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 September 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 November 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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large accelerated filer ☐
 
 Accelerated filer ☐
 
 Non-accelerated filer ☐
 
 Smaller reporting company ☑
 
 
 
 
 (Do not check if a smaller reporting company)
 
 
 

 
 
 
UNITED STATES ANTIMONY CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD
ENDED SEPTEMBER 30, 2017
(UNAUDITED)
 
TABLE OF CONTENTS
 
 
 Page
PART I – FINANCIAL INFORMATION
 
 
 
Item 1: Financial Statements (unaudited)
1-12
 
 
Item 2: Management’s Discussion and Analysis of Results of Operations and Financial Condition
 12-17
           

Item 3: Quantitative and Qualitative Disclosure about Market Risk
17
 
 
Item 4: Controls and Procedures
18
 
 
PART II – OTHER INFORMATION
 
 
 
Item 1: Legal Proceedings
19
 
 
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
19
 
 
Item 3: Defaults upon Senior Securities
19
 
 
Item 4: Mine Safety Disclosures
19
 
 
Item 5: Other Information
19
 
 
Item 6: Exhibits and Reports on Form 8-K
19
 
 
SIGNATURE
20
 
 
CERTIFICATIONS
 
 
[The balance of this page has been intentionally left blank.]
 
 
 
 
PART I-FINANCIAL INFORMATION
 
Item 1. Financial Statements
United States Antimony Corporation and Subsidiaries
Consolidated Balance Sheets
 
 
 
(Unaudited)
 
 
 
 
 ASSETS
 
September 30,
2017
 
 
December 31,
2016
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $27,576 
 $10,057 
Certificates of deposit
  252,298 
  251,641 
Accounts receivable, net
  496,397 
  552,119 
Inventories
  939,880 
  855,637 
Other current assets
  23,890 
  23,101 
Total current assets
  1,740,041 
  1,692,555 
 
    
    
Properties, plants and equipment, net
  15,338,206 
  15,695,966 
Restricted cash for reclamation bonds
  63,275 
  63,274 
Foreign value added tax refund receivable
  365,120 
  276,500 
Other assets
  32,520 
  37,703 
Total assets
 $17,539,162 
 $17,765,998 
 
    
    
LIABILITIES AND STOCKHOLDERS' EQUITY
    
    
Current liabilities:
    
    
Checks issued and payable
 $48,408 
 $35,682 
Accounts payable
  2,199,458 
  1,797,251 
Due to factor
  163,737 
  150,399 
Accrued payroll, taxes and interest
  162,833 
  213,695 
Other accrued liabilities
  153,273 
  122,968 
Payables to related parties
  16,322 
  14,525 
Deferred revenue
  78,730 
  78,730 
Notes payable to bank
  103,026 
  167,317 
Income taxes payable (Note 11)
  459,510 
  410,510 
Long-term debt, current portion, net of discount
  495,134 
  391,046 
Total current liabilities
  3,880,431 
  3,382,123 
 
    
    
Long-term debt, net of discount and current portion
  1,282,981 
  1,472,869 
Hillgrove advances payable (Note 8)
  1,134,196 
  1,134,221 
Common stock payable to directors for services
  131,250 
  168,750 
Asset retirement obligations and accrued reclamation costs
  270,124 
  265,782 
Total liabilities
  6,698,982 
  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
  (26,100,753)
  (25,429,930)
Total stockholders' equity
  10,840,180 
  11,342,253 
Total liabilities and stockholders' equity
 $17,539,162 
 $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 nine months ended  
 
 
 
September 30,
2017
 
 
September 30,
2016
 
 
September 30,
2017
 
 
September 30,
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
REVENUES
 $2,369,714 
 $2,846,699 
 $7,827,525 
 $9,166,628 
 
    
    
    
    
COST OF REVENUES
  2,315,646 
  2,888,660 
  7,381,020 
  8,811,663 
 
    
    
    
    
GROSS PROFIT (LOSS)
  54,068 
  (41,961)
  446,505 
  354,965 
 
    
    
    
    
OPERATING EXPENSES:
    
    
    
    
  General and administrative
  228,185 
  309,832 
  762,745 
  850,255 
  Professional fees
  53,045 
  29,004 
  190,965 
  252,469 
  Hillgrove advance - earned credit (Note 8)
  - 
  (32,813)
  - 
  (109,392)
TOTAL OPERATING EXPENSES
  281,230 
  306,023 
  953,710 
  993,332 
 
    
    
    
    
INCOME (LOSS) FROM OPERATIONS
  (227,162)
  (347,984)
  (507,205)
  (638,367)
 
    
    
    
    
OTHER INCOME (EXPENSE):
    
    
    
    
Interest income
  19 
  19 
  857 
  1,421 
Interest expense
  (25,960)
  (28,343)
  (80,764)
  (57,203)
Foreign exchange gain (loss)
  2,642 
  - 
  (49,000)
  - 
Factoring expense
  (12,104)
  (9,259)
  (34,711)
  (24,694)
TOTAL OTHER INCOME (EXPENSE)
  (35,403)
  (37,583)
  (163,618)
  (80,476)
 
    
    
    
    
INCOME (LOSS) BEFORE INCOME TAXES
  (262,565)
  (385,567)
  (670,823)
  (718,843)
 
    
    
    
    
Provision for income tax (Note 12)
  - 
  (411,490)
  - 
  (423,490)
 
    
    
    
    
NET INCOME (LOSS)
  (262,565)
  (797,057)
  (670,823)
  (1,142,333)
  Preferred dividends
  (12,162)
  (12,162)
  (36,487)
  (36,487)
 
    
    
    
    
  Net income (loss) available to common stockholders
 $(274,727)
 $(809,219)
 $(707,310)
 $(1,178,820)
 
    
    
    
    
Net income (loss) per share of common stock:
    
    
    
    
Basic
  
NIL
 
 $(0.01)
 $(0.01)
 $(0.02)
Diluted
  
NIL
 
 $(0.01)
 $(0.01)
 $(0.02)
 
    
    
    
    
Weighted average shares outstanding:
    
    
    
    
Basic
  67,488,153 
  66,866,278 
  67,387,337 
  66,687,981 
Diluted
  67,488,153 
  66,866,278 
  67,387,337 
  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 nine months ended
 
 
 
September 30,
2017
 
 
September 30,
2016
 
Cash Flows From Operating Activities:
 
 
 
 
 
 
Net income (loss)
 $(670,823)
 $(1,142,333)
Adjustments to reconcile net income (loss) to net cash
    
    
provided (used) by operating activities:
    
    
Depreciation and amortization expense
  637,225 
  652,375 
Hillgrove deferred revenue
  - 
  (109,392)
Amortization of loan discount
  70,242 
  73,058 
Accretion of asset retirement obligation
  4,342 
  4,091 
Common stock payable for director fees
  131,250 
  112,500 
Foreign exchange loss
  49,000 
  - 
Other non-cash items
  (682)
    
Change in:
    
    
Accounts receivable, net
  55,722 
  (97,444)
Inventories
  (84,243)
  356,120 
Other current assets
  (790)
  70,774 
Other assets
  (83,437)
  (14,990)
Accounts payable
  402,207 
  26,728 
Accrued payroll, taxes and interest
  (50,862)
  4,016 
Other accrued liabilities
  30,305 
  42,889 
Foreign income tax payable
  - 
  423,490 
Payables to related parties
  1,797 
  10,280 
Net cash provided by operating activities
  491,253 
  412,162 
 
    
    
Cash Flows From Investing Activities:
    
    
Purchase of properties, plants and equipment
  (279,465)
  (459,969)
Net cash used by investing activities
  (279,465)
  (459,969)
 
    
    
Cash Flows From Financing Activities:
    
    
  Net proceeds from (payments to) factor
  13,338 
  119,111 
  Checks issued and payable
  12,726 
  - 
Principal payments on notes payable to bank (see Note 7)
  (64,291)
  (30,672)
Principal payments on long-term debt
  (156,042)
  (130,857)
Net cash provided (used) by financing activities
  (194,269)
  (42,418)
 
    
    
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
  17,519 
  (90,225)
Cash and cash equivalents at beginning of period
  10,057 
  133,543 
Cash and cash equivalents at end of period
 $27,576 
 $43,318 
 
    
    
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    
    
Noncash investing and financing activities:
    
    
Properties, plants and equipment acquired with long-term debt
    
 $41,648 
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 nine month periods ended September 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 nine month periods ended September 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 September 30, 2017, our financial statements show that we have a negative working capital of approximately $2.14 million and an accumulated deficit of approximately $26.1 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 $3.07 per pound for the third quarter of 2016 to an average price of $4.25 for the third 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 smelter 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 for June 2016, and we have also reduced the cost for labor at the same mine. We have reduced administrative costs by approximately $81,000 from the prior year third 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 nine month periods ended September 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 September 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:
 
 
 
September 30,
2017
 
 
September 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 September 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 September 30, 2017 and December 31, 2016, is as follows:
 
 
 
September 30,
 
 
December 31,
 
 
 
2017
 
 
2016
 
Antimony Metal
 $- 
 $112,300 
Antimony Oxide
  452,871 
  326,126 
Antimony Concentrates
  19,017 
  30,815 
Antimony Ore
  151,841 
  181,815 
  Total antimony
  623,729 
  651,056 
Zeolite
  316,151 
  204,581 
 
 $939,880 
 $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
 
September 30,
2017
 
 
December 31,
2016
 
Accounts receivable - non factored
 $332,660 
 $401,720 
Accounts receivable - factored with recourse
  163,737 
  150,399 
  Accounts receivable - net
 $496,397 
 $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 September 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 September 30, 2017 and December 31, 2016, the Company had the following notes payable to bank:
 
 
 
September 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
 $3,027 
 $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
 $103,026 
 $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 September 30, 2017 and December 31, 2016, is as follows:
 
September 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.
 $10,660 
 $18,246 
Note payable to Cat Financial Services, bearing interest at 6%;
    
    
payable in monthly installments of $1,300; maturing
    
    
August 2019; collateralized by equipment.
  30,545 
  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.
  14,567 
  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.
  16,985 
  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.
  731,862 
  776,319 
Obligation payable for Guadalupe Mine, non-interest bearing,
    
    
 annual payments from $60,000 to $149,078 through 2026, net of discount.
  959,350 
  970,651 
 
  1,778,115 
  1,863,916 
Less current portion
  (495,134)
  (391,046)
Long-term portion
 $1,282,981 
 $1,472,870 
 
 
7
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
7.            
Long – Term Debt, Continued:
 
Year Ending September 30,
 
 
 
 
 
 
2018
  495,134 
     
2019
  307,810 
    
2020
  215,795 
    
2021
  128,742 
    
2022
  111,467 
    
Thereafter
  519,167 
    
 
 $1,778,115 
    
 
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 September 30, 2017, the net amount due to Hillgrove for advances was $1,134,196. As of September 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:
 
 
 
  For the Three Months Ended
 
 
  For the Nine Months Ended
 
Sales to Three
 
September 30,
 
 
September 30,
 
 
September 30,
 
 
September 30,
 
Largest Customers
 
2017
 
 
2016
 
 
2017
 
 
2016
 
Ampacet Corporation
 $150,234 
 $- 
 $- 
 $- 
Mexichem Specialty Compounds Inc.
  909,965 
  414,157 
  2,466,388 
  1,524,253 
Kohler Corporation
  512,451 
  362,770 
  1,458,949 
  972,083 
East Penn Corporation
  - 
  245,514 
  512,641 
  965,564 
 
 $1,572,650 
 $1,022,441 
 $4,437,978 
 $3,461,900 
% of Total Revenues
  66%
  36%
  57%
  38%
 
    
    
    
    
 

 
 
 
 
 
 
 
 
 
 
 
 
Three Largest
Accounts Receivable
 
September 30,
2017
 
 
September 30,
2016
 
 
 
 
 
 
 
Kohler Corporation
 $169,991 
 $133,705 
     
     
Earth Innovations Inc.
  31,522 
  33,150 
    
    
Axens North America, Inc.
  31,237 
  - 
    
    
East Penn Corporation
  - 
  135,828 
    
    
 
 $232,750 
 $302,683 
    
    
% of Total Receivables
  47.00%
  58.20%
    
    
 
10.
Related Party Transactions:
 
During the three and nine months ended September 30, 2017 and 2016, the Chairman of the audit committee and compensation committee received $4,500 and $9,000, and $4,500 and $18,000, respectively, for services performed. See Note 12 for shares of common stock issued to directors.
 
During the three and nine months ended September 30, 2017 and 2016, the Company paid $2,715 and $8,989, and $2,480 and $11,310, respectively, to John Lawrence, President and Chief Executive Officer, as reimbursement for equipment used by the Company.
 
11.            
Income Taxes:
 
During the nine months ended September 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 September 30, 2017.
 
Management estimates the effective tax rate at 0% for the current year.
 
In 2015, the Mexican tax authority (“SAT”) initiated an audit of the USAMSA’s 2013 income tax return. In October 2016, as a result of its audit, SAT assessed the Company $13.8 million pesos, which 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 September 30, 2017, the assessed amount is $746,000 in U.S dollars.
 
 
9
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
11.            
Income Taxes, Continued:
 
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 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 was for unpaid income taxes, $75,510 was for interest expense, and $49,952 was 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 September 30, 2017, the Company recognized a $49,000 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, 2015, and 2016, and have advised the Company that they do not expect the Company to have a tax liability for those years relating to similar issues.
 
12.            
Stockholder’s Equity:
 
Issuance of Common Stock for Payable to Board of Directors
 
During the nine months ended September 30, 2017, the Board of Directors was issued a total of 421,875 shares of common stock for $168,750 in directors’ fees that were payable at December 31, 2016. In addition, the Company accrued $131,250 in directors’ fees payable as of September 30, 2017, that will be paid in common stock.
 
During the nine months ended September 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 $112,500 in directors’ fees payable as of September 30, 2016, that will be paid in common stock.
 
13.            
Business Segments:
 
The Company is currently organized and managed by four segments, which represent our operating units: United States antimony operations, Mexican antimony operations, precious metals recovery and United States zeolite operations.
 
The Madero smelter and Puerto Blanco mill at the Company’s Mexico operation brings antimony up to an intermediate stage, which 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.
 
 
10
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
13.            
Business Segments, Continued:
 
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 nine months ended
 
 
 
September 30,
2017
 
 
September 30,
2016
 
 
September 30,
2017
 
 
September 30,
2016
 
Capital expenditures:
 
 
 
 
 
 
 
 
 
 
 
 
Antimony
 
 
 
 
 
 
 
 
 
 
 
 
United States
 $22,241 
 $- 
 $22,241 
 $1,040 
Mexico
  45,326 
  26,130 
  121,042 
  201,882 
Subtotal Antimony
  67,567 
  26,130 
  143,283 
  202,922 
Precious Metals
  24,798 
  85,804 
  84,379 
  247,500 
Zeolite
  35,856 
  61,284 
  51,803 
  123,075 
  Total
 $128,221 
 $173,218 
 $279,465 
 $573,497 
 
Properties, plants
and equipment, net:
 
September 30,
2017
 
 
December 31,
2016
 
Antimony
 
 
 
 
 
 
United States
 $1,697,360 
 $1,694,331 
Mexico
  11,677,840 
  11,984,467 
Subtotal Antimony
  13,375,200 
  13,678,798 
Precious metals
  588,650 
  544,615 
Zeolite
  1,374,356 
  1,472,553 
  Total
 $15,338,206 
 $15,695,966 
 
    
    
 
Total Assets:
 
September 30,
2017
 
 
December 31,
2016
 
Antimony
    
    
United States
 $2,543,350 
 $2,495,842 
Mexico
  12,338,179 
  12,681,109 
Subtotal Antimony
  14,881,529 
  15,176,951 
Precious metals
  588,650 
  544,615 
Zeolite
  2,020,575 
  2,044,432 
  Total
 $17,490,754 
 $17,765,998 
 
 
 
11
 
 
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 September 30, 2017
 
USA
 
 
Mexico
 
 
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $1,796,775 
 $- 
 $78,245 
 $494,694 
 $2,369,714 
 
    
    
    
    
    
Depreciation and amortization
  14,200 
  127,675 
  15,100 
  50,200 
  207,175 
 
    
    
    
    
    
Income (loss) from operations
  435,497 
  (861,683)
  63,145 
  135,879 
  (227,162)
 
    
    
    
    
    
Other income (expense):
  (11,611)
  (20,772)
  - 
  (3,020)
  (35,403)
 
    
    
    
    
    
NET INCOME (LOSS)
 $423,886 
 $(882,455)
 $63,145 
 $132,859 
 $(262,565)
 
Segment Operations for the three
 
Antimony
 
 
Antimony
 
 
Precious
 
 
 
 
 
 
 
months ended September 30, 2016
 
USA
 
 
Mexico
 
 
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $2,025,755 
 $3,557 
 $240,238 
 $577,149 
 $2,846,699 
 
    
    
    
    
    
Depreciation and amortization
  20,000 
  136,875 
  - 
  53,400 
  210,275 
 
    
    
    
    
    
Income (loss) from operations
  723,628 
  (1,421,013)
  240,238 
  109,163 
  (347,984)
 
    
    
    
    
    
Income tax expense
  - 
  (411,490)
  - 
  - 
  (411,490)
 
    
    
    
    
    
Other income (expense):
  (9,406)
  (24,617)
  - 
  (3,560)
  (37,583)
 
    
    
    
    
    
NET INCOME (LOSS)
 $714,222 
 $(1,857,120)
 $240,238 
 $105,604 
 $(797,057)
 
    
    
    
    
    
 
Segment Operations for the nine
 
Antimony
 
 
Antimony
 
 
Precious
 
 
 
 
 
 
 
months ended September 30, 2017
 
USA
 
 
Mexico
 
 
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $5,842,801 
 $17,782 
 $243,822 
 $1,723,120 
 $7,827,525 
 
    
    
    
    
    
Depreciation and amortization
  42,900 
  397,325 
  47,000 
  150,000 
  637,225 
 
    
    
    
    
    
Income (loss) from operations
  1,618,156 
  (2,680,293)
  196,821 
  358,110 
  (507,206)
 
    
    
    
    
    
Other income (expense):
  (34,654)
  (119,341)
  - 
  (9,622)
  (163,617)
 
    
    
    
    
    
NET INCOME (LOSS)
 $1,583,502 
 $(2,799,634)
 $196,821 
 $348,488 
 $(670,823)
 
Segment Operations for the nine
 
Antimony
 
 
Antimony
 
 
Precious
 
 
 
 
 
 
 
months ended September 30, 2016
 
USA
 
 
Mexico
 
 
Metals
 
 
Zeolite
 
 
Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 $6,621,732 
 $3,557 
 $564,581 
 $1,976,758 
 $9,166,628 
 
    
    
    
    
    
Depreciation and amortization
  60,400 
  431,975 
    
  160,000 
  652,375 
 
    
    
    
    
    
Income (loss) from operations
  2,582,390 
  (4,028,767)
  564,581 
  243,429 
  (638,367)
 
    
    
    
    
    
Income tax expense
  - 
  (423,490)
  - 
  - 
  (423,490)
 
    
    
    
    
    
Other income (expense):
  (23,837)
  (49,122)
  - 
  (7,517)
  (80,476)
 
    
    
    
    
    
NET INCOME (LOSS)
 $2,558,553 
 $(4,501,379)
 $564,581 
 $235,912 
 $(1,142,333)
 
 
12
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
United States Antimony Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited), Continued:
 
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
 
General
Certain matters discussed are forward-looking statements that involve risks and uncertainties, including the impact of antimony prices and production volatility, changing market conditions and the regulatory environment and other risks. Actual results may differ materially from those projected. These forward-looking statements represent our judgment as of the date of this filing. We disclaim, however, any intent or obligation to update these forward-looking statements.
 
Results of Operations by Division
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Antimony and Precious Metals
 
3rd Qtr
 
 
3rd Qtr
 
 
Nine Months
 
 
Nine Months
 
  Combined USA and Mexico
 
2017
 
 
2016
 
 
2017
 
 
2016
 
Lbs of Antimony Metal USA
  298,472 
  247,505 
  1,102,290 
  1,027,501 
Lbs of Antimony Metal Mexico
  123,919 
  411,410 
  372,307 
  1,277,058 
  Total Lbs of Antimony Metal Sold
  422,391 
  658,915 
  1,474,597 
  2,304,559 
Sales Price/Lb Metal
 $4.25 
 $3.07 
 $3.97 
 $2.87 
Net income (loss)/Lb Metal
 $(0.94)
 $(1.37)
 $(0.69)
 $(0.60)
 
    
    
    
    
Gross antimony revenue - net of discount
 $1,796,775 
 $2,025,755 
 $5,860,583 
 $6,625,289 
Precious metals revenue
  78,244 
  240,238 
  243,821 
  564,581 
Production and shipping costs
  (1,759,347)
  (2,135,052)
  (5,360,925)
  (6,135,067)
Mexico non-production costs
  (51,310)
  (156,489)
  (215,762)
  (514,400)
General and administrative - non-production
  (280,801)
  (315,361)
  (935,355)
  (1,060,261)
Other miscellaneous income(loss)
  2,642 
  32,813 
  (49,000)
  109,392 
Net interest and gain on sale of asset
  (24,652)
  (26,200)
  (75,448)
  (51,914)
  EBITDA
  (238,449)
  (334,296)
  (532,086)
  (462,380)
Income tax expense
  - 
  (411,490)
  - 
  (423,490)
Depreciation & amortization
  (156,975)
  (156,875)
  (487,225)
  (492,375)
Net income (loss) - antimony and precious metals
 $(395,424)
 $(902,661)
 $(1,019,311)
 $(1,378,245)
 
    
    
    
    
Zeolite
    
    
    
    
Tons sold
  2,671 
  3,375 
  9,446 
  10,690 
Sales Price/Ton
 $185.21 
 $171.01 
 $182.42 
 $184.92 
Net income /Ton
 $49.74 
 $31.29 
 $36.89 
 $22.07 
 
    
    
    
    
Gross zeolite revenue
 $494,694 
 $577,150 
 $1,723,120 
 $1,976,759 
Production costs, royalties, and shipping costs
  (297,815)
  (386,844)
  (1,167,108)
  (1,509,822)
General and administrative - non-production
  (12,532)
  (29,178)
  (53,065)
  (67,157)
Net interest
  (1,288)
  (2,124)
  (4,459)
  (3,868)
  EBITDA
  183,059 
  159,004 
  498,488 
  395,912 
Depreciation
  (50,200)
  (53,400)
  (150,000)
  (160,000)
Net income - zeolite
 $132,859 
 $105,604 
 $348,488 
 $235,912 
 
    
    
    
    
Company-wide
    
    
    
    
Gross revenue
 $2,369,713 
 $2,846,699 
 $7,827,524 
 $9,166,628 
Production costs, royalties, and shipping costs
  (2,108,472)
  (2,681,941)
  (6,743,795)
  (8,159,288)
General, administrative, and other non-production costs
  (293,333)
  (344,539)
  (988,420)
  (1,127,418)
Other miscellaneous income
  2,642 
  32,813 
  (49,000)
  109,392 
Net interest and gain on sale of asset
  (25,940)
  (28,324)
  (79,907)
  (55,782)
  EBITDA
  (55,390)
  (175,292)
  (33,598)
  (66,468)
Income tax expense
  - 
  (411,490)
  - 
  (423,490)
Depreciation & amortization
  (207,175)
  (210,275)
  (637,225)
  (652,375)
  Net income (loss)
 $(262,565)
 $(797,057)
 $(670,823)
 $(1,142,333)
 
 
13
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition, continued:
 
The Mexico non-production costs for the three and nine months ending September 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 nine months ending September 30, 2017.
 
Company-Wide
 
For the third quarter of 2017, we recognized a net loss of $262,565 on sales of $2,369,713, compared to a net loss of $797,057 in the third quarter of 2016 on sales of $2,846,699. This is a decrease in the loss for the period of 67%, and is significant progress in a corporate turnaround. For the nine month period ending September 30, 2017, we incurred a net loss of $670,823 on sales of $7,827,525, compared to a net loss of $1,142,333 for the same period in 2016, a decrease of 41%. The loss in the third quarter of 2017 and the nine 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 $49,000 through nine months 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 nine months ending September 30, 2017, was $207,175 and $637,225, respectively.
 
The loss for the third quarter of 2017 included $51,310 in non-production costs in Mexico (holding costs for non-producing Mexican properties), compared to $156,489 for the same period in 2016.
 
For the third quarter of 2017, EBITDA was a negative $55,390, compared to a negative EBITDA of $175,292 for the same period of 2016.
 
For the third quarter of 2017, the general and administrative expenses were $228,185 compared to $309,832 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 Q3 2017 was 422,391 pounds compared to 658,915 pounds during the same period in 2016.
2.
The sale of antimony during the first nine months of 2017 was 1,474,597 pounds compared to sales of 2,304,559 pounds for the same period of 2016.
3.
The average sales price of antimony during Q3 2017 was $4.25 per pound compared to $3.07 during the same period in 2016, an increase of 38%.
4.
The average sale price of antimony during the first nine months of 2017 was $3.97 compared to $2.87 for the same period of 2016, an increase of 38%.
5.
The decrease in production was offset by higher sales prices and better margins on production from our own mined ore.
 
 
14
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial, continued:
 
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 costs and increased recovery.
 
Precious Metals
 
The caustic leach of flotation concentrates from Los Juarez was successful, and 400 metric tons were run during the second quarter of 2017 that indicate that a cyanide leach circuit is necessary to increase the recoveries of precious metals from mill tailings.
 
Precious Metals Sales
 
 
 
 
 
 
 
 
 
 
Year to
 
Silver/Gold
 
For the Year Ended
 
 
Date
 
Montana
 
2014
 
 
2015
 
 
2016
 
 
2017
 
Ounces Gold Shipped (Au)
  64.77 
  89.12 
  108.10 
  88.62 
Ounces Silver Shipped (Ag)
  29,480.22 
  30,420.75 
  38,123.46 
  22,107.93 
Revenues
 $461,083 
 $491,426 
 $556,650 
 $352,165 
Mexico
    
    
    
    
Ounces Gold Shipped (Au)
    
    
    
    
Ounces Silver Shipped (Ag)
    
    
    
    
Revenues
    
    
    
    
Australian - Hillgrove
    
    
    
    
Ounces Gold Shipped (Au)
    
    
  496.65 
  79.54 
Revenues - Gross
    
    
 $597,309 
 $81,779 
Revenues to Hillgrove
    
    
  (481,088)
  (190,122)
Revenues to USAC
    
    
 $116,221 
 $(108,343)
 
    
    
    
    
 Total Revenues
 $461,083 
 $491,426 
 $672,871 
 $243,822 
 
 
15
 
 
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 Q3 2017, BRZ sold 2,671 tons of zeolite compared to 3,375 tons in the same period of 2016, down 704 tons (20%). The decrease in tonnage was due to required maintenance.
 
We realized a net income of $132,859 from zeolite sales in Q3 of 2017, compared to $105,604 for the same period in 2016. The increase in the profit from our zeolite operations was $27,255 (25%). The increase in profit was attributable to better plant efficiency. We realized net income of $348,488 from zeolite sales during the first nine months of 2017, compared to $235,912 for the same period in 2016. The increase in the profit from our zeolite operations was $112,576 (48%) and was attributable to better plant efficiency.
 
We realized an EBITDA from zeolite sales for Q3 2017 of $183,059, compared to $159,004 for the same period in 2016, an increase of $24,055 (15%). We realized an EBITDA from zeolite sales for the nine months ended September 30, 2017 of $498,488, compared to $395,912 for the same period in 2016, an increase of $102,576 (26%).
 
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
 
 
 
 
 
 
 
 
September 30,
2017
 
 
December 31,
2016
 
Current Assets
 $1,740,041 
 $1,692,555 
Current liabilities
  ( 3,880,431)
  ( 3,382,123)
  Net Working Capital
 $(2,140,390)
 $(1,689,568)
 
    
    
 
 
 
September 30,
2017
 
 
September 30,
2016
 
Cash provided (used) by operations
 $491,253 
 $412,162 
Cash used for capital outlay
  ( 279,465)
  ( 459,969)
Cash provided (used) by financing:
    
    
Net proceeds from (payments) to factor
  13,338 
  119,111 
  Payment of notes payable to bank
  (64,291)
  (30,672)
  Checks issued and payable
  12,726 
    
  Principal paid on long-term debt
  ( 156,042)
  ( 130,857)
  Net change in cash
 $17,519 
 $(90,225)
 
Our net working capital at September 30, 2017, has decreased by approximately $451,000 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 $280,000 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 $103,026 at September 30, 2017. We have a foreign value added tax refund receivable in Mexico of $365,120 at September 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).
 
 
16
 
 
PART I - FINANCIAL INFORMATION, CONTINUED:
 
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition, continued:
 
Going Concern Consideration
 
At September 30, 2017, our financial statements show that we have a negative working capital of approximately $2.14 million and an accumulated deficit of approximately $26.1 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 $3.07 per pound for the third quarter of 2016 to an average price of $4.25 for the third 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 smelter 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 for June 2016, and we have also reduced the cost for labor at the same mine. We have reduced administrative costs by approximately $81,000 from the prior year third 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
 
 
17
 
 
ITEM 4. Controls and Procedures
 
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
 
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosure. Our chief financial officer conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of September 30, 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 September 30, 2017. These material weaknesses are as follows:
 
Inadequate design of internal control over the preparation of the financial statements and financial reporting processes;
Inadequate monitoring of internal controls over significant accounts and processes including controls associated with domestic and Mexican subsidiary operations and the period-end financial reporting process; and