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UNITED STATES ANTIMONY CORP - Quarter Report: 2019 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, 2019
 
[ ]  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  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  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
 ☒
 
 
 Emerging growth company
 ☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the registrant is a shell company as defined by Rule 12b-2 of the Exchange Act. YES ☐ No 
 
At May 15, 2019, the registrant had outstanding 68,427,171 shares of par value $0.01 common stock.
 

 
 
 
UNITED STATES ANTIMONY CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD
ENDED MARCH 31, 2019
(UNAUDITED)
 
TABLE OF CONTENTS
 
 
Page
 
 
PART I – FINANCIAL INFORMATION
 
 
 
1-14
 
 
15-18
 
 
19
 
 
19
 
 
PART II – OTHER INFORMATION
 
 
 
20
 
 
20
 
 
20
 
 
20
 
 
20
 
 
20
 
 
21
 
 
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
 
 
 
 
 
 
 
 
March 31,
 
 
December 31,
 
 
 
2019
 
 
2018
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $43,504 
 $56,650 
Certificates of deposit
  253,552 
  252,954 
Accounts receivable
  335,186 
  438,391 
Inventories
  887,648 
  755,261 
Note receivable - sale of land
  - 
  400,000 
Total current assets
  1,519,890 
  1,903,256 
 
    
    
Properties, plants and equipment, net
  15,316,467 
  15,227,172 
Restricted cash for reclamation bonds
  57,247 
  57,247 
IVA receivable and other assets
  403,466 
  369,448 
Total assets
 $17,297,070 
 $17,557,123 
 
    
    
LIABILITIES AND STOCKHOLDERS' EQUITY
    
    
Current liabilities:
    
    
Checks issued and payable
 $45,637 
 $46,482 
Accounts payable
  2,045,402 
  1,926,320 
Due to factor
  5,440 
  16,524 
Accrued payroll, taxes and interest
  262,463 
  159,037 
Other accrued liabilities
  378,010 
  353,911 
Payables to related party
  247,731 
  93,567 
Deferred revenue
  32,400 
  32,400 
Notes payable to bank
  113,125 
  183,917 
Long-term debt, current portion, net of discount
  725,317 
  705,460 
Total current liabilities
  3,855,525 
  3,517,618 
 
    
    
Long-term debt, net of discount and current portion
  968,443 
  1,027,730 
Hillgrove advances payable
  1,134,221 
  1,134,221 
Stock payable to directors for services
  206,250 
  175,000 
Asset retirement obligations and accrued reclamation costs
  279,257 
  277,720 
Total liabilities
  6,443,696 
  6,132,289 
 
    
    
Commitments and contingencies (Note 4, and 7)
    
    
 
    
    
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 $930,000 and $922,500
    
    
 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 $5,002,470 and $4,961,324
    
    
 respectively)
  17,509 
  17,509 
 
Common stock, $0.01 par value, 90,000,000 shares authorized;
 
    
68,427,171 and 68,227,171 shares issued and outstanding, respectively
  684,271 
  682,271 
Additional paid-in capital
  36,540,874 
  36,406,874 
Accumulated deficit
  (26,398,559)
  (25,691,099)
Total stockholders' equity
  10,853,374 
  11,424,834 
Total liabilities and stockholders' equity
 $17,297,070 
 $17,557,123 
 
 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,
2019
 
 
March 31,
2018
 
 
 
 
 
 
 
 
REVENUES
 $2,456,365 
 $2,432,929 
 
    
    
COST OF REVENUES
  2,525,418 
  2,488,017 
 
    
    
GROSS PROFIT (LOSS)
  (69,053)
  (55,088)
 
    
    
OPERATING EXPENSES:
    
    
   General and administrative
  205,174 
  150,831 
   Salaries and benefits
  232,668 
  91,446 
   Other operating expenses
  76,130 
  - 
   Professional fees
  100,742 
  102,404 
       TOTAL OPERATING EXPENSES
  614,714 
  344,681 
 
    
    
INCOME (LOSS) FROM OPERATIONS
  (683,767)
  (399,769)
 
    
    
OTHER INCOME (EXPENSE):
    
    
Interest income
  741 
  562 
Interest expense
  (22,488)
  (23,833)
Foreign exchange gain (loss)
  - 
  (50,000)
Factoring expense
  (1,946)
  (1,400)
       TOTAL OTHER INCOME (EXPENSE)
  (23,693)
  (74,671)
 
    
    
NET LOSS
  (707,460)
  (474,440)
     Preferred dividends
  (12,162)
  (12,162)
 
    
    
Net loss available to common stockholders
 $(719,622)
 $(486,602)
 
    
    
Net income (loss) per share of
    
    
common stock:
    
    
Basic and diluted
 $(0.01)
 $(0.01)
 
    
    
Weighted average shares outstanding:
    
    
Basic
  68,394,204 
  67,488,063 
Diluted
  68,394,204 
  67,488,063 
 
 
2
 
 
United States Antimony Corporation and Subsidiaries
Consolidated Statement of Changes in Stockholders' Equity (Unaudited)
For the periods ended March 31, 2019 and and March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional
 
 
 
 
 
Total
 
 
 
Total Preferred Stock
 
 
Common Stock
 
 
 
 
 
Paid
 
 
Accumulated
 
 
Stockholders'
 
Quarter ended March 31, 2019
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
In Capital
 
 
Deficit
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balances, January 1, 2019
  2,678,909 
 $26,788 
  68,227,171 
 $682,271 
 $36,406,874 
 $(25,691,099)
 $11,424,834 
 
    
    
    
    
    
    
    
Issuance of common stock to chief financial officer
    
    
  200,000 
  2,000 
  134,000 
    
  136,000 
 
    
    
    
    
    
    
    
Net loss
    
    
    
    
    
  (707,460)
  (707,460)
Balances, March 31, 2019
  2,678,909 
 $26,788 
  68,427,171 
 $684,271 
 $36,540,874 
 $(26,398,559)
 $10,853,374 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional
 
 
 
 
 
Total
 
 
 
Total Preferred Stock
 
 
Common Stock
 
 
 
 
 
Paid
 
 
Accumulated
 
 
Stockholders'
 
Quarter ended March 31, 2018
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
In Capital
 
 
Deficit
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balances, January 1, 2018
  2,678,909 
 $26,788 
  67,488,153 
 $674,881 
 $36,239,264 
 $(26,564,324)
 $10,376,609 
 
    
    
    
    
    
    
    
Net loss
    
    
    
    
    
  (474,440)
  (474,440)
Balances, March 31, 2018
  2,678,909 
 $26,788 
  67,488,153 
 $674,881 
 $36,239,264 
 $(27,038,764)
 $9,902,169 
 
  The accompanying notes are an integral part of the consolidated financial statements.
 
 
3
 
 
United States Antimony Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
 
 
 
For the three months ended
 
Cash Flows From Operating Activities:
 
March 31,
2019
 
 
March 31,
2018
 
Net income (loss)
 $(707,460)
 $(474,440)
Adjustments to reconcile net income (loss) to net cash
    
    
 provided (used) by operating activities:
    
    
Depreciation and amortization
  223,273 
  277,562 
Amortization of debt discount
  18,037 
  21,120 
Accretion of asset retirement obligation
  1,537 
  1,537 
Common stock issued for services
  136,000 
  - 
Common stock payable for directors fees
  31,250 
  43,750 
Foreign exchange loss
  - 
  50,000 
Other, net
  (598)
  (444)
Change in:
    
    
Accounts receivable
  103,205 
  (49,967)
Inventories
  (132,387)
  273,615 
Other current assets
  - 
  4,697 
IVA receivable and other assets
  (34,018)
  (45,609)
Accounts payable
  119,082 
  16,202 
Accrued payroll, taxes and interest
  103,426 
  10,015 
Other accrued liabilities
  24,099 
  27,271 
Deferred revenue
  - 
  116 
Payables to related party
  28,964 
  8,236 
Net cash provided (used) by operating activities
  (85,590)
  163,661 
 
    
    
Cash Flows From Investing Activities:
    
    
Payment received on note receivable - sale of land
  400,000 
  - 
       Purchase of properties, plants and equipment
  (312,568)
  (94,805)
Net cash provided (used) by investing activities
  87,432 
  (94,805)
 
    
    
Cash Flows From Financing Activities:
    
    
Change in checks issued and payable
  (845)
  (17,203)
Net borrowing from factor
  (11,084)
  1,870 
Advance from related party
  125,200 
  75,000 
Principal paid on notes payable to bank
  (70,792)
  (95,448)
Principal payments of net debt
  (57,467)
  (48,681)
Net cash provided (used) by financing activities
  (14,988)
  (84,462)
NET INCREASE (DECREASE) IN CASH
    
    
    AND CASH EQUIVALENTS AND RESTRICTED CASH
  (13,146)
  (15,606)
Cash and cash equivalents and restricted cash at beginning of period
  113,897 
  91,332 
Cash and cash equivalents and restricted cash at end of period
 $100,751 
 $75,726 
 
The accompanying notes are an integral part of the consolidated financial statements.
 
 
4
 
 
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, 2019 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2019.
 
For further information refer to the financial statements and footnotes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
 
Going Concern Consideration
 
At March 31, 2019, the Company’s consolidated financial statements show negative working capital of approximately $2.3 million and accumulated deficit of approximately $26.4 million.  In addition, the Company has a net loss of $707,460 for the first quarter of 2019, and the Company has had recurring operating losses for most of the prior periods.  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 the production costs incurred in Mexico.
 
Regarding the antimony division, prices were stable or decreased slightly during the first quarter of 2019 compared to the same quarter in the prior year, but orders have been strong. For the quarter ended March 31, 2019, the average sale price for antimony is approximately $3.85 per pound compared to a price of $4.04 per pound for the quarter ended March 31, 2018. 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 2018, we endured supply interruptions from our North American supplier, but normal supply quantities have resumed since 2018. The new supply agreement with our North American supplier has helped us with cash flow from our antimony division in 2018 and into 2019.
 
In 2017, we reduced costs for labor at the Mexico locations which has resulted in a lower overall production costs in Mexico and we adjusted operating approaches at Madero that resulted in decreased operating costs for fuel, natural gas, electricity, and reagents for 2018 and 2019. The Company’s 2019 plan involves ramping up production at its antimony properties in Mexico. Our expectations are that in 2019 we can double the antimony output for 2018. We also are planning to produce and sell antimony metal directly from Mexico to customers which will save us approximately $0.38 per pound in processing costs and freight. 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 in the second quarter of 2019. We expect to be receiving income from the production of precious metals some time during the third quarter of 2019. We believe that with the lower cost per pound due to increased production and the savings from shipping metal directly from Mexico, we will have positive cash flow for Mexican antimony production by the end of the year and that we will be selling precious metals produced from Los Juarez before the end of 2019.
 
 
5
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 
1.
Basis of Presentation, Continued:
 
Over the past several years, the Company has been able to make required principal payments on its debt from cash generated from operations without the need for additional borrowings or selling shares of its common stock. The Company plans to continue keeping current on its debt payments in 2019 through cash flows from operations while we continue with the expansion of our Mexican operation. Management believes that the actions taken to increase production and revenue from both antimony and precious metals along with a reduction in production costs will enable the Company to meet its obligations for the next twelve months.
 
2. 
Developments in Accounting Pronouncements
 
Accounting Standards Updates Adopted
 
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02 Leases (Topic 842).  The update modified the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases.  The update was effective for fiscal years beginning after December 15, 2018, with early adoption permitted.  Adoption of this update as of January 1, 2019 did not have a material impact on the Company’s consolidated financial statements.
 
In June 2018, the FASB issued ASU No. 2018-07 Compensation - Stock Compensation (Topic 718):  Improvements to Nonemployee Share-Based Payment Accounting.  The update involves simplification of several aspects of accounting for nonemployee share-based payment transactions by expanding the scope of Topic 718 to include nonemployee awards.  The update was effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted.  Adoption of this update as of January 1, 2019 did not have a material impact on the Company’s consolidated financial statements.
 
Accounting Standards Updates to Become Effective in Future Periods
 
In August 2018, the FASB issued ASU No. 2018-13 Fair Value Measurement (Topic 820):  Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.  The update removes, modifies and makes additions to the disclosure requirements on fair value measurements.  The update is effective for fiscal years beginning after December 15, 2019, with early adoption permitted.  Management is evaluating the impact of this update on the Company’s fair value measurement disclosures.
 
 
6
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 
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.
 
For the three months ended March 31, 2019 and 2018, 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,
2019
 
 
March 31,
2018
 
Warrants
  250,000 
  250,000 
Convertible preferred stock
  1,751,005 
  1,751,005 
Total possible dilution
  2,001,005 
  2,001,005 
 
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 month periods ended March 31, 2019 and 2018, were as follows:
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2019
 
 
2018
 
Antimony
 $1,705,823 
 $1,681,812 
Zeolite
  726,015 
  690,707 
Precious metals
  24,527 
  60,410 
 
 $2,456,365 
 $2,432,929 
 
 
7
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 
4. 
Revenue Recognition, continued:
 
The following is sales information by geographic area based on the location of customers for the three month periods ended March 31, 2019 and 2018:
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2019
 
 
2018
 
United States
 $2,108,569 
 $2,247,691 
Canada
  187,257 
  185,238 
Mexico
  160,539 
  - 
 
 $2,456,365 
 $2,432,929 
 
Sales of products to significant customers were as follows for the three month periods ended March 31, 2019 and 2018:
 
Sales to Three
 
 For the Period Ended
 
Largest Customers
 
March 31,
2019
 
 
March 31,
2018
 
Kohler Corporation
 $458,094 
 $316,772 
Ampacet Corporation
  - 
  184,142 
East Penn Manufacturing
  157,328 
  - 
Mexichem Speciality Compounds
  684,011 
  728,578 
 
 $1,299,433 
 $1,229,492 
% of Total Revenues
  52.90%
  50.50%
 
Accounts receivable from largest customers were as follows at March 31, 2019 and December 31, 2018:
 
Three Largest
 
 
 
 
 
 
Accounts Receivable
 
March 31,
2019
 
 
December 31,
2018
 
DanaMart
 $- 
 $143,890 
Axens North America Inc.
  64,500 
  34,912 
Earth Innovations Inc.
  - 
  35,967 
Commerce Industrial Chemical
  36,652 
  - 
Nutreco Canada Inc.
  27,736 
  - 
 
 $128,888 
 $214,769 
% of Total Receivables
  38.50%
  49.00%
 
 
8
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
  
Our trade accounts receivable balance related to contracts with customers was $335,186 at March 31, 2019 and $438,391 at December 31, 2018. Our products do not involve any warranty agreements and product returns are not typical.
 
We have determined our contracts do not include a significant financing component. For antimony and zeolite sales contracts, we may factor certain receivables and receive final payment within 30 days of the performance obligation being met. For antimony and zeolite receivables not factored, we typically receive payment within 10 days. For precious metals sales, a provisional payment of 75% is typically received within 45 days of the date the product is delivered to the customer. After an exchange of assays, a final payment is normally received within 90 days of product delivery.
 
5.
Inventories
 
Inventories at March 31, 2019 and December 31, 2018 consisted primarily of finished antimony products, antimony metal, antimony ore, and finished zeolite products that are stated at weighted average lower of 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, 2019 and December 31, 2018, is as follows:
 
 
 
March 31,
 
 
December 31,
 
 
 
2019
 
 
2018
 
Antimony Metal
 $158,532 
 $8,127 
Antimony Oxide
  252,704 
  255,782 
Antimony Concentrates
  - 
  2,214 
Antimony Ore
  269,627 
  257,067 
     Total antimony
  680,863 
  523,190 
Zeolite
  206,785 
  232,071 
 
 $887,648 
 $755,261 
 
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
 
March 31,
2019
 
 
December 31,
2018
 
Accounts receivable - non factored
 $329,746 
 $421,867 
Accounts receivable - factored with recourse
  5,440 
  16,524 
      Accounts receivable - net
 $335,186 
 $438,391 
 
 
9
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
 
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 as of March 31, 2019, requires payments of $10,000 plus a tax of $1,700, per month. The lease is renewable each year with a 15 day notice to the lessor, and agreement of terms. The next lease renewal is scheduled for renewal in June 2019.
 
8. 
Notes Payable to Bank
 
At March 31, 2019 and December 31, 2018, the Company had the following notes payable to bank:
 
 
 
March 31,
 
 
December 31,
 
 
 
2019
 
 
2018
 
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
 $13,126 
 $83,918 
 
    
    
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 
  99,999 
 
    
    
Total notes payable to the bank
 $113,125 
 $183,917 
 
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.
 
 
10
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
9. 
Debt
 
Long-Term debt at March 31, 2019 and December 31, 2018 is as follows:
 
March 31,
 
 
December 31,
 
 
 
2019
 
 
2018
 
Note payable to Zeo Inc., non interest bearing, payable in 11 quarterly installments of $8,300 with a final payment of $8,700; maturing December 2022; uncollateralized.
 $100,000 
 $100,000 
 
    
    
Note payable to Cat Financial Services, bearing interest at 6%; payable in monthly installments of $1,300; maturing August 2019; collateralized by equipment.
  9,088 
  14,022 
 
    
    
Note payable to Cat Financial Services, bearing interest at 6%; payable in monthly installments of $778; maturing December 2022; collateralized by equipment.
  31,940 
  34,390 

    
    
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.
  3,294 
  5,851 

    
    
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.
  5,844 
  8,371 
 
    
Note payable to Phyllis Rice, bearing interest at 1%; payable in monthly installments of $2,000; originally maturing March 2015; collateralized by equipment.
  9,146 
  12,146 
 
    
Obligation payable for Soyatal Mine, non-interest bearing, annual payments of $100,000 or $200,000 through 2020, net of discount of $19,156 and $23,321, respectively. In addition, the Company is deliquent on payments of $392,069 related to this loan.
  623,913 
  639,747 
 
    
Obligation payable for Guadalupe Mine, non-interest bearing, annual payments from $60,000 to $149,078 through 2026, net of discount of $238,572 and $252,444, respectively. In addition, the Company is delinquent on payments of $32,539 related to this loan.
  910,535 
  918,663 
 
  1,693,760 
  1,733,190 
Less current portion
  (725,317)
  (705,460)
Long-term portion
 $968,443 
 $1,027,730 
 
At March 31, 2019, principal payments on debt are due as follows:
 
3 Months Ending March 31,
 
Principal Payment
 
 
Discount
 
 
Net
 
2020
 $791,908 
 $(66,591)
 $725,317 
2021
  264,928 
  (51,140)
  213,788 
2022
  190,396 
  (40,765)
  149,631 
2023
  182,996 
  (34,266)
  148,730 
2024
  149,078 
  (27,378)
  121,700 
Thereafter
  371,181 
  (36,587)
  334,594 
 
 $1,950,487 
 $(256,727)
 $1,693,760 
 
 
 
11
 
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
10. 
Related Party Transactions
 
During the three months ended March 31, 2019 and 2018, the Chairman of the audit committee and compensation committee received $0 and $4,500, respectively, for services performed. See Note 11 for shares of common stock issued to directors.
 
During the three months ended March 31, 2019 and 2018, the Company paid $1,584 and $2,461, respectively, to John Lawrence, our President and Chief Executive Officer, as reimbursement for equipment used by the Company. Mr. Lawrence advanced the Company $125,200 for ongoing operating expenses during the quarter ended March 31, 2019.
 
11. 
Stockholder’s Equity
 
Issuance of Common Stock for Payable to Board of Directors
 
During the quarters ended March 31, 2019 and March 31, 2018, the Company accrued $31,250 and $43,750, respectively, in directors’ fees payable that will be paid in common stock.
 
In January 2019, the Company issued Daniel Parks, the Company’s Chief Financial Officer, 200,000 shares of the Company’s common stock with a fair value of $136,000 to retain his services. As part of the agreement, Mr. Parks’ hours worked and financial compensation have been reduced.
 
12. 
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 is disassembling, salvaging and transporting the antimony plant and equipment for use in its existing operations in both Mexico and the United States. The project involves 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. As of March 31, 2019, we have substantially completed the demolition and transportation of the salvaged equipment. The real property acquired with the plant was sold for $700,000 in November 2018, for which the Company received $300,000 in 2018 and the remaining balance of $400,000 in the three month period ended March 31, 2019.
 
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 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:
 
March 31,
2019
 
 
December 31,
2018
 
Antimony
 
 
 
 
 
 
United States
 $1,625,783 
 $1,635,315 
Mexico
  11,786,592 
  11,660,769 
Subtotal Antimony
  13,412,375 
  13,296,084 
Precious metals
  605,462 
  615,719 
Zeolite
  1,298,630 
  1,315,369 
   Total
 $15,316,467 
 $15,227,172 
 
Total Assets:
 
March 31,
2019
 
 
December 31,
2018
 
Antimony
 
 
 
 
 
 
United States
 $2,183,085 
 $2,199,694 
Mexico
  12,616,734 
  12,824,292 
Subtotal Antimony
  14,799,819 
  15,023,986 
Precious metals
  605,462 
  615,719 
Zeolite
  1,891,789 
  1,917,418 
   Total
 $17,297,070 
 $17,557,123 
 
 
 
  For the three months ended
 
Capital expenditures:
 
March 31,
2019
 
 
March 31,
2018
 
Antimony
 
 
 
 
 
 
United States
 $1,345 
 $- 
Mexico
  274,906 
  40,085 
Subtotal Antimony
  276,251 
  40,085 
Precious Metals
  6,754 
  40,988 
Zeolite
  29,563 
  13,732 
   Total
 $312,568 
 $94,805 
 
 
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
 
 
Bear River
 
 
 
 
months ended March 31, 2019
 
USAC
 
 
Mexico
 
 
Antimony
 
 
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $1,545,284 
 $160,539 
 $1,705,823 
 $24,527 
 $726,015 
 $2,456,365 
 
    
    
    
    
    
    
Depreciation and amortization
  10,878 
  149,083 
  159,961 
  17,011 
  46,301 
  223,273 
 
    
    
    
    
    
    
Income (loss) from operations
  (52,096)
  (802,676)
  (854,772)
  7,516 
  163,489 
  (683,767)
 
    
    
    
    
    
    
Other income (expense):
  (1,367)
  (18,287)
  (19,654)
  - 
  (4,039)
  (23,693)
 
    
    
    
    
    
    
NET INCOME (LOSS)
 $(53,463)
 $(820,963)
 $(874,426)
 $7,516 
 $159,450 
 $(707,460)
 
Segment Operations for the three
 
Antimony
 
 
Antimony
 
 
Total
 
 
Precious
 
 
Bear River
 
 
 
 
months ended March 31, 2018
 
USAC
 
 
Mexico
 
 
Antimony
 
 
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $1,681,812 
 $- 
 $1,681,812 
 $60,410 
 $690,707 
 $2,432,929 
 
    
    
    
    
    
    
Depreciation and amortization
  13,209 
  149,004 
  162,213 
  67,529 
  47,820 
  277,562 
 
    
    
    
    
    
    
Income (loss) from operations
  198,039 
  (742,781)
  (544,742)
  (7,119)
  152,092 
  (399,769)
 
    
    
    
    
    
    
Other income (expense):
  (778)
  (71,120)
  (71,898)
  - 
  (2,773)
  (74,671)
 
    
    
    
    
    
    
NET INCOME (LOSS)
 $197,261 
 $(813,901)
 $(616,640)
 $(7,119)
 $149,319 
 $(474,440)
 
 
14
 
 
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
 
1st Quarter
 
 
1st Quarter
 
   and Mexico
 
2019
 
 
2018
 
Lbs of Antimony Metal USA
  233,596 
  263,620 
Lbs of Antimony Metal Mexico:
  209,552 
  152,344 
   Total Lbs of Antimony Metal Sold
  443,148 
  415,964 
Average Sales Price/Lb Metal
 $3.85 
 $4.04 
Net loss/Lb Metal
 $(1.97)
 $(1.48)
 
    
    
Gross antimony revenue - net of discount
 $1,705,823 
 $1,681,812 
 
    
    
Cost of sales
  (1,963,964)
  (1,906,002)
Operating expenses
  (596,631)
  (320,552)
Non-operating expenses
  (19,654)
  (71,898)
 
  (2,580,249)
  (2,298,452)
 
    
    
Net loss - antimony
  (874,426)
  (616,640)
Depreciation,& amortization
  159,961 
  162,213 
   EBITDA - antimony
 $(714,465)
 $(454,427)
 
    
    
Precious Metals
    
    
Ounces sold
    
    
  Gold
  6 
  12 
  Silver
  1,724 
  4,073 
 
    
    
Gross precious metals revenue
 $24,527 
 $60,410 
Production costs, royalties, and shipping costs
  (17,011)
  (67,529)
Net income (loss) - precious metals
  7,516 
  (7,119)
Depreciation
  17,011 
  67,529 
   EBITDA - precious metals
 $24,527 
 $60,410 
 
    
    
Zeolite
    
    
Tons sold
  3,841 
  3,753 
Average Sales Price/Ton
 $189.02 
 $184.04 
Net income/Ton
 $41.51 
 $39.79 
 
    
    
Gross zeolite revenue
 $726,015 
 $690,707 
Cost of sales
  (544,443)
  (514,486)
Operating expenses
  (18,083)
  (24,129)
Non-operating expenses
  (4,039)
  (2,773)
Net income - zeolite
  159,450 
  149,319 
Depreciation
  46,301 
  47,820 
   EBITDA - zeolite
 $205,751 
 $197,139 
 
    
    
Company-wide
    
    
Gross revenue
 $2,456,365 
 $2,432,929 
Production costs
  (2,525,418)
  (2,488,017)
Operating expenses
  (614,714)
  (344,681)
Non-operating expenses
  (23,693)
  (74,671)
Net income (loss)
  (707,460)
  (474,440)
Depreciation,& amortization
  223,273 
  277,562 
   EBITDA
 $(484,187)
 $(196,878)
 
    
    
 
 
15
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition, continued:
 
Company-Wide
 
For the first quarter of 2019, we recognized a net loss of $707,460, on sales of $2,456,365, compared to a net loss of $474,440 in the first quarter of 2018 on sales of $2,432,929. In addition to normal operating costs, the loss in the first quarter of 2019 was primarily due to the one time cost to demolish the Lanxess plant in Reynosa, Mexico ($76,130), an increase in administrative salaries paid by issuance of stock ($136,000), a reduction in precious metals revenue ($35,883), and the cost of the listing on the NYSE ($60,000). The loss in the first quarter of 2018 was primarily due to decrease in the raw materials received from our North American supplier. During 2018, we endured supply interruptions from our North American supplier, but we anticipate that near normal supply quantities will resume for the remainder of 2019.
 
For the first quarter of 2019, EBITDA was a negative $484,187 compared to a negative $196,878 for the same period of 2018.
 
Net non-cash expense items totaled $410,347 for 2019 and included $223,273 for depreciation and amortization, $18,037 for amortization of debt discount, $31,250 for director compensation, $136,000 for stock issued for employment, and $1,787 for other items.
 
Net non-cash expense items totaled $343,969 for the first quarter of 2018 and included $277,562 for depreciation and amortization, $21,120 for amortization of debt discount, $43,750 for director compensation and $1,537 for other items.
 
For the first quarter of 2019, general and administrative expenses were $205,174 compared to $150,831 for the same period of 2018.
 
Antimony
 
For the three months ended March 31, 2019, we sold 443,148 pounds of antimony compared to 415,964 pounds for the three months ended March 31, 2018. The raw material received from our North American supplier decreased by approximately 30,000 pounds for the three months ended March 31, 2019, compared to the same quarter for 2018. We had a increase in raw material of approximately 57,000 pounds from Mexico for the first quarter of 2019 compared to the same quarter for 2018.
 
The average sales price of antimony during the three months ended March 31, 2019 was $3.85 per pound compared to $4.04 during the same period in 2018.
 
The cyanide leach circuit at Puerto Blanco has been permitted, and construction of the leach circuit is underway and is nearly complete. The largest project was the construction of the tailings pond, and it is ready for a liner.
 
At the Wadley mine, production is being increased with more miners and load haul dump equipment. The use of pneumatic hammers is planned in lieu of explosives. We believe that we can double our production from this mine in 2019.
 
The Guadalupe mine has started production, and will be shipping direct shipping ore to our Madero smelter during 2019.
 
The Soyatal mine will be started once we receive an explosives permit.
 
 
16
 
 
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 two of 2019. Tests will include three technical discoveries that we expect to increase recovery and expedite processing.
 
For the three months ended March 31, 2019, income for precious metals was $24,527, compared to $60,410 for the same period of 2018.
 
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  
 
Montana
 
2019
 
 
2018
 
Ounces Gold Shipped (Au)
  6.45 
  11.59 
Ounces Silver Shipped (Ag)
  1,724.40 
  4,073.27 
 Total Revenues
 $24,527 
 $60,410 
 
Bear River Zeolite (BRZ)
 
For the three months ended March 31, 2019, BRZ sold 3,841 tons of zeolite compared to 3,753 tons in the same period of 2018, up 88 tons (2%).
 
BRZ realized net income of $159,450 after depreciation of $46,301 in the first quarter of 2019, compared to a net income of $149,319 after depreciation of $47,820 for the same quarter of 2018.
 
BRZ realized an EBITDA for the three months ended March 31, 2019 of $205,571, compared to $197,319 for the same period in 2018.
 
We are anticipating continued growth in all areas of zeolite sales.
 
 
17
 
 
Financial Position
 
Financial Condition and Liquidity
 
 
 
 
 
 
 
 
March 31,
2019
 
 
December 31,
2018
 
Current assets
 $1,519,890 
 $1,903,256 
Current liabilities
  (3,855,525)
  (3,517,618)
   Net Working Capital
 $(2,335,635)
 $(1,614,362)
 
 
 
 For the Three Months Ended
 
 
 
March 31,
2019
 
 
March 31,
2018
 
Cash provided (used) by operations
 $(85,590)
 $163,661 
Cash provided by collection of note receivable
  400,000 
  - 
Cash used for capital outlay
  (312,568)
  (94,805)
Cash provided (used) by financing:
    
    
   Net payments (to) from factor
  (11,084)
  1,870 
   Payments on notes payable to bank
  (70,792)
  (95,448)
   Principal paid on long-term debt
  (57,467)
  (48,681)
   Advance from related party
  125,200 
  75,000 
   Checks issued and payable
  (845)
  (17,203)
      Net change in cash and cash equivalents
 $(13,146)
 $(15,606)
 
Our net working capital decreased by approximately $721,273 from December 31, 2018. Our cash and cash equivalents decreased by approximately $13,000 during the same period. The decrease in our net working capital was partially due to $76,000 for decommissioning an antimony plant in Reynosa, Mexico, and an increase of approximately $160,000 in the liabilities in Mexico. We spent approximately $312,000 for capital items, including the capitalized portion of demolishing the Lanxess plant in Reynosa, Mexico, and our long term debt decreased by approximately $59,000. We have estimated commitments for construction and improvements of $100,000 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 $113,125 at March 31, 2019.
 
 
18
 
 
ITEM 3.
 
None
 
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, 2019. 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, 2019. 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, 2019.
 
 
19
 
 
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
  
 
20
 
 
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)
 
 
 
 
 
Date: May 15, 2019
By:  
/s/ John C. Lawrence  
 
 
 
John C. Lawrence, Director and President
 
 
 
(Principal Executive)
 
 
 

 
 
 
 
 
Date: May 15, 2019
By:  
/s/ Daniel L. Parks
 
 
 
Daniel L. Parks, Chief Financial Officer
 
 
 

 
 
 
 
21