | | $597,309 | $81,779 |
Revenues to Hillgrove | | | (481,088) | (190,122) |
Revenues to USAC | | | $116,221 | $(108,343) |
| | | | |
Total Revenues | $461,083 | $491,426 | $672,871 | $243,822 |
Metal | | | | |
Gold | | 90% | | $37.80 |
Silver | | 90% | $15.50/oz | $45.61 |
Antimony | 0.652% | 70% | | $41.52 |
Total | | | | $124.93 |
Current and prior years’ revenue from precious metals is as follows:
PART I - FINANCIAL INFORMATION, CONTINUED:
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition, continued:Precious Metal Sales Silver/Gold | | | | |
Montana | | | | |
Ounces Gold Shipped (Au) | 89.12 | 108.10 | 107.00 | 29.43 |
Ounces Silver Shipped (Ag) | 30,421 | 38,123 | 32,021 | 9,841 |
Revenues | $491,426 | $556,650 | $480,985 | $141,703 |
Australian - Hillgrove | | | | |
Ounces Gold Shipped (Au) | - | 496.65 | 90.94 | - |
Revenues - Gross | - | $597,309 | $96,471 | - |
Revenues to Hillgrove | - | (481,088) | (202,584) | - |
Revenues to USAC | - | $116,221 | $(106,113) | - |
Total Revenues | $491,426 | $672,871 | $374,872 | $141,703 |
Bear River Zeolite (BRZ)
During Q3 2017,For the three and six months ended June 30, 2018, BRZ sold 2,6713,578 and 7,331 tons of zeolite compared to 3,3753,422 and 6,775 tons in the same periodperiods of 2016, down 7042017, up 156 tons (20%)or 4.6% for the three months and 556 tons or 8.2% for the six months. . The decrease in tonnage was due to required maintenance.
WeBRZ realized a net incomeprofit of $132,859 from zeolite sales$139,402 after depreciation of $47,072 in Q3the second quarter of 2017,2018, compared to $105,604 for$129,426 after depreciation of $49,800 in the same period in 2016.second quarter of 2017. The increase in the profit from our zeolite operations was $27,255 (25%)$9,976 or 6.9%. The increase inFor the six months ended June 30, 2018, BRZ realized a gross profit was attributable to better plant efficiency. We realized net income of $348,488 from zeolite sales during the first nine months$288,720 after depreciation of 2017,$94,982 compared to $235,912a gross profit of $215,630 after depreciation of $99,800, an increase of $73,090 or 32%.
BRZ realized an EBITDA for the three and six months ended June 30, 2018 of $186,474 and $383,612, compared to $179,225 and 315,430 for the same periodperiods in 2016. The increase in the profit from our zeolite operations was $112,576 (48%) and was attributable to better plant efficiency.2017.
We realized an EBITDA fromare anticipating continued growth in all areas of zeolite sales for Q3 2017 of $183,059, compared to $159,004 for the same period in 2016, an increase of $24,055 (15%). We realized an EBITDA from zeolite sales for the nine months ended September 30, 2017 of $498,488, compared to $395,912 for the same period in 2016, an increase of $102,576 (26%).
Our new sales program for zeolite products has two field representatives and a research person that prepares sales brochures and literature. At this time this effort is adding new customers. Increased production at our zeolite plant will enable us to provide timely product deliveries to our customers.sales.
Financial Position
Financial Condition and Liquidity | | | |
| | | | |
Current Assets | $1,740,041 | $1,692,555 | |
Current assets | | $1,442,819 | $1,562,270 |
Current liabilities | ( 3,880,431) | ( 3,382,123) | (4,209,889) | (3,934,726) |
Net Working Capital | $(2,140,390) | $(1,689,568) | $(2,767,070) | $(2,372,456) |
| | |
| | | |
Cash provided (used) by operations | $491,253 | $412,162 | |
| | |
| | | |
Cash provided by operations | | $197,817 | $239,654 |
Cash used for capital outlay | ( 279,465) | ( 459,969) | (174,388) | (151,244) |
Cash provided (used) by financing: | | |
Net proceeds from (payments) to factor | 13,338 | 119,111 | |
Net proceeds (payments to) factor | | (5,440) | 20,471 |
Proceeds from notes payable to bank | | - | 24,827 |
Change in check issued and payable | | 82,330 | (12,776) |
Advances from related party | | 75,000 | - |
Payment on advances from related party | | (75,000) | - |
Payment of notes payable to bank | (64,291) | (30,672) | (1,556) | - |
Checks issued and payable | 12,726 | | |
Principal paid on long-term debt | ( 156,042) | ( 130,857) | (110,872) | (106,439) |
Net change in cash | $17,519 | $(90,225) | |
Net change in cash and cash equivalents | | $(12,109) | $14,493 |
Our net working capital at September 30, 2017, has decreased by approximately $451,000$395,000 from December 31, 2016.2017. Our cash decreased by approximately $12,000 during the same period. The decrease in our net working capital was primarily due to an increase in various categories of liabilities, and expenditures of approximately $280,000 for capital outlay.$50,000 in the current portion of long term debt and a decrease in inventories of approximately $200,000. We have estimated commitments of $50,000 for construction and improvements of $100,000, including $50,000 to finish building and installing the precious metals leach circuits. We believe that with our current cash balance, along with the future cash flow from operations and operating agreements, we have adequate liquid assets to meet these commitments and service our debt for the next twelve months. We have lines of credit of $202,000 which have been drawn down by $103,026$191,009 at SeptemberJune 30, 2017. We have a foreign value added tax refund receivable in Mexico of $365,120 at September 30, 2017. We believe that this refund will be adequate to offset the amount ultimately paid on the Mexican tax assessment (see Note 11 of the consolidated financial statements in Item 1).
PART I - FINANCIAL INFORMATION, CONTINUED:
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition, continued:
Going Concern Consideration
At September 30, 2017, our financial statements show that we have a negative working capital of approximately $2.14 million and an accumulated deficit of approximately $26.1 million. In addition, we have incurred losses for the prior three years. These factors indicate that there may be doubt regarding our ability to continue as a going concern for the next twelve months.
During the past twelve months, the price of antimony has increased from a low of $3.07 per pound for the third quarter of 2016 to an average price of $4.25 for the third quarter of 2017. We have gross profit and a positive cash flow from our U.S. operations at this price. Our operations in Mexico are still in a transitional phase since the loss of our raw material supply from Hillgrove of Australia. We are focusing our production at our Wadley mine to increase grade and output, and we have recently seen ore from there assaying 50% antimony. We are also trying new production techniques, and have found that we can process direct shipping ore successfully at our Madero smelter which will result in a reduction in our operating costs in Mexico going forward.
We have reduced costs at our Mexico locations, most notably a reduced monthly lease payment of $11,600 for the Wadley mine from $23,200 for June 2016, and we have also reduced the cost for labor at the same mine. We have reduced administrative costs by approximately $81,000 from the prior year third quarter at the corporate level. Our capital outlay should be minimal in the near future; and we completed paying for the Los Juarez mining concessions in 2016 which were a major outlay in prior years.
Our zeolite operations continue to operate profitably and provide cash to our operations. We are aggressively seeking new markets for our zeolite products, and we now have an outside sales staff that is working to obtain new customers and have had some success.
We believe that the combination of the above will enable us to stay in operation and meet our financial obligations for the next twelve months and further.2018.
ITEM 3.
None
PART I - FINANCIAL INFORMATION, CONTINUED:
Management’s Discussion and Analysis of Results of Operations and Financial Condition, continued:
ITEM 4. Controls and Procedures
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosure. Our chief financial officer conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of SeptemberJune 30, 2017.2018. It was determined that there were material weaknesses affecting our disclosure controls and procedures and, as a result of those weaknesses, our disclosure controls and procedures were not effective as of SeptemberJune 30, 2017.2018. These material weaknesses are as follows:
●
Inadequate design of internal control over the preparation of the financial statements and financial reporting processes;
●
Inadequate monitoring of internal controls over significant accounts and processes including controls associated with domestic and Mexican subsidiary operations and the period-end financial reporting process; and
●
The absence of proper segregation of duties within significant processes and ineffective controls over management oversight, including antifraud programs and controls.
We are aware of these material weaknesses and will develop procedures to ensure that independent review of material transactions is performed. The chief financial officer will develop internal control measures to mitigate the lack of inadequate documentation of controls and the monitoring of internal controls over significant accounts and processes including controls associated with the period-ending reporting processes, and to mitigate the segregation of duties within significant accounts and processes and the absence of controls over management oversight, including antifraud programs and controls.
We plan to consult with independent experts when complex transactions are entered into.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no significant changes made to internal controls over financial reporting for the quarter ended SeptemberJune 30, 20172018.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
The registrant has no outstanding senior securities.
Item 4. MINE SAFETY DISCLOSURES
The information concerning mine safety violations or other regulatory matters required by Section 1503 (a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Annual Report.
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Certifications
Certifications Pursuant to the Sarbanes-Oxley Act
Reports on Form 8-K None
SIGNATURES
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: November 14, 2017
John C. Lawrence, Director and President
(Principal | | | |
Date: August 14, 2018
| By: | /s/ John C. Lawrence | |
| | John C. Lawrence, Director and President | |
| | (Principal Executive) | |
By:
| | | |
Date: August 14, 2018
| By: | /s/ Daniel L. Parks Date: November 14, 2017 Daniel L. Parks, Chief Financial Officer | |
| | Daniel L. Parks, Chief Financial Officer | |
| |
| |