10-Q 1 uamy_10q.htm QUARTERLY REPORT Blueprint
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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
 
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 shell company as defined by Rule 12b-2 of the Exchange Act.
 
YES
 
No
 
At August 14, 2017, the registrant had outstanding 67,488,153 shares of par value $0.01 common stock.
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer
Accelerated filer
Non-accelerated filer
☐  (Do not check if a smaller reporting company)
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. ☐  

 
 
 
UNITED STATES ANTIMONY CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD
ENDED JUNE 30, 2017
(UNAUDITED)
 
TABLE OF CONTENTS
 
 
Page
 
 
PART I – FINANCIAL INFORMATION
 
 
 
Item 1: Financial Statements (unaudited)
1-14
 
 
Item 2: Management’s Discussion and Analysis of Results of Operations and Financial Condition
15-19
 
 
Item 3: Quantitative and Qualitative Disclosure about Market Risk
19
 
 
Item 4: Controls and Procedures
19
 
 
PART II – OTHER INFORMATION
 
 
 
Item 1: Legal Proceedings
20
 
 
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
20
 
 
Item 3: Defaults upon Senior Securities
20
 
 
Item 4: Mine Safety Disclosures
20
 
 
Item 5: Other Information
20
 
 
Item 6: Exhibits and Reports on Form 8-K
20
 
 
SIGNATURE
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
 
 
United States Antimony Corporation and Subsidiaries
 
 
Consolidated Balance Sheets
 
 
June 30, 2017 and December 31, 2016
 
 
ASSETS
 
 
 
(Unaudited)
 
 
 
 
 
 
June 30,
2017
 
 
December 31,
2016
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $24,550 
 $10,057 
Certificates of deposit
  252,298 
  251,641 
Accounts receivable, net
  541,284 
  552,119 
Inventories
  806,441 
  855,637 
Other current assets
  30,748 
  23,101 
Total current assets
  1,655,321 
  1,692,555 
 
    
    
Properties, plants and equipment, net
  15,417,160 
  15,695,966 
Restricted cash for reclamation bonds
  63,274 
  63,274 
Foreign value added tax refund receivable
  365,120 
  276,500 
Other assets
  32,520 
  37,703 
Total assets
 $17,533,395 
 $17,765,998 
 
    
    
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
    
    
Checks issued and payable
 $22,906 
 $35,682 
Accounts payable
  1,864,415 
  1,797,251 
Due to factor
  170,870 
  150,399 
Accrued payroll, taxes and interest
  173,333 
  213,695 
Other accrued liabilities
  154,659 
  122,968 
Payables to related parties
  16,759 
  14,525 
Deferred revenue
  78,730 
  78,730 
Notes payable to bank
  192,144 
  167,317 
Income taxes payable (Note 11)
  462,152 
  410,510 
Long-term debt, current portion, net of discount
  462,524 
  391,046 
Total current liabilities
  3,598,492 
  3,382,123 
 
    
    
Long-term debt, net of discount and current portion
  1,341,780 
  1,472,869 
Hillgrove advances payable (Note 8)
  1,134,201 
  1,134,221 
Common stock payable to directors for services
  87,500 
  168,750 
Asset retirement obligations and accrued reclamation costs
  268,677 
  265,782 
Total liabilities
  6,430,650 
  6,423,745 
Commitments and contingencies (Note 5 and 11)
    
    
 
    
    
Stockholders' equity:
    
    
Preferred stock $0.01 par value, 10,000,000 shares authorized:
    
    
Series A: -0- shares issued and outstanding
  - 
  - 
Series B: 750,000 shares issued and outstanding
    
    
(liquidation preference $909,375 and $907,500
    
    
 respectively)
  7,500 
  7,500 
Series C: 177,904 shares issued and outstanding
    
    
(liquidation preference $97,847)
  1,779 
  1,779 
Series D: 1,751,005 shares issued and outstanding
    
    
(liquidation preference $5,014,692 and $4,920,178
    
    
 respectively)
  17,509 
  17,509 
Common stock, $0.01 par value, 90,000,000 shares authorized;
    
    
67,488,153 and 67,066,278 shares issued and outstanding, respectively
  674,881 
  670,662 
Additional paid-in capital
  36,239,264 
  36,074,733 
Accumulated deficit
  (25,838,188)
  (25,429,930)
Total stockholders' equity
  11,102,745 
  11,342,253 
Total liabilities and stockholders' equity
 $17,533,395 
 $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  
 
 
  For the six months ended  
 
 
 
June 30, 2017
 
 
June 30, 2016
 
 
June 30, 2017
 
 
June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
REVENUES
 $2,838,480 
 $3,014,394 
 $5,457,811 
 $6,319,929 
 
    
    
    
    
COST OF REVENUES
  2,535,587 
  2,824,779 
  5,065,374 
  5,923,003 
 
    
    
    
    
GROSS PROFIT
  302,893 
  189,615 
  392,437 
  396,926 
 
    
    
    
    
OPERATING EXPENSES:
    
    
    
    
  General and administrative
  236,482 
  270,514 
  534,560 
  540,423 
  Professional fees
  34,582 
  79,815 
  137,920 
  223,465 
  Hillgrove advance - earned credit (Note 8)
  - 
  (52,588)
  - 
  (76,579)
TOTAL OPERATING EXPENSES
  271,064 
  297,741 
  672,480 
  687,309 
 
    
    
    
    
INCOME (LOSS) FROM OPERATIONS
  31,829 
  (108,126)
  (280,043)
  (290,383)
 
    
    
    
    
OTHER INCOME (EXPENSE):
    
    
    
    
Interest income
  267 
  220 
  838 
  1,402 
Interest expense
  (27,154)
  (28,855)
  (54,804)
  (28,860)
Foreign exchange loss
  (10,191)
  - 
  (51,642)
  - 
Factoring expense
  (11,706)
  (7,909)
  (22,607)
  (15,435)
TOTAL OTHER INCOME (EXPENSE)
  (48,784)
  (36,544)
  (128,215)
  (42,893)
 
    
    
    
    
INCOME (LOSS) BEFORE INCOME TAXES
  (16,955)
  (144,670)
  (408,258)
  (333,276)
 
    
    
    
    
Provision for income tax
  - 
  (12,000)
  - 
  (12,000)
 
    
    
    
    
NET INCOME (LOSS)
  (16,955)
  (156,670)
  (408,258)
  (345,276)
  Preferred dividends
  (12,162)
  (12,162)
  (24,325)
  (24,325)
 
    
    
    
    
  Net income (loss) available to common stockholders
 $(29,117)
 $(168,832)
 $(432,583)
 $(369,601)
 
    
    
    
    
Net income (loss) per share of common stock:
    
    
    
    
Basic
 
Nil
 
 
Nil
 
 $(0.01)
 $(0.01)
Diluted
 
Nil
 
 
Nil
 
 $(0.01)
 $(0.01)
 
    
    
    
    
Weighted average shares outstanding:
    
    
    
    
Basic
  67,488,153 
  66,866,278 
  67,336,651 
  66,687,981 
Diluted
  67,488,153 
  66,866,278 
  67,336,651 
  66,687,981 
 
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 six months ended
 
 
 
June 30, 2017
 
 
June 30, 2016
 
Cash Flows From Operating Activities:
 
 
 
 
 
 
Net income (loss)
 $(408,258)
 $(345,276)
Adjustments to reconcile net income (loss) to net cash
    
    
provided (used) by operating activities:
    
    
Depreciation and amortization
  430,050 
  442,100 
Amortization of debt discount
  46,828 
  - 
Hillgrove advance earned credit
  - 
  (76,579)
Accretion of asset retirement obligation
  2,895 
  2,727 
Common stock payable for directors' fees
  87,500 
  75,000 
Foreign exchange loss
  51,642 
  - 
Other non cash items
  (677)
  - 
Change in:
    
    
Accounts receivable, net
  10,835 
  (249,178)
Inventories
  49,196 
  188,536 
Other current assets
  (7,647)
  (30,604)
Other assets
  (83,437)
  (15,286)
Accounts payable
  67,164 
  100,638 
Accrued payroll, taxes and interest
  (40,362)
  67,224 
Other accrued liabilities
  31,691 
  74,128 
Income tax payable
  - 
  12,000 
Payables to related parties
  2,234 
  11,553 
Net cash provided (used) by operating activities
  239,654 
  256,983 
 
    
    
Cash Flows From Investing Activities:
    
    
Purchases of properties, plants and equipment
  (151,244)
  (361,003)
Net cash used by investing activities
  (151,244)
  (361,003)
 
    
    
Cash Flows From Financing Activities:
    
    
Change in checks issued and payable
  (12,776)
  - 
Net proceeds from factor
  20,471 
  94,182 
Proceeds from notes payable to bank
  24,827 
  26,506 
Principal paid notes payable to bank
  - 
  (30,673)
Principal payments on long-term debt
  (106,439)
  (36,596)
Net cash provided (used) by financing activities
  (73,917)
  53,419 
 
    
    
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
  14,493 
  (50,601)
Cash and cash equivalents at beginning of period
  10,057 
  133,543 
Cash and cash equivalents at end of period
 $24,550 
 $82,942 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    
    
 
    
    
Noncash investing and financing activities:
    
    
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 and six month periods ended June 30, 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.
 
Certain consolidated financial statement amounts for the three and six month periods ended June 30, 2016, have been reclassified to conform to the 2017 presentation. These reclassifications had no effect on the net income (loss) or cash flows or accumulated deficit as previously reported.
 
Going Concern Consideration
 
At June 30, 2017, our financial statements show that we have a negative working capital of approximately $1.9 million and an accumulated deficit of approximately $25.8 million. In addition, we have incurred losses for the prior three years. These factors indicate that there may be doubt regarding our ability to continue as a going concern for the next twelve months.
 
During the past twelve months, the price of antimony has increased from a low of $2.81 per pound to an average price of $4.11 for the second quarter of 2017. We have gross profit and a positive cash flow from our U.S. operations at this price. Our operations in Mexico are still in a transitional phase since the loss of our raw material supply from Hillgrove of Australia. We are focusing our production at our Wadley mine to increase grade and output, and we have recently seen ore from there assaying 50% antimony. We are also trying new production techniques, and have found that we can process direct shipping ore successfully at our Madero mill which will result in a reduction in our operating costs in Mexico going forward.
 
We have reduced costs at our Mexico locations, most notably a reduced monthly lease payment of $11,600 for the Wadley mine from $23,200 one year ago, and reduced cost for labor at the same mine. We have also reduced administrative costs by approximately 18% from the prior year for the second quarter at the corporate level. Our capital outlay should be minimal in the near future; and we completed paying for the Los Juarez mining concessions in 2016 which were a major outlay in prior years.
 
Our zeolite operations continue to operate profitably and provide cash to our operations. We are aggressively seeking new markets for our zeolite products, and we now have an outside sales staff that is working to obtain new customers and have had some success.
 
We believe that the combination of the above will enable us to stay in operation and meet our financial obligations for the next twelve months and further.
 
 
4
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
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 three and six month periods ended June 30, 2017 and June 30, 2016, is not applicable since any additions to outstanding shares related to common stock equivalents would be anti-dilutive.
 
As of June 30, 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:
 
 
 
June 30, 2017
 
 
June 30, 2016
 
Warrants
  250,000 
  250,000 
Convertible preferred stock
  1,751,005 
  1,751,005 
Total possible dilution
  2,001,005 
  2,001,005 
 
3.
Inventories:
 
Inventories at June 30, 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 June 30, 2017 and December 31, 2016, is as follows:
 
 
 
June 30,
 
 
December 31,
 
 
 
2017
 
 
2016
 
Antimony Metal
 $37,397 
 $112,300 
Antimony Oxide
  357,996 
  326,126 
Antimony Concentrates
  10,006 
  30,815 
Antimony Ore
  154,973 
  181,815 
  Total antimony
  560,372 
  651,056 
Zeolite
  246,069 
  204,581 
 
 $806,441 
 $855,637 
 
 
5
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
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
 
June 30,
2017
 
 
December 31,
2016
 
Accounts receivable - non factored
 $370,414 
 $401,720 
Accounts receivable - factored with recourse
  170,870 
  150,399 
  Accounts receivable - net
 $541,284 
 $552,119 
 
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, as of June 30, 2017, requires payments of $10,000 plus a tax of $1,600 per month. The lease is renewable each year with a 15 day notice to the lessor, and agreement of terms. The lease is scheduled for renewal in June 2018.
 
 
6
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
6.            
Notes Payable to Bank:
 
At June 30, 2017 and December 31, 2016, the Company had the following notes payable to bank:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30,
 
 
December 31,
 
 
 
2017
 
 
2016
 
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
 $92,145 
 $76,350 
 
    
    
Promissory note payable to First Security Bank of Missoula,
    
    
bearing interest at 3.150%, payable on demand, collateralized
    
    
by a lien on Certificate of Deposit
  99,999 
  90,967 
Total notes payable to the bank
 $192,144 
 $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.
 
7.            
Long – Term Debt:
 
Long-Term debt at June 30, 2017 and December 31, 2016 is as follows:
 
June 30,
 
 
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.
 $13,226 
 $18,245 
Note payable to Cat Financial Services, bearing interest at 6%;
    
    
payable in monthly installments of $1,300; maturing
    
    
August 2019; collateralized by equipment.
  33,954 
  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.
  16,389 
  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.
  18,791 
  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.
  746,014 
  776,319 
Obligation payable for Guadalupe Mine, non-interest bearing,
    
    
 annual payments from $60,000 to $149,078 through 2026, net of discount.
  961,784 
  970,651 
 
  1,804,304 
  1,863,915 
Less current portion
  (462,524)
  (391,046)
Long-term portion
 $1,341,780 
 $1,472,869 
 
 
7
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
7.            
Long – Term Debt, Continued:
 
Principal payments due               
Year Ending June 30,               
 
2018
 $462,524 
2019
  289,265 
2020
  247,045 
2021
  150,840 
2022
  109,890 
Thereafter
  544,740 
 
 $1,804,304 
 
 
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 June 30, 2017, the net amount due to Hillgrove for advances was $1,134,201. As of June 30, 2107, repayment of the advances is not expected to occur within the next twelve months so the balance is classified as a long term liability.
 
 
8
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
9. Concentrations of Risk:
 
Sales to Three
 
  For the Three Months Ended
 
 
  For the Six Months Ended
 
Largest Customers
 
June 30, 2017
 
 
June 30, 2016
 
 
June 30, 2017
 
 
June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mexichem Speciality Compounds
 $769,998 
 $585,798 
 $1,556,423 
 $1,176,221 
East Penn Manufacturing Inc.
  363,979 
    
  512,621 
  751,150 
Kohler Corporation
  501,320 
    
  946,498 
  649,050 
Plastatech
    
  279,543 
    
    
Rubicon Minerals Corporation
    
  328,057 
    
    
 
 $1,635,297 
 $1,193,398 
 $3,015,542 
 $2,576,421 
% of Total Revenues
  57.30%
  39.60%
  55.30%
  40.80%
 
    
    
    
    
Three Largest
    
    
    
    
Accounts Receivable
 
June 30, 2017
 
 
June 30, 2016
 
    
    
Kohler Corporation
 $175,182 
 $111,016 
    
    
GE Lighting (LPC)
  162,582 
    
    
    
Polymer Products
    
  104,498 
    
    
East Penn manufacturing, Inc.
  64,532 
    
    
    
Teck American, Inc.
    
  126,569 
    
    
 
 $402,296 
 $342,083 
    
    
% of Total Receivables
  62.70%
  46.15%
    
    
 
10.  Related Party Transactions:
 
During the three and six months ended June 30, 2017 and 2016, the Chairman of the audit committee and compensation committee received $4,500 and $9,000, and $9,000 and $18,000, respectively, for services performed. See Note 12 for shares of common stock issued to directors.
 
During the three and six months ended June 30, 2017 and 2016, the Company paid $2,480 and $5,054, and $2,444 and $4,924, respectively, to John Lawrence, President and Chief Executive Officer, as reimbursement for equipment used by the Company.
 
11.  Income Taxes:
 
During the six months ended June 30, 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 June 30, 2017.
 
Management estimates the effective tax rate at 0% for the current year.
 
 
9
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
11.  Income Taxes, Continued:
 
In 2015, the Mexican tax authority (“SAT”) initiated an audit of the USAMSA’s 2013 income tax return. In October 2016, as a result of its audit, SAT assessed the Company $13.8 million pesos, which was approximately $666,400 in U.S. Dollars (“USD”) as of December 31, 2016. Approximately $285,000 USD of the total assessment is interest and penalties. SAT’s assessment is based on the disallowance of specific costs that the Company deducted on the 2013 USAMSA income tax return. These disallowed costs were incurred by the Company for USAMSA’s business operations. SAT claims that the costs were not deductible or were not supported by appropriate documentation. At June 30, 2017, the assessed amount is $762,000 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.
 
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, the Company accrued a potential liability of $410,510 USD of which $285,048 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 June 30, 2017, the Company recognized a $51,642 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. The Company’s tax professionals in Mexico have reviewed and filed tax returns with the SAT for 2014 and 2015, 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 six months ended June 30, 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, the Company accrued $75,000 in directors’ fees payable as of June 30, 2016, that will be paid in common stock.
 
During the six months ended June 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, the Company accrued $87,500 in directors’ fees payable as of June 30, 2017, that will be paid in common stock.
 
 
10
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
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 is typically 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.
 
 
 
For the Three Months Ended
 
 
For the Six Months Ended
 
 
 
June 30, 2017
 
 
June 30, 2016
 
 
June 30, 2017
 
 
June 30, 2016
 
Capital expenditures:
 
 
 
 
 
 
 
 
 
 
 
 
Antimony
 
 
 
 
 
 
 
 
 
 
 
 
United States
 $- 
 $5,583 
 $- 
 $25,983 
Mexico
  47,033 
  104,618 
  75,716 
  312,505 
Subtotal Antimony
  47,033 
  110,201 
  75,716 
  338,488 
Precious Metals
  16,582 
  - 
  59,582 
  - 
Zeolite
  8,030 
  20,023 
  15,946 
  61,791 
  Total
 $71,645 
 $130,224 
 $151,244 
 $400,279 
 
 
11
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
13.            
Business Segments, Continued:
 
 
 
Properties, plants
 
 
 
 
 
 
  and equipment, net:
 
June 30, 2017
 
 
December 31, 2016
 
Antimony
 
 
 
 
 
 
United States
 $1,656,131 
 $1,694,331 
Mexico
  11,768,133 
  11,984,467 
Subtotal Antimony
  13,424,264 
  13,678,798 
Precious metals
  604,197 
  544,615 
Zeolite
  1,388,699 
  1,472,553 
  Total
 $15,417,160 
 $15,695,966 
 
 
Segment Operations for the three
 
Antimony
 
 
Antimony
 
 
Precious
 
 
 
 
 
 
 
months ended June 30, 2017
 
USA
 
 
Mexico
 
 
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $2,077,300 
 $- 
 $144,766 
 $616,414 
 $2,838,480 
 
    
    
    
    
    
Depreciation and amortization
 $18,700 
 $145,875 
 $- 
 $49,800 
 $214,375 
 
    
    
    
    
    
Income (loss) from operations
  844,257 
  (1,089,834)
  144,766 
  132,640 
  31,829 
 
    
    
    
    
    
Other income (expense):
  (11,965)
  (33,605)
  - 
  (3,214)
  (48,784)
 
    
    
    
    
    
NET INCOME (LOSS)
 $832,292 
 $(1,123,439)
 $144,766 
 $129,426 
 $(16,955)
 
 
12
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
13. Business Segments, Continued:
 
 
Segment Operations for the three
 
Antimony
 
 
Antimony
 
 
Precious
 
 
 
 
 
 
 
months ended June 30, 2016
 
USA
 
 
Mexico
 
 
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $2,056,644 
 $- 
 $141,495 
 $816,255 
 $3,014,394 
 
    
    
    
    
    
Depreciation and amortization
 $24,900 
 $138,950 
    
 $49,600 
 $213,450 
 
    
    
    
    
    
Income (loss) from operations
  974,565 
  (1,328,242)
  141,495 
  104,056 
  (108,126)
 
    
    
    
    
    
Income tax expense
  (12,000)
    
    
    
  (12,000)
 
    
    
    
    
    
Other income (expense):
  (8,454)
  (24,505)
    
  (3,585)
  (36,544)
 
    
    
    
    
    
NET INCOME (LOSS)
 $954,111 
 $(1,352,747)
 $141,495 
 $100,471 
 $(156,670)
 
 
Segment Operations for the six
 
Antimony
 
 
Antimony
 
 
Precious
 
 
 
 
 
 
 
months ended June 30, 2017
 
USA
 
 
Mexico
 
 
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $4,046,026 
 $17,782 
 $165,577 
 $1,228,426 
 $5,457,811 
 
    
    
    
    
    
Depreciation and amortization
 $38,200 
 $292,050 
    
 $99,800 
 $430,050 
 
    
    
    
    
    
Income (loss) from operations
  1,173,159 
  (1,841,012)
  165,577 
  222,232 
  (280,044)
 
    
    
    
    
    
Income tax expense
  - 
  - 
  - 
  - 
  - 
 
    
    
    
    
    
Other income (expense):
  (23,044)
  (98,569)
  - 
  (6,602)
  (128,215)
 
    
    
    
    
    
NET INCOME (LOSS)
 $1,150,115 
 $(1,939,581)
 $165,577 
 $215,630 
 $(408,259)
 
 
13
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
13. Business Segments, Continued:
 
 
Segment Operations for the six
 
Antimony
 
 
Antimony
 
 
Precious
 
 
 
 
 
 
 
months ended June 30, 2016
 
USA
 
 
Mexico
 
 
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $4,595,977 
 $- 
 $324,343 
 $1,399,609 
 $6,319,929 
 
    
    
    
    
    
Depreciation and amortization
 $40,400 
 $295,100 
    
 $106,600 
 $442,100 
 
    
    
    
    
    
Income (loss) from operations
  1,858,762 
  (2,607,754)
  324,343 
  134,266 
  (290,383)
 
    
    
    
    
    
Income tax expense
  (12,000)
    
    
    
  (12,000)
 
    
    
    
    
    
Other income (expense):
  (14,430)
  (24,505)
    
  (3,958)
  (42,893)
 
    
    
    
    
    
NET INCOME (LOSS)
 $1,832,332 
 $(2,632,259)
 $324,343 
 $130,308 
 $(345,276)
 
 
 
 
 
 
14
 
 
PART I - FINANCIAL INFORMATION, 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
 
2nd Qtr
 
 
2nd Qtr
 
 
Six Months
 
 
Six Months
 
Combined USA and Mexico
 
2017
 
 
2016
 
 
2017
 
 
2016
 
Lbs of Antimony Metal USA
  345,152 
  310,472 
  804,818 
  797,224 
Lbs of Antimony Metal Mexico
  160,204 
  422,330 
  248,388 
  848,419 
  Total Lbs of Antimony Metal Sold
  505,356 
  732,802 
  1,053,206 
  1,645,643 
Sales Price/Lb Metal
 $4.11 
 $2.81 
 $3.86 
 $2.79 
Net income (loss)/Lb Metal
 $(0.29)
 $(0.35)
 $(0.59)
 $(0.29)
 
    
    
    
    
Gross antimony revenue - net of discount
 $2,077,300 
 $2,056,644 
 $4,063,808 
 $4,595,976 
Precious metals revenue
  144,766 
  141,495 
  165,577 
  324,343 
Production and shipping costs
  (1,821,149)
  (1,815,761)
  (3,601,559)
  (4,020,588)
Mexico non-production costs
  (79,216)
  (151,612)
  (164,472)
  (337,337)
General and administrative - non-production
  (278,277)
  (285,680)
  (706,197)
  (664,764)
Net interest and gain on sale of asset
  (25,229)
  (26,378)
  (50,795)
  (25,714)
  EBITDA
  18,195 
  (81,292)
  (293,638)
  (128,084)
Income tax expense
  - 
  (12,000)
  - 
  (12,000)
Depreciation & amortization
  (164,575)
  (163,850)
  (330,250)
  (335,500)
Net income (loss) - antimony and precious metals
 $(146,380)
 $(257,142)
 $(623,888)
 $(475,584)
 
    
    
    
    
Zeolite
    
    
    
    
Tons sold
  3,422 
  4,218 
  6,775 
  7,315 
Sales Price/Ton
 $180.13 
 $193.52 
 $181.32 
 $191.33 
Net income /Ton
 $37.82 
 $23.82 
 $31.83 
 $17.81 
 
    
    
    
    
Gross zeolite revenue
 $616,414 
 $816,255 
 $1,228,426 
 $1,399,609 
Production costs, royalties, and shipping costs
  (420,847)
  (643,956)
  (869,292)
  (1,122,978)
General and administrative - non-production
  (14,684)
  (19,969)
  (40,534)
  (37,979)
Net interest
  (1,658)
  (2,258)
  (3,170)
  (1,744)
  EBITDA
  179,225 
  150,072 
  315,430 
  236,908 
Depreciation
  (49,800)
  (49,600)
  (99,800)
  (106,600)
Net income (loss) - zeolite
 $129,425 
 $100,472 
 $215,630 
 $130,308 
 
    
    
    
    
Company-wide
    
    
    
    
Gross revenue
 $2,838,480 
 $3,014,394 
 $5,457,811 
 $6,319,928 
Production costs
  (2,321,212)
  (2,611,329)
  (4,635,323)
  (5,480,903)
General and administrative -non-production
  (292,961)
  (305,649)
  (746,731)
  (702,743)
Net interest and gain on sale of asset
  (26,887)
  (28,636)
  (53,965)
  (27,458)
  EBITDA
  197,420 
  68,780 
  21,792 
  108,824 
Income tax expense
    
  (12,000)
    
  (12,000)
Depreciation & amortization
  (214,375)
  (213,450)
  (430,050)
  (442,100)
  Net income (loss)
 $(16,955)
 $(156,670)
 $(408,258)
 $(345,276)
 
 
15
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition, continued:
 
The Mexico non-production costs for the three and six months ending June 30, 2017, are primarily due to holding costs from inactivity at the Los Juarez, Guadalupe, and Soyatal mines and the Puerto Blanco mill. The loss of production at the Madero smelter from transitioning to Mexican raw material due to the closing of the Hillgrove mine in Australia and the subsequent loss of Hillgrove raw material contributed to non-production costs during the six months ending June 30, 2017.
 
Company-Wide
 
For the second quarter of 2017, we recognized a net loss of $16,955 on sales of $2,838,480, compared to a net loss of $156,670 in the second quarter of 2016 on sales of $3,014,394. This is a decrease in the loss for the period of 89%, and is significant progress in a corporate turnaround. For the six month period ending June 30, 2017, we incurred a net loss of $408,258 on sales of $5,457,811, compared to a net loss of $345,276 for the same period in 2016. The loss in the second quarter of 2017 and the six months then ended was primarily due to the loss of raw material from Hillgrove Mines of Australia. We also recognized approximately $124,732 of settlement costs related to our precious metals production during the first quarter of 2017, and we incurred a foreign exchange loss of $51,642 related to our Mexican tax liability. Hillgrove has given us permission to use the furnaces financed by them and that were dedicated to processing Hillgrove concentrates.
 
Depreciation and amortization for the quarter and six months ending June 30, 2017, was $214,375 and $430,050, respectively.
 
 For the second quarter of 2017, EBITDA was $197,420 compared to EBITDA of $68,780 for the same period of 2016.
 
For the second quarter of 2017, the general and administrative expenses were $236,482 compared to $270,514 for the same period of 2016.
 
Antimony
 
We began the mining and processing of ore from our own Mexican mines during Q1of 2017. Producing from our own Mexican mines will allow the Company to benefit from 100% of the price increases rather than a processing fee and a small percent of the price increases.
 
1.
The sale of antimony during Q2 2017 was 505,356 pounds compared to 732,802 pounds during the same period in 2016.
2.
The sale of antimony during the first six months of 2017 was 1,053,206 pounds compared to sales of 1,645,643 pounds for the same period of 2016.
3.
The reduction in sales was due to the loss of the Hillgrove production from concentrates which ended in late 2016.
4.
The average sales price of antimony during Q2 2017 was $4.11 per pound compared to $2.81 during the same period in 2016, an increase of 46%.
5.
The average sale price of antimony during the first six months of 2017 was $3.86 compared to $2.79 for the same period of 2016, an increase of 38%.
6.
The decrease in production was offset by higher sales prices and better margins on production from our own mined ore.
7.
The Mexican non-operating production costs were $79,216 for Q2 2017 compared to $151,612 for the same period in 2016, a decrease of 48%.
 
 
16
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition, continued:
 
8. The Mexican non-production costs were $164,472 for the first six months of 2017compared to $337,337 for the same period in 2016, a decrease of 51%.
9. The decrease in Mexican non-operating costs was due to metering funds to select operations in Mexico.
 
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.
 
At the Wadley mine, production is being increased with more miners. The use of pneumatic hammers is planned in lieu of explosives. Wadley is our main producer of Mexican ore with some 90 men underground. The tonnage and grade is being increased, and some of the ore contains up to 50 percent antimony.
 
Powder magazines are being built at the Soyatal mine. We will use the Los Juarez explosives license to mine direct shipping ore for smelter feed at Madero.
 
The access road to Guadalupe is being repaired to re-start production.
 
A 400 ton mill test of Los Juarez ore has indicated the necessity of a cyanide leach circuit for the mill tailings. With the leach circuit, the estimated gross value of the ore will be approximately $125.00 at current precious metal prices.
 
Production changes at the Madero smelter have cut the cost of fuel by 50%, electricity by 55%, and reagents by 75%.
 
Precious Metals
 
The caustic leach of flotation concentrates from Los Juarez was successful, and 400 metric tons were run that indicate that a cyanide leach circuit is necessary to increase the recoveries of precious metals from mill tailings.
 
Precious Metals Sales
 
 
 
 
 
 
 
 
 
 
 
 
Silver/Gold
 
 
 
 
 
 
 
 
 
 
 
 
Montana
 
2014
 
 
2015
 
 
2016
 
 
2017
 
Ounces Gold Shipped (Au)
  64.77 
  89.12 
  108.10 
  61.15 
Ounces Silver Shipped (Ag)
  29,480.22 
  30,420.75 
  38,123.46 
  17,552.51 
Revenues
 $461,083 
 $491,426 
 $556,650 
 $275,315 
Mexico
    
    
    
    
Ounces Gold Shipped (Au)
    
    
    
    
Ounces Silver Shipped (Ag)
    
    
    
    
Revenues
    
    
    
    
Australian - Hillgrove
    
    
    
    
Ounces Gold Shipped (Au)
    
    
  496.65 
  72.12 
Revenues - Gross
    
    
 $597,309 
 $72,478 
Revenues to Hillgrove
    
    
  (481,088)
  (182,216)
Revenues to USAC
    
    
 $116,221 
 $(109,738)
 
    
    
    
    
 Total Revenues
 $461,083 
 $491,426 
 $672,871 
 $165,577 
 
 
17
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition, continued:
 
Bear River Zeolite (BRZ)
 
During Q2 2017, BRZ sold 3,422 tons of zeolite compared to 4,218 tons in the same period of 2016, down 796 tons (19%). The decrease in tonnage was due to required maintenance.
 
We realized a net income of $129,426 from zeolite sales in Q2 of 2017, compared to $100,471 for the same period in 2016. The increase in the profit from our zeolite operations was $28,955 (29%). The increase in profit was attributable to overall better plant efficiency. We realized net income of $215,630 from zeolite sales during the first six months of 2017, compared to $130,308 for the same period in 2016. The increase in the profit from our zeolite operations was $85,332 (65%) and was attributable to overall better plant efficiency.
 
We realized an EBITDA from zeolite sales for Q2 2017 of $179,225, compared to $150,072 for the same period in 2016, an increase of $29,400 (19%). We realized an EBITDA from zeolite sales for the six months ended June 30, 2017 of $315,430, compared to $236,908 for the same period in 2016, an increase of $78,522 (33%).
 
Our new sales program for zeolite products has two field representatives and a research person that prepares sales brochures and literature. At this time this effort is adding new customers. Increased production at our zeolite plant will enable us to provide timely product deliveries to our customers.
 
Financial Position
 
Financial Condition and Liquidity
 
 
 
 
 
 
 
 
June 30, 2017
 
 
December 31, 2016
 
Current Assets
 $1,655,321 
 $1,692,555 
Current liabilities
  ( 3,598,492)
  ( 3,382,123)
  Net Working Capital
 $(1,943,171)
 $(1,689,568)
 
 
 
Six Months Ended
 
 
Six Months Ended
 
 
 
June 30, 2017
 
 
June 30, 2016
 
Cash provided (used) by operations
 $239,654 
 $256,983 
Cash used for capital outlay
  ( 151,244)
  ( 361,003)
Cash provided (used) by financing:
    
    
  Proceeds from notes payable to bank
  24,827 
  26,506 
  Payment of notes payable to bank
  - 
  (30,673)
  Principal paid on long-term debt
  ( 106,439)
  ( 36,596)
  Checks issued and payable
  (12,776)
  - 
  Net proceeds from factor
  20,471 
  94,182 
  Net change in cash
 $14,493 
 $(50,601)
 
Our net working capital at June 30, 2017, has decreased by approximately $250,000 from December 31, 2016. The decrease in our net working capital was primarily due to an increase in various categories of liabilities and expenditures of approximately $150,000 for capital outlay. We have estimated commitments of $50,000 for construction and improvements 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 $192,144 at June 30, 2017. We have a foreign value added tax refund receivable in Mexico of $365,120 at June 30, 2017. We believe that this refund will be adequate to offset the amount ultimately paid on the Mexican tax assessment (see Note 11 of the consolidated financial statements in Item 1).
 
 
18
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition, continued:
 
Going Concern Consideration
 
At June 30, 2017, our financial statements show that we have a negative working capital of approximately $1.9 million and an accumulated deficit of approximately $25.8 million. In addition, we have incurred losses for the prior three years. These factors indicate that there may be doubt regarding our ability to continue as a going concern for the next twelve months.
 
During the past twelve months, the price of antimony has increased from a low of $2.81 per pound to an average price of $4.11 for the second quarter of 2017. We have gross profit and a positive cash flow from our U.S. operations at this price. Our operations in Mexico are still in a transitional phase since the loss of our raw material supply from Hillgrove of Australia. We are focusing our production at our Wadley mine to increase grade and output, and we have recently seen ore from there assaying 50% antimony. We are also trying new production techniques, and have found that we can process direct shipping ore successfully at our Madero mill which will result in a reduction in our operating costs in Mexico going forward.
 
We have reduced costs at our Mexico locations, most notably a reduced lease payments of $11,600 for the Wadley mine from $23,200 one year ago, and reduced cost for labor at the same mine. We have also reduced administrative costs by approximately 18% for the second quarter at the corporate level. Our capital outlay should be minimal in the near future; and we completed paying for the Los Juarez mining concessions in 2016 which were a major outlay in prior years.
 
Our zeolite operations continue to operate profitably and provide cash to our operations. We are aggressively seeking new markets for our zeolite products, and we now have an outside sales staff that is working to obtain new customers and have had some success.
 
We believe that the combination of the above will enable us to stay in operation and meet our financial obligations for the next twelve months and further.
 
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 June 30, 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 June 30, 2017. These material weaknesses are as follows:
 
 
19
 
 
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 June 30, 2017.