UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

 

 

 

UNITED STATES ANTIMONY CORPORATION

 

 

 

 

 

 

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 definitions of “large accelerated filer,” “accelerated filer”, “small reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

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. [ ]

 

 

At August 14, 2018,2019, the registrant had outstanding 68,227,17168,757,354 shares of par value $0.01 common stock.

 

 

UNITED STATES ANTIMONY CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD

ENDED JUNE 30, 20182019

(UNAUDITED)

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

 

 

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 six month periods ended June 30, 20182019 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2018.2019.

 

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, 2017.2018.

 

Going Concern Consideration

 

 

The continuing losses are principally a result of the falling prices of antimony and the Company’s antimony operations and in particular to the production costs incurred in Mexico.

 

Regarding the antimony division, prices improved during 2017 with an average sale pricedecreased approximately 13% in the first six months of $4.01 per pound. Through2019 compared to the same period in the prior year.  For the six months ended June 30, 2018,2019, the average sale price for antimony iswas approximately $3.73 per pound compared to a price of $4.28 per pound. Additionally, in November 2017,pound for 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 ofended June 30, 2018. During 2018, we endured supply interruptions from our North American supplier, and theybut shipments have notified us that, dueresumed, although at a lower level than years prior 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 been able to continue with operations due to our Mexican raw material, and we will be directing our resources to increasing that supply source. TheA new supply agreement negotiated with our North American supplier in 2017 has helped us with our cash flow in 2018 from our antimony division.division in 2018, but falling prices for antimony have caused us to see a need for a better supply agreement in 2019.

 

In 2017, we reduced costs for labor at the Mexico locations which has resulted in a lower overall production costs in Mexico which has continued into 2018. In the fourth quarter 2017,and we adjusted operating approaches at Madero that has resulted in decreased operating costs for fuel, natural gas, electricity, and reagents for 2018. Although total production activity2018 and 2019. In June of 2019, we again reached agreement with our miners in Mexico decreasedto reduce labor costs, and we completed installation of one of the large rotating furnaces (LRFs) we obtained from the Lanxess transaction, which has resulted in 2017 due to the lack of Hillgrove concentrates, thelower operating costs. The Company’s 20182019 plan involves ramping up production at its ownour antimony properties in Mexico.Mexico, and installing additional LRFs obtained from Lanxess. Our expectations are that in the second half of 2019 we can substantially increase the antimony output from our Mexican properties from the 2018 production. We are anticipating agreements thatproducing and selling antimony metal directly from Mexico to customers which will providesave us with operating capital to achieve this (See Note 14).approximately $0.38 per pound in processing costs and freight. In addition, a new leach circuit expected to come on line during 20182019 in Mexico will result in more extraction of precious metals. The portion of the precious 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.

 

 

 

 

 

 

Accounting StandardStandards Updates Adopted

 

In February 2016, the FASBFinancial Accounting Standards Board (“FASB”) issued ASUAccounting Standards Update (“ASU”) No. 2016-02 Leases (Topic 842).  The update modifiesmodified the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases.  The update iswas effective for fiscal years beginning after December 15, 2018, with early adoption permitted.  We are currently reviewing our leasesAdoption of this update as of January 1, 2019 did not have a material impact on the Company’s consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07 Compensation - Stock Compensation (Topic 718):  Improvements to Nonemployee Share-Based Payment Accounting.  The update involves simplification of several aspects of accounting for nonemployee share-based payment transactions by expanding the scope of Topic 718 to include nonemployee awards.  The update was effective for fiscal years beginning after December 15, 2018, and compilinginterim periods within those fiscal years, with early adoption permitted.  Adoption of this update as of January 1, 2019 did not have a material impact on the information requiredCompany’s consolidated financial statements.

Accounting Standards Updates to implementBecome Effective in Future Periods

In August 2018, the new guidance. We are currentlyFASB issued ASU No. 2018-13 Fair Value Measurement (Topic 820):  Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.  The update removes, modifies and makes additions to the disclosure requirements on fair value measurements.  The update is effective for fiscal years beginning after December 15, 2019, with early adoption permitted.  Management is evaluating the potential impact of implementing this update on our consolidated financial statements.the Company’s fair value measurement disclosures.

 

 

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

For the calculation of diluted earnings per share for the quarterthree and six month periodsmonths ended June 30, 20182019 and June 30, 2017, is not applicable since any additions to outstanding shares related to common stock equivalents would be anti-dilutive.

 

 

 

Our products consist of the following:

 

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.

 

 

Sales of products for the three and six month periods ended June 30, 20182019 and 20172018 were as follows:

 

 

 

 

 

Accounts receivable from largest customers were as follows for June 30, 20182019 and December 31, 2017:2018:

 

 

Our trade accounts receivable balance related to contracts with customers was $461,291$417,005 at June 30, 20182019 and $362,579$438,391 at December 31, 2017.2018. 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 June 30, 20182019 and December 31, 20172018 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 June 30, 20182019 and December 31, 20172018 is as follows:

 

 

 

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.

 

 

 

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 term of one year and, and as of June 30, 2018,2019, requires payments of $10,000 plus a tax of $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 2019.2020.

 

 

At June 30, 20182019 and December 31, 2017,2018, the Company had the following notes payable to bank:

 

 

These notes are personally guaranteed by John C. Lawrence the Company’s Chief Executive Officer and Chairman of the Board of Directors. The maximum amount available for borrowing under each note is $99,999.

 

 

 

 

During the three and six months ended June 30, 2018, and 2017, the Chairman of the audit committee and compensation committee received $4,500, and $4,500,$9,000, respectively, for services performed. No compensation was received during the three and six month periods ended June 30, 2019. See Note 12 for shares of common stock issued to directors.

 

DuringFor the three and six months ended June 30, 2018 and 2017,2019, the Company paid $3,480 and $2,461, respectively, compared to $5,064, and $4,555 for the three and $2,480 and $5,054, respectively,six months ended June 30, 2018, to John Lawrence, our President and Chief Executive Officer, as reimbursement for equipment used by the Company. Mr. Lawrence advanced the Company $75,000$227,200 for ongoing operating expenses during the six months ended June 30, 2018, which has been repaid as of2019. In addition to the loan that was owed to Mr. Lawrence at June 30, 2018.2019, the Company also owed Mr. Lawrence for payroll and other liabilities equal to $129,702 for a total owed to Mr. Lawrence at June 30, 2019 of $356,902.

 

 

 

 

Issuance of Common Stock for Payable to Board of Directors

 

During the six month period ended June 30, 2017,2019, the Board of Directors was issued a total of 421,875330,183 shares of common stock for $168,750$175,000 in directors’ fees that were payable at December 31, 2016.2018. In addition, during the three and six months ended June 30, 2017,2019, the Company accrued $43,750$31,250 and $87,500,$62,500, respectively, in directors’ fees payable that will be paid in common stock.

 

On May 3, 2018, the Board of Directors was issued a total of 739,018 shares of common stock for $175,000 in directors’ fees that were payable at December 31, 2017. In addition during the quarter and six months ended June 30, 2018, the Company accrued $43,750 and $87,500, respectively, in directors’ fees payable that will be paid in common stock.

 

 

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 may be sold directly orproduces crude oxide and crude metal that is shipped to the United States operationMontana for finishing at the Thompson Falls, Montana, plant.plant, or finished antimony metal that is sold directly to customers in the United States. The precious metals recovery plant is operated in conjunction with the antimony processing plant at Thompson Falls, Montana. The zeolite operation produces zeolite near Preston, Idaho. Almost all of the sales of products from the United States antimony and zeolite operations are to customers in the United States.

 

Segment disclosure regarding sales to major customers is located in Note 4.