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UNITED STATES ANTIMONY CORP - Quarter Report: 2017 March (Form 10-Q)

 

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 March 31, 2017
 
[ ] 
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 shell company as defined by Rule 12b-2 of the Exchange Act.
 
YES
 
 
No
X
 
At May 15, 2017, the registrant had outstanding 67,183,466 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” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ☐ 
 
Accelerated filer ☐
 
Non-accelerated filer ☐
(Do not check if a smaller reporting company)
Smaller reporting company ☒

 
 
 
UNITED STATES ANTIMONY CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD
ENDED MARCH 31, 2017
(UNAUDITED)
 
TABLE OF CONTENTS
 
 
Page
 
 
PART I – FINANCIAL INFORMATION
 
 
 
Item 1: Financial Statements (unaudited)
1-12
 
 
Item 2: Management’s Discussion and Analysis of Results of Operations and Financial Condition
13-16
 
 
Item 3: Quantitative and Qualitative Disclosure about Market Risk
16
 
 
Item 4: Controls and Procedures
17
 
 
 
 
PART II – OTHER INFORMATION
 
 
 
Item 1: Legal Proceedings
18
 
 
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
18
 
 
Item 3: Defaults upon Senior Securities
18
 
 
Item 4: Mine Safety Disclosures
18
 
 
Item 5: Other Information
18
 
 
Item 6: Exhibits and Reports on Form 8-K
18
 
 
 
 
SIGNATURE
18
 
 
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
 
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
 
March 31,
2017
 
 
December 31,
2016
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $11,129 
 $10,057 
Certificates of deposit
  252,062 
  251,641 
Accounts receivable, net
  554,380 
  552,119 
Inventories
  911,023 
  855,637 
Other current assets
  5,183 
  23,101 
Total current assets
  1,733,777 
  1,692,555 
 
    
    
Properties, plants and equipment, net
  15,559,890 
  15,695,966 
Restricted cash for reclamation bonds
  63,274 
  63,274 
Other assets
  362,370 
  314,203 
Total assets
 $17,719,311 
 $17,765,998 
 
    
    
LIABILITIES AND STOCKHOLDERS' EQUITY
    
    
Current liabilities:
    
    
Checks issued and payable
 $14,163 
 $35,682 
Accounts payable
  2,121,759 
  1,797,251 
Due to factor
  146,011 
  150,399 
Accrued payroll, taxes and interest
  193,280 
  213,695 
Other accrued liabilities
  128,854 
  122,968 
Payables to related parties
  2,048 
  14,525 
Deferred revenue
  78,730 
  78,730 
Notes payable to bank
  183,302 
  167,317 
Income taxes payable (Note 11)
  451,961 
  410,510 
Long-term debt, current portion, net of discount
  433,993 
  391,046 
Total current liabilities
  3,754,101 
  3,382,123 
 
    
    
Long-term debt, net of discount and current portion
  1,400,315 
  1,472,869 
Hillgrove advances payable (Note 8)
  1,134,216 
  1,134,221 
Common stock payable to directors for services
  43,750 
  168,750 
Asset retirement obligations and accrued reclamation costs
  267,229 
  265,782 
Total liabilities
  6,599,611 
  6,423,745 
Commitments and contingencies (Note 5)
    
    
 
    
    
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 $4,879,029
    
    
 respectively)
  17,509 
  17,509 
    Common stock, $0.01 par value, 90,000,000 shares authorized;

    
67,488,063 and 66,866,278 shares issued and outstanding, respectively
  674,881 
  670,662 
Additional paid-in capital
  36,239,264 
  36,074,733 
Accumulated deficit
  (25,821,233)
  (25,429,930)
Total stockholders' equity
  11,119,700 
  11,342,253 
Total liabilities and stockholders' equity
 $17,719,311 
 $17,765,998 
 
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
 
 
 
March 31, 2017
 
 
March 31, 2016
 
 
 
 
 
 
 
 
REVENUES
 $2,619,330 
 $3,322,203 
 
    
    
COST OF REVENUES
  2,529,786 
  3,111,375 
 
    
    
GROSS PROFIT
  89,544 
  210,828 
 
    
    
OPERATING EXPENSES:
    
    
   General and administrative
  200,592 
  163,877 
   Salaries and benefits
  97,487 
  109,589 
   Hillgrove advance - earned credit (Note 8)
  - 
  (23,991)
   Professional fees
  103,338 
  143,650 
       TOTAL OPERATING EXPENSES
  401,417 
  393,125 
 
    
    
INCOME (LOSS) FROM OPERATIONS
  (311,873)
  (182,297)
 
    
    
OTHER INCOME (EXPENSE):
    
    
Interest income
  571 
  1,183 
Interest expense
  (27,650)
  - 
Foreign exchange gain (loss)
  (41,451)
  - 
Factoring expense
  (10,900)
  (7,526)
       TOTAL OTHER INCOME (EXPENSE)
  (79,430)
  (6,343)
 
    
    
INCOME (LOSS) BEFORE INCOME TAXES
  (391,303)
  (188,640)
 
    
    
NET LOSS
  (391,303)
  (188,640)
     Preferred dividends
  (12,162)
  (12,162)
 
    
    
Net loss available to common stockholders
 $(403,465)
 $(200,802)
 
    
    
Net income (loss) per share of
    
    
common stock:
    
    
Basic and diluted
 $(0.01)
 
 Nil
 
 
    
    
Weighted average shares outstanding:
    
    
Basic
  67,183,466 
  66,509,685 
Diluted
  67,183,466 
  66,509,685 

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 three months ended
 
Cash Flows From Operating Activities:
 
March 31, 2017
 
 
March 31, 2016
 
Net income (loss)
 $(391,303)
 $(188,640)
Adjustments to reconcile net income (loss) to net cash
    
    
 provided (used) by operating activities:
    
    
Depreciation and amortization
  215,675 
  261,150 
Amortization of debt discount
  23,413 
  - 
Hillgrove advance earned credit
  - 
  (23,991)
Accretion of asset retirement obligation
  1,447 
  1,364 
Common stock payable for directors fees
  43,750 
  37,500 
Foreign exchange loss
  41,451 
  - 
Other, net
  (426)
  - 
Change in:
    
    
Accounts receivable
  (2,261)
  (445,351)
Inventories
  (55,386)
  144,154 
Other current assets
  17,918 
  114,555 
Other assets
  (48,167)
  1,000 
Accounts payable
  324,508 
  330,057 
Accrued payroll, taxes and interest
  (20,415)
  (30,766)
Other accrued liabilities
  5,886 
  51,213 
Payables to related parties
  (12,477)
  231 
Net cash provided (used) by operating activities
  143,613 
  252,476 
 
    
    
Cash Flows From Investing Activities:
    
    
Purchase of properties, plants and equipment
  (79,599)
  (245,702)
Net cash used by investing activities
  (79,599)
  (245,702)
 
    
    
Cash Flows From Financing Activities:
    
    
Change in checks issued and payable
  (21,519)
  - 
Net borrowing from factor
  (4,388)
  84,083 
Proceeds from notes payable to bank
  15,985 
  - 
Principal paid notes payable to bank
  - 
  (44,912)
Principal payments of long-term debt
  (53,020)
  (41,824)
Net cash provided (used) by financing activities
  (62,942)
  (2,653)
NET INCREASE IN CASH
    
    
    AND CASH EQUIVALENTS
  1,072 
  4,121 
Cash and cash equivalents at beginning of period
  10,057 
  133,543 
Cash and cash equivalents at end of period
 $11,129 
 $137,664 
 
    
    
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    
    
Noncash investing and financing activities:
    
    
Imputed interest capitalized as property, plant and equipment
  - 
 $24,353 
Common stock payable issued to directors
 $168,750 
  137,500 
 
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 month period ended March 31, 2017 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2017.
 
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.
 
2.  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. Management has determined that the calculation of diluted earnings per share for the quarters ended March 31, 2017 and March 31, 2016, is not applicable since any additions to outstanding shares related to common stock equivalents would be anti-dilutive.
 
As of March 31, 2017 and 2016, 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:
 
 
 
March 31, 2017
 
 
March 31, 2016
 
Warrants
  250,000 
  250,000 
Convertible preferred stock
  1,751,005 
  1,751,005 
Total possible dilution
  2,001,005 
  2,001,005 
 
 
4
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
3.
Inventories:
 
Inventories at March 31, 2017 and December 31, 2016 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 March 31, 2017 and December 31, 2016, is as follows:
 
 
 
March 31,
 
 
December 31,
 
 
 
2017
 
 
2016
 
Antimony Metal
 $235,741 
 $112,300 
Antimony Oxide
  252,553 
  326,126 
Antimony Concentrates
  28,317 
  30,815 
Antimony Ore
  172,347 
  181,815 
     Total antimony
  688,958 
  651,056 
Zeolite
  222,065 
  204,581 
 
 $911,023 
 $855,637 
 
4.
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 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
 
March 31,
2017
 
 
December 31,
2016
 
Accounts receivable - non factored
 $408,369 
 $401,720 
Accounts receivable - factored with recourse
  146,011 
  150,399 
      Accounts receivable - net
 $554,380 
 $552,119 
 
 
5
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
5. 
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 mandatory term of one year and, and as of March 31, 2017, 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 2017.
 
6.   Notes Payable to Bank:
 
At March 31, 2017 and December 31, 2016, the Company had the following notes payable to the bank:
 
 
 
March 31,
 
 
December 31,
 
 
 
2017
 
 
2016
 
Promissory note payable to First Security Bank of Missoula,
 
 
 
 
 
 
bearing interest at 5.0%, maturing February 27, 2018,
 
 
 
 
 
 
payable on demand, collateralized by a lien on Certificate of
 
 
 
 
 
 
Deposit number 48614
 $83,303 
 $76,350 
 
    
    
Promissory note payable to First Security Bank of Missoula,
    
    
bearing interest at 5.0%, maturing February 27, 2018,
    
    
payable on demand, collateralized by a lien on Certificate of
    
    
Deposit number 48615
  99,999 
  90,967 
 
    
    
Total notes payable to bank
 $183,302 
 $167,317 
 
These notes are personally guaranteed by John C. Lawrence the Company’s President and Chairman of the Board of Directors. The maximum amount available for borrowing under each note is $99,999.
 
 
6
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
7. Long – Term Debt:
 
Long-Term debt at March 31, 2017 and December 31, 2016, is as follows:
 
March 31,
 
 
December 31,
 
 
 
2017
 
 
2016
 
Note payable to First Security Bank, bearing interest at 6%;
 
 
 
 
 
 
payable in monthly installments of $917; maturing
 
 
 
 
 
 
September 2018; collateralized by equipment.
 $15,755 
 $18,246 
Note payable to Cat Financial Services, bearing interest at 6%;
    
    
payable in monthly installments of $1,300; maturing
    
    
August 2019; collateralized by equipment.
  37,248 
  40,556 
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 De Lage Landen Financial Services,
    
    
bearing interest at 3.51%; payable in monthly installments of $655;
    
    
maturing September 2019; collateralized by equipment.
  18,195 
  20,581 
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.
  20,581 
  22,944 
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.
  762,167 
  776,319 
Obligation payable for Guadalupe Mine, non-interest bearing,
    
    
annual payments from $60,000 to $149,078 through 2026, net of discount.
  966,216 
  970,651 
 
  1,834,308 
  1,863,916 
Less current portion
  (433,993)
  (391,046)
Long-term portion
 $1,400,315 
 $1,472,870 
 
At March 31, 2017, principal payments on debt are due as follows:
 
Year Ending March 31,
 
 
 
2018
  433,993 
2019
  272,496 
2020
  275,467 
2021
  172,936 
2022
  108,312 
Thereafter
  571,104
 
 $1,834,308
 
 
7
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
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 March 31, 2017, the net amount due to Hillgrove for advances was $1,134,216. As of March 31, 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.
 
 9. Concentrations of Risk:
 
Sales to Three
 
 For the Period Ended
 
Largest Customers
 
March 31, 2017
 
 
March 31, 2016
 
Kohler Corporation
 $445,178 
 $432,283 
East Penn Manufacturing
  148,643 
  536,413 
Mexichem Speciality Compounds
  786,425 
  590,423 
 
 $1,380,246 
 $1,559,119 
% of Total Revenues
  52.70%
  46.90%
 
    
    
Three Largest
    
    
Accounts Receivable
 
March 31, 2017
 
 
March 31, 2016
 
Kohler Corporation
 $149,124 
 $211,295 
Accupowder International
    
  110,000 
Mexichem Speciality Compounds
  135,680 
  95,062 
Nutreco Canada Inc.
  28,139 
  - 
 
 $312,943 
 $416,357 
% of Total Receivables
  56.50%
  48.00%
 
 
8
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
10.  Related Party Transactions:
 
During the three months ended March 31, 2017 and 2016, the Chairman of the audit committee and compensation committee received $4,500 and $9,000, respectively, for services performed. See Note 12 for shares of common stock issued to directors.
 
During the three months ended March 31, 2017 and 2016, the Company paid $2,480 and $13,710, respectively, to John Lawrence, our President and Chief Executive Officer, as reimbursement for equipment used by the Company.
 
11.  Income Taxes:
 
During the quarter ended March 31, 2017, and the year ended December 31, 2016, 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, are fully reserved for at March 31, 2017.
 
Management estimates the effective tax rate at 0% for the current year.
 
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 is 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 March 31, 2017, the assessed amount is $737,000 in U.S dollars.
 
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 which is expected to be completed during 2017.
 
At December 31, 2016, management has 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, we accrued a potential liability of $410,510 USD of which $259,490 is for unpaid income taxes, $75,510 is for interest expense, and $49,952 is 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 March 31, 2017, the Company recognized a $41,151 increase due to the change in exchange rate. 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. Our tax professionals in Mexico have reviewed and filed tax returns with the SAT for 2014 and 2015, and have advised us that they do not expect us to have a tax liability for those years relating to similar issues.
 
 
9
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
12.  Stockholder’s Equity:
 
Issuance of Common Stock for Payable to Board of Directors
 
During the quarter ended March 31, 2016, the Board of Directors was issued a total of 550,000 shares of common stock for $137,500 in directors’ fees that were payable at December 31, 2015. In addition during the quarter, the Company accrued $37,500 in directors’ fees payable that will be paid in common stock.
 
During the quarter ended March 31, 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 quarter, the Company accrued $43,750 in directors’ fees payable that will be paid in common stock.
 
13.  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 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 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.
 
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.
 
 
10
 
 
Properties, plants and equipment, net:
 
March 31,
2017
 
 
 December 31,
2016
 
Antimony
 
 
 
 
 
 
United States
 $1,674,831 
 $1,694,331 
Mexico
  11,866,975 
  11,984,467 
Subtotal Antimony
  13,541,806 
  13,678,798 
Precious metals
  587,615 
  544,615 
Zeolite
  1,430,469 
  1,472,553 
   Total
 $15,559,890 
 $15,695,966 
 
    
    
Total Assets:
 
March 31,
2017
 
 
December 31,
2016
 
Antimony
    
    
United States
 $2,360,482 
 $2,495,842 
Mexico
  12,749,939 
  12,681,109 
Subtotal Antimony
  15,110,421 
  15,176,951 
Precious metals
  587,615 
  544,615 
Zeolite
  2,021,275 
  2,044,432 
   Total
 $17,719,311 
 $17,765,998 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
13.            
Business Segments, Continued:
 
 
 
  For the three months ended
 
Capital expenditures:
 
March 31, 2017
 
 
March 31, 2016
 
Antimony
 
 
 
 
 
 
United States
 $- 
 $1,035 
Mexico
  28,683 
  207,886 
Subtotal Antimony
  28,683 
  208,921 
Precious Metals
  43,000 
  19,365 
Zeolite
  7,916 
  41,769 
   Total
 $79,599 
 $270,055 
 
 
11
 
 
Segment Operations for the three
 
Antimony
 
 
Antimony
 
 
Precious
 
 
Bear River
 
 
 
 
months ended March 31, 2017
 
USAC
 
 
Mexico
 
 
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $1,968,725 
 $17,782 
 $20,811 
 $612,012 
 $2,619,330 
 
    
    
    
    
    
Depreciation and amortization
  19,500 
  146,175 
  - 
  50,000 
  215,675 
 
    
    
    
    
    
Income (loss) from operations
  328,900 
  (751,176)
  20,811 
  89,592 
  (311,873)
 
    
    
    
    
    
Other income (expense):
  (11,078)
  (64,965)
  - 
  (3,387)
  (79,430)
 
    
    
    
    
    
NET INCOME (LOSS)
 $317,822 
 $(816,141)
 $20,811 
 $86,205 
 $(391,303)
 
Segment Operations for the three
 
Antimony
 
 
Antimony
 
 
Precious
 
 
Bear River
 
 
 
 
months ended March 31, 2016
 
USAC
 
 
Mexico
 
 
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $2,504,564 
 $16,668 
 $217,617 
 $583,354 
 $3,322,203 
 
    
    
    
    
    
Depreciation and amortization
  15,500 
  188,650 
    
  57,000 
  261,150 
 
    
    
    
    
    
Income (loss) from operations
  884,197 
  (1,279,512)
  182,848 
  30,170 
  (182,297)
 
    
    
    
    
    
Other income (expense):
  (5,975)
  - 
  - 
  (368)
  (6,343)
 
    
    
    
    
    
NET INCOME (LOSS)
 $878,222 
 $(1,279,512)
 $182,848 
 $29,802 
 $(188,640)
 
 
12
 
 
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 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.

Results of Operations by Division
 
 
 
 
 
 
Antimony and Precious Metals
 
1st Qtr
 
 
1st Qtr
 
   Combined USA and Mexico
 
2017
 
 
2016
 
Lbs of Antimony Metal Canada
  459,666 
  486,752 
Lbs of Antimony Metal Mexico
  88,184 
  426,089 
   Total Lbs of Antimony Metal Sold
  547,850 
  912,841 
Sales Price/Lb Metal
 $3.63 
 $2.76 
Net income (loss)/Lb Metal
 $(0.87)
 $(0.24)
 
    
    
Gross antimony revenue - net of discount
  1,986,507 
  2,521,232 
Precious metals revenue
  20,811 
  217,617 
Production and shipping costs
  (1,780,410)
  (2,210,291)
Mexico non-production costs
  (126,707)
  (195,642)
General and administrative - non-production
  (386,468)
  (347,871)
Net interest and gain on sale of asset
  (25,566)
  663 
   EBITDA
  (311,833)
  (14,292)
Depreciation & amortization
  (165,675)
  (204,150)
Net income (loss) - antimony and precious metals
 $(477,508)
 $(218,442)
 
    
    
Zeolite
    
    
Tons sold
  3,353 
  3,097 
Sales Price/Ton
 $182.53 
 $188.36 
Net income (Loss)/Ton
 $25.71 
 $9.62 
 
    
    
Gross zeolite revenue
  612,012 
  583,354 
Production costs, royalties and shipping costs
  (448,446)
  (479,061)
General and administrative - non-production
  (25,849)
  (18,010)
Net interest
  (1,512)
  519 
   EBITDA
  136,205 
  86,802 
Depreciation
  (50,000)
  (57,000)
Net income (loss) - zeolite
 $86,205 
 $29,802 
 
    
    
Company-wide
    
    
Gross revenue
 $2,619,330 
 $3,322,203 
Production costs
  (2,228,856)
  (2,689,352)
Mexico non-production costs
  (126,707)
  (195,642)
General and administrative - non-production
  (412,317)
  (365,881)
Net interest
  (27,078)
  1,182 
   EBITDA
  (175,628)
  72,510 
Depreciation & amortization
  (215,675)
  (261,150)
   Net income (loss)
 $(391,303)
 $(188,640)
 
 
13
 
 
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 months ending March 31, 2017, are primarily due to holding costs from inactivity at the Los Juarez, Guadalupe, and Soyatal mines and the Puerto Blanco mill, as well as the foreign exchange loss on the outsanding tax liability in Mexico. 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 first quarter of 2017.
 
Company-Wide
 
For the first quarter of 2017, we recognized a net loss of $391,303 on sales of $2,619,330, compared to a net loss of $188,640 in the first quarter of 2016 on sales of $3,322,203. The loss in the first quarter of 2017 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 during the first quarter of 2017. Hillgrove Mines has given us permission to use the LRF and other furnaces built for their use for our own production.
 
For the first quarter of 2017, EBITDA was a negative $175,628 compared to a positive EBITDA of $72,510 for the same period of 2016.
 
For the first quarter of 2017, the non-production general and administrative expenses were $412,317 compared to $365,881 for the same period of 2016.
 
Antimony
 
We began the mining and processing of ore from our own Mexican mines during Q1of 2017 and although it had produced 132,184 pounds, only 88,184 pounds were sold. Producing fromour own Mexican mines will allow the Company to benefit from 100% of the price increases rather than a processing fee and a small percent of the price increases.
 
The average sales price of antimony during Q1 2017 was $3.63 per pound compared to $2.76 during the same period in 2016. Unfortunately, we realized only a small part of the price increase because we were selling approximately three months ahead. We are no longer taking orders this far in advance.
 
The metallurgical problems with the Los Juarez ore have been solved, and we are 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 if it is needed.
 
In response to the loss of the raw material supply from Australia, we are implementing the following actions:
 
At the Wadley mine, production is being increased with more miners. The use of pneumatic hammers is planned in lieu of explosives.
At the Soyatal mine, we have begun the direct shipping of high grade ore from the mine directly to the Madero smelter.
 
 
14
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
ITEM 2.  
Management’s Discussion and Analysis of Results of Operations and Financial Condition, continued:
 
Precious Metals
 
The caustic leach of flotation concentrates from Los Juarez was successful, and the sequential pilot production of the Los Juarez gold, silver, and antimony project has commenced at an initial rate of 400 metric tons per month. Assuming that the pilot testing of Los Juarez is economic, the production will be ramped up to 2,000 metric tons per month. In addition, a cyanide leach circuit to increase the recoveries of precious metals from mill tailings and the completion of a 400 ton capacity mill at Puerto Blanco will be considered.
 
Precious Metals Sales
 
 
 
 
 
 
 
 
 
 
 
 
Silver/Gold
 
 
 
 
 
 
 
 
 
 
 
 
Montana
 
2014
 
 
2015
 
 
2016
 
 
2017
 
Ounces Gold Shipped (Au)
  64.77 
  89.12 
  108.10 
  24.60 
Ounces Silver Shipped (Ag)
  29,480.22 
  30,420.75 
  38,123.46 
  8,639.39 
Revenues
 $461,083 
 $491,426 
 $556,650 
 $133,506 
Australian - Hillgrove
    
    
    
    
Ounces Gold Shipped (Au)
    
    
  496.65 
  57.25 
Revenues - Gross
    
    
 $597,309 
 $53,971 
Revenues to Hillgrove
    
    
  (481,088)
  (166,666)
Revenues to USAC
    
    
 $116,221 
 $(112,695)
 
    
    
    
    
 Total Revenues
 $461,083 
 $491,426 
 $672,871 
 $20,811 
 
Bear River Zeolite (BRZ)
 
During Q1 2017, BRZ sold 3,353 tons of zeolite compared to 3,097 tons in the same period of 2016, up 256 tons or 8.3%.
 
BRZ realized a profit of $86,205 in Q1 of 2017, compared to $29,802 in 2016. The increase in our profit from our zeolite operations was $56,403 (189%).
 
BRZ realized an EBITDA for Q1 2017 of $136,205 compared to $86,802 for the same period in 2016, an increase of $49,403 (56.9%).
 
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.
 
 
15
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
ITEM 2.
Management’s Discussion and Analysis of Results of Operations and Financial Condition, continued:
 
Financial Position
 
Financial Condition and Liquidity
 
March 31,
 
 
March 31,
 
 
 
2017
 
 
2016
 
Current Assets
 $1,733,777 
 $2,326,089 
Current liabilities
  (3,754,101)
  (2,948,379)
   Net Working Capital
 $(2,020,324)
 $(622,290)
 
    
    
Cash provided (used) by operations
 $143,613 
 $252,476 
Cash used for capital outlay
  (79,599)
  (245,702)
Cash provided (used) by financing:
    
    
   Net proceeds (payments to) factor
  (4,388)
  84,083 
   Proceeds from notes payable to bank
  15,985 
  - 
   Change in check issued and payable
  (21,519)
  - 
   Payment of notes payable to bank
  - 
  (44,912)
   Principal paid on long-term debt
  (53,020)
  (41,824)
      Net change in cash
 $1,072 
 $4,121 
 
Our net working capital decreased by approximately $331,000 from December 31, 2016. Our cash increased by approximately $1,000 during the same period. The decrease in our net working capital was primarily due to an increase of approximately $325,000 in accounts payable, and expenditures of approximately $80,000 for capital outlay. An increase in inventory of approximately $55,000 and decreases in our current liabilities increased our working capital. We have estimated commitments for construction and improvements, including $50,000 to finish building and installing precious metals leach circuits. We believe that with our current cash balance, along with the future cash flow from operations, 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 $183,302 at March 31, 2017.
 
ITEM 3.
 
None
 
 
16
 
 
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 March 31, 2017. 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 March 31, 2017. 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 March 31, 2017.
 
 
17
 
 
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: 
May 15, 2017
 
       John C. Lawrence, Director and President (Principal Executive)
 
 
 
 
 
 
 
 
 
By: /s/ Daniel L. Parks
 
Date: May 15, 2017
 
      Daniel L. Parks, Chief Financial Officer
 
 
 
 
 
 
 
18