UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X]
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2018
[ ]
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period _____ to______
Commission file number 001-08675
UNITED STATES ANTIMONY CORPORATION
(Exact name of registrant as specified in its 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.
YES | X | 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).
YES | X | No |
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.
Large Accelerated Filer ____ | Accelerated Filer ____ |
Non-Accelerated Filer ____ | Smaller reporting company X |
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 | X |
At November 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 SEPTEMBER 30, 2018
(UNAUDITED)
TABLE OF CONTENTS
Page | |
PART I – FINANCIAL INFORMATION | |
Item 1: Financial Statements (unaudited) | 1-16 |
Item 2: Management’s Discussion and Analysis of Results of Operations and Financial Condition | 17-20 |
Item 3: Quantitative and Qualitative Disclosure about Market Risk | 21 |
Item 4: Controls and Procedures | 21 |
PART II – OTHER INFORMATION | |
Item 1: Legal Proceedings | 22 |
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds | 22 |
Item 3: Defaults upon Senior Securities | 22 |
Item 4: Mine Safety Disclosures | 22 |
Item 5: Other Information | 22 |
Item 6: Exhibits and Reports on Form 8-K | 22 |
SIGNATURE | 22 |
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 (Unaudited)
ASSETS | ||
September 30, 2018 | December 31, 2017 | |
Current assets: | ||
Cash and cash equivalents | $519,282 | $27,987 |
Certificates of deposit | 252,954 | 252,298 |
Accounts receivable, net | 574,216 | 362,579 |
Inventories | 716,896 | 914,709 |
Other current assets | - | 4,697 |
Total current assets | 2,063,348 | 1,562,270 |
Properties, plants and equipment, net | 14,866,458 | 15,132,897 |
Restricted cash for reclamation bonds | 57,234 | 63,345 |
IVA receivable and other assets | 464,334 | 372,742 |
Total assets | $17,451,374 | $17,131,254 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Current liabilities: | ||
Checks issued and payable | $41,820 | $28,248 |
Accounts payable | 2,304,976 | 2,276,357 |
Due to factor | 16,048 | 10,880 |
Accrued payroll, taxes and interest | 135,299 | 185,283 |
Other accrued liabilities | 330,064 | 168,578 |
Payables to related parties | 56,337 | 22,668 |
Deferred revenue | 32,400 | 60,049 |
Notes payable to bank | 100,000 | 192,565 |
Income taxes payable (Note 11) | - | 443,110 |
Long-term debt, current portion, net of discount | 669,407 | 546,988 |
Total current liabilities | 3,686,351 | 3,934,726 |
Long-term debt, net of discount and current portion | 1,001,563 | 1,239,126 |
Hillgrove advances payable | 1,134,196 | 1,134,221 |
Common stock payable to directors for services | 131,250 | 175,000 |
Asset retirement obligations and accrued reclamation costs | 276,183 | 271,572 |
Total liabilities | 6,229,543 | 6,754,645 |
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 both years) | 1,779 | 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; | ||
68,227,171 and 67,488,063 shares issued and outstanding, respectively | 682,271 | 674,881 |
Additional paid-in capital | 36,406,874 | 36,239,264 |
Accumulated deficit | (25,894,102) | (26,564,324) |
Total stockholders' equity | 11,221,831 | 10,376,609 |
Total liabilities and stockholders' equity | $17,451,374 | $17,131,254 |
The accompanying notes are an integral part of the consolidated financial statements.
1
United States Antimony Corporation and Subsidiaries | ||||
Consolidated Statements of Operations (Unaudited) | ||||
For the three months ended | For the nine months ended | |||
September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | |
REVENUES | $2,091,725 | $2,369,714 | $6,781,001 | $7,827,525 |
COST OF REVENUES | 2,268,854 | 2,315,646 | 6,871,870 | 7,381,020 |
GROSS PROFIT (LOSS) | (177,129) | 54,068 | (90,869) | 446,505 |
OPERATING EXPENSES): | ||||
General and administrative | 151,825 | 130,698 | 489,067 | 480,482 |
Salaries and benefits | 93,723 | 97,487 | 281,596 | 282,263 |
Professional fees | 211,583 | 53,045 | 332,550 | 190,965 |
Gain on plant acquisition (Note 13) | (1,500,000) | - | (1,500,000) | - |
TOTAL OPERATING EXPENSES (INCOME) | (1,042,869) | 281,230 | (396,787) | 953,710 |
INCOME (LOSS) FROM OPERATIONS | 865,740 | (227,162) | 305,918 | (507,205) |
OTHER INCOME (EXPENSE): | ||||
Interest income | 19 | 19 | 849 | 857 |
Gain on tax settlement (Note 11) | 443,110 | - | 443,110 | - |
Interest expense | (27,516) | (25,960) | (76,163) | (80,764) |
Foreign exchange gain (loss) | (12,752) | 2,642 | - | (49,000) |
Factoring expense | (1,154) | (12,104) | (3,492) | (34,711) |
TOTAL OTHER INCOME (EXPENSE) | 401,707 | (35,403) | 364,304 | (163,618) |
INCOME (LOSS) BEFORE INCOME TAXES | 1,267,447 | (262,565) | 670,222 | (670,823) |
Preferred dividends | (12,162) | (12,162) | (36,487) | (36,487) |
Net income (loss) available to common stockholders | $1,255,285 | $(274,727) | $633,735 | $(707,310) |
Net income (loss) per share of common stock: | ||||
Basic | $0.02 | NIL | $0.01 | $(0.01) |
Diluted | $0.02 | NIL | $0.01 | $(0.01) |
Weighted average shares outstanding: | ||||
Basic | 68,227,171 | 67,488,153 | 67,894,207 | 67,387,337 |
Diluted | 68,373,471 | 67,488,153 | 67,992,339 | 67,387,337 |
The accompanying notes are an integral part of the consolidated financial statements.
2
United States Antimony Corporation and Subsidiaries | ||
Consolidated Statements of Cash Flows (Unaudited) | ||
For the nine months ended | ||
September 30, 2018 | September 30, 2017 | |
Cash Flows From Operating Activities: | ||
Net income (loss) | $670,222 | $(670,823) |
Adjustments to reconcile net income (loss) to net cash | ||
provided (used) by operating activities: | ||
Depreciation and amortization expense | 678,010 | 637,225 |
Gain on tax settlement | (443,110) | - |
Gain on plant acquisition | (1,500,000) | - |
Amortization of loan discount | 63,360 | 70,242 |
Accretion of asset retirement obligation | 4,611 | 4,342 |
Common stock payable for director fees | 131,250 | 131,250 |
Foreign exchange (gain) loss | - | 49,000 |
Other non-cash items | (681) | (682) |
Change in: | ||
Accounts receivable, net | (211,637) | 55,722 |
Inventories | 197,813 | (84,243) |
Other current assets | 4,697 | (790) |
Other assets | (91,592) | (83,437) |
Accounts payable | 28,619 | 402,207 |
Accrued payroll, taxes and interest | (49,984) | (50,862) |
Deferred revenues | (27,649) | - |
Other accrued liabilities | 161,486 | 30,305 |
Payables to related parties | 33,669 | 1,797 |
Net cash provided (used) by operating activities | (350,916) | 491,253 |
Cash Flows From Investing Activities: | ||
Purchase of properties, plants and equipment | (411,571) | (279,465) |
Proceeds from plant acquisition | 1,500,000 | - |
Net cash provided (used) by investing activities | 1,088,429 | (279,465) |
Cash Flows From Financing Activities: | ||
Net proceeds from (payments to) factor | 5,168 | 13,338 |
Checks issued and payable | 13,572 | 12,726 |
Advances from related party | 125,000 | - |
Payments on advances from related party | (125,000) | - |
Principal payments on notes payable to bank | (92,565) | (64,291) |
Principal payments on long-term debt | (178,504) | (156,042) |
Net cash provided (used) by financing activities | (252,329) | (194,269) |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 485,184 | 17,519 |
Cash and cash equivalents and restricted cash at beginning of period | 91,332 | 73,332 |
Cash and cash equivalents and restricted cash at end of period | $576,516 | $90,851 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Noncash investing and financing activities: | ||
Common stock payable issued to directors | $175,000 | $168,750 |
The accompanying notes are an integral part of the consolidated financial statements.
3
PART I - FINANCIAL INFORMATION, CONTINUED:
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
1.
Basis of 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 nine month periods ended September 30, 2018 are not necessarily indicative of the results that may be expected for the full year ending December 31, 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, 2017.
Going Concern Consideration
At September 30, 2018, the Company’s consolidated financial statements show negative working capital of approximately $1.6 million and accumulated deficit of approximately $25.9 million. In addition, although the Company has a net income for the third quarter of 2018, the Company has had recurring operating losses. These factors indicate that there may be doubt regarding the ability to continue as a going concern for the next twelve months.
The continuing losses are principally a result of the Company’s antimony operations and in particular to the production costs incurred in Mexico.
Regarding the antimony division, prices were stable or improved slightly during 2018. Through September 30, 2018, the average sale price for antimony is approximately $4.14 per pound. Additionally, in November 2017, the Company renegotiated its domestic sodium antimonite supply agreement with our North American supplier resulting in a lower cost per antimony per pound of approximately $0.44. During the first nine months of 2018, we endured supply interruptions from our North American supplier, and they have notified us that we will not be receiving normal shipments until 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. The new supply agreement with our North American supplier has helped us with cash flow in 2018 from our antimony division.
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, 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 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. In addition, a new leach circuit expected to come on line during 2019 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.
4
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
1.
Basis of Presentation, Continued:
In 2017, management implemented wage and other cost reductions at the corporate level that has kept administrative costs stable in 2018. The Company expects to continue paying a low cost for propane in Montana through 2018, which in years past has been a major operating cost.
In the third quarter of 2018, we closed on an agreement to purchase and dismantle an antimony processing plant in Reynosa, Mexico. The agreement was structured as a capital purchase agreement, and we were paid $1,500,000 to assist us in the plant closure and salvage operation (See Note 13). We expect that we will be able to complete the closure and salvage for less than that amount and use any remaining proceeds and salvaged equipment to enhance and improve our Mexican antimony operations. In addition, in the third quarter of 2018 we settled the tax assessment from the Mexican government completely in our favor (See Note 11). The accrual of $443,110 recorded as a potential tax liability in prior years was reversed and recognized as a gain during the quarter ended September 30, 2018. We paid our Mexican tax representatives $157,500 to negotiate the tax settlement, and we reported this expense as professional fees. Both of these transactions improved our net working capital position.
Subsequent to September 30, 2018, on November 7, 2018, the Company agreed to sell real property acquired in the Reynosa transaction for $700,000. The agreement calls for a down payment of $150,000 which we received on November 8, 2018, payment of $150,000 on December 8, 2018, and two more payments of $200,000 each on January 8 and February 8, 2019.
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 additional operating capital, will enable the Company to 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 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 nine months ended September 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.
5
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
2.
Developments in Accounting Pronouncements, Continued:
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 $57,234 as of September 30, 2018 and $63,345 as of December 31, 2017 and $63,274 as of September 30, 2017 and December 31, 2016, as well as amounts previously reported for cash and cash equivalents.
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
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.
Included in the calculation of diluted earnings per share for the quarter and nine month periods ended September 30, 2018 are 250,000 shares of stock warrants. For the three and nine months ended September 30, 2018 and 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:
September 30, 2018 | September 30, 2017 | |
Warrants | - | 250,000 |
Convertible preferred stock | 1,751,005 | 1,751,005 |
Total possible dilution | 1,751,005 | 2,001,005 |
6
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
4.
Revenue Recognition
Our products consist of the following:
●
Antimony: includes antimony oxide, sodium antimonate, antimony trisulfide, and antimony metal
●
Zeolite: includes coarse and fine zeolite crushed in various sizes.
●
Precious Metals: includes unrefined and 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.
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 nine month periods ended September 30, 2018 and 2017 were as follows:
Three Months Ended | Nine Months Ended | |||
September 30, | September 30, | |||
2018 | 2017 | 2018 | 2017 | |
Antimony | $1,366,540 | $1,796,776 | $4,540,873 | $5,860,584 |
Zeolite | 653,365 | 494,694 | 2,026,605 | 1,723,120 |
Precious metals | 71,820 | 78,244 | 213,523 | 243,821 |
$2,091,725 | $2,369,714 | $6,781,001 | $7,827,525 |
The following is sales information by geographic area based on the location of customers for the three and nine month periods ended September 30, 2018 and 2017:
Three Months Ended | Nine Months Ended | |||
September 30, | September 30, | |||
2018 | 2017 | 2018 | 2017 | |
United States | $1,876,218 | $2,208,417 | $6,151,068 | $7,284,803 |
Canada | 215,507 | 161,297 | 629,933 | 542,722 |
$2,091,725 | $2,369,714 | $6,781,001 | $7,827,525 |
7
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
4.
Revenue Recognition, Continued:
Sales of products to significant customers were as follows for the three and nine month periods ended September 30, 2018 and 2017:
For the Three Months Ended | For the Nine Months Ended | |||
Sales to Three | September 30, | September 30, | September 30, | September 30, |
Largest Customers | 2018 | 2017 | 2018 | 2017 |
Ampacet Corporation | $142,414 | $150,234 | $472,674 | $- |
Mexichem Specialty Compounds Inc. | 587,568 | 909,965 | 1,985,249 | 2,466,388 |
Kohler Corporation | 471,358 | 512,451 | 1,122,908 | 1,458,949 |
East Penn Corporation | - | - | - | 512,641 |
$1,201,340 | $1,572,650 | $3,580,831 | $4,437,978 | |
% of Total Revenues | 57% | 66% | 53% | 57% |
Accounts receivable from largest customers were as follows for September 30, 2018 and December 31, 2017:
Three Largest | ||
Accounts Receivable | September 30, 2018 | December 31, 2017 |
Kohler Corporation | $154,903 | $169,991 |
Earth Innovations Inc. | 36,107 | 31,522 |
Axens North America, Inc. | 38,403 | 31,237 |
$229,413 | $232,750 | |
% of Total Receivables | 40% | 47% |
Our trade accounts receivable balance related to contracts with customers was $574,216 at September 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.
8
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
5.
Inventories
Inventories at September 30, 2018 and December 31, 2017 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 September 30, 2018 and December 31, 2017 is as follows:
September 30, | December 31, | |
2018 | 2017 | |
Antimony oxide | $304,165 | $408,217 |
Antimony with precious metal content | - | 35,554 |
Antimony ore | 156,997 | 187,133 |
Total antimony | 461,162 | 630,904 |
Zeolite | 255,734 | 283,805 |
$716,896 | $914,709 |
6.
Accounts Receivable and Due to 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 | September 30, 2018 | December 31, 2017 |
Accounts receivable - non factored | $558,168 | $351,699 |
Accounts receivable - factored with recourse | 16,048 | 10,880 |
Accounts receivable - net | $574,216 | $362,579 |
7.
Commitments and 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 term of one year and, and as of September 30, 2018, 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.
9
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
8.
Notes Payable to Bank
At September 30, 2018 and December 31, 2017, the Company had the following notes payable to bank:
September 30, | December 31, | |
2018 | 2017 | |
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 | $1 | $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 | 99,999 | 93,702 |
Total notes payable to the bank | $100,000 | $192,565 |
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.
9.
Debt
Long-Term debt at September 30, 2018 and December 31, 2017, is as follows: | September 30, | December 31, |
2018 | 2017 | |
Note payable to First Security Bank, bearing interest at 6%; | ||
payable in monthly installments of $917; maturing | ||
September 2018; collateralized by equipment. | $- | $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. | 16,453 | 27,096 |
Note payable to Cat Financial Services, bearing interest at 6%; | ||
payable in monthly installments of $778; maturing | ||
December 2022; collateralized by equipment. | 35,596 | 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. | 7,749 | 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. | 10,246 | 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. | 661,988 | 715,709 |
Obligation payable for Guadalupe Mine, non-interest bearing, | ||
annual payments from $60,000 to $149,078 through 2026, net of discount. | 924,792 | 951,711 |
1,670,970 | 1,786,114 | |
Less current portion | (669,407) | (546,988) |
Long-term portion | $1,001,563 | $1,239,126 |
10
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
9.
Debt, Continued:
At September 30, 2018, principal payments on debt are due as follows:
12 Months Ending September 30, | |||
Principal Payment | Discount | Net | |
2019 | 744,149 | (74,742) | 669,407 |
2020 | 284,331 | (58,282) | 226,049 |
2021 | 182,197 | (45,336) | 136,861 |
2022 | 157,692 | (37,610) | 120,082 |
2023 | 153,087 | (30,922) | 122,165 |
Thereafter | 444,910 | (48,504) | 396,406 |
$1,966,366 | $(295,396) | $1,670,970 |
10.
Related Party Transactions
During the three and nine months ended September 30, 2018 and 2017, the Chairman of the audit committee and compensation committee received $4,500 and $4,500, respectively, for services performed. See Note 12 for shares of common stock issued to directors.
During the three and nine months ended September 30, 2018 and 2017, the Company paid $1,764 and $6,686, and $2,175 and $8,989, respectively, to John Lawrence, our President and Chief Executive Officer, as reimbursement for equipment used by the Company. Mr. Lawrence advanced the Company $125,000 for ongoing operating expenses during the nine months ended September 30, 2018, which has been repaid as of September 30, 2018.
11.
Income Taxes
During the three and nine months ended September 30, 2018, and the year ended December 31, 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 is fully reserved for at September 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.
Management reviewed the assessment notice from SAT and believes numerous findings have no merit. The Company engaged accountants and tax attorneys in Mexico to defend its position. An appeal was filed.
As of December 31, 2017, the Company had accrued a potential tax liability of $443,110 associated with this assessment. In the third quarter of 2018, we settled a tax assessment from the Mexican government completely in our favor. The accrual of $443,110 recorded as potential tax liability was reversed and recognized as a gain during the quarter ended September 30, 2018. The Company paid Mexican tax representatives $157,500 that were recognized as professional fees expense, to negotiate this settlement during the quarter ended September 30, 2018.
11
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
11.
Income Taxes, Continued:
The Company’s tax professionals in Mexico have reviewed and filed tax returns with the SAT for 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.
12.
Stockholder’s Equity
Issuance of Common Stock for Payable to Board of Directors
During the nine month period ended September 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 nine months ended September 30, 2017, the Company accrued $43,750 and $87,500, 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 nine months ended September 30, 2018, the Company accrued $43,750 and $131,250, respectively, in directors’ fees payable that will be paid in common stock.
13.
Plant Acquisition
On August 31, 2018, the Company closed a Member Interest and Capital Share Agreement (the “Agreement”) with Great Lakes Chemical Corporation and Lanxess Holding Company US Inc., as the sellers, and the Company as the buyer. Under the Agreement, the Company acquired 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. In addition, the Company was paid $1,500,000 by the sellers, which was recognized as operating income in the quarter ended September 30, 2018, to assist in the salvage and transport costs of the useable equipment. The transaction was accounted for as an asset acquisition as there was no business associated with the acquired assets. We expect that we will be able to complete the closure and salvage for less than that amount and use any remaining proceeds and salvaged equipment to enhance and improve our Mexican antimony operations.
14.
Business 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 may be sold directly or shipped to the United States operation for finishing 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 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.
12
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
14.
Business Segments, Continued:
Segment disclosure regarding sales to major customers is located in Note 4.
Properties, plants | ||
and equipment, net: | September 30, 2018 | December 31, 2017 |
Antimony | ||
United States | $1,648,447 | $1,687,997 |
Mexico | 11,341,144 | 11,452,507 |
Subtotal Antimony | 12,989,591 | 13,140,504 |
Precious metals | 632,730 | 642,774 |
Zeolite | 1,244,137 | 1,349,619 |
Total | $14,866,458 | $15,132,897 |
Total Assets: | September 30, 2018 | December 31, 2017 |
Antimony | ||
United States | $2,779,883 | $2,510,323 |
Mexico | 12,135,234 | 12,073,219 |
Subtotal Antimony | 14,915,117 | 14,583,542 |
Precious metals | 632,730 | 642,774 |
Zeolite | 1,903,527 | 1,904,938 |
Total | $17,451,374 | $17,131,254 |
For the Three Months Ended | For the Nine Months Ended | |||
September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | |
Capital expenditures: | ||||
Antimony | ||||
United States | $- | $22,241 | $- | $22,241 |
Mexico | 223,390 | 45,326 | 334,367 | 121,042 |
Subtotal Antimony | 223,390 | 67,567 | 334,367 | 143,283 |
Precious Metals | - | 24,798 | 40,988 | 84,379 |
Zeolite | 13,793 | 35,856 | 36,216 | 51,803 |
Total | $237,183 | $128,221 | $411,571 | $279,465 |
13
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
14.
Business Segments, Continued:
Segment Operations for the three | Antimony | Antimony | Total | Precious | ||
months ended September 30, 2018 | USA | Mexico | Antimony | Metals | Zeolite | Totals |
Total revenues | $1,366,540 | $- | $1,366,540 | $71,820 | $653,365 | $2,091,725 |
Depreciation and amortization | $13,170 | $148,363 | $161,533 | $17,011 | $46,807 | $225,351 |
Income (loss) from operations | 1,259,735 | (537,067) | 722,668 | 54,809 | 88,263 | 865,740 |
Other income (expense): | (3,715) | 409,238 | 405,523 | - | (3,816) | 401,707 |
NET INCOME (LOSS) | $1,256,020 | $(127,829) | $1,128,191 | $54,809 | $84,447 | $1,267,447 |
Segment Operations for the three | Antimony | Antimony | Total | Precious | ||
months ended September 30, 2017 | USA | Mexico | Antimony | Metals | Zeolite | Totals |
Total revenues | $1,796,775 | $- | $1,796,775 | $78,245 | $494,694 | $2,369,714 |
Depreciation and amortization | 14,200 | 127,675 | $141,875 | 15,100 | 50,200 | 207,175 |
Income (loss) from operations | 435,497 | (861,683) | (426,186) | 63,145 | 135,879 | (227,162) |
Other income (expense): | (11,611) | (20,772) | (32,383) | - | (3,020) | (35,403) |
NET INCOME (LOSS) | $423,886 | $(882,455) | $(458,569) | $63,145 | $132,859 | $(262,565) |
14
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
14.
Business Segments, Continued:
Segment Operations for the nine | Antimony | Antimony | Total | Precious | ||
months ended September 30, 2018 | USA | Mexico | Antimony | Metals | Zeolite | Totals |
Total revenues | $4,540,873 | $- | $4,540,873 | $213,523 | $2,026,605 | $6,781,001 |
Depreciation and amortization | $39,550 | $445,729 | $485,279 | $51,032 | $141,699 | $678,010 |
Income (loss) from operations | 1,849,669 | (2,088,424) | (238,755) | 162,491 | 382,182 | 305,918 |
Other income (expense): | (6,431) | 379,750 | 373,319 | - | (9,015) | 364,304 |
NET INCOME (LOSS) | $1,843,238 | $(1,708,674) | $134,564 | $162,491 | $373,167 | $670,222 |
Segment Operations for the nine | Antimony | Antimony | Total | Precious | ||
months ended September 30, 2017 | USA | Mexico | Antimony | Metals | Zeolite | Totals |
Total revenues | $5,842,801 | $17,782 | $5,860,583 | $243,822 | $1,723,120 | $7,827,525 |
Depreciation and amortization | 42,900 | 397,325 | $440,225 | 47,000 | 150,000 | $637,225 |
Income (loss) from operations | 1,618,156 | (2,680,293) | (1,062,137) | 196,821 | 358,110 | (507,206) |
Other income (expense): | (34,654) | (119,341) | (153,995) | - | (9,622) | (163,617) |
NET INCOME (LOSS) | $1,583,502 | $(2,799,634) | $(1,216,132) | $196,821 | $348,488 | $(670,823) |
15.
Subsequent Events
Subsequent to September 30, 2018, on November 7, 2018, the Company agreed to sell real property in acquired in the Reynosa transaction for $700,000. The agreement calls for a down payment of $150,000 which we received on November 8, 2018, payment of $150,000 on December 8, 2018, and two more payments of $200,000 each on January 8 and February 8, 2019.
15
16
ITEM 2.
Management’s Discussion and Analysis of Results of Operations and Financial Condition
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.
Antimony - Combined USA | Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended |
and Mexico | September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 |
Lbs of Antimony Metal USA | 229,865 | 298,472 | 690,838 | 1,102,290 |
Lbs of Antimony Metal Mexico: | 105,748 | 123,919 | 405,329 | 372,307 |
Total Lbs of Antimony Metal Sold | 335,613 | 422,391 | 1,096,167 | 1,474,597 |
Average Sales Price/Lb Metal | $4.07 | $4.25 | $4.14 | $3.97 |
Net income (loss)/Lb Metal | $3.36 | $(1.09) | $0.12 | $(0.82) |
Gross antimony revenue | $1,366,540 | $1,796,775 | $4,540,873 | $5,860,583 |
Cost of sales - domestic | (735,284) | (968,875) | (2,759,947) | (2,766,229) |
Cost of sales - Mexico | (973,149) | (833,876) | (2,484,242) | (2,620,336) |
Operating income (expenses) | 1,064,561 | (420,210) | 464,561 | (1,536,155) |
Non-operating income (expenses) | 405,523 | (32,383) | 373,319 | (153,995) |
(238,349) | (2,255,344) | (4,406,310) | (7,076,715) | |
Net income (loss) - antimony | 1,128,191 | (458,569) | 134,564 | (1,216,132) |
Depreciation,& amortization | 161,533 | 141,875 | 485,279 | 440,225 |
EBITDA - antimony | $1,289,724 | $(316,694) | $619,843 | $(775,907) |
Precious Metals | ||||
Ounces sold | ||||
Gold | 24 | 37 | 54 | 169 |
Silver | 5,415 | 4,555 | 15,256 | 22,108 |
Gross precious metals revenue | $71,820 | $78,245 | $213,523 | $243,822 |
Cost of sales | (17,011) | (15,100) | (51,032) | (47,001) |
Net income - precious metals | 54,809 | 63,145 | 162,491 | 196,821 |
Depreciation | 17,011 | 15,100 | 51,032 | 47,000 |
EBITDA - precious metals | $71,820 | $78,245 | $213,523 | $243,821 |
Zeolite | ||||
Tons sold | 3,556 | 2,671 | 10,887 | 9,446 |
Average Sales Price/Ton | $183.74 | $185.21 | $186.15 | $182.42 |
Net income (loss)/Ton | $23.75 | $49.74 | $34.28 | $36.89 |
Gross zeolite revenue | $653,365 | $494,694 | $2,026,605 | $1,723,120 |
Cost of sales | (543,410) | (297,815) | (1,576,649) | (1,167,108) |
Operating income (expenses) | (21,692) | (61,000) | (67,774) | (197,902) |
Non-operating income (expenses) | (3,816) | (3,020) | (9,015) | (9,622) |
Net income - zeolite | 84,447 | 132,859 | 373,167 | 348,488 |
Depreciation | 46,807 | 50,200 | 141,699 | 150,000 |
EBITDA - zeolite | $131,254 | $183,059 | $514,866 | $498,488 |
Company-wide | ||||
Gross revenue | $2,091,725 | $2,369,714 | $6,781,001 | $7,827,525 |
Cost of sales | (2,268,854) | (2,115,666) | (6,871,870) | (6,600,674) |
Operating expenses | 1,042,869 | (481,210) | 396,787 | (1,734,057) |
Non-operating expenses | 401,707 | (35,403) | 364,304 | (163,617) |
Net income (loss) | 1,267,447 | (262,565) | 670,222 | (670,823) |
Depreciation,& amortization | 225,351 | 207,175 | 678,010 | 637,225 |
EBITDA | $1,492,798 | $(55,390) | $1,348,232 | $(33,598) |
17
PART I - FINANCIAL INFORMATION, CONTINUED:
ITEM 2.
Management’s Discussion and Analysis of Results of Operations and Financial Condition, continued:
Company-Wide
For the third quarter of 2018, we recorded net income of $1,267,447. Net income includes income of $443,110 associated with the settlement of our Mexican tax assessment and receipt of $1,500,000 for decommissioning an antimony plant in Reynosa, Mexico. We recognized revenue of $2,091,725 for the third quarter of 2018. We reported a net loss of $262,565 in the third quarter of 2017 on sales of $2,369,714. We incurred an operating income in the third quarter of 2018 which was primarily due to the $1,500,000 gain on the Reynosa plant acquisition offset by a decrease in the raw materials received from our North American supplier. The loss in the third quarter of 2017 was primarily due to the loss of raw material from Hillgrove Mines of Australia. During the first nine months of 2018, we endured supply interruptions from our North American supplier, and we have been notified that due to a lack of raw material, they will not supply us with raw material from September 17, 2018 through November 5, 2018. We anticipate that normal supply quantities from our North American supplier will resume for the remainder of 2018. We will be directing our resources during that time to increasing our supply of raw material from Mexico.
For the three and nine months ended September 30, 2018, EBITDA was $1,492,798 and $1,348,232, compared to $(55,390) and $(33,598) for the same periods of 2017.
Net non-cash expense items totaled $302,973 for the three months ended September 30, 2018 and included $225,351 for depreciation and amortization, $21,120 for amortization of debt discount, $43,750 for director compensation and $12,752 for other items. Net non-cash expense items totaled $572,065 for the nine months ended September 30, 2018 and included $678,010 for depreciation and amortization, $63,360 of debt discount, $131,250 for director compensation.
Net non-cash expense items totaled $282,985 for the three months ended September 30, 2017 and included $207,175 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 $901,223 for the nine months ended September 30, 2017 and included $637,225 for depreciation and amortization, $70,242 of debt discount, $131,250 for director compensation and $55,307 for other items.
For the three and nine months ended September 30, 2018, general and administrative expenses were $151,825 and $489,067, respectively, compared to $130,698 and $480,482 for the same periods in 2017.
Antimony
For the three and nine months ended September 30, 2018, we sold 335,613 and 1,096,167 pounds of antimony compared to 422,391 and 1,474,597 pounds for the three and nine months ended September 30, 2017. The raw material received from our North American supplier decreased by approximately 444,000 pounds for the nine months ended September 30, 2018. We had a decrease in raw material of approximately 18,000 pounds from Mexico for the third quarter of 2018, but we did see an increase of approximately 30,000 pounds for the nine months ended September 30, 2018.
The average sales price of antimony during the three and nine months ended September 30, 2018 was $4.07 and $4.14 per pound compared to $4.25 and $3.97 during the same periods in 2017.
18
The cyanide leach circuit at Puerto Blanco has been permitted, and construction of the 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 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, and cut costs.
At the Wadley mine, production is being increased with more miners and load haul equipment. The use of pneumatic hammers is planned in lieu of explosives.
The Guadalupe mine has started production, and will be shipping DSO to our Madero smelter by the end of 2018.
The Soyatal mine will be started once we receive an explosives permit.
Precious Metals
The caustic leach of flotation concentrates from Los Juarez was successful, and the pilot production of the Los Juarez gold, silver, and antimony will commence with the completion of the cyanide leach plant at Puerto Blanco. The cyanide leach plant at Puerto Blanco is on schedule to start testing in quarter four of 2018. Tests will include three technical discoveries that we expect to increase recovery and expedite processing.
For the three and nine months ended September 30, 2018, EBITDA for precious metals was $71,820 and $213,523, compared to $78,245 and $243,821 for the same periods of 2017.
The estimated recovery of precious metals per metric ton, after the caustic leach and cyanide leach circuits, is as follows:
Metal | Assay | Recovery | Value | Value/Mt | ||||
Gold | 0.035 opmt | 90% | $1200/oz | $37.80 | ||||
Silver | 3.27 opmt | 90% | $15.50/oz | $45.61 | ||||
Antimony | 0.652% | 70% | 4.14/lb | $41.52 | ||||
Total | $124.93 |
Current and prior years’ revenue from precious metals is as follows:
Precious Metal Sales Silver/Gold | 2015 | 2016 | 2017 | Nine Months 2018 |
Montana | ||||
Ounces Gold Shipped (Au) | 89.12 | 108.10 | 107.00 | 53.69 |
Ounces Silver Shipped (Ag) | 30,421 | 38,123 | 32,021 | 15,256 |
Revenues | $491,426 | $556,650 | $480,985 | $213,523 |
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 | $213,523 |
19
Bear River Zeolite (BRZ)
For the three and nine months ended September 30, 2018, BRZ sold 3,556 and 10,887 tons of zeolite compared to 2,671 and 9,446 tons in the same periods of 2017, up 885 tons or 33.2% for the three months and 1,441 tons or 15.3% for the nine months.
BRZ realized net income of $84,447 after depreciation of $46,807 in the third quarter of 2018, compared to $132,859 after depreciation of $50,200 in the third quarter of 2017. For the nine months ended September 30, 2018, BRZ realized net income of $373,167 after depreciation of $141,699 compared to a net income of $348,488 after depreciation of $150,000.
BRZ realized an EBITDA for the three and nine months ended September 30, 2018 of $131,254 and $514,866, compared to $183,059 and $498,488 for the same periods in 2017.
We are anticipating continued growth in all areas of zeolite sales.
Financial Position
Financial Condition and Liquidity | September 30, | December 31, |
2018 | 2017 | |
Current assets | $2,063,348 | $1,562,270 |
Current liabilities | ��(3,686,351) | (3,934,726) |
Net Working Capital | $(1,623,003) | $(2,372,456) |
Nine Months Ended | ||
September 30, | September 30, | |
2018 | 2017 | |
Cash provided by operations | $(350,916) | $491,253 |
Cash used for capital outlay | (411,571) | (279,465) |
Proceeds from plant acquisition | 1,500,000 | - |
Cash provided (used) by financing: | ||
Net proceeds (payments to) factor | 5,168 | 13,338 |
Proceeds from notes payable to bank | - | (64,291) |
Change in check issued and payable | 13,572 | 12,726 |
Advances from related party | 125,000 | - |
Payment on advances from related party | (125,000) | - |
Payment of notes payable to bank | (92,565) | - |
Principal paid on long-term debt | (178,504) | (156,042) |
Net change in cash and cash equivalents | $485,184 | $17,519 |
Our net working capital increased by approximately $750,000 from December 31, 2017. Our cash and cash equivalents increased by approximately $485,000 during the same period. The increase in our net working capital was primarily due to $1,500,000 for decommissioning an antimony plant in Reynosa, Mexico, and a reduction of the Mexican tax liability of $443,110. We expect to incur approximately $350,000 to $500,000 to finish decommissioning the Reynosa antimony plant. We have estimated commitments for construction and improvements of $350,000 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 $100,000 at September 30, 2018.
20
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 September 30, 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 September 30, 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 September 30, 2018.
21
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
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, 2018 | |
John C. Lawrence, Director and President | |||
(Principal Executive) | |||
By: | /s/ Daniel L. Parks | Date: November 14, 2018 | |
Daniel L. Parks, Chief Financial Officer |
22